JATIN PREMJI GHALA, MUMBAI V. ADDL CIT 1(2), MUMBAI

ITA 339/MUM/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62399 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 13-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARASARTH NAIK

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.339/MUM/2012 (ASSESSMENT YEAR: 2008-09) JATIN PREMJI GHALA, 8TH ROAD, KHAR (WEST), MUMBAI -400 052 ..... APPELLANT VS INCOME-TAX OFFICER, WARD -19(1)(3), PIRAMAL CHAMBERS, LALBAUG, MUMBAI -400 012 .... RESPONDENT PAN : AAGPS 8381 J APPELLANT BY: NONE RESPONDENT BY: SHRI PARASARTH NAIK DATE OF HEARING: 03.05.2012 DATE OF PRONOUNCEMENT: 01.06.2012 O R D E R R.S. PADVEKAR, JM: THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING TH E IMPUGNED ORDER OF THE LD. CIT (A)-22, MUMBAI DATED 04.10.201 1 FOR THE A.Y. 2008- 09. WHEN THIS APPEAL WAS CALLED FOR THE HEARING TH E LD. D.R. FOR THE REVENUE WAS PRESENT AND NONE WAS PRESENT FOR THE AS SESSEE. IT IS SEEN THAT THE NOTICE OF HEARING HAS ALREADY BEEN SERVED ON THE ASSESSEE AND ACKNOWLEDGMENT IS ALSO PLACED ON RECORD. I, THEREF ORE, DECIDED TO DISPOSE OFF THIS MATTER ON MERIT AFTER HEARING THE LD. D.R. 2. THE SOLITARY ISSUE IN CONTROVERSY IS WHETHER THE RE IS A JUSTIFICATION IN MAKING THE ADDITION OF ` 2,43,481/- U/S.41(1) ON THE REASON OF CESSATION OF LIABILITY. 3. THE FACTS REVEALED FROM THE RECORD ARE AS UNDER. THE A.O. HAS OBSERVED THAT FROM THE BALANCE SHEET OF MR. JATIN P . GALA, THE ASSESSEE, ITA 339/M/2012 JATIN PREMJI GHALA 2 A SUM OF ` 2,43,481/- WAS SHOWN AS LIABILITY IN THE NAME OF M /S. SHREE SHIVAM. THE A.O. SOUGHT THE EXPLANATION OF THE ASS ESSEE ON THE SAID OUTSTANDING LIABILITY. THE ASSESSEE STATED BEFORE THE A.O. THAT HE IS A PARTNER IN M/S. SHREE SHIVAM AND AMOUNT OF ` 2,43,481/- IS PARTNERS OVERDRAWN AMOUNT FROM FIRM AND THE SAID AMOUNT IS P AYABLE TO THE FIRM. THE A.O. ASKED THE ASSESSEE COPY OF THE BALA NCE SHEET OF M/S. SHREE SHIVAM FOR THE EARLIER YEARS AND ALSO COPY OF THE BANK ACCOUNTS ETC. THE ASSESSEE INFORMED THE A.O. THAT M/S. SHRE E SHIVAM HAS BEEN DISSOLVED ON 30.06.2004 AND HE HAS FILED THE COPY O F DISSOLUTION DEED OF THE SAID FIRM. THE A.O. HAS REPRODUCED SOME OF THE CLAUSES OF THE DISSOLUTION DEED IN THE ASSESSMENT ORDER AND OBSERV ED THAT IN PARA 4 OF THE DEED OF RESOLUTION IT IS CLEARLY MENTIONED T HAT ALL THE PARTNERS HAVE RELEASED EACH OTHER FROM THERE RESPECTIVE SHAR E, RIGHTS, TITLE, CLAIMS, INTEREST, PROPERTIES, ASSETS AND DEPOSIT OF BUSINESS. IN THE OPINION OF THE A.O. THE LIABILITY OF ` 2,43,481/- AS SHOWN IN THE BALANCE SHEET AS PAYABLE TO M/S. SHREE SHIVAM WAS NOT ACTUA L LIABILITY AS FIRM WAS DISSOLVED IN 2004. HE, THEREFORE, MADE THE ADD ITION OF ` 2,43,481/- TREATING THE SAME AS CESSATION OF LIABILITY. THE A SSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT (A) WHO CONFIRMED THE ORDE R OF THE A.O. THE LD. CIT (A) REJECTED THE CLAIM OF THE ASSESSEE THAT EVE N THE WRITE OFF OF THE LIABILITY IS NOT REQUIRED AS THE SAME CAN BE TAXED IN THE HANDS OF THE ASSESSEE. I HAVE HEARD THE LD. D.R. WHO SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. THE SHORT DISPUTE IN CONTROVERSY IS IN RESPECT O F THE LIABILITY SHOWN BY THE ASSESSEE IN THE BALANCE SHEET (B/S) PA YABLE TO M/S. SHREE SHIVAM IN WHICH HE WAS A PARTNER. NOWHERE, IT IS D ISPUTED THAT THE SAID FIRM WAS DISSOLVED IN 2004. THE A.O. MADE THE ADDITION U/S.41(1). IN MY OPINION, THE SAID ADDITION IS NOT AT ALL JUST IFIED FOR THE FOLLOWING REASONS: I) AS FIRM HAS BEEN DISSOLVED IN JUNE, 2004, SO AT THE MOST THE LIABILITY CEASED IN THE A.Y. 2005-06; ITA 339/M/2012 JATIN PREMJI GHALA 3 II) SEC.41(1) CONTEMPLATES THAT THE ASSESSEE SHOULD HAVE CLAIMED THE DEDUCTION IN RESPECT OF THE SUM SHOWN A S A LIABILITY. WHAT I FIND IS THE LIABILITY RELATING TO CAPITAL AC COUNT OF THE ASSESSEE FIRM IS DISSOLVED. IN MY OPINION, BOTH THE PARTIES BELOW HAVE MISINTERPRETED THE PROVISIONS OF SEC.41(1). I FIND NO JUSTIFICATION TO SUSTAIN THE ADDITION OF ` 2,43,481/- AND I, ACCORDINGLY, DELETE THE SAME. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 ST JUNE 2012. SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 1ST JUNE 2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 22, MUMBAI. 4) THE CIT-19, MUMBAI. 5) THE D.R. SMC BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN