M/s. Millat Fibers, Surat V. The ACIT., Circle-6, Surat

ITA 365/AHD/2009

• Counselvise Citation: 36520514 RSA 2009
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-08-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 04-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA KUMAR
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained cash credit; Period of limitation; Time period of passing order; Set aside
• Section: 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.K.GARODIA, ACCOUNTANT MEMBER ITA NO.365/AHD/2009 ASSESSMENT YEAR:2002-03 DATE OF HEARING:5.8.11 DRAFTED:18.8.11 M/S MILLAT FIBRES, 76/10, MOTA BORSARA, KIM STATION ROAD, SURAT PAN NO.AAGFM3363E V/S . ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-6, SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI RASESH SHAH & SHRI HARDIK VORA, AR RESPONDENT BY:- SHRI RAVINDRA KUMAR, CIT-DR DATE OF HEARING 05/08/2011 DATE OF PRONOUNCEMENT 26/08/2011 O R D E R PER A.K.GARODIA, ACCOUNTANT MEMBER:- THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-IV, SURAT DATED 08-05-2008 FOR ASSESSMENT YEAR 2002-03. 2. THE GROUND RAISED BY THE ASSESSEE IS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(APPEALS) HAS ERRED IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.2,82,66, 387/- U/S.41(1) IN RESPECT OF AMOUNTS PAYABLE WHEN THERE WAS NO REMISSION OR C ESSATION OF LIABILITY. 3. THE BRIEF FACTS ARE NOTED BY THE LD. CIT(APPEALS ) ON PAGE 1 AND 2 OF HIS ORDER AND THE RELEVANT PORTION OF THE SAME IS REPRODUCED BELOW:- THE FACTS OF THE CASE ARE THE FIRST APPEAL WAS DEC IDED AGAINST THE APPELLANT BY THE UNDERSIGNED VIDE ORDER DATED 20.10.2005. THE APPELLANT PREFERRED AN APPEAL BEFORE THE ITAT, AHMEDABAD, WHO OBSERVED THA T THE APPELLANT WAS NOT GIVEN SUFFICIENT OPPORTUNITY AND RESTORED THE I SSUE TO THE FILES OF THE AO VIDE THEIR ORDER DATED 25.09.2006. DURING THE COURS E OF FRESH PROCEEDINGS THE APPELLANT WAS ASKED TO PRODUCE THE DIRECTORS OF THE CONCERNS WHICH WERE ITA NO.365/AHD/2009 A.Y.2002-03 M/S MILLAT FIBRES V. ACIT, CIR-6 SRT PAGE 2 APPEARING AS CREDITORS IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. IT IS IMPORTANT TO NOTE THAT THE NOTICES BY THE AO FOR HE ARING COULD NOT BE SERVED BECAUSE THE APPELLANT FIRM DID NOT EXIST AT THE GIV EN ADDRESS AND THEREFORE THE AR OF THE APPELLANT WAS SERVED A NOTICE. THE AR FIL ED A LETTER DATED ON 30.11.2007 STATING THAT THE SAID PERSONS COULD NOT BE PRODUCED AND DETAILS OF THE CREDITORS WERE FILED. THE AO ISSUED NOTICES U/S . 133(6) OF THE IT ACT AT THE GIVEN ADDRESS OF THE SAID PERSONS BUT THE SAME WERE RETURNED SINCE NONE OF THE PERSONS WAS EXISTING AT THE GIVEN ADDRESS. THE AO THEREFORE CONCLUDED THAT THE LIABILITIES SHOWN BY THEE APPELLANT WERE B OGUS AND HAD CEASED TO EXIST AS PER PROVISIONS OF SECTION 41(1) OF THE ACT . SHE ALSO CONCLUDED THAT THE SAID AMOUNTS WERE NOT PAYABLE ANY MORE, THERE WAS N O CORRESPONDENCE WITH THE SAID CREDITORS AND EVEN AFTER A LAPSE OF SO MAN Y YEARS, NOBODY HAD COME FORWARD TO CLAIM THE AMOUNT DUE. AN ADDITION OF RS. 2,82,66,387/- WAS MADE US.41(1) OF THE IT ACT. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(APPEALS). IT WAS SUBMITTED BY THE ASSESSEE BEFO RE LD. CIT(APPEALS) THAT ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE THE DIRECTOR/PROPRIETOR OF THE CONCERN, WHICH WERE CREDITORS. IT WAS ALSO SUBMITTE D THAT ASSESSEE IMPORTED GOODS AS ALSO PURCHASED THE SAME LOCALLY AND THERE WAS A CORRESPONDING SALE AND CLOSING STOCK. IT WAS ALSO SUBMITTED THAT ASSESSEE WAS ACKN OWLEDGING THE DEBT ON ACCOUNT OF VARIOUS PARTIES. IT WAS ALSO SUBMITTED BEFORE LD . CIT(APPEALS) THAT PAYMENTS COULD NOT BE MADE AS THE ASSESSEE WAS NOT HAVING SU FFICIENT FUNDS DUE TO NON- RECOVERY OF PAYMENTS FROM ITS OWN DEBTORS. IT WAS A LSO SUBMITTED THAT THE OUTSTANDING AMOUNTS PAYABLE TO VARIOUS PARTIES WERE NOT WRITTEN OFF IN THE BOOKS OF ACCOUNT AND THEREFORE, PROVISIONS OF SECTION 41(1) OF THE INCOME-TAX ACT, 1961 WERE NOT APPLICABLE. THEREAFTER, IT IS NOTED BY LD. CIT( APPEALS) THAT MATTER WAS RESTORED BY THE TRIBUNAL TO THE FILE OF ASSESSING OFFICER FO R GIVING FRESH OPPORTUNITY TO THE ASSESSEE TO PROVE THE GENUINENESS OF THE CREDITORS BUT IN SPITE OF BEING GIVEN A NUMBER OF OPPORTUNITIES, THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE ANY OF THE CREDITORS AND CREDITORS DO NOT EXIST AT THE ADDRESS ES FURNISHED BY THE ASSESSEE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, LD. CIT (APPEALS) CAME TO THE CONCLUSION THAT THIS IS A CLEAR CASE OF CESSATION O F LIABILITY U/S.41(1) OF THE ACT AND HE CONFIRMED THE ADDITION MADE BY ASSESSING OFFICER. N OW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. IT IS SUBMITTED BY LD. AR OF ASSESSEE THAT THESE FACTS ARE NOT IN DISPUTE THAT THE ASSESSEE HAS NOT WRITTEN BACK LIABILITY AND THE LIABILITY IS STILL CONTINUING IN THE ITA NO.365/AHD/2009 A.Y.2002-03 M/S MILLAT FIBRES V. ACIT, CIR-6 SRT PAGE 3 BALANCE-SHEET OF THE ASSESSEE AND IN SUPPORT OF THI S, OUR ATTENTION WAS DRAWN TO PAGE NO.4 OF THE PAPER BOOK, WHICH CONTAINS THE DET AILS OF THE CREDITORS, WHICH ARE 21 IN NUMBERS. THE TOTAL AMOUNT INVOLVED IS RS.2,82 ,66,387/-, OUT OF WHICH, AN AMOUNT OF RS.1,37,28,980/- IS ON ACCOUNT OF CURRENT YEAR PURCHASES AND THE BALANCE AMOUNT OF RS.1,45,38,357/- IS FOR PURCHASE OF EARLI ER YEARS. IT IS ALSO SUBMITTED THAT LIST OF CREDITORS AS ON 31-03-2002 IS AVAILABLE ON PAGE NO.41 OF THE PAPER BOOK WHICH INCLUDES ALL THESE CREDITORS FOR WHICH THE AD DITION HAS BEEN MADE BY ASSESSING OFFICER AND HENCE, THIS SHOWS THAT THE AS SESSEE HAS NOT WRITTEN BACK LIABILITY ON ACCOUNT OF THESE CREDITORS. IT IS ALSO SUBMITTED THAT AS PER EXPLANATION-1 TO SECTION 41(1) WHICH HAS BEEN INSERTED WITH EFFECT F ROM 1-4-1997, IF THE ASSESSEE HAS WRITTEN BACK THE LIABILITY, IT CAN BE CONSIDERED AS REMISSION OR CESSATION OF THE LIABILITY BUT THE SAME IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE ASSESSEE HAS NOT WRITTEN BACK THE MONEY. HE ALSO SUBMITTED THAT CONF IRMATION OF CREDITORS ARE AVAILABLE ON PAGES 32-37 OF THE PAPER BOOK AND THE DETAILS REGARDING IMPORTER EXPORTER CODE OF THE CREDITORS ARE AVAILABLE ON PAG ES 24-29 OF THE PAPER BOOK. OUR ATTENTION WAS ALSO DRAWN TO PARA-11 OF THE ASSESSME NT ORDER, WHERE THE ASSESSING OFFICER HAS ALSO OBSERVED THAT ALMOST ALL THE AMOUN TS EXCEPT RS.85,99,589/- REMAINED OUTSTANDING EVEN ON 31-03-2007. RELIANCE W AS PLACED ON THE FOLLOWING JUDGMENTS:- A) CIT V. SUGAULI SUGAR WORKS (P) LTD. (1999) 236 ITR 518 (SC) B) CIT V. KESARIA TEA CO. LTD. (2002) 254 ITR 434 (SC) 6. AS AGAINST THIS, IT IS SUBMITTED BY LD. CIT DR T HAT NO CREDITOR IS TRACEABLE AND MAJOR PART IS FOR CURRENT YEAR PURCHASES. HENCE, EV EN IF THE ADDITION HAS BEEN MADE BY ASSESSING OFFICER U/S.41(1), THE SAME CAN BE SUS TAINED AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT AND MERELY FOR THIS REASON THAT WRONG SECTION HAS BEEN MENTIONED BY ASSESSING OFFICER, THE ADDITION CANNOT BE DELETED. RELIANCE WAS PLACED ON THE TRIBUNALS DECISION IN THE CASE OF ITO V. AHUJA GRAPHIC MACHINERY (P) LTD. AS REPORTED IN 111 TTJ (MUM) 445. RELIANCE WAS A LSO PLACED ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT V. T.V. SUNDARAM IYENGAR AND SONS LTD. (1996) 222 ITR 344 (SC). 7. IN REJOINDER, IT IS SUBMITTED BY LD. AR OF THE A SSESSEE THAT THE 3 RD MEMBER DECISION OF THE TRIBUNAL CITED BY LD. DR IS IN FACT IN FAVOUR OF ASSESSEE AND PORTION ITA NO.365/AHD/2009 A.Y.2002-03 M/S MILLAT FIBRES V. ACIT, CIR-6 SRT PAGE 4 READ OUT BY THE LD. DR IS THE MINORITY VIEW OF HON BLE ACCOUNTANT MEMBER IN THAT CASE WHICH WAS NOT AGREED TO BY HONBE THIRD MEMBER WHO HAS AGREED WITH THE VIEW OF THE JUDICIAL MEMBER IN THAT CASE WHICH WAS IN FAVOUR OF ASSESSEE AND THEREFORE, RELIANCE PLACED BY DR OF THE REVENUE ON THIS TRIBUNALS DECISION IS MISPLACED. REGARDING THE JUDGMENT OF HONBLE APEX C OURT RENDERED IN THE CASE OF T.V.SUNDARAM IYENGAR AND SONS LTD. (SUPRA), IT WAS SUBMITTED THAT THIS DECISION IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACT S ARE DIFFERENT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD AND GONE THROUGH THE ORDERS OF LOWER AUTHORITIES AND JUDGMEN TS CITED BY BOTH THE SIDES. REGARDING THE FACTS, WE FIND THAT IT IS NOTED BY TH E TRIBUNAL IN THE ORDER IN FIRST ROUND IN ITA NO.2566/AHD/2005 DATED 25-09-2006 THAT IT WAS COMMUNICATED TO THE L OWER AUTHORITIES THAT ASSESSEE WAS HAVING STRAINED RELAT IONSHIP AS IT WAS HIT BY FINANCIALLY ADVERSE SITUATION AND SINCE THE ASSESSEE WAS NOT AB LE TO MAKE PAYMENTS, SUPPLIERS WERE NOT COOPERATING. REGARDING THE REASONS FOR ASS ESSEES INABILITY TO MAKE PAYMENT, IT WAS EXPLAINED THAT THE ASSESSEE COULD N OT MAKE PAYMENT TO THE SUPPLIERS BECAUSE ASSESSEES DEBTORS WERE NOT MAKIN G PAYMENT WHICH CAN BE VERIFIED FROM THE BALANCE-SHEET. IT WAS ALSO NOTED BY THE TRIBUNAL IN PARA-4 OF THIS EARLIER ORDER DATED 25-09-2006 THAT LD. CIT(APPEALS ) CALLED FOR REMAND REPORT FROM ASSESSING OFFICER AND REMAND REPORT DATED 02-09-200 5 WAS INCOMPLETE INASMUCH AS AO IN TURN HAS CALLED FOR REPORT FROM ADIT (HQ) REQ UESTING HIM TO EXAMINE THESE PARTIES AND SEND REPORT TO THE ASSESSING OFFICER. F OR THESE REASONS, THE MATTER WAS RESTORED BY TRIBUNAL TO THE FILE OF ASSESSING OFFIC ER FOR FRESH DECISION. IN THE SECOND ROUND ALSO, THE ADDITION WAS MADE BY AO U/S 41(1) A ND WAS CONFIRMED BY LD. CIT(APPEALS) UNDER THAT SECTION ONLY AND NOW IN COU RSE OF ARGUMENT BEFORE US, IT WAS THE SUBMISSION OF LD. DR OF REVENUE THAT AT LEA ST FOR THAT PART OF THE AMOUNT WHICH IS RELATED TO PURCHASES OF CURRENT YEAR, ADDI TION SHOULD BE CONFIRMED U/S.68 OF THE ACT, IF IT IS FOUND THAT THE SAME CANNOT BE CON FIRMED U/S.41(1) OF THE ACT. WITH REGARD TO THIS CONTENTION, WE WOULD LIKE TO OBSERVE THAT THIS FACTUAL POSITION IS RELEVANT FOR DECIDING THIS CONTENTION THAT THESE CR EDITS ARE ON ACCOUNT OF PURCHASE AND AGAINST THESE PURCHASES, THERE IS CORRESPONDING SALE AND CLOSING STOCK AND HENCE, IT CANNOT BE SAID THAT THESE CREDITORS WITH REGARD TO THESE PURCHASES IN THE PRESENT YEAR ARE UNEXPLAINED CASH CREDIT FOR WHICH THE ADDITION CAN BE MADE U/S.68. THESE CREDITS ARE EXPLAINED TO BE ON ACCOUNT OF CRE DIT PURCHASE AND CONFIRMATION OF ITA NO.365/AHD/2009 A.Y.2002-03 M/S MILLAT FIBRES V. ACIT, CIR-6 SRT PAGE 5 THESE SUPPLIERS WERE DULY FURNISHED ALONG WITH ADDR ESS AND PAN OF THE SUPPLIERS. THERE IS ONE MORE VITAL ASPECT OF THIS CONTENTION T HAT THIS PRESENT APPEAL IS IN COURSE OF SECOND ROUND AND AS PER THE JUDGMENT OF HONBLE GUJARAT HIGH COURT REPORTED IN THE CASE OF SAHELI SYNTHETICS P. LTD. V. CIT (2008) 302 ITR 126 (GUJ), WHEREIN IT WAS HELD THAT IN ANY SET ASIDE ASSESSMENT WHICH DOES NO T INVOLVE PROPOSAL OF ENHANCEMENT, THERE IS NO SCOPE OR POWER AVAILABLE T O THE ASSESSING OFFICER WHILE MAKING THE FRESH ASSESSMENT TO INCLUDE A NEW SOURCE OF INCOME. IN THE PRESENT CASE, THE MATTER WAS RESTORED BACK BY THE TRIBUNAL TO THE FILE OF ASSESSING OFFICER FOR RE-DECIDING THE MATTER IN CONNECTION WITH THE ADDIT ION MADE BY AO U/S 41(1) AND HENCE, IN OUR CONSIDERED OPINION, AS PER THIS JUDGM ENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF SAHELI SYNTHETICS P. LTD. (SUPRA), IN THE SECOND ROUND, THIS PLEA CANNOT BE TAKEN BY THE REVENUE THAT IF TH E ADDITION IS NOT SUSTAINABLE U/S.41(1), THE SAME SHOULD BE SUSTAINED U/S.68 OF T HE ACT. APART FROM THIS, WE HAVE ALSO OBSERVED THAT IN THE FACTS OF THE PRESENT CASE , THE PROVISION OF SECTION 68 ARE NOT ATTRACTED BECAUSE THE CREDITS IN QUESTION ARE I N RESPECT OF PURCHASES OF THE PRESENT YEAR AND AGAINST THESE PURCHASES, THERE IS CORRESPONDING SALE OR CLOSING STOCK AND UNLESS THIS CONTENTION OF THE ASSESSEE IS CONTROVERTED BY SHOWING THAT THESE PURCHASES ARE NOT HAVING ANY CORRESPONDING SA LE OR CLOSING STOCK, THE ADDITION U/S.68 CANNOT BE MADE WITH REGARD TO THESE CREDITS IN THE BOOKS OF THE ASSESSEE PARTICULARLY WHEN THE ASSESSEE HAS DULY FURNISHED T HE CONFIRMATION AND THERE IS CORRESPONDING SALE OR CLOSING STOCK AGAINST THESE P URCHASES. HENCE, THIS CONTENTION OF LD. DR OF THE REVENUE IS REJECTED. 9. REGARDING SUSTAINABILITY OF THE ADDITION MADE BY ASSESSING OFFICER U/S 41(1), WE FIND THAT PROVISIONS OF SECTION 41 ARE NOT APPLI CABLE IN THE PRESENT CASE. AS PER THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF KESARIA TEA CO. LTD. (SUPRA), THE UNILATERAL ACTION ON THE PART OF THE A SSESSEE BY WAY OF WRITING OFF THE LIABILITY IN ITS ACCOUNTS DID NOT NECESSARILY MEAN THAT THE LIABILITY HAS CEASED IN THE EYE OF LAW. THIS JUDGMENT HAS DULY CONSIDERED ANOTH ER JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF SUGAULI SUGAR WORKS (P) LTD. (SUPRA) ON WHICH RELIANCE HAS BEEN PLACED BY LD. AR OF THE ASSESSEE AND ALSO IN THE CASE OF T.V.SUNDARAM IYENGAR AND SONS LTD. (SUPRA) ON WHICH RELIANCE HAS BEEN PLACED BY LD. D R OF THE REVENUE. ITA NO.365/AHD/2009 A.Y.2002-03 M/S MILLAT FIBRES V. ACIT, CIR-6 SRT PAGE 6 10. REGARDING THE JUDGMENT OF HONBLE APEX COURT RE NDERED IN THE CASE OF T.V.SUNDARAM IYENGAR AND SONS LTD. (SUPRA) ON WHICH RELIANCE HAS BEEN PLACED BY THE LD. DEPARTMENTAL REPRESENTATIVE, WE FIND THAT I N THAT CASE, THE FACTS WERE THAT THE AMOUNT IN QUESTION OF RS.17,381/- HAD BEEN CRED ITED BY THE ASSESSEE TO THE PROFIT AND LOSS ACCOUNT IN THE PRESENT YEAR AND ANO THER AMOUNT OF RS.38,975/- WAS CREDITED BY THE ASSESSEE TO THE PROFIT AND LOSS ACC OUNT IN THE NEXT YEAR I.E. DURING THE FINANCIAL YEAR ENDING ON 31 ST MARCH, 1983. THESE AMOUNTS WERE NOT INCLUDED IN TH E INCOME OF THE ASSESSEE AND THESE SUMS WERE STATED T O BE CREDIT BALANCE STANDING IN FAVOUR OF CUSTOMER OF THE ASSESSEE-COMPANY AND SINC E THESE BALANCES WERE NOT CLAIMED BY THE CUSTOMERS, THE AMOUNTS WERE TRANSFER RED BY THE ASSESSEE TO PROFIT AND LOSS ACCOUNT. ONE MORE FACT IS NOTED BY HONBLE APEX COURT IN THAT CASE THAT THERE IS NO DISPUTE THAT AMOUNT WAS RECEIVED BY THE ASSESSEE IN THE COURSE OF TRADE TRANSACTION. THESE FACTS ARE ALSO NOTED BY HONBLE APEX COURT ON PAGE 353 OF 222 ITR THAT THE AMOUNT WAS RECEIVED BY THE ASSESSEE IN THE COURSE OF CARRYING ON HIS BUSINESS AND ALTHOUGH IT WAS TREATED AS DEPOSIT AND WAS OF CAPITAL NATURE AT THE POINT OF TIME IT WAS RECEIVED, BY EFFLUX OF TIME, T HE MONEY HAS BECOME THE ASSESSEES OWN MONEY. IT IS CLEAR THAT IN THE PRESE NT CASE, THE FACTS ARE DIFFERENT. IN THE PRESENT CASE, THE AMOUNT IN QUESTION HAS NOT BE EN RECEIVED BY THE ASSESSEE FROM ITS CUSTOMERS WHICH REMAINED UN-CLAIMED. IN TH E PRESENT CASE, THE CREDITS ARE ON ACCOUNT OF PURCHASE OF ASSESSEE WHICH COULD NOT BE PAID BY THE ASSESSEE FOR THE REASON THAT ASSESSEE WAS NOT GETTING PAYMENT FROM I TS CUSTOMERS. IN OUR CONSIDERED OPINION, THIS JUDGMENT OF HONBLE APEX COURT IS OF NO HELP TO THE REVENUE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. 11. IN THE CASE OF AHUJA GRAPHIC MACHINERY (P) LTD. (SUPRA) ON WHICH RELIANCE HAS BEEN PLACED BY LD. DR OF THE REVENUE, 3 RD MEMBER HAD AGREED WITH THE VIEW OF JUDICIAL MEMBER AND HAS DECIDED THE MATTER IN FAVOU R OF ASSESSEE. THE RELEVANT PORTION OF THIS 3 RD MEMBER DECISION IS IN PARA-10 WHICH IS REPRODUCED BELOW:- 10. AGAIN THE HONBLE SUPREME COURT IN THE CASE OF CHIEF CIT VS. KESARIA TEA CO. LTD. (SUPRA) (CONSISTING OF 3 JUDGES) HAD FOLLOWED THE DECISION OF CIT VS. SUGAULI SUGAR WORKS (P) LTD. (SUPRA) AND DISTINGUISHED THE FACTS IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS LTD. (SUPRA). IN THE FACTS OF THE PRESENT CASE ADMITTEDLY THE DECISION OF THE HON BLE SUPREME COURT IN CIT VS. T.V. SUNDARAM IYENGAR & SONS LTD. (SUPRA) CANNOT BE APPLIED BECAUSE THE SUMS IN QUESTION ARE NOT APPROPRIATED OR WRITTE N OFF TO THE P&L A/C AND, THEREFORE, IN MY VIEW THE DECISION OF THE HONBLE S UPREME COURT IN CIT VS. ITA NO.365/AHD/2009 A.Y.2002-03 M/S MILLAT FIBRES V. ACIT, CIR-6 SRT PAGE 7 KESARIA TEA CO. LTD. (SUPRA) CLEARLY TAKES THE ASSESSEE AWAY FROM BEING TAXED ON SUCH AMOUNTS WHICH HAVE STILL SHOWN AS TRADING LIAB ILITIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THERE IS NO MATERIAL TO SHOW THE CHAR ACTER OF THESE RECEIPTS HAS CHANGED MERELY BY PASSAGE OF TIME. 12. IN THE PRESENT CASE ALSO, THERE IS NO MATERIAL TO SHOW THAT CHARACTER OF THESE CREDITS HAVE CHANGED BY PASSAGE OF TIME AND MERELY BECAUSE CREDITORS ARE NOT TRACEABLE, IT CANNOT BE CONCLUDED THAT LIABILITY HAS CEASED TO EXIST. IT WAS HELD BY HONBLE APEX COURT IN THE CASE OF SUGAULI SUGAR WORKS (P) LTD. (SUPRA) THAT EXPIRY OF THE PERIOD OF LIMITATION PR ESCRIBED UNDER THE LIMITATION ACT COULD NOT EXTINGUISH THE D EBT BUT IT WOULD ONLY PREVENT THE CREDITOR FROM ENFORCING THE DEBT. IT WAS ALSO HELD THAT MERE ENTRY IN THE BOOKS OF ACCOUNT OF THE DEBTOR MADE UNILATERALLY WITHOUT ANY ACT ON THE PAR T OF THE CREDITOR WILL NOT ENABLE THE DEBTOR TO SAY THAT THE LIABILITY HAS COME TO AN END. THIS JUDGMENT FULLY SUPPORT THE CASE OF THE ASSESSEE. THIS JUDGMENT WAS FOR THE PERIOD PRIOR TO INSERTION OF EXPLANATION-1 TO SECTION 41(1) BUT WHEN THERE IS NO TRANSFER BY THE ASSESSEE OF THE CREDIT BALANCES TO THE CREDIT OF PROFIT AND LOSS ACCOUNT, THIS JUDGMENT IS VERY MUCH APPLICABLE EVEN NOW AND HENCE, MERELY BECAUSE THE LIMITATION PERIOD HAS EXPIRED OR CREDIT OR IS NOT TRACEABLE, IT CANNOT BE SAID THAT THE LIABILITY HAS CEASE TO EXIST. HENCE, IN OUR CON SIDERED OPINION, THE PROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE IN THE FACTS OF THE PRESEN T CASE. BY RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF SUGAULI SUGAR WORKS (P) LTD. (SUPRA), WE HOLD THAT THE PROVISIONS OF SECTION 41( 1) ARE NOT APPLICABLE IN THE PRESENT CASE. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 13. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26/08/2011 SD/- SD/- (BHAVNESH SAINI) (A.K.GAROD IA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, DATED : 26/08/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-IV, SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD