JT CIT 17(3), MUMBAI V. LATE SHRI NARMNDRA R. LATH REP BY L.H ANAND KUMAR LATH, MUMBAI

ITA 3504/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62536 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 02-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAVIN VARMA
• Assessee Lawyers: RAJESH GUPTA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI G.E.VEERABHADRAPPA, PRESIDENT & SHRI I.P.BANSAL (J.M) ITA NO. 4028/MUM/2011(A.Y. 2007-08) LATE NARENDRA KUMAR LATH, L/H.ANAND KUMAR LATH, 55/4, BAWKAR NIWAS, S.M.ROAD, CHUNABHATTI, SION, MUMBAI 400 022. PAN:AAAPL 4206D (APPELLANT) VS. THE JCIT RG. 17(3), MUMBAI. (RESPONDENT) ITA NO.3504/MUM/2011(A.Y. 2007-08) THE JCIT 17(3), MUMBAI. (APPELLANT) VS. LATE NARENDRA KUMAR LATH, L/H.ANAND KUMAR LATH, 55/4, BAWKAR NIWAS, S.M.ROAD, CHUNABHATTI, SION, MUMBAI 400 022. PAN:AAAPL 4206D (RESPONDENT) ASSESSEE BY : SHRI RAJESH GUPTA REVENUE BY : SHRI PRAVIN VARMA DATE OF HEARING : 31/05/2012 DATE OF PRONOUNCEMENT : 20/06/2012 ORDER PER I.P.BANSAL, J.M THESE ARE CROSS APPEALS AND THEY ARE DIRECTED AGAI NST THE ORDER PASSED BY CIT(A)-29, MUMBAI FOR ASSESSMENT YEAR 2007-08. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AS WELL AS REVENUE ARE REPRO DUCED AS UNDER: ASSESSEES GROUNDS: ON FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW: ITA NO. 4028&3504/MUM/2011(A.Y. 2007-08) 2 A. THE LEARNED CIT (A) ERRED IN CALCULATING ACCR UED INCOME ON ACTIONABLE CLAIM WHICH IS NOT VALID IN LAW BECAUSE THE RIGHTS TO THE DEBTS (ARISING FROM A COMPANY WHICH WAS SUPPOSED TO HONOUR THE SAID ACTIONABLE CLAIM IS UNDER LIQUIDATION) HAVE BEEN AS SIGNED TO M/S GRAND VIEW ESTATE PRIVATE LIMITED WHO SHALL RECEIVE THE CLAIM ON FINAL SETTLEMENT AND NOT THE APPELLANT. B. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE ASSESSING OFFICER VIDE THE ASSESSMENT ORDER DATED 29.12.2009, POINT N O. 4.6 MENTIONS AS BELOW: AS PER THE DEED OF ASSIGNMENT DATED 10.01.2007, TH E ASSESSEE HAS ALREADY RECEIVED A SUN OF RS. 4,36,37,583/- AGAINST ALL RIGHT, CLAIM, TITLE, INTEREST, ESTATE, DEMAND TO THE DEBT AND THE UNDERLYING FINANCIAL INSTRUMENTS. AS NOTHING MORE TO RECEIVE BY THE ASSE SSEE, THE REAL INCOME HAS ONLY TO BE OFFERED TO TAXATION. THE REAL INCOME I.E. 4,36,37,583/- HAS ALREADY BEEN OFFERED FOR TAXATION. C. THE APPELLANT CRAVES, LEAVE TO ADD, ALTER AND AM END ANY OR ALL GROUNDS OF APPEAL BEFORE OR DURING THE PROCEEDINGS OF THE APPEAL. REVENUES GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO FOR RS.3,44,91,214/- U/S. 41(1) OF THE I.T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN NOT ALLOWING AO TO VERIFY THE F RESH EVIDENCE SUBMITTED BY APPELLANT U/R 46A OF THE I.T RULES 196 2 DURING THE APPELLATE PROCEEDINGS. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A ) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFIC ER BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD A NEW GROUND, WHICH MAY BE NECESSARY. 2. THE ASSESSEE IN THE PRESENT CASE IS SHRI NAREDRA KUMAR LATH, WHO WAS THE PROPRIETOR OF A CONCERN UNDER THE NAME AN D STYLE OF M/S. ANAND TRADERS AND SINCE THE ASSESSEE IS DECEASED HE IS RE PRESENTED BY HIS SON, SHRI ANAND KUMAR LATH, AS LEGAL HEIR AND REPRESENTA TIVE. ITA NO. 4028&3504/MUM/2011(A.Y. 2007-08) 3 2.1 THE DECEASED ASSESSEE HAD BEEN CARRYING ON THE BUSINESS OF SUPPLY OF RAW COTTON TO M/S. SWADESHI MILLS COMPANY LTD. ( IN SHORT SWADESHI) AND THE ASSESSEE WAS HAVING OUTSTANDING AMOUNT RECEIVABLE FROM THE SAID COMPANY AS ON 31/3/2006 OF RS. 2,67, 22,963/-. IN THE EARLIER YEARS SWADESHI WAS OWING A SUM OF RS.4,3 6,37,533/- AND TO RECOVER THE SAID AMOUNT ASSESSEE HAD OBTAINED DECRE E ON 28/7/1997 IN SUIT NO.2142 FOR THE RECOVERY OF THE SAID AMOUNT PLUS I NTEREST @ 18% PER ANNUM FROM THE DATE OF THE DECREE TO THE DATE OF RE ALIZATION. ON 13/2/2002 SWADESHI WINDED UP. THEREFORE, ASSESSEE COULD NO T EXECUTE AFOREMENTIONED DECREE. DURING THE PROCESS THE PETI TION WAS FILED BY THE DECEASED ASSESSSEE TO THE OFFICIAL LIQUIDATOR OF BOMBAY HIGH COURT FOR CLAIMING A SUM OF RS. 8,33,74,831/- IN PETITION N O.3016 OF 2001 AND THE OFFICIAL LIQUIDATOR OF BOMBAY HIGH COURT VIDE ORDE R DATED 16/2/2006 HAD ADMITTED THE CLAIM OF THE ASSESSEE FOR A SUM OF RS . 8,06,69,709/- AS ORDINARY CLAIM AGAINST THE CLAIMED AMOUNT OF RS. 8,33,74,831/-. IT IS THE CASE OF THE ASSESSEE THAT AFTER HAVING RESISTED 10 YEARS OF FINANCIAL CRISIS, THE ASSESSEE WAS COMPELLED TO ASSIGN THE DECREE IN FAV OUR OF M/S. GRAND VIEW ESTATE PVT. LTD. ( IN SHORT GRAND) AT PRESENT REALIZABLE VALUE OF THE SAID CLAIM AMOUNTING TO RS.4,36,37,583/- ( AMOUNT AS ORIGINALLY CLAIMED IN THE DECREE ORDER OF 1997) BY WAY OF DEED OF ASSIGNMENT DATED 10/1/2007 AND OFFICIAL LIQUIDATOR OF THE HIGH COURT WAS ALSO INFO RMED OF THE SAID FACT. 2.2 IT IS ALSO THE CASE OF THE ASSESSEE THAT DURING THE INTERVENING PERIOD SWADESHI HAD SUPPLIED THE ASSESSEE SOME FINISHED MATERIAL AND IN THIS MANNER THE AMOUNT OF RS.4,36,37,583/- WAS REDUCED T O RS.2,67,22,963/- AND THE SAID AMOUNT WAS RECOVERED FROM SWADESHI IN THE FORM OF FINISHED GOODS. SUCH RECOVERED AMOUNT OF RS. 1,69,03,620/- HAS BEEN OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME UNDER SECTION 41(4) OF THE INCOME TAX ACT (THE ACT) IT IS ALSO THE CASE OF THE ASSESSEE THAT AS THE SAID AMOUNT HAS BEEN OFFERED TO TAX AND APPROPRIATE TAX HAS BEEN PA ID IN THE RETURN OF ITA NO. 4028&3504/MUM/2011(A.Y. 2007-08) 4 INCOME, THE OTHER AMOUNT I.E. THE BALANCE OF RS. 2, 67,33,396/- BEING DEBT RECEIVABLE ONLY WAS NOT ASSESSABLE TO INCOME. 2.3 IT IS ALSO THE CASE OF THE ASSESSEE THAT HE HAS NOT RECEIVED ANY OTHER AMOUNT EXCEPT A SUM OF RS.4,36,37,583/- FROM GRAN D AND SUM OF RS.1,69,03,620/-(FROM SWADESHI) IN THE SHAPE OF G OODS. THUS IN SHORT THE CASE OF THE ASSESSEE IS THAT WHATEVER EXTRA AMOUNT HAS BEEN RECEIVED BY THE ASSESSEE FROM RECOVERY OF THE DUES OF RS. 4,36,37, 583/- HAS BEEN DECLARED AS INCOME. NO AMOUNT OTHER THAN ABOVE HAS BEEN RE CEIVED AFTER THE ASSIGNING OF THE DEBT. THERE IS NO PROVISION IN TH E ASSIGNMENT DEED TO RECEIVE ANY EXTRA AMOUNT AS THE EXTRA RECOVERY, I F ANY, WILL BE APPROPRIATED BY GRAND ONLY AS PER TERMS OF THE ASSIGNMENT DEE D. 2.4 THE AFOREMENTIONED FACTS RELATE TO THE ISSUE RA ISED BY THE ASSESSEE IN HIS APPEAL AND SO FAR AS IT RELATES TO THE ISSUE RA ISED BY THE REVENUE IN ITS APPEAL, THE FACTS ARE THAT IT WAS NOTICED BY THE A O THAT IN THE BALANCE SHEET AS ON 31/3/2007 THE ASSESSEE HAD SHOWN SUNDRY CRED ITORS AGGREGATING TO AN AMOUNT OF RS. 3,44,91,214/- AND SAID AMOUNT WAS ADDED BY THE AO IN THE INCOME OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 41(1) OF THE INCOME TAX ACT,1961. THE ADDITION IS ALSO MADE FOR THE REASON THAT ASSESSEE DID NOT FILE CONFIRMATIONS FROM THE CREDITORS WHICH CONFIRMATIONS ARE STATED TO BE FILED ONLY BEFORE THE CIT(A) BASED UPON WHICH THE CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE AND IT IS THE CONTENTION OF THE REVENUE THAT THOSE CONFIRMATIONS HAVE BEEN ACCEPTED BY CIT(A) WITHOUT CONFRONTING THE SAME TO THE AO AND, THEREFORE, THE ADDITION HAS BEEN DELETE D IN VIOLATION OF THE PROVISIONS OF RULE 46A OF THE INCOME TAX RULES, 196 2(THE RULES). 2.5 ON THE FIRST ISSUE THE AO, ON THE FACTS STATED AS ABOVE, TAKING THE AMOUNT OF RS. 8,06,69,709/-, THE AMOUNT AS STATED I N THE AFOREMENTIONED ORDER DATED 16/2/2006 PASSED BY OFFICIAL LIQUIDATOR OF THE HIGH COURT, HAS REDUCED THERE-FROM THE TWO AMOUNTS OF RS. 2,67,33, 964/-(RECEIVABLE FROM ITA NO. 4028&3504/MUM/2011(A.Y. 2007-08) 5 SWADESHI) AND AN AMOUNT OF RS.1,69,03,619/- (ADDE D BY THE ASSESSEE TO ITS INCOME UNDER SECTION 41(4) OF THE ACT) HAS ADDE D A SUM OF RS. 3,70,32,126/- TO THE INCOME OF THE ASSESSEE WHICH H AS BEEN SUSTAINED BY LD. CIT(A). THE ADDITION HAS BEEN SUSTAINED BY LD . CIT(A) ON THE FOLLOWING GROUNDS: (1) THE OFFICIAL LIQUIDATOR OF HONBLE HIGH COURT VID E ORDER DATED 16/2/2006 HAS ALLOWED THE CLAIM OF THE ASSESSEE FOR A SUM OF RS. 8,06,69,709/- AND NO DISPUTE REGARDING THAT AMOUNT IS THERE AND THERE IS NO FURTHER LITIGATION. THE SAID AMOUNT HA S UNCONDITIONALLY ACCRUED TO THE ASSESSEE. (2) THE SURPLUS AMOUNT OVER AND ABOVE THE DEBT WAS NOTH ING BUT INTEREST PAYABLE TO THE ASSESSEE FOR THE PERIOD OF DELAY AND ASSIGNMENT OF ACTIONABLE CLAIM BY THE ASSESSEE TO GRAND ON 1 0/1/2007 WILL NOT CHANGE THE NATURE OF THE INCOME WHICH HAD ALREADY BEEN ACCRUED TO THE ASSESSEE. (3) THE AWARD BY THE OFFICIAL LIQUIDATOR HAD GRANTED THE ASSESSEE AN UNDISPUTED LEGAL RIGHT TO RECEIVE THE COMPENSATION , THEREFORE, AO WAS RIGHT IN ADDING THE SAME AS PER DECISION OF THE DEL HI HIGH COURT IN THE CASE OF SARASWATI INSURANCE COMPANY LTD., 252 ITR 4 30(DEL) AND SUCH VIEW IS ALSO SUPPORTED BY THE HONBLE SUPREME COURT IN THE CASE OF UNITED PROVINCE ELECTRIC SUPPLY COMPANY 244 ITR 764 (SC). 3. AFTER NARRATING THE FACTS LD. A.R PLEADED THAT T HERE IS NO DISPUTE THAT THE ASSESSEE HAD RECEIVED COMMUNICATION FROM THE O FFICIAL LIQUIDATOR OF THE HIGH COURT , ACCORDING TO WHICH THE CLAIM OF THE AS SESSEE WAS ALLOWED TO RS. 8,06,69,709/-, AGAINST THE CLAIM MADE BY THE ASSESS EE OF A SUM OF RS.8,33,74,831/-. FURTHER, LD. A.R SUBMITTED THAT THE ASSESSEE COULD NOT GET ANY AMOUNT, THEREFORE, THE SAID DECREE WAS ASSI GNED TO GRAND FROM WHOM THE ASSESSEE HAD RECEIVED ONLY A SUM OF RS.4,3 6,37,583/- VIDE CHEQUE NO.635304 DATED 10/1/2007 TOWARDS ASSIGNING OF THE AFOREMENTIONED ITA NO. 4028&3504/MUM/2011(A.Y. 2007-08) 6 DECREE. LD. A.R IN THIS REGARD REFERRED TO THE ORD ER OF THE OFFICIAL LIQUIDATOR, COPY OF WHICH IS PLACED AT PAGE 17 OF THE PAPER B OOK AND ALSO THE LETTER OF GRAND, COPY OF WHICH IS PLACED AT PAGE-1, OF THE PAPER BOOK. HE ALSO REFERRED TO THE COPY OF DEED OF ASSIGNMENT ENTERED INTO BY THE ASSESSEE WITH GRAND WHICH IS PLACED AT PAGE 2 TO 11 OF THE PAPE R BOOK AND ALSO THE COPY OF SUMMARY SUIT FILED IN THE HIGH COURT, WHICH IS PLACED AT PAGES 12 TO 16 OF THE PAPER BOOK. HE SUBMITTED THAT NO NOTIONAL I NCOME COULD BE ASSESSED AS ASSESSEE HAS NOT RECEIVED ANY AMOUNT WHICH HAS NOT BEEN EITHER DISCLOSED AS INCOME OR IS RECEIVABLE AS DEBT. HE, THEREFORE, SUBMITTED THAT THE ADDITION OF RS. 3,70,32,126/- HAS WRONGLY BEEN CONFIRMED BY CIT(A) AND THE SAME IS REQUIRED TO BE DELETED. 4. ON THE OTHER HAND, LD. D.R RELYING UPON THE ORD ER PASSED BY AO & CIT(A) VEHEMENTLY PLEADED THAT ADDITION HAS RIGHTLY BEEN SUSTAINED BY CIT(A). HE SUBMITTED THAT THE ASSESSEE HAD UNDISPU TEDLY GOT A RIGHT TO RECEIVE THE AMOUNT OF RS.8,06,69,709/- AND THUS THE SAID AMOUNT HAD ACCRUED TO THE ASSESSEE. THE AGREEMENT OF THE ASS ESSEE WITH GRAND IS A SUBSEQUENT EVENT VIDE WHICH THE ASSESSABLE INCOME O F THE ASSESSEE CANNOT BE REDUCED. THUS IT WAS SUBMITTED BY LD. D.R THAT ADDITION HAS RIGHTLY BEEN SUSTAINED BY CIT(A) AND HIS ORDER ON THIS ISSUE SH OULD BE UPHELD. 4.1 IT WAS FURTHER SUBMITTED BY LD. D.R THAT THE CO MPUTATION OF THE ASSESSEE WILL REVEAL THAT A SUM OF RS.1,69,03,620/- IS ADDED UNDER THE PROVISIONS OF SECTION 41(4) OF THE ACT. HE SUBMITT ED THAT THE SAID AMOUNT CAN BE ADDED ONLY IF THE AMOUNT WAS CLAIMED BY THE ASSESSEE IN EARLIER YEARS AS BAD DEBT. HE SUBMITTED THAT FROM THE FACTS IT I S NOT CLEAR THAT WHETHER OR NOT THE ASSESSEE HAD CLAIMED THE ENTIRE AMOUNT AS B AD DEBT. HE SUBMITTED THAT IN CASE IF THE ENTIRE AMOUNT WAS CLAIMED AS BAD DEBT IN EARLIER YEAR THEN THE ISSUE SHOULD BE RESTORED BACK TO THE FILE OF AO FOR EXAMINING THE SAME. ARGUING ABOUT THE APPEAL FILED BY THE RE VENUE, IT WAS SUBMITTED BY ITA NO. 4028&3504/MUM/2011(A.Y. 2007-08) 7 LD. D.R THAT ASSESSEE DID NOT SUBMIT ANY CONFIRMATI ON BEFORE THE AO. THE CONFIRMATIONS WITH REGARD TO SUNDRY CREDITORS WAS SUBMITTED BY THE ASSESSEE ONLY BEFORE LD. CIT(A). THEREFORE, HE PLE ADED THAT LD. CIT(A) HAS ACTED IN VIOLATION OF RULE 46A AS THE ADDITION HAS BEEN DELETED WITHOUT REFERRING THOSE CONFIRMATIONS TO THE AO. LD. D.R S UBMITTED THAT THE MATTER SHOULD RESTORED BACK TO THE FILE OF AO FOR RE-ADJUD ICATION. 5. ON THE OTHER HAND WITH REGARD TO APPEAL OF REVEN UE LD. A.R RELIED UPON THE ORDER PASSED BY CIT(A) AND HE SUBMITTED CONFIR MATIONS HAVE BEEN SUBMITTED BEFORE CIT(A) AND ADDITION HAS RIGHTLY B EEN DELETED BY HIM AND HIS ORDER ON THIS ISSUE SHOULD BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. WHILE MAKING THE ADDITI ON OF RS.3,70,32,126/- IT IS THE MAIN CASE OF AO THAT OFFICIAL LIQUIDATOR OF THE HIGH COURT HAD ALLOWED THE CLAIM IN FAVOUR OF THE ASSESSEE OF A SUM OF R S.8,06,69,709/- AND THUS THE SAID AMOUNT HAD ACCRUED TO THE ASSESSEE AND IT DOES NOT MAKE ANY DIFFERENCE THAT WHETHER OR NOT THE ASSESSEE HAS REC EIVED THE SAID AMOUNT. REDUCING FROM THE SAID SUM OF RS. 8,06,69,709/- AN AGGREGATE AMOUNT OF RS. 4,36,37,583/- ( RS.2,67,33,964/- ON ACCOUNT OF OPENING DEBIT BALANCE OUTSTANDING IN RESPECT OF SWADESHI + RS.1,69,03, 619/- ADDED BY THE ASSESSEE UNDER SECTION 41(4) OF THE ACT), A.O HA S MADE THE ADDITION OF RS.3,70,32,126/-. AGAINST THE AFOREMENTIONED CASE OF AO IT IS THE CASE OF THE ASSESSEE THAT THOUGH THE AMOUNT OF RS.8,06,69,7 09/- WAS ALLOWED BY THE OFFICIAL LIQUIDATOR BUT NOTHING HAS BEEN RECEIVED B Y THE ASSESSEE TILL DATE. THE ASSESSEE HAD ASSIGNED THE AFOREMENTIONED AMOUNT BY WAY OF AN AGREEMENT TO GRAND AND WHAT IS RECEIVED BY THE AS SESSEE IS ONLY A SUM OF RS.4,36,37,583/- OUT OF WHICH ASSESSEE HAD ALREADY RECOVERED A SUM OF RS. 1,69,03,619/- WHICH WAS DECLARED UNDER SECTION 41(4 ) OF THE ACT AND NO OTHER AMOUNT WAS REQUIRED TO BE ADDED TO THE INCOME OF THE ASSESSEE. THUS ITA NO. 4028&3504/MUM/2011(A.Y. 2007-08) 8 THE ASSESSEE IS ASSAILING THE ACTION OF THE AO FO R ADDITION OF RS.3,70,32,126/-. 6.1 BEFORE, PROCEEDING FURTHER IT WILL BE RELEVANT TO REPRODUCE THE ORDER OF OFFICIAL LIQUIDATOR. NOTICE OF ADMISSION OF PROOF TO MR. NARENDRA, S/O. RAMDEO LATH, M/S. ANAND TRADING, 182/A, ANAND VATIKA, 15 TH ROAD, CHEMBUR, MUMBAI - 400 071. SUBJECT:- YOUR CLAIM NO. FOR 8,33,74,831/- SIR, YOU ARE HEREBY INFORMED THAT YOUR CLAIM AGAINST THE ABOVE COMPANY HAS BEEN ALLOWED FOR A SUM OF RS.8,06,69,709/- AS O RDINARY CLAIM AGAINST YOUR FOR RS.8,33,74,831/- THE BALANCE AMOUN T HAS BEEN REJECTED AS NOT PROVED. AND TAKE FURTHER NOTICE THAT SUBJECT TO THE POWER O F THE COURT TO EXTEND THE TIME NO APPLICATION TO RESERVE OR VARY M Y DECISION IN REJECTING EITHER IN FULL OR IN PART ANY OF YOUR CL AIM AS AFORESAID WILL BE ENTERTAINED AFTER THE EXPIRATION OF 21 DAYS FROM TH E DATE OF SERVICE OF THIS NOTICE. DATED THIS 15 TH DAY OF FEBRUARY 2006. SD/-PG RAO. 6.2 A PERUSAL OF THE AFOREMENTIONED NOTICE OF ADMI SSION OF PROOF WILL REVEAL THAT THE CLAIM TO THE EXTENT OF RS.8,06,69,7 09/- WAS ALLOWED AND IT WAS NOT PAID TO THE ASSESSEE. THE AFOREMENTIONED C LAIM AFTER A GAP OF ALMOST ONE YEAR I.E. ON 10/1/2007 WAS TRANSFERRED B Y THE DEED OF ASSIGNMENT BY THE PROPRIETARY CONCERN OF THE ASSES SEE TO GRAND. COPY OF THIS ASSIGNMENT AGREEMENT IS ALSO FILED. A BARE P ERUSAL OF THE SAID DEED OF ITA NO. 4028&3504/MUM/2011(A.Y. 2007-08) 9 ASSIGNMENT WILL REVEAL THAT ASSESSEE HAD ACCEPTED A SUM OF RS. 4,36,37,583/- VIDE CHEQUE NO.635304 DATED 10/1/2007 ON ACCOUNT OF ASSIGNMENT OF THE ALLOWANCE OF CLAIM BY THE OFFICE OF OFFICIAL LIQUIDATOR OF HIGH COURT AMOUNTING TO RS. 8,06,69,709/-. AFTER R ECEIVING SUCH PAYMENT ALL RIGHTS RELATING TO THE SAID DEBT HAVE BEEN CON VEYED TO THE ASSIGNEE WHO SHALL BE DEEMED TO BE FULL AND ABSOLUTE LEGAL OWNE R LEGALLY ENTITLED TO RECEIVE THE REPAYMENT OF THE DEBT OR PART THERE-O F INCLUDING THE RIGHT TO FILE A SUIT OR INSTITUTE SUCH OTHER LAWFUL RECOVERY PROC EEDING AND IT IS CLEAR FROM THE FOLLOWING RECITAL OF THE DEED OF ASSIGNMENT. NOW,, THEREFORE, THIS DEED WITNESSETH IN FURTHERA NCE TO THE CONSIDERATION, PAID BY THE ASSIGNEE VIDE CHEQUE NO. 635304 DATED 10 TH JANUARY,07 FOR RS.4,36,37,583/-(RUPEES FOUR CRORES THIRTY SIX LAKHS THIRTY SEVEN THOUSAND FIVE HUNDRED AND EIGHT THREE ONLY) TO THE ASSIGNOR ON SIGNING THESE PRESENTS, THE ASSIGNOR DO TH HEREBY UNCONDITIONALLY AND ABSOLUTELY ASSIGN UNTO THE ASS IGNEE, WITHOUT THE ASSIGNEE HAVING ANY RIGHT OF RECOURSE TO THE ASSIGN OR, ALL THAT RIGHT, TITLE AND INTEREST BENEFIT IN AND TO THE DEBT AND I NCIDENTAL RIGHTS THERETO, UNTO THE ASSIGNEE FOREVER FROM THE DATE HE REOF TO THE END AND INTENT THAT THE ASSIGNEE SHALL HEREAFTER BE DEEMED TO BE THE FULL AND ABSOLUTE LEGAL OWNER AND AS SUCH THE ONLY PERSON LE GALLY ENTITLED TO RECEIVE THE REPAYMENTS OF DEBTS OR ANY PART THEREOF INCLUDING THE RIGHT TO FILE A SUIT OR INSTITUTE SUCH OTHER LAWFUL RECOV ERY PROCEEDINGS AND TAKE SUCH OTHER ACTION AS MAY BE REQUIRED FOR THE P URPOSE OF RECOVERY OF THE DEBTS IN ITS OWN NAME AND RIGHTS AND AS AN A SSIGNEE AND NOT MERELY AS A REPRESENTATIVE OR AGENT OF THE ASSIGNOR . 6.3 IN VIEW OF THE ABOVE POSITION IT CANNOT BE SAI D THAT ASSESSEE COULD EVER RECEIVE THE AFOREMENTIONED AMOUNT OF RS. 8, 06,69,709/-. THE SAID AMOUNT CANNOT ALSO BE SAID TO HAVE ACCRUED TO THE A SSESSEE AS WHAT HAS BEEN ORDERED BY THE OFFICIAL LIQUIDATOR IS THE NO TICE OF ADMISSION OF PROOF AND NOT THE ADMISSION OF THE PAYMENT TO BE MADE OF THE SAID AMOUNT. THE PAYMENT OF THE SAID AMOUNT WILL DEPEND UPON SEVERAL OTHER CIRCUMSTANCES AND IT IS A MATTER OF FACT THAT TILL DATE THE ASSE SSEE HAD NOT RECEIVED ANY AMOUNT. IT IS ALSO A MATTER OF FACT THAT AFTER ALM OST ONE YEAR THE CLAIM WAS ASSIGNED TO OTHER PARTY WHO ONLY HAS THE RIGHT T O RECEIVE THE CLAIM, IF ANY, GIVEN IN THE NAME OF THE ASSESSEE. THEREFORE, WE A RE OF THE OPINION THAT THE ITA NO. 4028&3504/MUM/2011(A.Y. 2007-08) 10 AFOREMENTIONED AMOUNT HAVING NOT BEEN RECEIVED OR ACCRUED TO THE ASSESSEE CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE. NOW THE QUESTION ARISE THAT WHILE MAKING THE ADDITION THE AO HAS OBSERVED THAT THE AMOUNT OF RS.5,39,35,745/- WAS TO BE DEEMED AS INCOME OF THE ASSESSEE UNDER SECTION 41(4) OF THE ACT. FROM THESE OBSERVATIONS OF THE A O, IT IS NOT CLEAR THAT WHETHER OR NOT THE ASSESSEE IN EARLIER YEARS HAD C LAIMED THE DEBT RECEIVABLE BY HIM FROM SWADESHI AMOUNTING TO RS. 4,36,37,583 /- AS BAD DEBT. LD. A.R OF THE ASSESSEE COULD NOT CLARIFY THIS POSITI ON. HOWEVER, HE HAD SUBMITTED THAT THE ASSESSEE HAD NEVER CLAIMED THE SAID AMOUNT AS BAD DEBT. HOWEVER, IT IS FOUND FROM THE COMPUTATION OF INCOME FILED BY THE ASSESSEE THAT ASSESSEE HAD ADDED A SUM OF RS. 1,69, 03,619/- UNDER SECTION 41(4) OF THE ACT. SECTION 41(4) DESCRIBES THAT WHE RE A DEDUCTION HAS BEEN ALLOWED IN RESPECT OF BAD DEBT OR PART OF DEBT UNDE R THE PROVISIONS OF CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 36, THEN, IF TH E AMOUNT SUBSEQUENTLY RECOVERED ON ANY SUCH DEBIT OR PART IS GREATER THEN THE DIFFERENCE BETWEEN DEBT AND PART OF DEBT AND THE AMOUNT SO ALLOWED, TH E EXCESS SHALL BE DEEMED TO BE PROFIT AND GAINS OF BUSINESS OR PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME TAX AS THE INCOME OF THE PREVIOUS YEAR IN WHICH IT IS RECOVERED, WHETHER BUSINESS OR PROFESSION IN RESPECT OF WHICH THE DEDUCTION HAS BEEN ALLOWED IS IN EXISTENCE IN THAT YEAR OR NOT. THE MENTION OF SECTION 41(4) IN THE COMPUTATION OF INCOME FILED BY THE ASSESSEE SUG GESTS THAT THE ASSESSEE HAD EARLIER CLAIMED THE DEBT AS BAD DEBT. THEREFOR E, WE CONSIDER IT JUST AND PROPER TO DIRECT THE AO TO VERIFY FROM THE ASSESSM ENT RECORDS OF THE ASSESSEE THAT WHETHER OR NOT ASSESSEE HAS CLAIMED THE DEBT O F SWADESHI AS BAD DEBT. WE DIRECT ACCORDINGLY. IF ON VERIFICATION I T IS FOUND BY THE AO THAT IN EARLIER YEARS THE ASSESSEE DID NOT CLAIM THE DEBT O F SWADESHI AS BAD DEBT THEN THE CLAIM OF ASSESSEE IN THIS REGARD WILL BE A CCEPTED BY THE A.O AS THE AMOUNT RECEIVED BY THE ASSESSEE OVER AND ABOVE THE AMOUNT OF DEBT OUTSTANDING AGAINST SWADESH HAS ALREADY BEEN OFFE RED AS INCOME BY THE ASSESSEE IN HIS COMPUTATION OF INCOME. WITH THESE OBSERVATION WE ALLOW THE ITA NO. 4028&3504/MUM/2011(A.Y. 2007-08) 11 APPEAL FILED BY THE ASSESSEE FOR STATISTICAL PURP OSES IN THE MANNER AFORESAID. 6.4 BEFORE PARTING WITH THE APPEAL FILED BY THE AS SESSEE IT MAY BE MENTIONED THAT ASSESSEE HAS RAISED SOME ADDITIONAL GROUNDS WHICH WERE NOT PRESSED BY LD. A.R ACCORDINGLY THE ADDITIONAL GROUNDS WERE NOT ADMITTED FOR ADJUDICATION. 6.5 COMING TO THE DEPARTMENTAL APPEAL, IT HAS ALREA DY POINTED OUT THAT CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE ON TH E BASIS OF CONFIRMATIONS FILED BEFORE HIM FOR THE FIRST TIME, WHICH WERE NOT CONFRONTED TO THE AO. IN THE APPEAL FILED BY THE ASSESSEE WE HAVE RESTORED T HE ISSUE TO THE FILE OF A.O FOR CERTAIN VERIFICATION. THEREFORE, CONSIDERING T HAT FACT IN MIND, WE RESTORE THIS ISSUE RAISED BY THE REVENUE IN ITS APPEAL ALSO TO THE FILE OF A.O FOR THE REASON THAT THE OBJECTION OF REVENUE IS THAT THE CONFIRMATIONS FOR THE FIRST TIME WERE FILED BY THE ASSESSEE BEFORE LD. CIT(A) AND A.O DID NOT HAVE OPPORTUNITY TO EXAMINE THE SAME. THE A.O WILL GIV E THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING AND WILL RE-ADJUD ICATE THIS ISSUE ALSO AS PER LAW. FOR STATISTICAL PURPOSES APPEAL FILED BY THE REVENUE IS ALSO TREATED AS ALLOWED. 7. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFOREMENTIONED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 20 TH DAY OF JUNE, 2012 SD/- SD/- ( G.E.VEERABHADRAPPA ) (I.P.BANSAL) PRESIDENT JUDICIAL MEMBER MUMBAI, DATED 20TH JUNE, 2012 ITA NO. 4028&3504/MUM/2011(A.Y. 2007-08) 12 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RB BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.