ITO WD.21(1)(4), MUMBAI V. RAVIDRA D PHADKE, MUMBAI

ITA 3473/MUM/2010

• Counselvise Citation: 347319914 RSA 2010
• Duration Of Justice: 1 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 03-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS VANDANA SAGAR
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Business expenditure
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI P.M. JAGTAP P.M. JAGTAP P.M. JAGTAP P.M. JAGTAP (AM) AND (AM) AND (AM) AND (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) SMT. ASHA VIJAYARAGHAVAN (JM) SMT. ASHA VIJAYARAGHAVAN (JM) SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO.3473/MUM/2010 ASSESSMENT YEAR-2006-07 THE ITO, WARD 21(1)(4), PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA, MUMBAI VS. MR. RAVINDRA DIGAMBER PHADKE, 1/6, JUHU GULMOHAR CHS, GULMOHAR ROAD, JVPD SCHEME, MUMBAI-400 049 PAN-AACPP7905P (APPELLANT) (RESPONDENT) APPELLANT BY: MRS. VANDANA SAGAR RESPONDENT BY: SHRI M. SUBRAMANIAN O R D E R O R D E R O R D E R O R D E R PER ASHA PER ASHA PER ASHA PER ASHA VIJAYARAGHAVAN (JM) VIJAYARAGHAVAN (JM) VIJAYARAGHAVAN (JM) VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER DATED 4.2.2010 PASSED BY THE LD. CIT(A)-32 FOR THE ASSESSMENT YEAR 2006-07. 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE CONTINUED TO CARRY ON THE BUSINESS OF AUTHORISED SERVICE REPRESENTATI VE OF ADONIS ELECTRONICS PVT. LTD. FOR THE YEAR UNDER CONSIDERATI ON, THE ASSESSEE FILED RETURN OF INCOME DECLARING AN INCOME OF `. 1, 41,557/-. THE RETURN OF INCOME WAS ACCOMPANIED BY COMPUTATION OF TOTAL IN COME, P&L A/C, BALANCE SHEET ETC. THEREAFTER NOTICES U/S. 143(2) AND 142(1) WERE ISSUED. THE ASSESSMENT WAS COMPLETING BY PASSING AN ORDER U/S. 144 DT. 30.12.2008 DETERMINING THE INCOME AT `. 18,65,8 10/- AS AGAINST RETURNED INCOME OF `. 1,41,557/-. ITA NO. 3473/M/2010 2 3. THE ASSESSEE HAS OBJECTED TO THE ADDITION OF `. 14,38 ,178/- AS CESSATION OF LIABILITY U/S. 41(1). 4. ON FURTHER APPEAL BEFORE THE LD. CIT(A), THE CIT (A) HELD AS FOLLOWS: THE ASSESSING OFFICER OBSERVED FROM THE BALANCE SHEET THAT THE ASSESSEE HAS SHOWN LOANS AND LIABILITIES TO THE TU NE OF `. 14,38,178/-. IT HAS BEEN WRITTEN IN THE ASSESSMENT ORDE R IN PARA 6.2 THAT THE UNPAID SUNDRY CREDITORS ARE PRESUMED TO BE MORE THAN THREE YEARS OLD AND WHICH IS NOT YET PAID AMOUNT ING TO `. 14,38,178/-. THE SAID PRESUMPTION ITSELF HAS BEEN CON TROVERTED BY THE AR OF THE ASSESSEE IN HIS SUBMISSION AS NONE OF THE AMOUNT WAS MORE THAN THREE YEARS OLD. THE PRESUMPTION OF THREE YEARS WAS MADE BY THE AO, SINCE THE DETAILS WERE NOT AVAILABLE WITH HIM IN THIS RESPECT. THE ASSESSEE HAS NOT WRITTEN THESE AMOUNTS BACK IN HIS BOOKS OF ACCOUNTS. THESE BORRO WINGS WERE MADE TO MEET THE ROUTINE BUSINESS EXPENDITURE. T HEREFORE, THE ADDITION CANNOT BE SUSTAINED AND SAME IS DIRECTED T O BE DELETED. 5. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US AND HAS R AISED THE FOLLOWING GROUNDS: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S. 41(1) OF THE I.T. ACT OF `. 14,38,178/- SHO WN UNDER THE HEAD SUNDRY CREDITORS IN THE BALANCE SHEET MADE U/S. 41(1) OF THE I.T. ACT. II) THE AO IN HIS ASSESSMENT ORDER PASSED U/S. 144 HAD MADE THE ADDITION U/S. 41(1) IN THE ABSENCE OF DETAIL S OF SUNDRY CREDITORS. ON THAT ISSUE IF CIT(A) HAD ENOUGH MATERIAL TO CONSIDER THE SAME THAT THE SUNDRY CREDITOR S ARE LESS THAN THREE YEARS, THEN HE SHOULD HAVE AFFORDED OPPORTUNITY TO AO R/R 46A. BY NOT DOING SO, HE HAS ADMITTED FRESH EVIDENCE WITHOUT AFFORDING NATURAL JU STICE TO AO AS PROVIDED UNDER RULE 46A AND ON THIS GROUND ALON E THE MATTER NEEDS TO BE SET ASIDE. 6. WE HEARD BOTH THE PARTIES. SEC. 41(1) READS AS FOL LOWS: ITA NO. 3473/M/2010 3 41. [(1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN M ADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXP ENDITURE OR TRADING LIABILITY INCURRED BY THE QUENTLY DURING AN Y PREVIOUS YEAR,- A) THE FIRST MENTIONED PERSON HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRAD ING LIABILITY BY WAY OF REMISSION OR CESSATION THEROF, THE AMOUNT OB TAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHAL L BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACC ORDINGLY CHARGEABLE TO INCOME TAX AS THE INCOME OF THAT PREV IOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WH ICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENC E IN THAT YEAR OR NOT; OR B) THE SUCCESSOR IN BUSINESS HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF W HICH LOSS OR EXPENDITURE WAS INCURRED BY THE FIRST MENTIONED PER SON OR SOME BENEFIT IN RESPECT OF THE TRADING LIABILITY REFERRE D TO IN CLAUSE (A) BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT O BTAINED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRU ING TO THE SUCCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME TAX AS THE INCOME OF THAT PREVIOUS YEAR. FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSIO N LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF SHALL INC LUDE THE REMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT B Y THE FIRST MENTIONED PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINES S UNDER CLAUSE (B) OF THAT SUB-SECTION BY WAY OF WRITING OFF SUCH LIAB ILITY IN HIS ACCOUNTS. 7. HOWEVER, THE LD. CIT(A) HAS OBSERVED THAT THE AOS STATEMENT THAT UNPAID SUNDRY CREDITORS ARE MORE THAN 3 YEARS OLD IS MISCONCEIVED AND HAS BEEN CONTROVERTED BY THE AR OF THE ASSESSEE. F URTHER HE HAS OBSERVED THAT THE ASSESSEE HAS NOT WRITTEN THESE AMOUNTS IN HIS BOOKS OF ACCOUNTS. 8. IN THESE CIRCUMSTANCES WE SHALL REMIT THE MATTER TO THE FILE OF THE AO IN ORDER TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO BRING OUT CLEARLY THE FACTS WHICH HE HAS PRODUCED BEFORE THE LD . CIT(A) AND FAILED ITA NO. 3473/M/2010 4 TO PRODUCE BEFORE THE AO WHILE COMPLETING THE ASSESSMEN T. THEREAFTER AO SHALL DECIDE IN ACCORDANCE WITH LAW AF TER SATISFYING HIMSELF AS TO APPLICABILITY OF PROVISIONS OF SEC. 41(1) . 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 27 TH DAY OF MAY, 2011 SD/- SD/- (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 27 TH MAY , 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR D BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI