Divya Vasundhara Financiers Pvt.Ltd., Surat V. The Income tax Officer, Ward-1(2), Surat

ITA 331/AHD/2007

• Counselvise Citation: 33120514 RSA 2007
• Duration Of Justice: 4 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-09-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 18-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: M K PATEL
• Keywords: Additional evidence; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.331 / AHD/2007 (ASSESSMENT YEAR 2003-04) DIVYA VASUNDHARA FINANCIERS PVT. LTD., SHREENIKETN, PARSEE SHERI, NAVAPURA, SURAT. VS. ITO, WARD 1(2), SURAT PAN/GIR NO. : AABCD4077C (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI M K PATEL, AR RESPONDENT BY: SHRI O P BATHEJA, DR DATE OF HEARING: 20.09.2011 DATE OF PRONOUNCEMENT: 23.09.2011 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-I, SURAT DATED 21.11.2006 FOR THE ASSESSMENT YEAR 2003 -04. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1) THAT THE LD. CIT(A) - I, SURAT HAS GRIEVOUSLY E RRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OFRS.8,41,3 26/- MADE U/S 41(1) OF THE INCOME TAX ACT, 1961. 2) THAT THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN NOT ADM ITTING THE ADDITIONAL EVIDENCE AND IN NOT AFFORDING PROPER AND ADEQUATE OPPORTUNITY TO THE ASSESSEE. 3) THAT ON FACTS, IN LAW, AND IN THE INTEREST OF JUST ICE, A REASONABLE OPPORTUNITY OUGHT TO HAVE BEEN GRANTED B Y BOTH THE LOWER AUTHORITIES. 3. THE BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE A.O. IN THE ASSESSMENT ORDER THAT ON THE PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE COMPANY AS ON 31.03.2003, IT WAS NOTED THAT THERE A RE SEVERAL VERY OLD TRADING LIABILITIES, WHICH WERE INCURRED BY THE ASS ESSEE COMPANY IN I.T.A.NO. 331 /AHD/2007 2 RESPECT OF ROUTINE BUSINESS OF THE ASSESSEE COMPANY AND THESE ARE SHOWN AS OUTSTANDING. THE A.O. HAS NOTED 22 PARTIES AND AMOUNTS OF SUCH OUTSTANDING LIABILITIES AS ON 31.03.2003. THE A.O. ISSUED A QUESTIONNAIRE DATED 25.07.2005 AND THEREAFTER, VIDE ORDER SHEET E NTRY ON VARIOUS DATES, HE REQUESTED THE ASSESSEE COMPANY TO FURNISH COMPLE TE POSTAL ADDRESS, PAN, CONFIRMATION OF THE CREDITORS ETC. THE A.O. H AS FURTHER NOTED THE ASSESSEE HAS NEITHER FURNISHED PRESENT ADDRESS OF T HESE FIRMS NOR INCOME TAX PAN OR ACKNOWLEDGEMENT OF FILING OF THEIR INCOM E TAX RETURNS OR ANY CONFIRMATION OF ACCOUNTS OR ANY OTHER EVIDENCE, WHI CH PROVES THAT THE AMOUNT AS ON 31.03.2003 IS PAYABLE TO THEM. THE A. O. INVOKED THE PROVISIONS OF SECTION 41(1) OF THE INCOME TAX ACT A ND MADE ADDITION FOR THE ENTIRE AMOUNT PAYABLE TO THESE 22 PARTIES FOR R S.8,41,326/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER PEAL BEFORE US. 4. IT IS SUBMITTED BY THE LD. A.R. OF THE ASSESSEE THAT AS PER LETTER DATED 15.5.2006, SUBMITTED BY THE ASSESSEE BEFORE C IT(A), DETAILED SUBMISSIONS WERE MADE IN RESPECT OF EACH PARTY AND IT WAS POINTED OUT THAT IN SOME OF THE CASES, THE DEDUCTION WAS NOT AL LOWED TO THE ASSESSEE AS REVENUE EXPENDITURE IN ANY YEAR WHETHER THE CURRENT YEAR OR EARLIER YEAR AND WITH RESPECT TO ALL THE PARTIES, THE MAIN REQUI REMENT OF SECTION 41(1) I.E. REMISSION OR CESSATION OF LIABILITY IS NOT PRE SENT AND HENCE, THE PROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE IN T HE FACTS OF THE PRESENT CASE. HE SUBMITTED A COPY OF THIS LETTER DATED 15. 05.2006, WHICH WAS SUBMITTED BEFORE THE LD. CIT(A). RELIANCE WAS PLAC E ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF SUGAULI SUGAR WORKS (P) LTD., 236 ITR 518 (S.C.) AND ON THE TRIBUNAL DECISI ON RENDERED IN THE CASE OF NEW COMMERCIAL MILLS CO. LTD. VS DCIT AS REPORTE D IN 73 TTJ (AHD.) 893. 5. AS AGAINST THIS, IT WAS SUBMITTED BY THE LD. D.R . THAT A CLEAR FINDING IS GIVEN BY THE LD. CIT(A) IN PARA 2.5 AT P AGE 7 OF HIS ORDER THAT I.T.A.NO. 331 /AHD/2007 3 THE ASSESSEE HAS NOT EVEN MADE ATTEMPT TO EXPLAIN A S TO WHY THE A.O.S NOTICE DATED 14.09.2006 SERVED ON THE ASSESSEE ON 1 5.09.2006 FOR PREPARING REMAND REPORT, REMAINED UNATTENDED ON 20. 09.2006. IT IS POINTED OUT THAT THIS IS ALSO NOTED BY THE CIT(A) T HAT THE ASSESSEE HAS FAILED TO EXPLAIN AS TO WHY THESE DETAILS WERE NOT GIVEN AT THE TIME OF ASSESSMENT PROCEEDINGS AND WHY THEY WERE NOT GIVEN TO THE A.O. FOR VERIFICATION DURING REMAND PROCEEDINGS. IT IS ALSO SUBMITTED THAT THIS FINDING IS ALSO GIVEN BY LD. CIT(A) THAT THE ASSESS EE HAS SIMPLY GIVEN THE EXPLANATION WITHOUT ANY PROOF EVEN DURING THE APPEL LATE PROCEEDINGS. IT WAS SUBMITTED THAT UNDER THESE FACTS, THE ORDER OF LD. CIT(A) SHOULD BE CONFIRMED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE A.O. HAS MADE ADDITION BY INVOKING THE PRO VISIONS OF SECTION 41(1) OF THE ACT. AS PER THE PROVISIONS OF SECTION 41(1), IT IS THE FIRST REQUIREMENT THAT THE ASSESSEE MUST GET SOME BENEFIT IN RESPECT OF TRADING LIABILITIES BY WAY OF REMISSION OR CESSATION THEREO F. AS PER THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF SUGAU LI SUGAR WORKS PVT. LTD. (SUPRA), EVEN UNILATERAL ACTION OF THE ASSESSE E OF WRITING BACK THE AMOUNT IN ITS BOOKS OF ACCOUNTS BY CREDITING THE SA ME TO P & L ACCOUNT DOES NOT MEAN REMISSION OR CESSATION OF LIABILITY. THEREAFTER, EXPLANATION (1) WAS INSERTED IN SECTION 41(1) W.E.F. 01.04.1997 AS PER WHICH, IF THE ASSESSEE WRITES BACK THE TRADING LIABILITIES, SUCH UNILATERAL ACTION OF THE ASSESSEE WILL ALSO AMOUNT TO REMISSION OR CESSATION OF THE LIABILITY. BUT IN THE PRESENT CASE, EVEN EXPLANATION (1) IS NOT APPLI CABLE BECAUSE THE ASSESSEE HAS NOT WRITTEN BACK THE LIABILITY IN QUES TION AND IT IS STILL APPEARING IN THE BALANCE SHEET OF THE ASSESSEE COMP ANY AS LIABILITY. UNDER THESE FACTS, WE FEEL THAT THE REQUIREMENT OF SECTION 41(1) IS NOT GETTING FULFILLED AND HENCE, THE PROVISIONS OF SECT ION 41(1) ARE NOT APPLICABLE IN THE PRESENT CASE AS PER THIS JUDGMENT OF HONBLE APEX COURT I.T.A.NO. 331 /AHD/2007 4 RENDERED IN THE CASE OF SUGAULI SUGAR WORKS (P) LTD . (SUPRA). BY RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE APEX COURT IN SUGAULI SUGAR WORKS (P) LTD. (SUPRA), WE HOLD THAT THE PROV ISIONS OF SECTION 41(1) ARE NOT APPLICABLE IN THE PRESENT CASE CONSID ERING THE FACTS OF THE PRESENT CASE. 7. REGARDING THE OBSERVATION OF LD. CIT(A) THAT THE ASSESSEE HAS MERELY GIVEN EXPLANATION WITHOUT ANY PROOF, WE WOUL D LIKE TO OBSERVE THAT THIS IS NOT IN DISPUTE THAT THE LIABILITY IN Q UESTION IS STILL APPEARING IN THE BALANCE SHEET OF THE ASSESSEE COMPANY AS LIABIL ITY AS ON 31.03.2003 BECAUSE THIS FACTS HAS BEEN NOTED BY THE A.O. ALSO ON PAGE 2 OF THE ASSESSMENT ORDER AND HENCE, NO FURTHER PROOF IS REQ UIRED TO BRING HOME THIS POINT THAT THE LIABILITY HAS NOT CEASED TO EXI ST. NO OTHER ADVERSE EVIDENCE HAD BEEN BROUGHT ON RECORD BY THE AUTHORIT IES BELOW TO SHOW THAT THE ASSESSEE HAS OBTAINED ANY BENEFIT IN RESPE CT OF THESE CREDITORS IN THE PRESENT YEAR EITHER IN CASH OR IN ANY OTHER MAN NER. HENCE, THIS OBJECTION OF LD. CIT(A) IS NOT RELEVANT. WE DELETE THE ADDITION MADE BY THE A.O. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . 9. PRONOUNCED IN THE OPEN COURT ON 23 RD SEP., 2011. SD./- SD./- (BHAVNESH SAINI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED : 23.09.2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO. 331 /AHD/2007 5 1. DATE OF DICTATION 22/9 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22/9 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 22/9 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 23/9/2011 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.23/9 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23/9/11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..