ITO 18(3)(4), MUMBAI V. THADARAM KHALDAS TOLANI, MUMBAI

ITA 3149/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7996 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 04-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA N O. 3149 / MUM/2016 ( ASSESSMENT YEAR : 20 12 13 ) INCOME TAX OFFICER WARD 18(3)(4), MUMBAI . APPELLANT V/S SHRI THADARAM KHALDAS TOLANI 64, SUTAR CHAWL, MUMBAI 400 002 PAN ABHPT6162C . RESPONDENT APPELLANT BY : SHR I M.C. OMI NINGSHEN RESPONDENT BY : NONE DATE OF HEARING 14 .1 2 .201 7 DATE OF ORDER 20.12.2017 O R D E R PER SAKTIJIT DEY, J.M. THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 8 TH FEBRUARY 2016, PASSED BY THE LEARNED COMMISSIONER (A PPEALS ) 29 , MUMBAI , FOR A SSESSMENT Y EAR 20 12 13 . 2 . THE ONLY ISSUE ARISING FOR CONSIDERATION IN THE PRESENT APPEAL RELATES TO DELETION OF ADDITION OF ` 97,75,838, MADE UNDER SECTION 41(1) INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). 2 SHRI THADARAM KHALDAS TOLANI 3 . B RIEF FACTS ARE, THE ASSESSEE , AN INDIVIDUAL , IS STATED TO BE ENGAGED IN TH E BUSINESS OF TRADING IN LUBE OIL. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED HIS RETURN OF INCOME ON 29 TH SEPTEMBER 2012, DECLARING TOTAL INCOME OF ` 3,44,521. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON EXAMINING THE BALANC E SHEET OF THE ASSESSEE NOTICED OUTSTANDING SUNDRY CREDITORS OF ` 1,80,12,997. THE ASSESSING OFFICER, THEREFORE, CALLED UPON THE ASSESSEE TO FURNISH CONFIRMATIONS OF THE SUNDRY CREDITORS. IN RESPONSE, ASSESSEE FURNISHED A CHART INDICATING THE NAME AND ADDR ESS OF THE SUNDRY CREDITORS ALONG WITH OUTSTANDING CREDIT BALANCE OF EACH SUNDRY CREDITOR . FROM THE DETAILS FURNISHED, THE ASSESSING OFFICER FOUND THAT OUT OF TOTAL SUNDRY CREDITORS APPEARING IN THE BALANCE SHEET, SUNDRY CREDITORS AMOUNTING TO ` . 1,01,27,08 8 HAS REMAINED OUTSTANDING FOR MORE THAN THREE YEARS. HE, THEREFORE, CALLED UPON THE ASSESSEE TO EXPLAIN WHY SUCH AMOUNT WHICH HAS REMAINED OUTSTANDING FOR MORE THAN THREE YEARS SHOULD NOT BE TREATED AS ASSESSEES INCOME UNDER SECTION 41(1) OF THE ACT ON A CCOUNT OF CESSATION OF LIABILITY. THOUGH, THE ASSESSEE OBJECTED TO THE PROPOSED ACTION OF THE ASSESSING OFFICER AND FURNISHED CERTAIN FACTUAL DETAILS TO INDICATE THAT ALL THE CREDITORS ARE STILL EXISTING WHICH COULD BE FOUND FROM THE PAYMENTS MADE TO THEM SUBSEQUENT TO THE BALANCE SHEET DATE, HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. THE 3 SHRI THADARAM KHALDAS TOLANI ASSESSING OFFICER OBSERVED , SINCE 56.22% OUT O F THE TOTAL SUNDRY CREDITORS HAVE REMAINED OUTSTANDING FOR MORE THAN THREE YEARS , IT HAS TO BE PRESUMED THAT THE SUNDRY CREDITORS ARE NO MORE OUTSTANDING AND TO THAT EXTENT THERE IS REMISSION / CESSATION OF LIABILITY AS PER SECTION 41(1) OF THE ACT. ACCORDINGLY, HE ADDED BACK AN AMOUNT OF ` 97,75,838. BEING AGGRIEVED OF THE ADDITION S O MADE, ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, LD. FIRST APPELLATE AUTHORITY FOUND THAT SUNDRY CREDITORS AMOUNTING TO ` . 1,01,27,088, WHICH HAS REMAINED OUTSTANDING FOR MORE THAN THREE YEARS WERE DUE TO ELEVEN PARTIES. FURTHER, ON VERIFYING THE DETAILS FILED BEFORE THE ASSESSING OFFICER, THE LEARNED COMMISSIONER (APPEALS) FOUND THAT AFTER THE END OF RELEVANT FINANCIAL YEAR I.E., FINANCIA L YEAR 2011 12, THE ASSESSEE HAS ALSO MADE PAYMENT AGGREGATING TO ` . 41,31,504 TO THESE PARTIES . THUS, THE LEARNED COMMISSIONER (APPEALS) WAS OF THE VIEW THAT THE SUNDRY CREDITORS ARE AVAILABLE AND THE LIABILITY STILL CONTINUES IN THE BOOKS OF THE ASSESSEE. RELYING UPON THE DECISION OF THE HON'BLE SUPREME COURT IN SUGAULI SUGAR WORKS PVT. LTD., 236 ITR 518 (SC) AND FEW OTHER DECISIONS OF DIFFERENT HIGH COURT S , THE LEARNED COMMISSIONER (APPEALS) HELD THAT THERE CANNOT BE REMISSION / CESSATION OF LIABILITY UND ER SECTION 41(1) OF THE ACT MERELY BECAUSE THE LIABILITY REMAINS UNPAID FOR 4 SHRI THADARAM KHALDAS TOLANI A PERIOD OF THREE YEARS. ACCORDINGLY, HE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 5 . WHEN THE APPEAL WAS CALLED FOR HEARING, NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE I N SPITE OF ISSUANCE O F NOTICE OF HARING THROUGH RPAD. T HEREFORE, WE PROCEED TO DISPOSE OFF THE APPEAL EX PARTE QUA THE ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ON THE BASIS OF MATERIAL ON RECORD. 6 . HEARD THE LEARNED DEPARTMENTAL REP RESENTATIVE AND PERUSED THE MATERIAL ON RECORD. IT IS EVIDENT , MERELY ON THE REASONING THAT LIABILITY IN RESPECT OF SOME OF THE SUNDRY CREDITORS HAVE REMAINED OUTSTANDING FOR ABOUT THREE YEARS THE ASSESSING OFFICER HAS CONCLUDED THAT THEY HAVE TO BE TREAT ED AS INCOME OF THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR AS THEY HAVE CEASED TO EXIST AS PER SECTION 41(1) OF THE ACT. HOWEVER, AS COULD BE SEEN FROM THE FACTS ON RECORD, IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE NOT ONLY FURNISHED THE NAMES AN D ADDRESS ES OF THE SUNDRY CREDITORS BUT ALSO FURNISHED THE DETAILS OF OUTSTANDING LIABILITY AGAINST EACH OF THOSE CREDITORS. THE ASSESSEE HAS ALSO SUBMITTED THAT HE WAS HAVING BUSINESS TRANSACTIONS WITH THE CONCERNED CREDITORS, THEREFORE, THE SUNDRY CREDIT ORS REPRESENT TRADING LIABILITY OF THE ASSESSEE. THE ASSESSEE ALSO BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER PAYMENTS MADE TO THE CONCERNED CREDITORS SUBSEQUENT TO THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 5 SHRI THADARAM KHALDAS TOLANI UNDER DISPUTE. HOWEVER, THE ASSESSIN G OFFICER HAS NOT FOUND MERIT IN THE AFORESAID SUBMISSIONS OF THE ASSESSEE. AT THIS STAGE, IT IS NECESSARY TO HAVE A LOOK AT THE PROVISIONS OF SECTION 41(1) OF THE ACT. A PLAIN READING OF THE AFORESAID PROVISIONS WOULD MAKE IT CLEAR THAT BEFORE COMING TO T HE CONCLUSION THAT A LIABILITY HAS CEASED TO EXIST OR THERE IS REMISSION / CESSATION OF A PARTICULAR LIABILITY, THREE CONDITIONS ARE TO BE FULFILLED. FIRSTLY, IT MUST BE A TRADING LIABILITY; SECONDLY, THE PERSON SHOWING SUCH LIABILITY MUST HAVE OBTAINED SO ME BENEFIT EITHER IN CASH OR IN ANY OTHER MANNER IN RESPECT OF SUCH LIABILITY AND THIRDLY, SUCH BENEFIT BY WAY OF REMISSION / CESSATION HAS ACCRUED TO THE ASSESSEE IN THE RELEVANT FINANCIAL YEAR. IF WE JUXTAPOSE THE FACTS OF THE PRESENT CASE AGAINST THE CO NDITIONS OF SECTION 41(1) OF THE ACT, IT WILL BECOME CLEAR THAT THE LIABILITY SHOWN BY THE ASSESSEE IS NO DOUBT A TRADING LIABILITY AS THE ASSESSING OFFICER HAS NOT DISPUTED THE CLAIM OF THE ASSESSEE THAT IT HAS BUSINESS TRANSACTION WITH THE CONCERNED PART IES. AS FAR AS ACCRUAL OF ANY BENEFIT EITHER BY WAY OF CASH OR SOME OTHER MANNER TO THE ASSESSEE IN RESPECT OF SUCH LIABILITY, THERE IS NOTHING ON RECORD TO SHOW THAT EITHER THE CREDITORS HAVE WRITTEN OFF THE LIABILITIES IN THEIR BOOKS OF ACCOUNT OR THE AS SESSEE HAS REFUSED TO PAY THE AMOUNT TO THEM. THEREFORE, IT CANNOT BE SAID THAT ANY BENEFIT ON ACCOUNT OF THE LIABILITY HAS ACCRUED TO THE ASSESSEE . THE THIRD CONDITION WHICH IS VERY MUCH CRUCIAL IS, WHETHER THE LIABILITY HAS 6 SHRI THADARAM KHALDAS TOLANI CEASED TO EXIST IN THE IMPUGNE D ASSESSMENT YEAR. AS PER ASSESSING OFFICERS OWN ADMISSION, THE SUNDRY CREDITORS HAVE REMAINED OUTSTA NDING FOR MORE THAN THREE YEARS. T HEREFORE, WHAT PROMPTED THE ASSESSING OFFICER TO CONCLUDE THAT THE LIABILITY HAS CEASED TO EXIST IN THE IMPUGNED ASSESSM ENT YEAR HAS NOT BEEN EXPRESSED BY THE ASSESSING OFFICER. AT LEAST , NO VALID REASONS HAVE BEEN PROVIDED BY THE ASSESSING OFFICER TO INDICATE WHAT LED HIM TO CONCLUDE THAT THE LIABILITY HAS CEASED TO EXIST IN THE IMPUGNED ASSESSMENT YEAR. A READING OF THE P ROVISIONS CONTAINED UNDER SECTION 41(1) OF THE ACT WOULD ALSO MAKE IT CLEAR THAT THE BURDEN IS ON THE ASSESSING OFFICER TO PROVE THAT CONDITIONS OF SECTION 41(1) OF THE ACT HAVE BEEN FULFILLED TO TREAT A LIABILITY AS AN INCOME ON ACCOUNT OF REMISSION OR C ESSATION OF LIABILITY IN A PARTICULAR ASSESSMENT YEAR. IN THE FACTS OF THE PRESENT CASE, IT IS EVIDENT, IN THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF, THE ASSESSEE HAS FURNISHED EVIDENCE BEFORE THE ASSESSING OFFICER TO DEMONSTRATE THAT PAYMENTS HAVE BEEN MADE TO THE CONCERNED CREDITORS SUBSEQUENT TO THE RELEVANT FINANCIAL YEAR. SURPRISINGLY, THE ASSESSING OFFICER HAS GLOSSED OVER THE CONTENTION OF THE ASSESSEE ON THE PRESUMPTION THAT THE ASSESSEE MIGHT HAVE ISSUED BEARER CHEQUES IN THE NAME OF THE CONCERNE D PARTIES. IN OUR VIEW, AFORESAID CONCLUSION OF THE ASSESSING OFFICER WITHOUT MAKING ANY ENQUIRY WITH THE CONCERNED BANK OR FROM ANY OTHER SOURCE CANNOT BE GIVEN MUCH WEIGHT AGE . W HEN THE ASSESSEE 7 SHRI THADARAM KHALDAS TOLANI HAS FURNISHED NAMES AND ADDRESS ES OF THE SUNDRY CREDITORS AND OTHER RELEVANT DETAILS THE ASSESSING OFFICER COULD HAVE CON DUCTED NECESSARY ENQUIRY WITH THE CONCERNED CREDITORS FOR ASCERTAINING THE FACT WHETHER THE LIABILITY IS STILL CONTINUING OR NOT. WITHOUT MAKING ANY SUCH ENQUIRY, THE A SSESSING OFFICER CANNOT PRESUME CESSATION OF LIABILITY. MORE SO, WHEN THE EVIDENCE BROUGHT ON RECORD INDICATE THAT THE ASSESSEE HAS CONTINUED PAYMENT TO THE CONCERNED PARTIES SUBSEQUENTLY TO DISCHARGE THE LIABILITY. THOUGH, THE LEARNED DEPARTMENTAL REPRESE NTATIVE HAS SUBMITTED BEFORE US THAT THE FIRST APPELLATE AUTHORITY HAS CONSIDERED ADDITIONAL EVIDENCES IN VIOLATION OF RULE 46A, HOWEVER, AFTER PERUSING THE RECORD WE HAVE FOUND THAT THE SO CALLED ADDITIONAL EVIDENCES ARE NOTHING BUT DETAILS OF PAYMENT MAD E TO SUNDRY CREDITORS SUBSEQUENT TO THE RELEVANT FINANCIAL YEAR AND PART OF SUCH EVIDENCE WAS ALSO PRODUCED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. THAT BEING THE CASE, WE DO NOT ACCEPT THE CONTENTION OF THE LEARNED DEPARTMENTAL REP RESENTATIVE THAT THE FIRST APPELLATE AUTHORITY HAS COMMITTED ANY GRAVE ERROR WHICH COULD INVALIDATE THE ORDER PASSED BY HIM. THEREFORE, ON OVER ALL CONSIDERATION OF FACTS AND MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THE IMPUGNED ORDER OF THE FIRST APPEL LATE AUTHORITY DOES NOT SUFFER FROM ANY INFIRMITY , HENCE , HAS TO BE U PHELD. ACCORDINGLY, WE DISMISS THE GROUNDS RAISED BY THE REVENUE. 8 SHRI THADARAM KHALDAS TOLANI 7 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.12.2017 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 20.12.2017 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI