EAST COAST ENTERPRISES, MUMBAI V. ITO 20(3)(1), MUMBAI

ITA 3368/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54881 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 11-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 29-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C G K NAIR
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A NO.3368/ MUM/2010 ASSESSMENT YEAR: 2006-07 EAST COAST ENTERPRISES, .. APPELLANT LOK BHAVAN, LOK BHARATI COMPLEX, MAROL, MAROSHI ROAD, ANDHERI(E), MUMBAI-400 059 PA NO.AAAFE 0534 F VS INCOME TAX OFFICER 20(3)(1) .. RESPONDEN T BANDRA KURLA COMPLEX, BANDRA(E) MUMBAI. APPEARANCES: M.P.MEHWALA, FOR THE APPELLANT C.G.K. NAIR , FOR THE RESPONDENT DATE OF HEARING : 11.7.2011 DATE OF PRONOUNCEMENT : 12 -08-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CALLED I NTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 30 TH JANUARY, 2009, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESS MENT YEAR 2006-07. I.T.A NO.3368/ MUM/2010 ASSESSMENT YEAR: 2006-07 2 2. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICA TE IN THIS APPEAL IS, WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE DI SALLOWANCE OF RS.35,59,662/- MADE BY THE AO UNDER SECTION 41(1) OF THE ACT. 3. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS OF ` .65,63,871 ON ACCOUNT OF PAYMENTS TO CONTRACTORS AN D FURTHER AN AMOUNT OF ` .25,74,001 PAYABLE ON ACCOUNT OF GOODS. ON VERIFIC ATION OF RECORDS, THE AO OBSERVED THAT THE EXPENSES ARE OUTSTANDING S INCE 1994-95 ONWARDS AND REMAINED UNPAID TILL THE RELEVANT ASSESSMENT YEAR. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF OUTSTANDING EXPENSES, IF PAID DURING THE SUBSEQUENT ASSESSMENT YEARS I.E. A.Y. 2007-08 AND 2 008-09. FROM THE DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THA T A SUM OF ` .2543,419 IS STILL OUTSTANDING ON ACCOUNT OF SUNDRY CREDITORS FOR GOOD S AND AN AMOUNT OF ` .10,15,843 AGAINST SUNDRY CREDITORS FOR CONTRACTS. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER DISALLOWED THE ENTIRE UNPAID LIABILITY OF ` .35,59,662 UNDER SECTION 41(1) OF THE ACT. AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE CIT(A). THE CIT(A) APPROVED THE STAND OF THE ASSESSING OFFICER, INTER ALIA, OBSERVING THAT THE LIABILITY OF THE APPELLANT FOR MAKING PAYMENTS TO T HE VARIOUS PARTIES OUTSTANDING PRIOR TO 10 TO 12 YEARS HAS ALREADY BARRED BY LIMIT ATION, OR IN OTHER WORDS, THE RELEVANT LIABILITY OF THE APPELLANT HAS CEASED TO E XIST. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 4. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE RECORD OF THE CASE, WE FIND THAT THE ASSESSEE HAD INCURRED THE IMPUGNED LIABILITY FOR ITS BUSINESS NEEDS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUC TION OF RESIDENTIAL BUILDINGS. ALTHOUGH THE CONSTRUCTION OF THE PROJECT WAS COMPLE TED IN THE YEARS 1994-95 TO 1996-97, STILL SOME OUTSTANDING ARE AGAINST SUNDRY CREDITORS FOR CONTRACTORS AND ALSO SUNDRY CREDITORS FOR GOODS. THE LEARNED CIT(A ) HAS OBSERVED THAT LIABILITY OF THE APPELLANT FOR MAKING PAYMENTS TO THE VARIOUS PA RTIES OUTSTANDING PRIOR TO 10 TO 12 YEARS HAS ALREADY BARRED BY LIMITATION, OR IN OT HER WORDS, THE RELEVANT LIABILITY OF I.T.A NO.3368/ MUM/2010 ASSESSMENT YEAR: 2006-07 3 THE APPELLANT HAS CEASED TO EXIST. IN OUR CONSIDER ED VIEW, HOWEVER, MERELY BECAUSE IT IS TIME BARRED AND THE LIABILITY HAS NOT BEEN PA ID OVER A LONG PERIOD OF TIME, IT DOES NOT CEASE TO EXIST. THE CONDITIONS FOR TAXABILITY UNDER SECTION 41(1) ARE THUS NOT SATISFIED. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THE LIABILITY CANNOT BE ADDED UNDER SECTION 41(1). WE, THEREFORE, DIRECT THE ASSE SSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 5. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2011 SD/- (VIJAY PAL RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 12 TH AUGUST, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),31, MUMBAI 4. COMMISSIONER OF INCOME TAX, 20 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH A MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI