DCIT CIR 3(3)(2), MUMBAI V. TRANS FREIGHT CONTAINERS LTD, MUMBAI

ITA 3532/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7258 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 20-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Assessee Lawyers: MIHIR SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Period of limitation; Deemed to accrue or arise in india; Question of law
• Section: 143(3); 50C; 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 3532 / MUM/20 16 ( ASSESSMENT YEAR : 2011 - 12 ) DCIT CIR 3(3)(2) R.NO.609, 6 TH FLOOR AAYAKAR BHAVAN M.K.ROAD, MUMBAI 400 020 VS. M/S. TRANS FREIGHT CONTAINERS LTD., 72 - 73, NARIMAN BHAVAN NARIMAN POINT MUMBAI 400 021 PAN/GIR NO. AAACT1447P APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI RAJAT MITTAL ASSESSEE BY SHRI MIHIR SHAH DATE OF HEARING 11 / 04 /201 8 D ATE OF PRONOUNCEME NT 26 / 04 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 8, MUMBAI DATED 26/02/2016 FOR A.Y.2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2 . FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: - 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 49,95,5007 - MADE BY THE AO U/S 50C OF THE IT ACT WITHOUT APPRECIAT ING THE FACT THAT THE LEASEHOLD LAND IS A CAPITAL ASSET AS HAS BEEN DECIDED BY T HE HON'BLE DELHI HIGH COURT IN THE CASE OF TELETUBE ELECTRONICS LTD VS. CIT(2015)61 T AXMANN.COM 350(DELHI) & THE HON'BLE ITAT, LUCKNOW IN THE CASE OF ITO VS SHRI HARI OM GUPTA IN ITA NO. 222/LKW/2013.' ITA NO. 3532/MUM/2016 M/S. TRANS FREIGHT CONTAINERS LTD., 2 2. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO U/S 41(1) OF THE IT ACT WITHOUT APPRECIATING THE FACT THAT DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE ASSESSEE FAILED TO FILE ANY INFORMATION/CORRESPONDENCE FROM THE SAID CREDITORS IN RESPECT OF THEIR CLAIMS, WHICH ARE PENDING IN THE ASSESSEE'S BOOKS FOR A LONG PERIOD.' 3. 'THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GR OUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 4. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 3. THE FACTS IN BRIEF ARE THAT ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANU FACTURING OF ENGINEERING GOODS, HOWEVER, FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS NO BUSINESS ACTIVITY BUT REPORT ED SOME SALE. A SSESSEE HAS SHOWN SUNDRY CREDITORS AMOUNTING TO RS. 3,50,91,205/ - AS ON 31.03.2011 DESPITE THE FACT THAT ASSESSEE HAS STOPP ED THE MANUFACTURING ACTIVITY A WAY LONG BACK. THEREFORE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY NOT THE CREDIT BALANCE OF SUNDRY CREDITORS OUTSTANDING AS ON 31.03.2011 BE DISALLOWED AND ADDED TO TH E TOTAL INCOME OF THE ASSESSEE U/S 41(1) OF THE IT ACT,1961.ASSESSEE VIDE ITS SUBMISSION DATED 25/02/2014 SUBMITTED THAT 'OUT OF TOTAL CREDITORS OF RS. 3,50,91,205/ - OUTSTANDING AS ON 31.03.2011 SUNDRY CREDITORS OF RS. 3,43,38,424/ - ARE ALREADY ADDED IN TH E TOTAL INCOME U/S 41(1) WHILE PASSING 143(3) . THE BALANCE AMOUNT OF RS.7,52,781/ - ARE ON ACCOUNT OF RUNNING ACCOUNT. FURTHER ACCORDING TO THE ASSESSEE THE LIABILITY IN RESPECT OF THE OTHER CREDITORS OF RS.7,52,781/ - IS NOT CEASED TO EXIST AND THEREFORE T HE SAME IS SHOWN IN THE BALANCE SHEET AND NOT WRITTEN BACK IN ITS BOOKS OF ACCOUNTS. ITA NO. 3532/MUM/2016 M/S. TRANS FREIGHT CONTAINERS LTD., 3 WITHOUT PREJUDICE TO THE ABOVE IT WAS SUBMITTED THAT IN THE EVENT IT IS NOT AGREEABLE TO THE FACTUAL POSITION THAT THE LIABILITY TOWARDS SUCH CREDITORS DOES NOT CEASED T O EXIST AND WANTS TO TAX THE SAME BY INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT, IN SUCH EVENT PENALTY U/S 271(L)(C) OF THE ACT, SHOULD NOT BE INITIATED. THE SUBMISSION OF THE ASSESSEE WA S NOT ACCEPTABLE TO THE AO AS THE CREDITORS WHICH ARE STILL OUTSTANDING ARE VERY OLD ONE AND THE ASSESSEE FAILED TO BRING ON RECORD THE PROPER REASONS FOR SHOWING SUCH CREDITORS OVER SUCH A LONG PERIOD. FURTHER, THE ASSESSEE FAILED TO FILE ANY CONFIRMATIONS / CORRESPONDENCES FROM THE SAID CREDITORS IN RESPECT OF TH EIR CLAIM. IN ABSENCE OF ANY CONFIRMATION AND EVIDENCE IN RESPECT OF SUCH CLAIM FROM THE CREDITORS, THOUGH THE DUES ARE LONG PENDING, THE CLAIM OF THE ASSESSEE TO PAY SUCH LIABILITY CEASED TO EXIST. THUS, THERE IS NO LIABILITY ON THE ASSESSEE TO PAY SUCH C REDITOR. HENCE, THE SAME HAS BEEN CONSIDERED AS DEEMED INCOME U/S 41(1} OF THE INCOME TAX ACT BY PLACING THE RELIANCE ON THE DECISION OF POLYFLEX INDIA PVT LTD VS. CIT(2O02) 257 ITR 343{SC). THUS, AN ADDITION OF RS.7,52,781/ - IS MADE TO THE TOTAL INCOME OF THE ASSESSEE U/S 41(1) OF THE ITACT,1961 , THEREAFTER APPLIED PROVISIONS OF SECTION 50C AND MADE AN ADDITION OF RS.2,66,12,234/ - . 4. BY THE IMPUGNED ORDER, CIT(A) DELETED THE ADDITION AFTER OBSERVING AS UNDER: - 5.1.1. THROUGH THIS GROUND THE APPELLANT OBJE CTED THE AOS ACTION OF APPLYING PROVISIONS OF SECTION 50C OF THE IT ACT ON TRANSFER OF LEASEHOLD RIGHTS BY THE APPELLANT AND THEREBY MAKING ADDITION OF RS.49,95,500/ - . THE SECOND GROUND IS WITHOUT PREJUDICE GROUND. THE AO DISCUSSED THIS ISSUE AT PARA - 5 OF HIS ORDER . ITA NO. 3532/MUM/2016 M/S. TRANS FREIGHT CONTAINERS LTD., 4 5.1.2. AT PARA - 5.1, THE AO OBSERVED, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SOLD IMMOVABLE PROPERTY VIZ. LEASEHOLD LAND SITUATED AT PLOT NO.H - 2 IN TARAPUR INDUSTRIAL AREA....'THUS, IT IS CLEAR THAT THE AO HIMSELF HAS NOT DISPUTE D THAT THE TRANSACTION WAS IN RESPECT OF 'LEASE HOLD LAND'. HE HAS ALSO NOT GIVEN ANY JUSTIFICATION FOR TREATING THE SAME AS CAPITAL ASSET. 5.1.3 UNDER THE CIRCUMSTANCES, I FIND THAT THE RATIO OF HON'BLE ITAT MUMBAI IN THE CASE OF ATUL G PURANIK VS ITO, 11 TAXMANN 92 CITED BY THE APPELLANT APPLIES WITH FULL FORCE IN THE INSTANT CASE. PROVISIONS OF SECTION 50C{1) OF INCOME TAX ACT, 1961 PERTAINS TO CAPITAL ASSETS .ONLY. AS PER THE RATIO OF JURISDICTIONAL ITAT MENTIONED ABOVE, LEASEHOLD LAND IS NOT CAPITAL AS SET. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE ITAT, GROUND NO.1 IS ALLOWED. IN VIEW IF THIS, GROUND NO. 2 IS I NFRUCTUOUS 5 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DE CISION OF BOMBAY HIGH COURT IN THE CASE OF GREENFIELD HOTELS AND ESTATES P VT. LTD., 389 ITR 68, WHEREIN HONBLE HIGH COURT OBSERVED AS UNDER: - THIS APPEAL UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 (THE ACT) CHALLENGES THE ORDER DATED 23 OCTOBER 2013 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL (TRIBUNAL). THE IMPUGNED ORDER RELATES TO ASSESSMENT YEAR 2007 - 08. 2. THE REVENUE URGES THE FOLLOWING QUESTION OF LAW FOR OUR CONSIDERATION : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN UPHOLDING THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF LONG TERM CAPITAL GAIN OF RS.80,58,000/ - ON THE GROUND THAT PROVISIONS OF SECTION 50C OF THE IT ACT, 1961 WERE NOT APPLICABLE TO TRANSFER OF LAND AND BUIL DING, BEING A LEASEHOLD PROPERTY? 3. THE IMPUGNED ORDER OF THE TRIBUNAL HAS DISMISSED THE REVENUE'S APPEAL FROM THE ORDER DATED 15 JUNE 2012 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS). THE ISSUE BEFORE THE TRIBUNAL WAS WHETHER SECTION 50C OF THE ACT WOULD BE APPLICABLE TO TRANSFER OF LEASEHOLD RIGHTS IN LAND AND BUILDINGS. THE IMPUGNED ORDER OF THE TRIBUNAL FOLLOWED ITS DECISION IN ATUL G. PURANIK VS. ITO (ITANO.3051/MUM/2010) DECIDED ON 13 MAY 2011 WHICH HELD THAT SECTION 50C IS NOT APPLICABLE WH ILE COMPUTING CAPITAL GAINS ON TRANSFER OF LEASEHOLD RIGHTS IN LAND AND BUILDINGS. 4. MR. KOTANGALE, LEARNED COUNSEL FOR THE REVENUE, STATES THAT THE REVENUE HAS NOT PREFERRED ANY APPEAL AGAINST THE DECISION OF THE TRIBUNAL IN THE CASE OF ATUL PURANIK (SU PRA). THUS, IT COULD BE INFERRED THAT IT HAS BEEN ITA NO. 3532/MUM/2016 M/S. TRANS FREIGHT CONTAINERS LTD., 5 ACCEPTED. OUR COURT IN DIT VS. CREDIT AGRICOLE INDOSUEZ 377 ITR 102 (DEALING WITH TRIBUNAL ORDER) AND THE APEX COURT IN UOI VS. SATISH P. SHAH 249 ITR 221 (DEALING WITH HIGH COURT ORDER) HAS LAID DOWN THE S ALUTARY PRINCIPLE THAT WHERE THE REVENUE HAS ACCEPTED THE DECISION OF THE COURT/TRIBUNAL ON AN ISSUE OF LAW AND NOT CHALLENGED IT IN APPEAL, THEN A SUBSEQUENT DECISION FOLLOWING THE EARLIER DECISION CANNOT BE CHALLENGED. FURTHER, IT IS NOT THE REVENUE'S CA SE BEFORE US THAT THERE ARE ANY DISTINGUISHING FEATURES EITHER IN FACTS OR IN LAW IN THE PRESENT APPEAL FROM THAT ARISING IN THE CASE OF ATUL PURANIK (SUPRA). 5. IN THE ABOVE VIEW, THE QUESTION AS FRAMED BY THE REVENUE DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS, NOT ENTERTAINED. 6. LEARNED D R FAIRLY CONCEDED THAT ISSUE IS COVERED BY THE BOMBAY HIGH COURT. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE U/S.50C OF THE IT ACT. 7 . DU RING T HE COURSE OF ASSESSMENT, THE AO HAS ALSO MADE AN ADDITION U/S.41(1) WHICH WAS DELETED BY CIT(A) AFTER OBSERVING AS UNDER: - 5.3.1 THIS GROUND PERTAINS TO THE ADDITION OF RS. 7 , 52 , 781/ - U/S 41(1) OF THE IT. ACT. I FIND THAT IDENTICAL ISSUE WAS DECIDE D BY LD. CIT(A) ; S VIDE ORDER NO.CIT(A} - 7/ ACIT - 3(3)/IT - 199/11 - 12 DATED 23.05.2012 FOR A.Y. 2009 - 10. THE RELEVANT EXTRACTS FROM CIT(A)'S ORDER ARE REPRODUCED HEREUNDER - ' I ALSO FIND THAT THE AO MERELY INVOKED THE PROVISIONS OF SECTION 41(1) OF THE ACT BASE D ON THE FACT THAT THE APPELLANT COMPANY WAS SHOWING ITS LIABILITY OVER A LONGER PERIOD. BUT HAVING TAKEN NOTE OF THE AO'S ORDER AND THE APPELLANT'S SUBMISSION, I FIND THAT THE AO FAILED TO ESTABLISHES ANYWHERE THAT THE APPELLANT COMPANY HAS GOT OR OBTAINE D ANY BENEFIT OF SUCH OUTSTANDING LIABILITY. NOT ONLY THIS,, HE ALSO NOT PROVED BY ANY EVIDENCE OR DOCUMENTS THAT THERE WAS ANY REMISSION OR CESSATION OF SUCH LIABILITIES. FURTHER THE APPELLANT COMPANY HAS NOWHERE MADE ANY? UNILATERAL WRITING BACK OF THESE LIABILITIES, HENCE THE QUESTION OF APPLICABILITY OF SECTION 41(1) OF THE ACT DOES NOT ARISE IN THE CASE OF THE APPELLANT. FURTHER TO THAT THERE IS ALSO NO MATERIAL ON RECORD TO HOLD THAT THE APPELLANT'S HAS NO INTENTION TO PAY TO THE CREDITORS. IN VIEW OF THE SAME, I CONSIDER IT PROPER AND APPROPRIATE TO HOLD THAT THE AOS ACTION OF INVOKING THE PROVISIONS OF SECTION41(1) IN THE CASE OF THE APPELLANT IS COMPLETELY INCORRECT AND UNJUSTIFIED IN THE GIVEN FACTS OF THE APPELLANT'S CASE. FURTHER TO THAT, HAVIN G TAKEN NOTE OF THE JUDICIAL PRONOUNCEMENTS CITED BY THE APPELLANT AS EXTRACTED IN PARA - 3.4 OF THIS ORDER, IT IS EVIDENT THAT THE APPELLANT COMPANY HAS NOWHERE WRITTEN OFF ITA NO. 3532/MUM/2016 M/S. TRANS FREIGHT CONTAINERS LTD., 6 ITS LIABILITY NOR IT DENIES THE OUTSTANDING LIABILITY, SUCH OUTSTANDING LIABILITY WA S CARRIED FORWARD BY THE APPELLANT COMPANY AS EXISTING. MERELY BECAUSE SUCH LIABILITIES WERE OUTSTANDING FOR LAST SEVERAL YEARS IT CANNOT BE SAID TO BE CESSATION OR REMISSION OF SUCH LIABILITIES. IN VIEW OF THE SAME, I CONSIDER IT PROPER AND APPROPRIATE TO HOLD THAT IN THE INSTANT CASE, THE PROVISIONS OF SECTION 41(1) IS NOT APPLICABLE IN THE YEAR UNDER CONSIDERATION'. 5.3.2 SINCE THERE IS NO CHANGE IN FACTS OF THE APPELLANT'S CASE FOR THE YEAR UNDER CONSIDERATION AND IN VIEW OF CIT(A)'S DECISION REFERRED A BOVE, THE AO IS DIRECTED THE DELETE THE ADDITION OF RS. 7.52.781/ - MADE U/S 41(1) OF THE ACT. THIS GROUND OF APPEAL IS ALLOWED. 8 . LEARNED AR ALSO PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE DATED 21/06/2017 FOR THE A.Y.2009 - 10 WHERE IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE U/S.41(1) WAS CONFIRMED BY THE TRIBUNAL AFTER OBSERVING AS UNDER: - 7. WE HAVE HEARD THE LD. COUNSELS APPEARING FOR THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS COULD BE SEEN, THE AO HIMSELF IN THE ASSESSMENT ORDER HAS STATED THAT THE SUNDRY CREDITS AMOUNTING TO RS.7.29 CRORES ORIGINATED IN ASSESSMENT YEARS 1997 - 98 TO 2002 - 03 AND CONTINUING UNCHANGED TILL THE IMPUGNED ASSESSMENT YEAR. THEREFORE, THE AO HAS ASSESSED THE LIABILITY SINCE IT CONTINUED I N THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR SUCH A LONG PERIOD WITHOUT BEING PAID OFF BY THE ASSESSEE HENCE, SUCH LIABILITY HAVE CEASED TO EXIST AND TO BE TREATED AS INCOME OF THE ASSESSEE. HE FURTHER HELD THAT THE ASSESSEE HAS FAILED TO PROVE GENUINENESS O F THE SUNDRY CREDITORS BY FURNISHING THE CONFIRMATIONS OR ANY OTHER DOCUMENTARY EVIDENCES. AS FAR AS THE SECOND ALLEGATION OF THE AO IS CONCERNED, WE ARE UNABLE TO ACCEPT THE SAME. WHEN THE AO ACCEPTS THAT THE LIABILITIES WERE CREATED IN ASSESSMENT YEARS 1 997 - 98 TO 2002 - 03, THE GENUINENESS OF SUCH TRANSACTIONS HAVE TO BE EXAMINED IN THOSE ASSESSMENT YEARS AND NOT IN ASSESSMENT YEAR UNDER CONSIDERATION. THE SUNDRY CREDITORS SHOWN BY THE ASSESSEE IN THE YEAR OF ORIGIN HAVING BEEN ACCEPTED BY THE DEPARTMENT, T HE GENUINENESS OF SUCH TRANSACTIONS CANNOT BE CALLED INTO QUESTION IN THE IMPUGNED ASSESSMENT YEAR. AS FAR AS THE ALLEGATION OF THE AO THAT LIABILITY ON ACCOUNT OF SUNDRY CREDITORS HAS CEASED TO EXIST IN THE ASSESSMENT YEAR IN TERMS OF SECTION 41(1), ON PL AIN READING OF THE PROVISIONS OF SECTION 41(1) OF THE ACT, WE ARE OF THE VIEW THAT BEFORE TREATING THE AMOUNT OUTSTANDING TOWARDS SUNDRY CREDITORS AS DEEMED INCOME OF THE ASSESSEE U/S 41(1) ON ACCOUNT OF REMISSION/CESSATION OF LIABILITY, THE AO IS DUTY BOU ND TO EXAMINE WHETHER THE CONDITION LAID DOWN U/S 41(1) ARE FULFILLED OR NOT. AS PER THE READING OF SECTION 41(1) ALONG WITH EXPLANATION (1) TO SECTION 41(1), THE LIABILITY CEASES TO EXIST ITA NO. 3532/MUM/2016 M/S. TRANS FREIGHT CONTAINERS LTD., 7 IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN A PARTICULAR PREVIOUS YE AR, IF THE PERSON SHOWING SUCH LIABILITY HAD OBTAINED BENEFIT EITHER IN CASH OR IN ANY OTHER MANNER IN RESPECT OF SUCH LIABILITY. IT FURTHER PROVIDES THAT SUCH REMISSION OR CESSATION OF LIABILITY IS ALSO ACCEPTABLE BY UNILATERAL ACT OF WRITING OFF SUCH LIA BILITY IN ITS ACCOUNT BY THE PERSON SHOWING SUCH LIABILITY. THUS, BEFORE APPLYING THE PROVISIONS OF SECTION 41(1), IT IS NECESSARY TO ESTABLISH ON RECORD THAT THE ASSESSEE HAS OBTAINED A BENEFIT EITHER IN CASH OR IN ANY FORM IN RESPECT OF SUCH LIABILITY IN THE RELEVANT PREVIOUS YEAR. THUS, WHEN IN AOS OWN ADMISSION LIABILITY CONTINUED FROM PAST SO MANY YEARS, WHAT PROMPTED THE AO TO CONCLUDE THAT THE ASSESSEE HAS OBTAINED BENEFIT IN RESPECT OF SUCH LIABILITY IN THE IMPUGNED ASSESSMENT YEAR MUST BE CLEARLY BROUGHT ON RECORD. IN ABSENCE OF ANY MATERIAL TO ESTABLISH THAT THE ASSESSEE HAS OBTAINED ANY BENEFIT IN RESPECT OF THE LIABILITY ON ACCOUNT OF SUNDRY CREDITORS IN THE IMPUGNED ASSESSMENT YEAR MERELY ON SURMISES AND ASSUMPTIONS IT CANNOT BE SAID THAT THERE IS REMISSION/CESSATION OF LIABILITY IN THE IMPUGNED ASSESSMENT YEAR. MORE SO, WHEN THERE IS NO UNILATERAL ACT BY THE ASSESSEE IN WRITING OFF OF LIABILITY IN ITS BOOKS OF ACCOUNTS. FURTHER, IT IS EVIDENT FROM THE MATERIAL ON RECORD THAT IN COURSE OF ASSESS MENT PROCEEDINGS THE ASSESSEE HAD FURNISHED THE NECESSARY DETAILS AND SUBMITTED THAT PART OF THE LIABILITY HAS ALREADY BEEN WRITTEN OFF OR PAID BACK IN THE SUBSEQUENT YEARS. HOWEVER, THE AO WITHOUT ANY VALID REASONS HAS FAILED TO RECOGNISE SUCH FACTS. IN F ACT, AS POINTED OUT BY THE LD. AR, SUCH REPAYMENT OR WRITING OFF OF THE LIABILITY IN SUBSEQUENT YEARS WAS PRIOR TO THE QUERY RAISED BY THE AO ON 07.12.2011 FOR INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT. THUS, THE ACT OF THE ASSESSEE IN REPAYING A PART OF THE SUNDRY CREDITORS OF WRITING OFF THE LIABILITY IN ITS BOOKS OF ACCOUNT CANNOT BE HELD TO BE AN AFTERTHOUGHT BUT HAS TO BE CONSIDERED TO HAVE BEEN DONE IN GOOD FAITH. MOREOVER, A PART OF THE LIABILITY IS DUE TO GOVERNMENT AGENCIES. UNLESS THERE IS ANY COMMUNICATION BY THE GOVERNMENT GIVING TIE - UP ITS RIGHT TO RECOVERY OF THE DEBT THERE CANNOT BE REMISSION OF THE LIABILITY. THE HONBLE DELHI HIGH COURT IN THE CASE OF JAIN EXPORTS (P) LTD (SUPRA) HELD AS UNDER : 21. ALTHOUGH, ENFORCEMENT OF A DEB T BEING BARRED BY LIMITATION DOES NOT IPSO FACTO LEAD TO THE CONCLUSION THAT THERE IS CESSATION OR REMISSION OF LIABILITY, IN THE FACTS OF THE PRESENT CASE, IT IS ALSO NOT POSSIBLE TO CONCLUDE THAT THE DEBT HAS BECOME UNENFORCEABLE. IT IS WELL SETTLED THAT REFLECTING AN AMOUNT AS OUTSTANDING IN THE BALANCE SHEET BY A COMPANY AMOUNTS TO THE COMPANY ACKNOWLEDGING THE DEBT FOR THE PURPOSES OF SECTION 18 OF THE LIMITATION ACT, 1963 AND, THUS, THE CLAIM BY M/S ELEPHANTA OIL & VANASPATI LTD. CAN ALSO NOT BE CONSI DERED AS TIME BARRED AS THE PERIOD OF LIMITATION WOULD STAND EXTENDED. EVEN, OTHERWISE, IT CANNOT BE STATED THAT M/S ELEPHANTA OIL & VANASPATI LTD. WOULD BE UNABLE TO CLAIM A SET - OFF ON ACCOUNT OF THE AMOUNT REFLECTED AS PAYABLE TO IT BY THE ASSESSEE. ADMI TTEDLY, WINDING UP PROCEEDINGS AGAINST M/S ELEPHANTA OIL & VANASPATI LTD. ARE PENDING AND THERE IS NO CERTAINTY THAT ANY CLAIM THAT MAY BE MADE BY THE ASSESSEE WITH ITA NO. 3532/MUM/2016 M/S. TRANS FREIGHT CONTAINERS LTD., 8 REGARD TO THE AMOUNTS RECEIVABLE FROM M/S ELEPHANTA OIL & VANASPATI LTD. WOULD BE PAID WITH OUT THE LIQUIDATOR CLAIMING THE CREDIT FOR THE AMOUNTS RECEIVABLE FROM THE ASSESSEE COMPANY. IT IS WELL SETTLED THAT IN ORDER TO ATTRACT THE PROVISIONS OF SECTION 41(1) OF THE ACT, THERE SHOULD HAVE BEEN AN IRREVOCABLE CESSION OF LIABILITY WITHOUT ANY POSS IBILITY OF THE SAME BEING REVIVED. THE ASSESSEE COMPANY HAVING ACKNOWLEDGED ITS LIABILITY SUCCESSIVELY OVER THE YEARS WOULD NOT BE IN A POSITION TO DEFEND ANY CLAIM THAT MAY BE MADE ON BEHALF OF THE LIQUIDATOR FOR CREDIT OF THE SAID AMOUNT REFLECTED BY THE ASSESSEE AS PAYABLE TO M/S ELEPHANTA OIL & VANASPATI LTD. 22. WE MAY ALSO ADD THAT, ADMITTEDLY, NO CREDIT ENTRY HAS BEEN MADE IN THE BOOKS OF THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2008 - 2009. THE OUTSTANDING BALANCES REFLECTED AS PAYABLE TO M/S ELEPHANTA OIL & VANASPATI LTD. ARE THE OPENING BALANCES WHICH ARE BEING CARRIED FORWARD FOR SEVERAL YEARS. THE ISSUE AS TO THE GENUINENESS OF A CREDIT ENTRY, THUS DOES NOT ARISE IN THE CURRENT YEAR AND THIS ISSUE COULD ONLY BE EXAMINED I N THE YEAR WHEN THE LIABILITY WAS RECORDED AS HAVING ARISEN, THAT IS, IN THE YEAR 1984 - 1985. THE DEPARTMENT HAVING ACCEPTED THE BALANCES OUTSTANDING OVER SEVERAL YEARS, IT WAS NOT OPEN FOR THE CIT (APPEALS) TO CONFIRM THE ADDITION OF THE AMOUNT OF RS. 1,53 ,48,850/ - ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE SUFFICIENT EVIDENCE TO PROVE THE GENUINENESS OF THE TRANSACTIONS WHICH WERE UNDERTAKEN IN THE YEAR 1984 - 85. 23. THE PRESENT APPEAL DOES NOT DISCLOSE ANY SUBSTANTIAL QUESTION OF LAW FOR OUR CONSIDE RATION AND IS, ACCORDINGLY, DISMISSED. 8. IN THE CASE OF MATRUPRASAD C PANDEY (SUPRA), THE HONBLE GUJARAT HIGH COURT HAS HELD AS UNDER : 6.1 AT THE OUTSET, IT IS REQUIRED TO BE NOTED THAT THE ASSESSING OFFICER MADE THE ADDITION OF RS. 56,96,645/ - INVO KING SECTION 41(1) OF THE INCOME TAX ACT BY DOUBTING CERTAIN SUNDRY CREDITORS AMOUNTING TO RS. 56,96,645/ - APPEARING IN THE BALANCE SHEET OF THE ASSESSEE SINCE PAST SEVERAL YEARS. HOWEVER, IT IS REQUIRED TO BE NOTED THAT AS SUCH THOSE SUNDRY CREDITORS MENT IONED IN THE BALANCE SHEET OF THE ASSESSEE WERE SHOWN AS SUNDRY CREDITORS SINCE PAST SEVERAL YEARS FROM THE RELEVANT ASSESSMENT YEAR AND AT NO POINT OF TIME EARLIER THE ASSESSING OFFICER DOUBTED THE CREDITWORTHINESS AND/OR IDENTITY. IN ANY CASE THE ADDITIO N ON THE AFORESAID GROUND UNDER SECTION 41(1) OF THE ACT CANNOT BE MADE UNLESS AND UNTIL IT IS FOUND THAT THERE WAS REMISSION AND/OR CESSATION OF THE LIABILITY THAT TOO DURING THE PREVIOUS YEAR, RELEVANT TO THE ASSESSMENT YEAR IN QUESTION, THERE CANNOT BE ANY ADDITION INVOKING THE PROVISION OF SECTION 41(1) OF THE ACT. IDENTICAL QUESTION CAME TO BE CONSIDERED BY THE DIVISION BENCH OF THIS COURT IN THE CASE OF NITIN S. GARG (SUPRA) AND IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE ADDITI ON WAS MADE INVOKING SECTION 41(1) OF THE ACT BY DOUBTING THE CREDITWORTHINESS AND/OR IDENTITY OF THE SUNDRY CREDITORS MENTIONED IN THE BALANCE SHEET AND IT WAS FOUND THAT THOSE SUNDRY CREDITORS WERE VERY OLD AND NO INTEREST HAD BEEN PAID ON THOSE LOANS, ITA NO. 3532/MUM/2016 M/S. TRANS FREIGHT CONTAINERS LTD., 9 T HE DIVISION BENCH HAS DELETED SUCH ADDITION MADE UNDER SECTION 41(1) OF THE ACT. IN PARAGRAPH 15 THE DIVISION BENCH HAS OBSERVED AND HELD AS UNDER; 15. IN THE CASE BEFORE US, IT IS NOT BEEN ESTABLISHED THAT THE ASSESSEE HAS WRITTEN OFF THE OUTSTANDING LI ABILITIES IN THE BOOKS OF ACCOUNT. THE APPELLATE TRIBUNAL IS JUSTIFIED IN TAKING THE VIEW THAT AS ASSESSEE HAD CONTINUED TO SHOW THE ADMITTED AMOUNTS AS LIABILITIES IN ITS BALANCE SHEET THE SAME CANNOT BE TREATED AS ASSESSMENT OF LIABILITIES. MERELY BECAUS E THE LIABILITIES ARE OUTSTANDING FOR LAST MANY YEARS, IT CANNOT BE INFERRED THAT THE SAID LIABILITIES HAVE SEIZED TO EXIST. THE APPELLATE TRIBUNAL HAS RIGHTLY OBSERVED THAT THE ASSESSING OFFICER SHALL HAVE TO PROVE THAT THE ASSESSEE HAS OBTAINED THE BENEF ITS IN RESPECT OF SUCH TRADING LIABILITIES BY WAY OF REMISSION OR CESSATION THEREOF WHICH IS NOT THE CASE BEFORE US. MERELY BECAUSE THE ASSESSEE OBTAINED BENEFIT OF REDUCTION IN THE EARLIER YEARS AND BALANCE IS CARRIED FORWARD IN THE SUBSEQUENT YEAR, IT WO ULD NOT PROVE THAT THE TRADING LIABILITIES OF THE ASSESSEE HAVE BECOME NON EXISTENT. 6.2 THE AFORESAID DECISION OF THE DIVISION BENCH IN THE CASE OF NITIN S. GARG (SUPRA) HAS BEEN CONSIDERED AND FOLLOWED BY THE DIVISION BENCH OF THIS COURT IN THE CASE O F BHOGILAL RAMJIBHAI ATARA (SUPRA) AND THE ADDITION MADE UNDER SECTION 41(1) OF THE ACT IN THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE IS ORDERED TO BE DELETED. IN PARAGRAPH 8 THE DIVISION BENCH HAS OBSERVED AND HELD AS UNDER; 'WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL. SECTION 41(1) OF THE ACT AS DISCUSSED IN THE ABOVE THREE DECISIONS WOULD APPLY IN A CASE WHERE THERE HAS BEEN REMISSION OR CESSATION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION SUBJECT TO THE CONDITIONS CONTAINED IN THE STAT UTE BEING FULFILLED. ADDITIONALLY, SUCH CESSATION OR REMISSION HAS TO BE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE PRESENT CASE, BOTH ELEMENTS ARE MISSING. THERE WAS NOTHING ON RECORD TO SUGGEST THERE WAS REMISSIO N OR CESSATION OF LIABILITY THAT TOO DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2007 - 08 WHICH WAS THE YEAR UNDER CONSIDERATION. IT IS UNDOUBTEDLY A CURIOUS CASE. EVEN THE LIABILITY ITSELF SEEMS UNDER SERIOUS DOUBT. THE ASSESSING OFFICER UNDER TOOK THE EXERCISE TO VERIFY THE RECORDS OF THE SO CALLED CREDITORS. MANY OF THEM WERE NOT FOUND AT ALL IN THE GIVEN ADDRESS. SOME OF THEM STATED THAT THEY HAD NO DEALING WITH THE ASSESSEE. IN ONE OR TWO CASES, THE RESPONSE WAS THAT THEY HAD NO DEALING WITH THE ASSESSEE NOR DID THEY KNOW HIM. OF COURSE, THESE INQUIRIES WERE MADE EX PARTE AND IN THAT VIEW OF THE MATTER, THE ASSESSEE WOULD BE ALLOWED TO CONTEST SUCH FINDINGS. NEVERTHELESS, EVEN IF SUCH FACTS WERE ESTABLISHED THROUGH BIPARTE INQUIRIES, THE LIAB ILITY AS IT STANDS PERHAPS HOLDS THAT THERE WAS NO CESSATION OR REMISSION OF LIABILITY AND THAT THEREFORE, THE AMOUNT IN QUESTION CANNOT BE ADDED BACK AS A DEEMED INCOME UNDER SECTION 41(C) F THE ACT. THIS IS ONE OF THE STRANGE CASES WHERE EVEN IF THE DEBT ITSELF IS FOUND TO BE NON - GENUINE FROM THE VERY INCEPTION, AT LEAST IN TERMS OF SECTION 41(1) OF THE ACT THERE IS NO CURE ITA NO. 3532/MUM/2016 M/S. TRANS FREIGHT CONTAINERS LTD., 10 FOR IT. BE THAT AS IT MAY, INSOFAR AS THE ORDERS OF THE REVENUE AUTHORITIES ARE CONCERNED, THE TRIBUNAL NOT HAVING MADE ANY ERROR, TH IS TAX APPEAL IS DISMISSED.' IN THE PRESENT CASE THERE WAS NO REMISSION AND/OR CESSATION OF THE LIABILITY DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. AS SUCH, THERE IS NO REMISSION AND/OR CESSATION OF THE LIABILITY DURING THE YEAR UNDER CONSIDERATION SUBJECT TO THE CONDITIONS CONTAINED IN THE STATUTE BEING FULFILLED. IN THE PRESENT CASE, BOTH THE AFORESAID ELEMENTS ARE MISSING. 9. THUS, APPLYING THE RATIO LAID DOWN IN THE AFORESAID DECISIONS TO THE FACTS OF THE PRESENT C ASE, WE ARE OF THE VIEW THAT THERE IS NO REMISSION OR CESSATION OF LIABILITY OF THE SUNDRY CREDITORS APPEARING IN THE BOOKS OF ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR. IN VIEW OF THE AFORESAID FACTUAL POSITION, WE DO NOT CONSIDER IT NECESSARY TO DWELL MUC H UPON THE DECISIONS RELIED UPON BY THE LD. DR. THUS, IN THE ULTIMATE ANALYSIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) WHICH IS ACCORDINGLY CONFIRMED. 10. GROUND RAISED IN THE PRESENT APPEAL IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. 9 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS ORDER PASSED BY TRIBUNAL IN ASSESSEES OWN CASE DATED 21/06/2017. AS THE FACTS AND CIRCUMSTANCES DURING THE YEA R ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) DELETING ADDITION OF RS.7,52,781/ - MADE U/S.41(1) OF IT ACT. 1 0 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PR ONOUNCED IN THE OPEN COURT ON THIS 26 / 04 /201 8 SD/ - ( SANDEEP GOSAIN ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 26 / 04 /201 8 KARUNA SR. PS ITA NO. 3532/MUM/2016 M/S. TRANS FREIGHT CONTAINERS LTD., 11 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//