The Assistant Commissioner of Income Tax, Circle 1(1), Panaji V. M/s Milroc Good Earth Property and Developers LLP, Panaji

ITA 26/PAN/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5159 (ITAT-PANAJI)
• Duration Of Justice: 4 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: WT(D)
• Assessment Year: 2013-2014
• Appeal Filed On: 18-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PREETHI PATEL
• Keywords: Capital asset converted into stock in trade; Additional evidence; Question of law; Commercial expediency; Set aside
• Section: 145; 143(3); 260A; 143(1)

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ,पणजी मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, PANAJI (Through virtual Court- at Raipur) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D BATTULL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 26/PAN/2018 Ĥ×या¢ेपसं./CO.No.06/PAN/2018 (Arising out of ITA No.26/PAN/2018) Ǔनधा[रण वष[ /Assessment Year : 2013-14 The Assistant Commissioner of Income Tax Circle-1(1), Panaji, Goa .......अपीलाथȸ / Appellant बनाम / V/s. M/s. Milroc Good Earth Property and Developers LLP, 501, 5 th Floor Milroc Lar Menezes, S.V. Road, Panaji-Goa - 403001 PAN : AAACG7222M ......Ĥ×यथȸ / Respondent Assessee by : Smt. Preethi Patel, AR Revenue by : Shri Sourabh Nayak, Sr. DR स ु नवाई कȧ तारȣख / Date of Hearing : 22.02.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 06.04.2022 2 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the revenue is directed against the order passed by the CIT(Appeals), Panaji-2, dated 26.04.2017, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income-tax Act, 1961 (in short ‘the Act’), dated 29.03.2016 for assessment year 2013-14. Also the assessee is before us as a cross-objector. Before us the revenue has assailed the impugned order on the following grounds of appeal : “1. The order of the Ld. CIT(A) is opposed to law and facts of the case. 2. Whether the CIT(A) was right deleting the addition of Rs.1,61,56,414/- made by the Assessing Officer on account of interest paid on overdraft. 3. The Ld. CIT(A) failed to appreciate the fact that the Assessing Officer has clearly mentioned in its assessment order that the assessee is having huge work in progress of various projects, but the interest cost incurred has not been allocated to any of the projects but claimed as expenditure in the P & L account. The Assessing Officer applied the ratio of decision of Hon'ble Supreme Court in the case of British Paints India Pvt. Ltd. (184 ITR 44) and disallowed the interest from the administrative expenses and directed it to be added to the work in progress. 4. The CIT(A) failed to sustain the alternative disallowance of interest of Rs.1,11,30,410/- on account of interest bearing funds diverted to the sister concern at lower rate of interest. 5. For these and other grounds that may be adduced at the time of hearing, the order of the CIT(A) may be set aside and the order of the Assessing Officer restored.” 2. Succinctly stated, the assessee had filed its return of income for the assessment year 2013-14 on 30.09.2013, declaring an income of Rs.8,65,42,694/-. 3 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 The return of income filed by the assessee was processed as such u/s. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee had in its Profit & loss a/c debited an amount of Rs. 1,61,56,414/- towards interest paid on Overdraft Account (OD A/c) with the bank. It was noticed by the Assessing Officer that the aforesaid interest expenditure was not included by the assessee in its closing stock of Work-in-Progress (WIP) of its projects. Observing, that the assessee had claimed the entire amount of interest expenditure as a deduction against the revenue generated from its business activities, the Assessing Officer called upon it to justify its aforesaid claim. As the reply filed by the assessee did not find favor with the Assessing Officer, therefore, he included the entire amount of interest expenditure of Rs.1,61,56,414/- (supra) in the closing stock of WIP. 3. Alternatively, the Assessing Officer taking cognizance of the fact that the assessee had borrowed interest bearing funds at a higher rate of interest i.e @ 15.38% p.a from banks and had advanced part of the same to its associates/sister concern /partners at a lower rate of interest i.e @ 4.78% p.a, therefore, disallowed an amount of Rs. 1,11,30,410/- i.e, the differential rate of interest of 10.6% p.a [15.38% (-) 4.78%] on the borrowed funds that were diverted to its associates/sister concerns/partners. Further, it was observed by the Assessing Officer that the assessee in its ‘balance sheet’ had reflected an amount of Rs. 4 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 80,57,738/- as a current liability under the head “Security deposit of sub- contractors”. On being called upon to furnish the full details a/w evidences in respect of its aforesaid outstanding liability, the assessee though placed on record a list of the said sub-contractors, but failed to furnish the details as regards addresses of majority of them. Backed by the aforesaid facts the Assessing Officer called upon the assessee to place on record confirmations and other documentary evidences to substantiate the genuineness of the aforesaid outstanding liabilities. However, the assessee expressed its inability to file the requisite details for the reason that it was unable to contact the parties concerned. Observing, that the assessee had failed to substantiate the genuineness and veracity of the outstanding liability to the extent of Rs.7,62,165/-, the Assessing Officer held the same as bogus and non-existent and added the entire amount to the returned income of the assessee. After, inter alia, making the aforesaid addition/disallowance the Assessing Officer vide his order passed u/s.143(3) of the Act, dated 29.03.2016 determined the income of the assessee at Rs.10,40,16,239/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). In so far the disallowance of interest expenditure of Rs.1,61,56,414/-(supra) was concerned, it was observed by the CIT (Appeals), that a similar addition that was made in the case of the assessee for the immediately preceding year i.e. A.Y. 2012-13 was deleted by his predecessor and his order, 5 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 thereafter, was confirmed by the Tribunal in ITA No.166/PAN/2016, dated 22.11.2016. Accordingly, the CIT(Appeals) respectfully followed the order of the Tribunal and vacated the disallowance of Rs. 1,61,56,414/- (supra) that was made by the Assessing Officer towards interest paid on bank OD. As regards the addition of Rs.7,62,165/- that was made by the Assessing Officer u/s.41(1) of the Act, it was observed by the CIT(Appeals) that the assessee on the basis of bank statements had demonstrated that a liability to the tune of Rs.5,60,566/- (out of Rs. 7,62,165/-) had thereafter been paid/discharged by it till 31.03.2017. Backed by the aforesaid facts, the CIT(Appeals) concluded that as the liability towards the aforesaid creditors to the tune of Rs.5,60,566/-(supra) had been discharged/paid by the assessee, therefore, the same could not be held to have ‘ceased to exist’ on 31.03.2013. Accordingly, the CIT(Appeals) on the basis of his aforesaid observations vacated the addition of Rs. 5,60,566/- (supra) made by the Assessing Officer u/s.41(1) of the Act. As regards the balance addition of Rs.2,01,609/- [Rs. 7,62,165/- (-) Rs. 5,60,566/-], it was observed by the CIT(Appeals) that the said amount was outstanding even on 31.03.2017. It was noticed by the CIT(Appeals) that out of the aforesaid amount the assessee had produced before him confirmations from the parties for an amount of Rs.1,27,306/-. As regards the e balance outstanding liability of Rs.74,303/- (out of Rs. 2,01,609/-) it was observed by the CIT(A) that not only the assessee had failed to place on record the confirmations as regards the same, but in fact had admitted that the liability to 6 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 that extent had ceased to exist. Observing, that the assessee in the course of the proceedings before him had produced as fresh evidence the confirmations as regards the outstanding liability of Rs.1,27,306/-(supra), the CIT(Appeals) declined to admit the same, for the reason, that there was no justification in not filing the same in the course of the assessment proceedings. Backed by his aforesaid deliberations the CIT(Appeals) upheld the addition made by the Assessing Officer u/s 41(1) to the tune of Rs.2,01,609/- (supra). 5. The Revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 6. At the very outset of hearing of the appeal the Ld. Departmental Representative (for short ‘DR’), submitted, that the CIT(Appeals) had gravely erred in vacating the disallowance of assessee’s claim for deduction of interest paid on bank OD of Rs.1,61,56,414/-. It was submitted by the Ld. DR that as the assessee had failed to include the aforesaid interest expenditure in its closing WIP, therefore, the addition of the same was correctly made by the Assessing Officer while framing the assessment u/s. 143(3) of the Act, dated 29.03.2016. Rebutting the aforesaid claim of the Ld. DR, it was submitted by the Ld. Authorized Representative (for short ‘AR’) for the assessee that involving identical facts the asesssee’s claim for deduction of interest paid on OD account was disallowed by the Assessing Officer in its case for the immediately preceding year i.e. A.Y.2012- 7 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 13 which, thereafter, was set-aside by the CIT(Appeals). It was further submitted by the ld. AR that the order of the CIT(A) in the assessee’s appeal for AY 2012-13 had thereafter been upheld by the Tribunal in ITA No.166/PAN/2016, dated 22.11.2016. It was submitted by the Ld. AR that as the issue was squarely covered by the order passed by the Tribunal in the assessee’s own case for the immediately preceding year, therefore, no infirmity could be related to the order of the CIT(Appeals) who had rightly followed the view taken by the Tribunal and vacated the disallowance of interest expenditure for the year under consideration. Adverting to the deletion of the addition made by the CIT(Appeals) qua the liability that had ceased to exist u/s 41(1) of the Act, the Ld. AR submitted that as the assessee had substantiated to the hilt that liability of Rs.5,60,566/- (supra.) was paid/discharged upto 31.03.2017, therefore, the CIT(Appeals) had rightly vacated the addition to the said extent. It was, however, submitted by the Ld. AR that the CIT(Appeals) had erred in sustaining the addition of Rs.2,01,609/- made by the Assessing Officer u/s.41(1) of the Act. Elaborating on his aforesaid contention, it was submitted by the Ld. AR that though the assessee had placed on record confirmations evidencing the existence of the outstanding liabilities to the extent of Rs.1,27,306/- (supra) during the course of proceedings before the CIT(Appeals), however, he had on the basis of a hyper technical approach most arbitrarily brushed aside the same and upheld the view taken by the Assessing Officer. As regards the addition made by the Assessing Officer u/s. 41(1) of the Act of 8 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 Rs.74,303/-, it was submitted by the Ld. AR that though the said liability admittedly had ceased to exist, however, the lower authorities without pointing out the basis as to how such cessation of liability was related by them to the year under consideration i.e. A.Y. 2013-14, had most arbitrarily added/sustained the same in the hands of the assessee. 7. Apropos the claim of the ld. D.R that the Assessing Officer had rightly included the interest cost in the closing work-in-progress of the assessee, we find that the same is a recurring issue which on an earlier occasion too have been looked into by the Tribunal in the case of the assessee for the immediately preceding year i.e. A.Y. 2012-13 in ITA No.166/PAN/2016, dated 22.11.2016. Observing, that the assessee firm had rightly claimed interest expenditure pertaining to the loan of Rs. 10 crore that was raised from Andhra Bank in F.Y 2010-11 as an “administrative expenditure” in its Profit and loss account for the year under consideration, and the same was not to be added to its work-in- progress, it was observed by the tribunal as under : “8. We have considered the rival contentions, we have perused the material on record including case laws relied upon by the rival parties. We have observed that assessee is engaged in the real estate and construction business. The assessee had borrowed an amount of Rs.10 Crores from the Andhra Bank in the financial year 2010-11 on interest @18.25 p.a. , out of which Rs.8 Crores was advanced by the assessee to sister concern MDC @12% p.a.. The said partnership firm is also engaged in real estate and construction and the assessee is partner in the said firm MDC having 50% share in profits. The assessee paid interest of Rs. 1,59,27,795/- to the Andhra Bank on OD of Rs. 10 crores which is stated by the assessee to be sanctioned for working capital purposes. The assessee has in all advanced 9 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 Rs. 30 crores to its sister concern MDC as at 31-03-2012 on which interest income of Rs. 3,37,40,072/- @12% p.a. was earned by the assessee which was offered for taxation by the assessee. The statement has been made before us by learned counsel for the assessee that the assessee had paid interest in the preceding year to the Andhra Bank of Rs. 94,95,392/- on OD account which was allowed by the Revenue in the assessment framed u/s 143(3) of the Act and no additions have been made in the WIP, which is not controverted by the learned Departmental Representative and rather conceded by ld DR. We have further observed that as per Accounting Standard AS-2 relating to the inventories issued by ICAI , it has been stipulated in Accounting Standard AS-2 that interest cost will not be added to the inventories, as under:- "Interest and other borrowing costs are usually considered as not relating to bringing the inventories to their present location and condition and are, therefore, usually not included in the cost of inventories". Further, we have observed that assessee has borrowed the said amount from Andhra Bank for the purpose of working capital facilities which is used for making advance of Rs 8 crores to MDC and also for other purposes for meeting administrative expenses . It is stated that assessee has advanced the said amount to MDC for commercial expediency and placed reliance on the decision of the Hon'ble Supreme court in the case of SA Builders Limited v. CIT (2007) 288 ITR 1(SC).The assessee is partner in MDC entitled for 50% share in profits and the said concern is also engaged in real estate and construction. The Revenue could not controvert the said contention of the assessee that the said amount was advanced keeping in view commercial expediency as stated above, thus keeping in view our above detailed reasoning , we are of the considered view that the addition of Rs.1,59,27,795/- made by the Assessing Officer by disallowing the interest expenses and adding the same to WIP is not sustainable keeping in view peculiar facts and circumstances of the case. The revenue is also not able to show that inventories are acquired out of borrowings and interest is to be capitalised keeping in view AS-16 issued by ICAI. The AS-2 issued by ICAI clearly stipulates that generally the interest shall not be added to the inventories as the same does not usually bring the inventories to the present location and condition The assessee has earned interest income from MDC of Rs.3,37,40,072/- which is offered for taxation , while interest paid for Andhra Bank on OD is Rs.1,59,27,795/- and hence there is net interest income which had been earned by the assessee . We have also noted a peculiar fact that advances received from customer by the assessee as at 31-03-2012 is Rs. 68.57 crores , while closing WIP is Rs. 45.04 crores , thus advances from customer received by the assessee are higher than closing WIP as at 31-03-2012 . Thus , keeping in view our detailed discussions and reasoning as set out above, we donot find any infirmity in 10 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 the appellate order of the learned CIT(A) , which we confirm and refuse to interfere. We order accordingly.” Accordingly, the Tribunal while dismissing the revenues appeal in the case of the assessee for the immediately preceding year i.e AY 2012-13, had concurred with the CIT(A) who had vacated the disallowance of interest expenditure that was made by the Assessing Officer by adding the same to the closing WIP. We find that the aforesaid order of the Tribunal had thereafter been approved by the Hon'ble High Court of Bombay in the case of Pr. CIT Vs. Milroc Good Earth Property and Developers Ltd., Tax Appeal No. 109 of 2017, dated 28.02.2018. The Hon’ble High Court while approving the view taken by the Tribunal had observed as under: “5. We have heard Ms. Susan Linhares, learned Standing Counsel for the Revenue and Mr. A. Kulkarni, learned Counsel for the Respondent. 6. Ms. Linhares, the learned Standing Counsel for the Appellant urged that the appeal involves the question of law, namely whether the Tribunal has ignored the fact that the Assessee has taken loan for development and construction of residential buildings and the findings that the loan was taken for working capital requirement cannot be directly attributed to the work in progress, is incorrect. Mr. Kulkarni, the learned Counsel for the Respondent-Assesses submitted that the question raised is a question of fact and no question of law arises. 7. We have gone through the orders passed by the Assessing Officer, the Commissioner (Appeals) and the Tribunal. The Tribunal and the Commissioner (Appeals) had, after considering the mate before them, found that no additions were made in the work progress, which fact was not controverted by the Departmental Representative and rather it was conceded by the Departmental Representative. The Tribunal observed that the Revenue did controvert the contention of the Respondent-Assessee that amount was advanced keeping in view the commercial expediency The Tribunal also observed that the Revenue was not able to show that the inventories were acquired out of borrowings and interest to be capitalized keeping in view AS-16, issued by the Institute of Chartered Accountants of India. Further, the Tribunal also noted that the advances received from the customers by the Assessee were at Rs. 68.57 crores, while the closing work 11 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 in progress was Rs.45.04 crores and the advances were higher than the closing work in progress a 31 March 2012. These findings, as rightly contended by the lea] Counsel for the Respondent-Assessee, are purely factual issues. 8. Ms. Linhares placed reliance on the decision of the Court in the case of Commissioner of Income-tax vs. M/s. British Paints India Ltd. We have perused this decision. When decision was rendered, the Assessment Years 1963-64 and 196 were under consideration. Mr. Kulkarni has placed on record Section 145 which was applicable to those assessment years. Now, Section 145(2) has been amended and contemplates a notification by the Central Government in respect of the accounting standards to be followed by the class of assessees. Mr. Kulkarni placed reliance on the decision of the Apex Court in the case of J.K. Industries Ltd., and another vs. Union of India and ors.,' in respect of the accounting standards. According to Mr. Kulkarni even though the decision is rendered under the Companies Act, the observations have been made which are relevant for construing Section 145(2) of the Income-tax Act, 1961. Be that as it may, in the decision of the Apex Court in British Paints India Ltd. (supra), itself the Apex Court has indicted what is profit or trade or business and how it is to be ascertained and the questions analogous to the same, as involved in the present appeal, are essentially questions of fact. Both the authorities have rendered a concurrent finding of fact. The learned Standing Counsel for the appellant has not been able to demonstrate as to how the question of law will still arise, if the question of fact rendered by both the authorities are confirmed. The scope of the appeal under Section 260A of the Income Tax Act, is well settled. The High Court will entertain an appeal on pure questions of facts rendered on the assessment of evidence. 9. In the circumstances, since no question of law is involved and we are only called upon to adjudicate the questions of fact, the appeal cannot be entertained and the same is dismissed.” 8. As the facts and the issue involved in the present appeal of the revenue remains same as were there in its case for the immediately preceding year i.e. A.Y.2012-13, therefore, we find no infirmity in the view taken by the CIT(Appeals), who in our considered view had rightly relied upon the order of the Tribunal in the assessee’s own case for the immediately preceding year i.e. A.Y.2012-13 and vacated the disallowance of the interest paid on bank OD of Rs.1,61,56,414/-. We, 12 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 thus, uphold the view taken by the CIT(Appeals) and dismiss the Ground of appeal No. 2 & 3 raised by the revenue before us. 9. We shall now advert to the claim of the revenue that the CIT(Appeals) had erred in not sustaining the alternative disallowance of Rs.1,11,30,410/-(supra) on account of interest-bearing funds that were diverted by the assessee to its associates/sister concerns/partners at a lower rate of interest. 10. Shorn of unnecessary details, it is the alternate claim of the ld. DR that though the assessee had paid higher interest rate i.e 15.38% p.a on loans that were raised from banks, however, it had charged lower interest rate i.e 4.78 % p.a. on advances that were given to its associates/sister concerns/partner i.e. Milroc Development company. Backed by his aforesaid observations the Assessing Officer called upon the assesee to explain as to why the excess interest of Rs. 1,11,30,410/- that was paid to the banks on borrowed funds may not be disallowed. In reply, it was submitted by the assessee that as in the immediately preceding year it had not charged interest on the amounts advanced to its sister concerns at any fixed rate, but had recovered the entire amount of interest that was charged by the bank on the corresponding amounts. It was claimed by the assesee that as it had recovered the entire amount of interest of Rs.1,61,56,414/- pertaining to the amount that was advanced to its sister concern, therefore, its claim for deduction of interest expenditure was nullified as against the interest 13 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 income received. However, the Assessing Officer taking note of the fact that the excess interest that was paid by the assessee on the amount advanced to its sister concern was disallowed in the immediately preceding year i.e. A.Y.2012-13, thus, worked out the disallowance at an amount of Rs.1,11,30,410/-. 11. Before us, it is the claim of the Ld. AR that as in the immediately preceding year the assesee had recovered from its sister concern the corresponding amount of interest that was charged by the bank on the amount that was advanced to it, therefore, its claim for deduction of interest expenditure was nullified against the interest income so received. It was submitted by the Ld. AR that a similar disallowance that was made by the Assessing Officer in the case of the assessee in the immediately preceding year i.e. A.Y. 2012-13 was vacated by the Tribunal and the said order had thereafter been approved by the Hon’ble High Court of Bombay. 12. We have given a thoughtful consideration to the aforesaid issue before us and concur with the claim of the Ld. AR that the grievance of the department qua the alternate disallowance of interest of Rs.1,11,30,410/- (supra) being devoid and bereft of any merit, thus, cannot be accepted. As observed by us hereinabove, now when the assessee had recovered the entire amount of interest that was charged by the bank on the amount which was advanced by it to its sister concern, therefore, as stated by the ld. AR, and rightly so, the claim for deduction of interest expenditure stood nullified in the backdrop of the corresponding interest 14 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 income that was received from the sister concern. Apart from that, we find that a similar alternate disallowance of interest expenditure that was made by the Assessing Officer in the case of the assessee for the immediately preceding year i.e. A.Y. 2012-13 was vacated by the Tribunal, and the said order had thereafter been approved by the Hon’ble High Court of Bombay. Backed by our aforesaid observations we find no merit in the aforesaid grievance of the revenue that the CIT(Appeals) had erred in not sustaining the alternate disallowance of Rs.1,11,30,410/-. The Ground of appeal No.4 raised by the revenue is dismissed in terms of our aforesaid observations. 13. Grounds of appeal No.(s) 1 & 5 being general in nature are dismissed as not pressed. 14. In the result, appeal of the Revenue in ITA No.26/PAN/2018 for the assessment year 2013-14 is dismissed in terms of our aforesaid observations. CO No.06/PAN/2018 A.Y. 2013-14 15. Now, we shall advert to the cross-objection filed by the assessee before us. The assessee has objected to the order of the CIT(Appeals), for the reason, that he had erred in upholding the addition of Rs.2,01,609/- u/s. 41(1) of the Act. As observed by us hereinabove, the assessee in the course of the assessment proceedings had failed to substantiate the existence of the outstanding liability of 15 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 Rs.7,62,165/- (supra) as was so claimed in its books of accounts. Backed by the aforesaid fact the Assessing Officer had dubbed the aforementioned amount as a ceased liability u/s.41(1) of the Act and added the entire amount to the returned income of the assessee. 16. On appeal, as the assesee was able to demonstrate that outstanding liabilities to the extent of Rs. 5,60,566/- (supra) were paid/discharged by it till 31.03.2013, therefore, the CIT(Appeals) vacated the disallowance, though only to the said extent. As regards the balance outstanding liability of Rs.2,01,609/-(supra) that was added by the Assessing Officer u/s.41(1) of the Act, though the assessee had in the course of the proceedings before the CIT(A) produced confirmations from the parties for an amount of Rs.1,27,306/- but the CIT(Appeals) refused to admit the said additional evidence, for the reason, that the assessee had not filed the same in the course of the assessment proceedings. Also, as regards the balance outstanding liability of Rs.74,303/- [Rs. 2,01,609/- (-) Rs. 1,27,306/-] the same was sustained by the CIT(Appeals), for the reason, that not only the assessee had failed to place on record the supporting confirmations, but had also admitted to the cessation of the same. 17. Before us, the assessee by way of the present cross-objection had objected to the sustainability of the addition of Rs.2,01,609/- u/s.41(1) of the Act. On a perusal of the records, we find that there is nothing discernible therefrom which 16 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 would justify the addition of aforementioned amount aggregating to Rs.2,01,609/- [ Rs.74,030/- (+) Rs.1,27,306/-] as a trading liability which had ceased within the meaning of section 41(1) of the Act during the year under consideration. As per section 41(1) of the Act, where an allowance or deduction has been made in the assessment 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 whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year. 18. In sum and substance, the ceased liability can be added u/s. 41(1) of the Act only in the year, when some benefit in respect of trading liability i.e., by way of remission or cessation thereof, had been obtained by the assessee. As such, the addition of a trading liability which had ceased can only be made in the previous year, in which, some benefit in respect of such trading liability by way of remission or cessation thereof, had been obtained by the assessee. In our considered view, the Assessing Officer in the case before us had though pointed out that there is a cessation of liability qua the aforesaid amount of Rs.2,01,609/-, but had failed to place on record any material which would irrefutably evidence that such cessation 17 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 had taken place during the year in question i.e. A.Y. 2013-14, and as a result thereof, the consequential benefit by way of remission or cessation thereof had been obtained by the assessee during the said year itself. We, thus, in terms of our aforesaid observations not being able to persuade ourselves to the summarily dubbing of the aforesaid amount of Rs.2,01,609/- (supra) as the assessee’s ceased liability for the year under consideration vacate the same. Our aforesaid view is fortified by the decision of a coordinate bench of the Tribunal i.e ITAT, Amritsar in the case of Shri Rakesh Kumar Vs. ITO, Jalandhar in ITA No.182/Asr/2017 dated 17.11.2017. Thus, the cross-objection filed by the assessee is allowed in terms of our aforesaid observations. 19. In the result, cross-objection filed by the assessee in CO No.06/PAN/2018 is allowed in terms of our aforesaid observations. 20. In the combined result, appeal of the revenue is dismissed and cross- objection filed by the assessee is allowed in terms of our aforesaid observations. Order pronounced in Open Court on 06 th day of April, 2022. Sd/- Sd/- JAMLAPPA D BATTULL RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 06 th April, 2022 **SB 18 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-2, Panaji 4. The Pr. CIT, Panaji 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, पणजी / DR, ITAT, Panaji. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 19 M/s. Milroc Good Earth Property & Developers, LLP ITA No. 26/PAN/2018 CO No. 06/PAN/2018 Date 1 Draft dictated on 22.03.2022 Sr.PS/PS 2 Draft placed before author 22.03.2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order