The ACIT, Circle-4(1)., Visakhapatnam V. M/s Vinson Industries (P) Ltd, Visakhapatnam

ITA 267/VIZ/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0722 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 13-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Assessee Lawyers: C KAMESWARA RAO

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SRI B.R. BASKARAN, ACCOUNTANT MEMBER I.T.A. NO.267/VIZAG/2008 ASSESSMENT YEAR : 2005-06 ACIT, CIRCLE-4(1) VISAKHAPATNAM VS. M/S. VINSON INDUSTRIES (P) LTD VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AABCV 5959K APPELLANT BY : SHRI G.S.S. GOPINATH, DR RESPONDENT BY : SHRI C. KAMESWARA RAO, CA O R D E R PER SHRI B.R. BASKARAN, ACCOUNTANT MEMBER : IN THE APPEAL OF THE REVENUE FILED AGAINST THE ORDER DATED 13.03.2008 PASSED BY LD CIT(A)-I, VISAKHAPATNAM, THE SOLITARY ISSUE U RGED IS WHETHER THE LD CIT(A) IS RIGHT IN LAW IN DELETING THE ADDITION OF RS.49,1 0,199/- MADE TOWARDS CESSATION OF LIABILITY RELATING TO THE ASSESSMENT YEAR 2005-0 6. 2. THE FACTS RELATING TO THE ISSUE ARE STATED I N BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MULTI LEVEL MARKETING AND IT WAS NOTICED THAT THE MAJOR EXPENDITURE FOR THE ASSESSEE IS THE PAYMENT OF COMM ISSION TO ITS MEMBERS. THE AO CAME ACROSS THE DETAILS OF STALE CHEQUES, I.E. C HEQUES ISSUED TO THE MEMBERS BUT NOT COLLECTED WITHIN SIX MONTHS OF THE DATE OF ISSUE WHICH WAS OUTSTANDING AT A FIGURE OF RS.49,10,199/-. THE AO ADDED THE SAID AMOUNT WITH THE FOLLOWING OBSERVATION. 2 THUS, THE LIABILITY SHALL BE LOGICALLY CEASED TO EXIST AS THE SAME IS OUTSTANDING FOR YEAR AFTER YEAR, THOUGH REVALIDATIO N OF THE SAME CAN BE DONE WITHIN NO TIME AND NOT DONE BY THE ASSESSEE. SINCE THE LD CIT(A) DELETED THE IMPUGNED ADDITION, THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE PARTIES AND CAREFULLY PERU SED THE RECORD. THE LD CIT(A) NOTICED THAT THE ASSESSEE IS IN THE HABIT OF TRANSF ERRING THE AMOUNT PAYABLE TOWARDS COMMISSION TO THE DESIGNATED BANKS, I.E. ID BI AND INDUSIND BANK. THUS THE AMOUNT REPRESENTED BY THE STALE CHEQUES CONTINU ES TO REMAIN IN A SEPARATE BANK. LD CIT(A) ALSO NOTICED THAT THE REVALIDATION OF CHEQUES CANNOT BE DONE SUO MOTTO BY THE ASSESSEE COMPANY AND IT CAN BE DON E ONLY ON THE REQUEST OF THE CONCERNED PERSON. THE LD CIT(A) HAS ALSO CONSI DERED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BOMBAY DYEING MANUFACT URING CO. LTD. VS. STATE OF BOMBAY REPORTED IN AIR 1958 (SC) 328, WHEREIN IT WA S HELD THAT THE BAR OF LIMITATION ONLY EFFECTS THE RIGHT OF THE CREDITOR T O ENFORCE HIS CLAIM IN A COURT OF LAW BUT WOULD NOT WIPE OUT OR OBLITERATE THE LIABIL ITY OR OBLIGATION OF THE DEBTOR TO PAY THE MONIES DUE. AFTER CONSIDERING THE FACTS OF THE CASE, THE LD CIT(A) HAS CATEGORICALLY HELD THAT THE LIABILITY TO PAY SUCH C OMMISSION AMOUNTS HAVE NOT CEASED TO EXIST IN THE HANDS OF THE ASSESS EE. THE LD CIT(A) HAS ALSO NOTICED STALE CHEQUES HAVE BEEN REVALIDATED IN THE SUBSEQUENT YEARS AS AND WHEN THE REQUEST CAME FROM THE CONCERNED MEMBERS. ACCORDINGLY THE LD CIT(A) HAS CONCLUDED THAT THE ASSESSING OFFICER IS NOT COR RECT IN TREATING THE AMOUNTS DEPOSITED IN STALE CHEQUE ACCOUNT AS CESSATION OF L IABILITY AND ACCORDINGLY DELETED THE IMPUGNED ADDITION. 4. FROM THE FOREGOING DISCUSSIONS, IT CAN BE NOTI CED THAT THE LD CIT(A) HAS ANALYSED THE ISSUE IN A PROPER PERSPECTIVE AND HAS TAKEN A CONSCIOUS DECISION. THE ASSESSEE IS FOLLOWING THE ACCOUNTING PRACTICE O F TRANSFERRING THE STALE CHEQUES TO A SEPARATE ACCOUNT AND ALSO REVALIDATING THE SAME AS AND WHEN THE REQUEST CAME FROM THE CONCERNED MEMBER. IN SUCH A KIND OF SITUATION, WE FIND 3 NO REASON TO PRESUME THAT THE AMOUNT REPRESENTED BY THE STALE CHEQUES HAVE CEASED TO EXIST. IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD CIT(A), WE DO NOT FIND ANY INFIRMITY IN HIS DECISION AND ACCORDIN GLY APPROVE THE SAME. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 4.6.2010 SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER VISAKHAPATNAM DATE : 4 TH JUNE, 2010 A COPY OF THIS ORDER IS FORWARDED TO : 01 THE ACIT, CIRCLE-4(1), VISAKHAPATNAM 02 M/S. VINSON INDUSTRIES (P) LTD., 2 ND FLOOR, BALAJI MANGALAGIRI CHAMBERS, SIRIPURAM, VISAKHAPATNAM 03 THE CIT (A)-I, VISAKHAPATNAM 04 THE CIT, VISAKHAPATNAM 05 THE DR, ITAT, VISAKHAPAATNAM 06 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT, VISAKHAPATNAM BENCH