M/S KRANTI WINES PVT LDT , Pune V. DEPUTY COMMISSIONER OF INCOME TAX , CIRCLE - 14 , PUNE, PUNE

ITA 244/PUN/2020

AI Insights

M/s. Kranti Wines Pvt. Ltd. appealed against the order of the Commissioner of Income Tax (Appeals)-9, Pune, which confirmed the additions made by the Assessing Officer. The additions included disallowance of foreign education expenses and an addition of Rs.34,45,438 concerning unsecured loans received, which were outstanding for more than three years. The Tribunal dismissed the disallowance of foreign education expenses as not pressed and focused on the addition related to unsecured loans. The Tribunal examined whether the addition was justified under section 68 of the Income Tax Act, considering the legal precedents and the fact that the loans were not received during the year under consideration but in earlier years.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137144 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 26-02-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 13-02-2020
• Other Referred Cases: CIT vs. Sugauli Sugar Works (P.) Ltd., CIT vs. Mahindra and Mahindra Ltd., CIT vs. Reliance Industries Ltd., CIT vs. Shri Vardhman Overseas Ltd., PCIT vs. Batliboi Environmental Engineering Ltd., CIT vs. Indian Rayon and Industries Ltd., Ivan Singh vs. ACIT, CIT vs. Bhaichand N. Gandhi, CIT vs. Lakshman Swaroop Gupta & Brothers, Bhor Industries Ltd. vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.244/PUN/2020 िनधाᭅरण वषᭅ / Assessment Year : 2014-15 M/s. Kranti Wines Pvt. Ltd., 583, Karmayogi Complex, Market Yard, Gultekdi, Pune- 411037. PAN : AAACK8682M Vs. DCIT, Circle-14, Pune. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)- 9, Pune [‘the CIT(A)’] dated 20.11.2019 for the assessment year 2014-15. 2. Briefly, the facts of the case are that the appellant is a Private Limited Company engaged in the business of distribution of IMFL. The Return of Income for the assessment year 2014-15 was filed on 29.11.2014 declaring total income of Rs.61,39,140/-. Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax, Circle-14, Pune (‘the Assessing Assessee by : Shri P. B. Sandbhor Revenue by : Shri Ramnath P. Murkunde Date of hearing : 27.02.2023 Date of pronouncement : 28.02.2023 ITA No.244/PUN/2020 2 Officer’) vide order dated 23.12.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.1,19,79,180/-. While doing so, the Assessing Officer disallowed foreign education expense of son of the Director of the appellant company of Rs.23,94,605/- and also made addition of Rs.34,45,438/- on account of unsecured loans received during the previous year relevant to the earlier assessment years on the ground that the loans were outstanding for a period of more than 3 years and the appellant had not filed the confirmation letters and had not discharged the onus of proving the genuineness and creditworthiness of the sundry creditors. 3. Being aggrieved, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed the above additions. 4. Being aggrieved, the appellant is in appeal before us in the present appeal. 5. Ground of appeal nos.1 to 4 challenges the disallowance of foreign education expenses of son of the directors of the appellant company, were not pressed during the course of hearing, hence dismissed as not pressed/withdrawn. 6. Ground of appeal no.5 to 7 challenges the addition of Rs.34,45,438/- made u/s 68 as confirmed by the ld. CIT(A). It is submitted before us that before the ld. CIT(A), the appellant filed ITA No.244/PUN/2020 3 the confirmation letters and also establishing the genuineness, creditworthiness and identity of the sundry creditors. It is further submitted that merely because the loans were outstanding for a period of more than 3 years does not lead to the conclusion that the liability is ceased to exist. In support of this, he placed reliance on the following decisions :- (i) CIT vs. Sugauli Sugar Works (P.) Ltd., 236 ITR 518 (SC). (ii) CIT vs. Mahindra and Mahindra Ltd., 404 ITR 1 (SC). (iii) CIT vs. Reliance Industries Ltd., 102 taxmann.com 142 (Bom.) (iv) CIT vs. Shri Vardhman Overseas Ltd., 343 ITR 408 (Delhi). 7. It is further submitted that the loans were not received during the year under consideration and, therefore, the question of disallowance does not arise. He further submitted that there was no cessation of trading liability attracting the provisions of section 41(1) of the Act. In this regard, he placed reliance on the decision of the Jurisdictional High Court in the case of PCIT vs. Batliboi Environmental Engineering Ltd., 446 ITR 238 (Bom.) and CIT vs. Indian Rayon and Industries Ltd., 336 ITR 479 (Bom.). 8. On the other hand, ld. Sr. DR placed reliance on the orders of the lower authorities. 9. We heard the rival submissions and perused the material on record. The issue in the present ground appeal nos.5 to 7 relates to ITA No.244/PUN/2020 4 whether on the facts and circumstances of the case, the Assessing Officer was justified in making addition of Rs.34,45,438/- in respect of sundry creditors for loans outstanding for a period of more than 3 years on the ground that the same were barred by limitation. It is undisputed fact that the subject loans were not received and credited in the books of account of the appellant company for the first time during the previous year relevant to the assessment year under consideration. The Assessing Officer concluded that the debts are barred by limitation since the credits were outstanding for a period of more than 3 years and there were no transactions had taken place in the preceding 3 years. The Hon’ble Bombay High Court in the case of Batliboi Environmental Engineering Ltd. 446 ITR 238 (Bom.) has taken a view that merely because the debts were barred by limitation does not cease to be debts, cannot be treated as an income u/s 28(1) or section 41(1) of the Act following the decision of the Hon’ble Delhi High Court in the case of CIT vs. Jain Exports (P.) Ltd., 217 Taxman 54 (Mag.). The Hon’ble Delhi High Court, in turn, relied upon the decision of the Hon’ble Supreme Court in the case of Bombay Dyeing and Manufacturing Co. Ltd. vs. State of Bombay, AIR 1958 SC 328 and CIT vs. Sugauli Sugar Works (P.) Ltd. 236 ITR 518 similar view was taken by the Jurisdictional High Court in the case of CIT vs. Indian Rayon and Industries Ltd., 336 ITA No.244/PUN/2020 5 ITR 479 (Bom.). Thus, in the light of this settled position of law, it cannot be said that the debts merely because barred by limitation does not cease to be debts and cannot be treated as income invoking provisions of section 41(1) of the Act. 10. Further, as noted by us supra that the relevant credits were received by the appellant company during the previous year relevant to the earlier assessment year, however, the Assessing Officer had sought to be brought to tax as income of the appellant-assessee for the assessment year under consideration. The Jurisdictional High Court in the case of Ivan Singh vs. ACIT, 272 Taxman 36 (Bom.) held that where any sum is found to be credited in the books of account maintained for any previous year in the absence of any proper explanation as regards to the genuineness, creditworthiness and identity of the sundry creditors for such credits, sum so credited can be brought to tax as income of the assessee of that previous year in which the credits were first introduced in the books of account not in the subsequent assessment years after making reference to its earlier decision in the case of CIT vs. Bhaichand N. Gandhi, 141 ITR 67 (Bom.), decision of the Hon’ble Rajasthan High Court in the case of CIT vs. Lakshman Swaroop Gupta & Brothers, 100 ITR 222 (Rajasthan) and the decision of the Hon’ble Supreme Court in the case of Bhor Industries Ltd. vs. CIT, 42 ITR 57 (SC). In view of ITA No.244/PUN/2020 6 the aforesaid enunciation of law, we hold that the Assessing Officer was not justified in making addition on account of unsecured loans of Rs.34,45,438/- as unexplained cash credit in the subsequent assessment years other than the year in which the credits were received. Accordingly, ground of appeal no.5 to 7 stands allowed. 11. In the result, the appeal filed by the assessee stands partly allowed. Order pronounced on this 28 th day of February, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 28 th February, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-9, Pune. 4. The Pr. CIT-6, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.