ITO, New Delhi V. M/s. Paam Antibiotics Limited, New Delhi

ITA 2327/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3162 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 06-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 16-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO.2327/DEL/2014 ASSESSMENT YEAR : 2007-08 ITO, WARD- 14(1), NEW DELHI. VS. PAAM ANTIBIOTICS LIMITED, 718, VISHAL MKT., BHAI PARMANAND COLONY, MUKHERJEE NAGAR, NEW DELHI. PAN : AACCP6138P (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI ATIQ AHMAD, SR.DR ASSESSEE BY : NONE DATE OF HEARING : 13-02-2018 DATE OF PRONOUNCEMENT : 27-02-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 27.01.2014 OF THE CIT(A)- XVII, NEW DELHI RELATING TO ASSESSMENT YEAR 2007-08. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A LIMITED COMPANY AND FILED ITS RETURN OF INCOME ON 13.10.2007 DECLARING LOSS OF RS.6,94,345/-. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER A SKED THE ASSESSEE TO FURNISH THE CONFIRMATIONS OF THE SUNDRY CREDITORS IN RESPEC T OF 12 PARTIES TOTALING TO RS.1,18,43,514/-. IT WAS EXPLAINED BY THE AUTHORIZ ED REPRESENTATIVE OF THE 2 ITA NO.2327/DEL/2014 ASSESSEE THAT THE BALANCES ARE VERY OLD AND THEY AR E UNABLE TO FURNISH CONFIRMATIONS. SINCE ACCORDING TO THE ASSESSING OF FICER THE BURDEN OF PROOF IS ON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF ANY LIABILITY FOUND IN THE BOOKS AND SINCE THE ASSESSEE FAILED TO EXPLAIN SUCH LIABILITY TO THE SATISFACTION OF THE ASSESSING OFFICER, THE ASSESSING OFFICER PROCEE DED TO BRING THE AMOUNT TO TAX U/S 41(1) OF THE I.T. ACT. IN THE MEANTIME, TH E ASSESSING OFFICER RECEIVED CONFIRMATIONS FROM M/S INSTITUTE OF VALUERS AMOUNTI NG TO RS.48,00,000/-. THEREFORE, AFTER GIVING THE BENEFIT OF RS.48,00,000 /-, THE ASSESSING OFFICER BROUGHT THE TAX AN AMOUNT OF RS.70,43,514/- U/S 41( 1) OF THE I.T. ACT. 3. IN APPEAL, THE LD. CIT(A) DELETED THE ADDITION. WHILE DOING SO, HE HELD THAT THE ASSESSING OFFICER SHOULD HAVE CONDUCTED FU RTHER ENQUIRIES FROM THE CREDITORS IF, HE WAS OF THE VIEW THAT THEY ARE NOT GENUINE. HOWEVER, IN THE INSTANT CASE, HE HAS NOT DONE THE SAME. FURTHER, A CCORDING TO HIM, THE ASSESSING OFFICER FAILED TO SHOW THAT THERE WAS A DEDUCTION I N RESPECT OF A TRADING LIABILITY IN AN EARLIER YEAR AND REMISSION OR CESSATION OF SU CH LIABILITY IN THIS YEAR RESULTED IN A BENEFIT TO THE ASSESSEE. RELYING ON VARIOUS D ECISIONS INCLUDING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SUGANLI SUGAR MILLS AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. JAIN EXPORTS (P) LTD. IN ITA NO.235 OF 2013 AND VARIOUS OTHER DECISI ONS, HE HELD THAT THE 3 ITA NO.2327/DEL/2014 ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE AD DITION U/S 41(1) OF THE I.T. ACT. 4. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUND S :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.70,43,514/- MA DE BY THE AO U/S 41(1) OF THE ACT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN HOLDING THAT THE AO SHOULD HAVE CONDUCTED FURTHER E NQUIRIES FROM THE CREDITORS, IGNORING THE FACT THAT THE ONUS TO FURNISH CONFIRMA TION FOR CREDIT BALANCE LIES WITH THE ASSESSEE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THERE WAS NO REMISSION ON CESSATION OF LIABILITY IN RESPECT OF ANY PERSONS BY NOT APPRECIATING THE FACT THAT THE ASSESSEE FAIL ED TO PROVIDE CONFIRMATION FOR OPENING CREDIT BALANCES IN THE BOOKS OF ACCOUNTS AN D HAS ALREADY TAKEN BENEFIT OF THESE DEDUCTIONS IN EARLIER YEARS. 4. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUND OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE. DESPIT E ISSUE OF NOTICES FOR A NUMBER OF TIME BY THE REGISTRY THROUGH REGISTERED P OST. ALL THE NOTICES WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES WITH TH E REMARK LEFT OR NO PERSON FOUND. WE, THEREFORE, PROCEED TO DECIDE THE APPEA L ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DR. 6. AS MENTIONED EARLIER, THE ASSESSING OFFICER MADE ADDITION OF RS.70,43,514/- U/S 41(1) ON THE GROUND THAT THE ASS ESSEE FAILED TO FILE THE CONFIRMATIONS IN RESPECT OF SUNDRY CREDITORS. WE F IND THE AUTHORIZED REPRESENTATIVES OF THE ASSESSEE, WHO APPEARED BEFOR E THE ASSESSING OFFICER 4 ITA NO.2327/DEL/2014 ALONG WITH ACCOUNTS MANAGER STATED BEFORE THE ASSES SING OFFICER THAT THE BALANCES ARE VERY OLD AND THEY ARE UNABLE TO FURNIS H THE CONFIRMATIONS. UNDER THESE CIRCUMSTANCES, THE FINDINGS GIVEN BY THE LD. CIT(A) THAT THE ASSESSING OFFICER SHOULD HAVE CONDUCTED FURTHER ENQUIRIES FRO M THE CREDITORS IF HE WAS OF THE VIEW THAT THEY ARE NOT GENUINE IS NOT CORRECT. HOWEVER, IT IS AN ADMITTED FACT THAT ALL THESE CREDITORS ARE OLD CREDITORS AND ASSE SSEE HAS NOT WRITTEN OFF SUCH CREDITORS IN ITS BOOKS OF ACCOUNT AND ALL THESE BAL ANCES ARE PENDING BALANCES WHICH WARE BEING CARRIED FORWARD FOR SEVERAL YEARS. THEREFORE, THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JAIN EX PORTS (SUPRA) WHICH HAS BEEN REPRODUCED BY THE LD. CIT(A) IN THE BODY OF TH E ASSESSMENT ORDER IS CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE WHERE T HE HON'BLE HIGH COURT HAS OBSERVED AS UNDER :- WE MAY ALSO ADD THAT, ADMITTEDLY, NO CREDIT ENTRY HAS BEEN MADE IN THE BOOKS OF THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR 2008- 2009. THE OUTSTANDING BALANCES REFLECTED AS PAYABLE TO M/S EL EPHANTA OIL & VANASPATI LTD. ARE THE OPENING BALANCES WHICH ARE BEING CARRIED FORWAR D FOR SEVERAL YEARS. THE ISSUE AS TO THE GENUINENESS OF A CREDIT ENTRY, THUS DOES NOT ARISE IN THE CURRENT YEAR AND THIS ISSUE COULD ONLY BE EXAMINED IN THE YEAR WHEN THE L IABILITY WAS RECORDED AS HAVING ARISEN, THAT IS, IN THE YEAR 1984-1985. THE DEPARTM ENT HAVING ACCEPTED THE BALANCES OUTSTANDING OVER SEVERAL YEARS, IT WAS NOT OPEN FOR THE CIT (APPEALS) TO CONFIRM THE ADDITION OF THE AMOUNT OF ` 1,53,48,850/- ON THE GR OUND THAT THE ASSESSEE COULD NOT PRODUCE SUFFICIENT EVIDENCE TO PROVE THE GENUINENES S OF THE TRANSACTIONS WHICH WERE UNDERTAKEN IN THE YEAR 1984-85. 20. IN ORDER TO ATTRACT THE PROVISIONS OF SECTION 4 1(1) OF THE ACT, IT IS NECESSARY THAT THERE SHOULD HAVE BEEN A CESSATION OR REMISSIO N OF LIABILITY. AS HELD BY THE BOMBAY HIGH COURT, IN THE CASE OF J. K. CHEMICALS L TD. (SUPRA), CESSATION OF LIABILITY MAY OCCUR EITHER BY THE REASON OF THE LIABILITY BEC OMING UNENFORCEABLE IN LAW BY THE CREDITOR COUPLED WITH DEBTOR DECLARING HIS INTENTIO N NOT TO HONOUR HIS LIABILITY, OR BY A CONTRACT BETWEEN PARTIES OR BY DISCHARGE OF THE DEB T. IN THE PRESENT CASE, THE ASSESSEE IS ACKNOWLEDGING THE DEBT PAYABLE TO M/S ELEPHANTA OIL & VANASPATI LTD. AND THERE IS NO MATERIAL TO INDICATE THAT THE PARTIES HAVE CO NTRACTED TO EXTINGUISH THE LIABILITY. 5 ITA NO.2327/DEL/2014 THUS, IN OUR VIEW IT CANNOT BE CONCLUDED THAT THE D EBT OWED BY THE ASSESSEE TO M/S ELEPHANTA OILS & VANASPATI LTD. STOOD EXTINGUISHED. 7. SIMILARLY, THE LD. CIT(A) ALSO HAS RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AUTO KASHYA P INDIA (P) LTD. REPORTED IN 330 ITR 435 WHEREIN THE HON'BLE HIGH COURT HAS OBSE RVED AS UNDER :- 5. SECTION 41 OF INCOME-TAX ACT, TO THE EXTENT IT IS RELEVANT, PROVIDES THAT WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSE SSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE HAS OBTAINED WHETHER IN CASH OR IN ANY OTHER MANNER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE O R SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY THE ASSESSEE FROM THE VALUE OF THE BENEFIT ACCRUED TO H IM SHALL BE DEEMED TO BE PROFITS AND GAINS OF PROFESSION OR BUSINESS, AND ACCORDINGL Y CHARGEABLE TO INCOME TAX, AS THE INCOME OF THAT PREVIOUS YEAR. 6. IT IS, THEREFORE, A PRE-REQUISITE CONDITION BEFO RE TAKING RECOURSE TO THE SECTION 41 OF THE ACT THAT THAT ASSESSEE MUST HAVE EITHER O BTAINED THE AMOUNT IN RESPECT OF THE LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED EAR LIER BY IT OR IT SHOULD HAVE RECEIVED ANY BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. THE OBJECTIVE IS TO TAX THE AMOUNT OR BENE FIT RECEIVED BY THE ASSESSEE THEREBY MAKING HIM PAY BACK FOR THE BENEFIT AVAILED EARLIER BY HIM BY WAY OF CLAIMING LOSS, EXPENDITURE OR LIABILITY IN RESPECT OF THAT AMOUNT. 7. REMISSION IS A POSITIVE CONDUCT ON THE PART OF T HE CREDITOR. IN THE PRESENT CASE, ADMITTEDLY THERE HAS BEEN NO REMISSION OF THE LIABI LITY OF THE ASSESSEE. THEREFORE, THE ONLY QUESTION WHICH ARISES IN THIS CASE IS WHETHER THERE WAS ANY CESSATION OF LIABILITY AS HAS BEEN CLAIMED BY THE REVENUE. THE CESSATION O F THE LIABILITY MAY ACCRUE EITHER BY OPERATION OF LAW, I.E., ON THE LIABILITY BECOMIN G UNENFORCEABLE IN LAW BY THE CREDITOR, PROVIDED THE DEBTOR UNEQUIVOCALLY DECLARE S HIS INTENTION NOT TO OWN THE LIABILITY EVEN IF DEMANDED BY THE CREDITOR. IT MAY ALSO ACCRUE BY WAY OF A JUDICIAL PRONOUNCEMENT, ABSOLVING THE ASSESSEE FROM THE LIAB ILITY. IT MAY ACCRUE IF THERE IS A CONTRACT BETWEEN THE PARTIES WHEREBY THE LIABILITY GETS EXTINGUISHED OR IT MAY COME TO AN END BY DISCHARGE OF THE DEBT. SOME BENEFIT HOWEV ER MUST ACCRUE TO THE ASSESSEE BY VIRTUE OF REMISSION OR CESSATION OF THE LIABILITY, AS THE CASE MAY BE. 8. SINCE THE ORDER OF THE LD. CIT(A) IS BASED ON TH E DECISIONS HONBLE DELHI HIGH COURT IN THE CASES CITED (SUPRA), THEREFORE, W E ARE BOUND BY THE DECISION OF THE JURISDICTIONAL HIGH COURT AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO 6 ITA NO.2327/DEL/2014 OUR NOTICE BY THE LD. DR, WE UPHELD THE ORDER OF TH E LD. CIT(A) ON THIS ISSUE AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH FEBRUARY, 2018. SD/- SD/- (BEENA A. PILLAI) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27-02-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI