ITO 20(3)(4), MUMBAI V. VIKRAM A PRADHAN, MUMBAI

ITA 2212/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3191 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 11-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 2212/MUM/2012 (ASSESSMENT YEAR : 2008-09) THE INCOME TAX OFFICER 20(3)(4), 511, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012 ... APPELLANT VS. M/S. VIKRAM A. PRADHAN, 104, GYANDEEP SOCIETY, 1 ST FLOOR, GULMOHAR CROSS ROAD NO.7, JVPD SCHEME , MUMBAI -49 PAN:AINPP9962D ..... RESPONDENT APPELLANT BY : SHRI M. V.RAJGURU RESPONDENT BY : NONE. DATE OF HEARING : 17/08/2016 DATE OF PRONOUNCEMENT : /08/ 2016 ORDER PER JASON P. BOAZ, A.M: THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE OR DER OF THE CIT(APPEAL)-31, MUMBAI DATED 31/1/2011 FOR ASSESSME NT YEAR 2008-09. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF SALE OF VARIOUS EDUCATIONAL PRODUCTS TO SCHOOLS THROUGH HIS PROPRIETARY CONCERN M/S.BRAINWAVE INTERACTIVE & BRAINWAVE VISUALIZERS A ND PRODUCTION OF FILMS IN ANOTHER PROPRIETARY CONCERN M/S. BRAINWAVE PRODUCTION. THE ASSESSEE FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 ON 2 ITA NO. 2212/MUM/2012 (ASSESSMENT YEAR : 2008-09) 23/3/2009 DECLARING AN INCOME OF RS.5,53,180/-. TH E RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX AC T, 1961( IN SHORT THE ACT) AND THE CASE WAS SUBSEQUENTLY TAKEN UP F OR SCRUTINY. THE ASSESSMENT WAS CONCLUDED UNDER SECTION 143(3) OF TH E ACT VIDE ORDER DATED 15/12/2010, WHEREIN THE INCOME OF THE ASSESSE E WAS DETERMINED AT RS.81,96,760/- IN VIEW OF THE FOLLOWING ADDITION S/DISALLOWANCES:- (I) ADDITION ON ACCOUNT OF DIFFERENCE IN SALES : RS.19,10,929/- (II) ADDITION ON ACCOUNT CESSATION LIABILITY UNDER SECTION 41(1) : RS.33,44,827/- (III)ADDITION ON ACCOUNT OF DIFFERENCE IN CASH EXPENSES : RS.27,74,461/- 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 15/ 12/2010 FOR ASSESSMENT YEAR 2008-09, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS)-31, MUMBAI CHALLENGING THE AFORESAID THREE ADDITIONS LIST AT PARA 2.1 OF THIS ORDER(SUPRA). THE LD. CIT(APPE ALS) DISPOSED OF THE ASSESSEES APPEAL VIDE THE IMPUGNED ORDER DATED 31/ 1/2011 ALLOWING THE ASSESSEE PARTIAL RELIEF. 3.1 THE REVENUE BEING AGGRIEVED BY THE ORDER OF THE CIT(APPEALS)-31, MUMBAI DATED 31/1/2011 FOR ASSESSMENT YEAR 2008-09 HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS:- I THE LEARNED.CIT(A) HAS ERRED ON FACT AND IN L AW AND IN THE CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.33,44,827/- MADE BY A.O AS CESSATION OF LIABILITY INVOKING PROV ISIONS OF SECTION 41 (1) OF I.T.ACT. II THE LEARNED CIT(A) HAS FAILED TO APPRECIATE T HAT THE ASSESSEE HAS NOT DISCHARGED BURDEN OF PROVING THAT LIABILITY EXI STS BY ANY EVIDENCE WHATSOEVER AND EVEN MOST ELEMENTARY ACT I. E. SUBMITTING CONFIRMATIONS FROM THE CONCERNED CREDITORS WERE NOT FILED III THE LEARNED CIT(A) ON THE FACTS AND CIRCUMSTAN CES OF THE CASE HAS NOT APPRECIATED THAT THE ASSESSEE SHIFTED HIS BUSIN ESS FROM INDORE TO MUMBAI, THE CREDITORS ARE ADMITTEDLY BASED IN IN DORE. EVEN IN 3 ITA NO. 2212/MUM/2012 (ASSESSMENT YEAR : 2008-09) MOST CASES LIABILITY ., IS 7-8 YEAR OLD AND ITS REC OVERY BY LEGAL MEANS STANDS BARRED BY LIMITATION IV THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RE STORED. IV THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NEW GROUND WHICH MAY BE NECESSARY . 3.2 AS PER THE RECORD, THIS APPEAL WAS FIXED FOR H EARING ON AT LEAST 20 OCCASIONS. ON THE DAYS ON WHICH THE BENCH DID NOT FUNCTION, THE CASE WAS ADJOURNED THROUGH INFORMATION ON THE NOTICE BOA RDS. IT IS SEEN THAT ON ALL THE DATES THE CASE WAS CALLED FOR HEARI NG, NONE WAS PRESENT FOR THE ASSESSEE, NOR ANY ADJOURNMENT SOUGHT. EVE N NOTICES ISSUED BY RPAD HAVE BEEN RETURNED UNSERVED. WHEN THE CASE WA S CALLED FOR HEARING ON 17/08/2016, AGAIN NONE WAS PRESENT FOR T HE ASSESSEE BUT THE LD. DEPARTMENTAL REPRESENTATIVE WAS PRESENT AN D READY TO ARGUE FOR REVENUE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT INTERESTED IN SERIOUSLY PURSUING TH IS APPEAL AND WE, THEREFORE, PROCEED TO DISPOSE OFF THIS APPEAL WITH THE ASSISTANCE OF THE LD. DEPARTMENTAL REPRESENTATIVE AND THE MATERIAL O N RECORD. 3.3 FROM A PERUSAL OF THE GROUNDS RAISED, IT APPEA RS TO US THAT THE ONLY ISSUE FOR CONSIDERATION AND ADJUDICATION BEFOR E US IS WITH RESPECT TO THE ISSUE OF THE DELETION BY THE CIT(APPEALS) OF THE ADDITION OF RS.33,44,827/- MADE BY THE ASSESSING OFFICER AS CES SATION OF LIABILITY INVOKING THE PROVISIONS OF SECTION41(1) OF THE ACT. IN THESE GROUNDS, APART FROM ASSAILING THE DECISION OF THE CIT(APPEAL S) IN ORDERING DELETION OF THE ADDITION OF RS.33,44,827/- UNDER SE CTION 41(1) OF THE ACT , IT HAS BEEN CONTENDED THAT THE ASSESSEE HAS NOT DISCHARGED THE BURDEN OF PROVING THAT LIABILITY EXISTS BY ANY EVID ENCE WHATSOEVER SINCE EVEN CONFIRMATION FROM THE CONCERNED CREDITORS WAS NOT FILED. IT IS 4 ITA NO. 2212/MUM/2012 (ASSESSMENT YEAR : 2008-09) FURTHER CONTENDED THAT SINCE THESE CREDITORS WAS AD MITTEDLY IN MOST CASES 7-8 YEARS OLD, ITS RECOVERY BY LEGAL MEANS ST ANDS BARRED BY LIMITATION. THE LD. DEPARTMENTAL REPRESENTATIVE W AS HEARD IN SUPPORT OF THE GROUNDS RAISED AND PRAYED THAT IN THE LIGHT OF THE ABOVE SUBMISSIONS, THE FINDING OF THE CIT(APPEALS) BE REV ERSED AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 3.4.1 WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTA TIVE IN SUPPORT OF THE GROUNDS RAISED ON THE ISSUE OF DELETION OF T HE ADDITION OF RS.33,44,827/- MADE BY THE ASSESSING OFFICER UNDER SECTION 41(1) OF THE ACT ON THE GROUNDS OF CESSATION OF LIABILITY AND CA REFULLY CONSIDERED THE MATERIAL ON RECORD. THE FACTS OF THE MATTER AS EM ANATE FROM THE RECORD ARE THAT IN THE COURSE OF ASSESSMENT PROCEED INGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEES BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION I.E. 31/3/2007 REFLECTED CREDITORS AG GREGATING TO RS.33,44,827/-. ON BEING QUERIED IN THE MATTER, TH E ASSESSEE SUBMITTED THAT THE SAME ARE OLD CREDITORS PERTAINING TO THE PERIOD WHEN HE CARRIED OUT BUSINESS IN INDORE AND HAVE BEEN CARRIE D FORWARD FOR THE LAST 7-8 YEARS AND NOT PAID SO FAR DUE TO CERTAIN D ISPUTE WITH THE CREDITORS. THE ASSESSING OFFICER, HOWEVER, BRUSHIN G ASIDE THE AVERMENTS OF THE ASSESSEE CONSIDERED THE ENTIRE CRE DITORS BALANCE OUTSTANDING AGGREGATING TO RS.33,44,827/- AS INCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT AS CESSATION OF LIABILITY FOR THE REASONS THAT THE SAID CREDITORS A RE OLD FROM LAST 7-8 YEARS, PERTAIN TO THE ASSESSEES OLD PLACE OF BUSIN ESS I.E. INDORE AND THE SAME HAVE REMAINED UNPAID FOR MANY YEARS. 5 ITA NO. 2212/MUM/2012 (ASSESSMENT YEAR : 2008-09) 3.4.2 ON APPEAL, BEFORE THE LD. CIT(A) THE ASSESSEE REITERATED THAT THE CREDITORS OUTSTANDING BALANCES OF RS.33,44,827/- AS REFLECTED IN THE ASSESSEES BALANCE SHEET AS ON 31/3/2007 WERE MOSTL Y 7-8 YEARS OLD, PERTAINING TO THE PERIOD WHEN THE ASSESSEE WAS DOI NG BUSINESS IN INDORE AND WERE NOT PAID SO FAR DUE TO CERTAIN DISP UTES WITH THE CREDITORS. ACCORDING TO THE ASSESSEE, THE AFORESAI D LIABILITY OF THE ASSESSEE IS LIABLE TO MAKE THE PAYMENT THEREOF AS A ND WHEN THE DISPUTES ARE RESOLVED AND THE AMOUNT IS CRYSTALLIZE D, AND THEREFORE, THERE IS NO CESSATION OF LIABILITY AS HELD BY THE A SSESSING OFFICER TO WARRANT INVOCATION OF THE PROVISIONS OF SECTION 41 (1) OF THE ACT IN THE YEAR UNDER CONSIDERATION AND PRAYED THAT THE ENTIRE ADDITION BE DELETED. THE LD. CIT(A) AFTER CONSIDERING THE MATE RIAL ON RECORD AND REFERRING TO THE JUDICIAL PRONOUNCEMENTS OF THE HON BLE APEX COURT IN THE CASES OF CIT VS. SUGAULI SUGAR WORKS (P) LTD. ( 1999) 236 ITR 518 (SC) AND U.O.I VS. J.K.SYNTHETICS LTD. (199 ITR 14) (SC) HELD THAT IN THE CASE ON HAND THERE IS NO WRITE BACK OF THE LIABILITY PAYABL E TO VARIOUS CREDITORS WHICH IS DULY DISCLOSED IN THE ASSESSEES BALANCE S HEET AS ON 31/3/2007. THE LD.CIT(A) ALSO OBSERVED THAT NO INDEPENDENT IN QUIRIES WERE CARRIED OUT BY THE ASSESSING OFFICER TO ESTABLISH THAT THES E CREDITORS HAVE WRITTEN OFF THE DEBTS APPEARING IN THEIR RESPECTIVE ACCOUNT. IN THAT VIEW OF THE MATTER, THE LD. CIT(A) WENT ON TO HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN UNILATERALLY DECIDING THAT TH E LIABILITIES EXISTING IN THE BALANCE SHEET OF THE ASSESSEE TO THE EXTENT OF RS.33,44,827/- HAD CEASED TO EXIST WITHIN THE MEANING OF SECTION 41(1) OF THE ACT AND DIRECTED THAT THE ENTIRE ADDITION ON THIS ACCOUNT B E DELETED. 6 ITA NO. 2212/MUM/2012 (ASSESSMENT YEAR : 2008-09) 3.4.3 ACCORDING TO THE AVERMENTS OF THE ASSESSEE BE FORE THE LD. CIT(A), THE ADDITION UNDER SECTION 41(1) OF THE ACT TO THE EXTENT OF RS.33,44,827/- CANNOT BE SUSTAINED SINCE THE OUTSTA NDING BALANCE OF THE CREDITORS INVOLVED APPEAR AS ACKNOWLEDGED OUTSTA NDING CREDITORS IN THE ASSESSEES BALANCE SHEET AS ON 31/3/2007. IN T HE CASE ON HAND, AS OBSERVED BY THE LD. CIT(A), WE FIND THAT THE ASSES SING OFFICER HAS FAILED TO CAUSE ENQUIRIES TO BE MADE WITH OR NOTICES ISSU ED TO CREDITORS TO ASCERTAIN FROM THEM WHETHER THEY HAVE REMITTED THE DUES FROM THE ASSESSEE IN THEIR BOOKS OF ACCOUNT. THE FACT THAT THE CREDITORS OUTSTANDING BALANCES WERE NOT WRITTEN BACK IN THE ASSESSEES BOOKS OF ACCOUNT, BUT RATHER STOOD REFLECTED IN THE ASSESSEE S BALANCE SHEET AS ON 31/3/2007 CLEARLY ESTABLISHES THAT IS NO CESSATI ON OF LIABILITY. ON THE CONTRARY, IT IS AN ACKNOWLEDGEMENT BY THE ASSESSEE OF EXISTING DEBTS IT OWES TO ITS CREDITORS. WE OBSERVE THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THERE WAS REMISSION OR CESSATION OF LIABILITY. WHEN THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE WAS CESSATION OF LIABILITY IN THE CASE ON HAN D, IT WAS INCUMBENT UPON HIM TO CAUSE NECESSARY ENQUIRIES TO BE MADE IN ORDER TO BRING ON RECORD MATERIAL EVIDENCE TO ESTABLISH THE REQUIREM ENT FOR INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT. THE VERY F ACT THAT THE ASSESSEE REFLECTS THESE AMOUNTS AS CREDITORS IN HIS BALANCE SHEET AS ON 31/3/2007, IS AN ACKNOWLEDGEMENT OF HIS LIABILITY TO THESE CREDITORS AND THIS ALSO AUTOMATICALLY EXTENDS THE PERIOD OF L IMITATION UNDER SECTION18 OF THE LIMITATION ACT. ONCE THE ASSESSEE ACKNOWLEDGES THAT THE DEBTS TO CREDITORS ARE OUTSTANDING IN HIS BALAN CE SHEET, THAT HE IS LIABLE TO PAY HIS CREDITORS, REVENUE CANNOT SUO-MOT O CONCLUDE THAT THE CREDITORS HAVE REMITTED THEIR LIABILITY OR THAT THE LIABILITY HAS OTHERWISE 7 ITA NO. 2212/MUM/2012 (ASSESSMENT YEAR : 2008-09) CEASED TO EXIST, WITHOUT BRINGING ON RECORD ANY MAT ERIAL EVIDENCE TO THE CONTRARY. IN THE CASE ON HAND, THE CREDITORS AGGR EGATING TO RS.33,44,827/- CONTINUE TO BE REFLECTED IN THE ASSE SSEES BALANCE SHEET AS ON 31/3/2007. IN THIS FACTUAL MATRIX OF THE CAS E, AS DISCUSSED ABOVE, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HA S NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCE TO ESTABLISH THAT THER E WAS CESSATION OF LIABILITY IN RESPECT OF THE OUTSTANDING CREDITORS BALANCES REPRESENTED IN THE ASSESSEES BALANCE SHEET AS ON 31/3/2007, AND C ONCUR WITH THE FINDING OF THE LD. CIT(A) THAT THE ADDITION OF RS.3 3,44,827/- UNDER SECTION 41(1) OF THE ACT AS CESSATION OF LIABILITY BEING UNSUSTAINABLE, IS TO BE DELETED. IN COMING TO THIS FINDING, WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF S UGUALI SUGAR WORKS (P) LTD. (1999) 236 ITR 518(SC); THE RATIO LAID DOW N THEREIN BEING SQUARELY APPLICABLE TO THE CASE ON HAND. CONSEQUEN TLY, REVENUES GROUNDS AT S.NO.I TO V ARE DISMISSED. 4. IN THE RESULT, REVENUES APPEAL FOR ASSESSMENT Y EAR 2007-08 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/08/2016 SD/- SD/- (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 24/08/2016 VM , SR. PS 8 ITA NO. 2212/MUM/2012 (ASSESSMENT YEAR : 2008-09) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI