DCIT, New Delhi V. M/s. Renu Construction Pvt. Ltd., New Delhi

ITA 220/DEL/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0071 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 21-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: N O N E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F DELHI BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL I.T.A.NO.220(DEL)/2011 ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME RENU CONSTR UCTIONS PVT. LTD., TAX, CENTRAL CIRCLE-19, VS. 292 , TAGORE PARK EXTENSION, NEW DELHI. MODEL TOWN-1, NEW DELHI PAN-AACCR3114P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.K. LAL, SR. DR RESPONDENT BY : NO NE ORDER PER K.G. BANSAL : AM THE REVENUE HAS TAKEN FIVE GROUNDS IN THE APPE AL, THE SUM AND SUBSTANCE OF WHICH IS THAT THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS. 47,05,387/ -, MADE BY THE AO IN RESPECT OF UNCLAIMED UNSECURED LOANS AND THAT HE FAILED TO APPRECIATE THAT THE AMOUNT REPRESENTS INCOME U/S 28(IV) OF THE IN COME-TAX ACT, 1961. 2. THE FINDING OF THE AO IN THIS REGARD IS THAT T HE ASSESSEE HAS NOT BEEN CARRYING ON ANY BUSINESS ACTIVITY FOR LAST MANY YEARS, TILL IT IS SHOWING UNSECURED LOANS PAYABLE AT RS. 47,05,387/-. THES E LOANS HAVE REMAINED OUTSTANDING FOR A NUMBER OF YEARS AND, THEREFO RE, IT APPEARS THAT THERE IS ITA NO. 220(DEL)/2011 2 NO OBLIGATION ON THE ASSESSEE TO PAY BACK THESE LOANS. THE AMOUNT CONSTITUTES INCOME IN VIEW OF THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF T.V. SUNDARAM IYENGAR & SONS LTD., 222 ITR 344. 3. THE FINDING OF THE LD. CIT(APPEALS) IS THAT THE AO HAS ADDED THIS AMOUNT PRESUMABLY U/S 41(1) OF THE ACT, WHICH CO MES INTO OPERATION IF (I) THE ASSESSEE HAD INCURRED A TRADING LIABIL ITY; (II) THE LIABILITY HAS BEEN ALLOWED AS DEDUCTION IN ANY EARLIER YEAR OR THIS Y EAR; (III) IT HAS BEEN RECOVERED IN THE YEAR OR IT HAS CEASED TO EX IST OR HAS BEEN REMITTED. THE CASE OF T.V.SUNDARAM IYENGAR & SONS LTD. (SUPRA) HAS BEEN DISTINGUISHED. SINCE NONE OF THE CONDITIONS MENTIONED ABOVE HAS BEEN SATISFIED, THE ADDITION HAS BEEN DELETED. 4. BEFORE US, THE LD. DR EXPLAINED THE FINDINGS O F THE AO AND THE LD. CIT(APPEALS). HEAVY RELIANCE HAS BEEN PLACED ON THE ORDER OF THE AO TO ARGUE THAT THE IMPUGNED ORDER MAY BE SET ASIDE A ND THE ORDER OF THE AO MAY BE RESTORED. NO AUTHORIZED PERSON ATTENDED ON BEHALF OF THE ASSESSEE. THEREFORE, WE PROCEED ON THE BASIS OF ASSISTANCE GRANTED TO US BY THE LD. DR. ITA NO. 220(DEL)/2011 3 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. IN THE CASE OF T.V. IYENGAR & SONS (S UPRA), THE FACTS WERE THAT DEPOSITS WERE RECEIVED FOR SUPPLY OF GOODS. WITH THE EFFLUX OF TIME, CREDIT BALANCES IN THESE ACCOUNTS WERE WRITTEN OFF TO THE CREDIT OF PROFIT AND LOSS ACCOUNT. THE HONBLE SUPREME COURT HELD THAT THE ASSESSEE HAS BECOME RICHER BY THE AMOUNT WRITTEN TO PROFIT AND LOSS A CCOUNT ON ACCOUNT OF TRADING TRANSACTIONS. THE FACTS OF THIS CASE ARE CLEARLY DISTINGUISHABLE AS ADMITTEDLY THE AMOUNTS CONSTITUTED LOANS, A CAPITAL LIABILITY. FURTHER, THE AMOUNTS HAVE NOT BEEN WRITTEN OFF TO THE CREDIT OF PROFIT AND LOSS ACCOUNT. 5.1 COMING TO THE PROVISION CONTAINED IN SECTION 41(1), THE ADMITTED POSITION IS THAT THE LIABILITY IS CAPITAL IN NATURE . IT HAS NOT BEEN YET WRITTEN OFF TO PROFIT AND LOSS ACCOUNT. THE FINDING OF T HE AO THAT THE ASSESSEE HAS NOT BEEN CARRYING ON BUSINESS IS CONTRADICTED BY H IM WHEN BUSINESS LOSS OF RS. 13,927/- WAS ALLOWED. THUS, IT IS NOT A T RADING LIABILITY ALLOWED IN PAST. IT HAS NOT BEEN WRITTEN OFF TO THE CREDIT O F PROFIT AND LOSS ACCOUNT, WHOLLY OR PARTLY. THEREFORE, THERE IS NO REAS ON TO COME TO THE CONCLUSION THAT THE LIABILITY HAS CEASED TO EXIST AND THE A SSESSEE CONSEQUENTIALLY GOT SOME BENEFIT IN RESPECT OF THE LIABILITY ALLOWED IN THE PAST. THEREFORE, WE ITA NO. 220(DEL)/2011 4 ARE OF THE VIEW THAT THERE IS NO SUCH ERROR IN THE IMPUGNED ORDER, WHICH REQUIRES MODIFICATION FROM US. 6. IN THE RESULT, THE APPEAL IS DISMISSED. THE APPEAL WAS PRONOUNCED IN THE OPEN COURT ON 2 5 MARCH, 2011. SD/- SD/- (I.P. BANSAL) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 25TH MARCH, 2011. SP SATIA COPY OF THE ORDER FORWARDED TO:- RENU CONSTRUCTIONS PVT. LTD., NEW DELHI. DCIT, CENTRAL CIRCLE 19, NEW DELHI. CIT(A) CIT, THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.