DCIT, New Delhi V. M/s UEM India Pvt. Ltd., Delhi

ITA 3674/DEL/2013

• Counselvise Citation: 367420114 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 19-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 07-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R S MEENA
• Keywords: Business income; Depreciation; Transfer pricing; International transaction; Period of limitation; Additional evidence; Question of law; Agreed addition; Tax effect; Capital receipt
• Section: 133(6); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H , NEW DELHI) BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.3413 /DEL/2013 ASSESSMENT YEAR : 2009-10 UEM INDIA PVT. LTD., VS. ADDL. CIT, RANGE 18, 2 ND & 3 RD FLOOR, TOWER B, NEW DELHI A-1, WINDSOR I T PARK, SECTOR 125, NOIDA-201301 GIR / PAN:AAACU0043Q ITA 3674/DEL/2013 ASSESSMENT YEAR 2009-10) DCIT, CIRCLE 18(1), VS. UEM INDIA PVT. LTD., NEW DELHI 2 ND & 3 RD FLOOR, TOWER B, A-1, WINDSOR I T PARK, SECTOR 125, NOIDA (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATISH KHOSLA, ADV. RESPONDENT BY : SHRI R S MEENA, CIT DR ORDER PER T.S. KAPOOR, AM: THESE ARE CROSS APPEALS FILED BY THE REVENUE AS WE LL AS BY THE ASSESSEE AGAINST ORDER OF LD. CIT(A) DATED 08.03.20 13. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL: 1) LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.2,35,096/- AND RS.27,670/- MADE BY THE A.O. BY DISALLOWANCE OF 10% OF VEHICLE MAINTENANCE EXPENSES AND 2 ITA NO.3413,3674/DEL/2013 DEPRECIATION ON CAR NOT HAVING BEEN INCURRED FOR TH E PURPOSE OF BUSINESS. 2) LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.66,02,696/- MADE BY THE A.O. U/S 41(1) OF THE I. T. ACT. 2.1 THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS: ON THE FACTS OF AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - XXI, NEW DELHI ['CIT(A)'J HAS: 1. ERRED IN PASSING AN ORDER WHICH IS BAD IN LAW BY CONFIRMING THE DISALLOWANCE MADE BY THE LD. AO AMOUNTING TO RS 10, 94,714 UNDER SECTION 41 (1) OF THE ACT, WHICH IS PAYABLE TO M/S KIRLOSKAR BROTHERS ON THE ALLEGED BASIS THAT THE SAID AMOUNT IS NOT MO RE PAYABLE AND REPRESENTS CESSATION OF TRADING LIABILITY AND THE A PPELLANT HAS AGREED TO OFFER THE SAME TO TAXATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. ERRED IN PASSING AN ORDER WHICH IS BAD IN LAW B Y: (I) CONFIRMING THE DISALLOWANCE MADE BY LD. AO AMO UNTING TO RS. 4,835,897 ON ACCOUNT OF FAILURE AND NON-COMPLIANCE OF NOTICES ISSUED UNDER SECTION 133(6) OF THE INCOME TAX ACT, 1961 BY THE APPELLANT'S CREDITORS WITHOUT APPRECIATING THAT THE APPELLANT'S RESPONSIBILITY IS LIMITED TO PROVIDING THE DESIRED INFORMATION BY WAY OF NAMES AND ADDRESSES OF THE CREDITORS WHICH WAS DULY COMPLIED WITH AND THE APPELLANT CANNOT BE HELD RESPONSIBLE AND PENALIZED FOR THE NON- COMPLIANCE OF NOTICES BY THE CREDITORS. (II) CONFIRMING THE ADDITIONS MADE BY THE LD. AO I N THE ABSENCE OF THE ASSESSEE'S BOOK BEING REJECTED WHICH IS IMPERMI SSIBLE IN LAW. (III) NOT APPRECIATING THAT WITHOUT BRINGING ANY EV IDENCE ON RECORD TO EVIDENCE CESSATION OF LIABILITY, THE LD. AO WAS PRE CLUDED FROM INVOKING THE PROVISIONS OF SECTION 41 (1) OF THE AC T. (IV) NOT APPRECIATING THAT THE TRADING ADDITIONS HA VE BEEN MADE BY THE AO MERELY ON SURMISES AND CONJECTURES. (V) NOT APPRECIATING THAT THE CREDITORS ARE THE REG ULAR VENDORS OF THE APPELLANT AND THE TRANSACTIONS WITH THEM ARE GENUIN E BUSINESS TRANSACTIONS AND HAVE BEEN UNDERTAKEN WHOLLY AND EX CLUSIVELY FOR THE PURPOSES OF THE BUSINESS. 3 ITA NO.3413,3674/DEL/2013 (VI) NOT APPRECIATING AND IGNORING THE DOCUMENTATIO N FURNISHED BY THE APPELLANT IN THE FORM OF INVOICES, LEDGERS AND BANK STATEMENTS SHOWING PAYMENTS TO THE CREDITORS TO SUBSTANTIATE T HAT THE TRANSACTIONS ARE GENUINE. 2.1 ERRED IN PASSING AN ORDER AND CONFIRMING A DIS ALLOWANCE MADE IN THE ASSESSMENT ORDER BOTH OF WHICH ARE PERVERSE. 3. ERRED IN PASSING AN ORDER WHICH IS BAD IN LAW B Y : (I) CONFIRMING THE DISALLOWANCE MADE BY THE LD. AO AMOUNTING TO RS 13,03,16,737 UNDER SECTION 41(1) OF THE ACT, WHI CH REPRESENTS UNSECURED LOAN PAYABLE TO UEM INC. ON THE ALLEGED B ASIS THAT THE SAID AMOUNT IS NOT MORE PAYABLE AND REPRESENTS CESSATION OF TRADING LIABILITY (II) NOT APPRECIATING THE FACT THAT THE APPELLANT H AS MADE THE REMITTANCE OF RS. 91,472,410 TO UEM LNC. POST RECEI PT OF THE APPROVAL FROM RESERVE BANK OF INDIA ON 10 APRIL 2012 AND IS IN THE PROCESS OF OBTAINING THE APPROVAL FOR THE BALANCE AMOUNT. (III) CONFIRMING THE RELIANCE MADE BY THE LD. AO ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF TV SUNDRAM AIYANGAR & SONS 222 ITR 344 AND THE JUDGMENT OF THE HON'BLE MU MBAI HIGH COURT IN THE CASE OF ACIT V PHOENIX MILLS LTD. (200 2) (BOM) 83 ITD 65 ON REMISSION LIABILITY WITHOUT APPRECIATING THAT THE FACTS IN THOSE CASES ARE ENTIRELY DIFFERENT FROM THE FACTS OF THE APPELLANT. 3.1. ERRED IN PASSING A NON-SPEAKING ORDER AND WHI CH EVIDENCES COMPLETE NON-APPLICATION OF MIND. THE ABOVE GROUNDS OF APPEAL ARE MUTUALLY AND WITHOU T- PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMI T OR SUBSTITUTE, ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL AND CONSIDER EACH OF THE GROUNDS AS WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF DESIGN, SUPPLY ERECTION AND COMMISS ION OF WATER AND WASTE WATER TREATMENT PLANTS, MACHINERY AND EQUIPMENTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 25.09.200 9 DECLARING TOTAL INCOME 4 ITA NO.3413,3674/DEL/2013 OF RS.9,38,55,545/- BEFORE SETTING OFF OF BROUGHT F ORWARD LOSSES. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING ASS ESSMENT PROCEEDINGS THE A.O. OBSERVED THAT ASSESSEE HAD INCURRED AN EXPENDI TURE OF RS.23,50,967/- UNDER THE HEAD VEHICLE REPAIR & PETROL EXPENSES. THE A.O. HELD THAT SINCE LOG BOOK WAS NOT MAINTAINED AND THEREFORE, ELEMENT OF PERSONAL USE CANNOT BE RULED OUT AND IN VIEW OF THE ABOVE, DISALLOWED A N AMOUNT OF RS.2,62,767/- REPRESENTING 10% OF THE EXPENSES. IT IS FURTHER OBSERVED THAT DURING ASSESSMENT PROCEEDINGS THE A.O. HAD ISSUED N OTICE U/S. 133(6) TO VARIOUS SUNDRY CREDITORS AND IN RESPONSE TO THE NOT ICES, SOME OF THE PARTIES RESPONDED AND SUBMITTED THEIR CONFIRMATIONS AND SOM E OF THE NOTICES WERE RETURNED BACK AS UNSERVED. THEREAFTER, A SHOW CAUS E NOTICE WAS ISSUED TO THE ASSESSEE COMPANY AND IT WAS DIRECTED TO EXPLAIN BAL ANCES APPEARING IN THE BOOKS OF ACCOUNTS. THE A.O. OBSERVED THAT REPLY TO NOTICES ISSUED TO 7 PARTIES AS LISTED IN HIS ASSESSMENT ORDER, AT PARA 4.4 HAD NOT BEEN RECEIVED, THEREFORE, RELYING UPON THE JUDGEMENT OF HON'BLE SU PREME COURT IN THE CASE OF IN CIT VS T.V. SUNDARAM IYENGER & SONS LTD. 222 ITR 344 MADE AN ADDITION OF RS.1,14,38,593/- REPRESENTING OUTSTANDI NG BALANCES OF THESE SUNDRY CREDITORS. THE SAID ADDITION WAS MADE U/S 4 1(1) OF THE ACT. THE A.O. ALSO OBSERVED THAT IN THE CASE OF KIRLOSKAR BR OTHERS, THERE WAS DIFFERENCE BETWEEN BALANCE AS PER ASSESSEES BOOKS OF ACCOUNTS AND AS PER CONFIRMATION SUBMITTED BY THE PARTY. THEREFORE, AS SESSEE WAS SHOW CAUSED TO EXPLAIN THE DIFFERENCE. ASSESSEE OFFERED THE DI FFERENCE FOR TAXATION AND THEREFORE, A.O. MADE THE ADDITION OF RS.10,94,714/- REPRESENTING THE DIFFERENCE BETWEEN THE TWO BALANCES. THE A.O. FURT HER OBSERVED THAT THE ASSESSEE HAD FROZEN TRADING LIABILITY BELONGING TO UEM INC. AMOUNTING TO 5 ITA NO.3413,3674/DEL/2013 RS.13,03,16,737/-. HE OBSERVED THAT ASSESSEE ITSEL F IN ITS NOTES TO ACCOUNTS AT SL. NO.12 SCHEDULE XVIII HAD MENTIONED ABOUT THIS F ACT. FOR THE SAKE OF CONVENIENCE, THE SAID NOTE AS RECORDED BY A.O. IS R EPRODUCED BELOW: (I) 'IN TERMS OF AGREEMENT DATED 07.02.2003, BETWE EN THE COMPANY AND UEM INC. USA, IT WAS PROPOSED TO ALLOT PREFEREN CE SHARES TO UEM LNC., USA SUBJECT TO OBTAINING NECESSARY APPROV ALS FROM REGULATORY AUTHORITIES, AGAINST SETTLEMENT OF -ITS DUES BY WAY OF DEFERRED PAYMENT CREDIT AMOUNTING TO RS. 7,53,38,71 5/- . CONSEQUENTLY, DEFERRED PAYMENT CREDIT RECEIVED FROM UEM LNC., USA WAS TRANSFERRED TO SHARE APPLICATION MONEY ACCOUNT IN 2002-03. DUE TO NON-RECEIPT OF REQUISITE APPROVAL, THE COMPANY H AD BY VIRTUE OF AN AGREEMENT DATED 01.09.2003 WITH UEM INC. USA, FROZE N ITS LIABILITY IN RUPEE TERMS AT THE SAME AMOUNT AND TRANSFERRED THE SAID SHARE APPLICATION MONEY TO DEFERRED PAYMENT CREDIT ACCOUN T UNDER THE HEAD UNSECURED LOAN. (II) DURING THE YEAR 2007-08, IN TERMS OF AN AGREEM ENT DATED 31.12.2007 WITH UEM LNC., USA, THE COMPANY HAS TRAN SFERRED A SUM OF RS.5,49, 78,022/-BEING THE DUES PAYABLE TO UEM I NC. FROM CREDITORS ACCOUNT TO UNSECURED LOAN ACCOUNT . THIS TRADING LIABILITY HAS BEEN FROZEN IN RUPEE TERMS AS ON 31.12.2007 OND BEING SHOWN UNDER THE HEAD UNSECURED LOAN .' 4. IN VIEW OF THE ABOVE, THE LD. A.R. WAS GIVEN SHO W CAUSE LETTER TO EXPLAIN AS TO WHY AMOUNT OF RS.13,03,16,737/- SHOUL D NOT BE TREATED AS CESSATION OF LIABILITY U/S 41. IN RESPONSE TO THE ABOVE SHOW CAUSE NOTICE, THE LD. A.R. SUBMITTED AS UNDER: IN THIS REGARD, WE, ON. BEHALF OF AND UNDER THE IN STRUCTIONS OF THE ASSESSEE, SUBMIT AS UNDER: FURTHER, TO OUR SUBMISSIONS DATED 12.12.2011 AND 19 .12.2011, IT IS REITERATED THAT THE AMOUNT OF RS.130316737/- (75338 715+54978022) REPRESENTS UNSECURED LOAN FROM UEM LNC WHICH IS EVI DENT FROM 'SCHEDULE 4 - UNSECURED LOANS' OF THE FINANCIAL STA TEMENTS FOR THE FINANCIAL YEAR (FY) 2008-09. 6 ITA NO.3413,3674/DEL/2013 IT IS SUBMITTED THAT DURING THE FINANCIAL YEARS 200 1-02 TO 2006-07, THE ASSESSEE SECURED A NUMBER OF DOMESTIC AND OVERSEAS PROJECTS FOR INSTALLATION OF WASTE WATER PLANTS, SEWAGE WATER PL ANTS & REVERSE OSMOSIS PLANTS AT VARIOUS LOCATIONS. IN ORDER TO ME ET THE SPECIFICATIONS AND REQUIREMENTS OF THE PROJECTS, THE ASSESSEE MADE SEVERAL PURCHASES OF MACHINERY AND EQUIPMENTS AMOUNTING TO USD 293553 9.84 FROM UEM TNC, USA AND OTHER OVERSEAS SUPPLIERS. IT IS FURTHER SUBMITTED THAT DUE TO INSUFFICIENT FU NDS, THE ASSESSEE COULD NOT MAKE PAYMENTS EITHER TO UEM INC OR THE OVERSEAS SUPPLIERS. ON THE REQUEST OF THE ASSESSEE, UEM INC SETTLED THE' A CCOUNTS OF THE OVERSEAS SUPPLIERS ON BEHALF OF THE ASSESSEE AND DE FERRED THE PAYMENTS FROM TIME. THE ASSESSEE FILED AN APPLICATION DATED 07.02.2003 WITH DEPARTMENT OF INDUSTRIAL POLICY (,DIPP') FOR ISSUANCE OF PREFE RENCE SHARES TO UEM INC. AGAINST THE AMOUNT OUTSTANDING WHICH WAS R EJECTED BY DIPP. HOWEVER, THE ASSESSEE AND UEM INC THROUGH AGREEMENT S DATED 01.09.2003 AND 31.12.2007 DECIDED TO FREEZE THE AMO UNT AT RS.75,338715/- AND RS.54,978,022/- RESPECTIVELY AND TREAT THE SAME AS UNSECURED LOAN IN THE BOOKS OF THE ASSESSEE TILL THE TIME EITHER THE ASSESSEE IS ABLE TO MAKE THE FINAL PAYMENT OF THE O UTSTANDING DUES OR APPROVAL IS GRANTED BY DIPP FOR ISSUANCE OF PREFERE NCE SHARES. (COPY OF THE AGREEMENTS ENCLOSED AS ANNEXURE 2 & 3). FURTHER, IN A PLETHORA OF JUDGMENTS, IT HAS BEEN HE LD THAT IN THE ABSENCE OF ANY WRITE OFF BY THE ASSESSEE AND ALSO I N THE ABSENCE OF ANY TANGIBLE PROOF OF THE SUPPLIER HAVING GIVEN UP ITS CLAIM, THE BALANCE OUTSTANDING IN THE BOOKS OF THE ASSESSEE CANNOT BE TREATED AS CESSATION OF LIABILITY AND INCOME OF THE ASSESSEE. 5. THE A.O. WAS NOT SATISFIED AND HE MADE THE ADDIT ION OF THE SAME BY HOLDING AS UNDER: ASSESSEE'S REPLY HAS BEEN CONSIDERED AND FOUND UNT ENABLE. ASSESSEE COMPANY, HAD PURCHASED MACHINERIES FROM U. K BASED COMPANY IN 2003 AND 2007 FOR RS.7,53,38,715/- AND R S.5,49,78,022/- FOR WHICH PAYMENTS WERE MADE BY UEM INC.USA (PARENT COMPANY OF ASSESSEE). NOW THIS AMOUNT WAS TO BE PAID BY ASSESS EE COMPANY, BUT 7 ITA NO.3413,3674/DEL/2013 INSTEAD SAME WAS PAID BY ITS PARENT COMPANY ON ITS BEHALF. THE ASSESSEE COMPANY DECIDED TO ALLOT PREFERENCE SHARES TO ITS PARENT COMPANY IN LIEU OF ABOVE SUM FOR WHICH APPROVAL FRO M INDIAN AUTHORITIES WAS REJECTED. THEREFORE, THE ASSESSEE C OMPANY ENTERED INTO AGREEMENT WITH PARENT COMPANY ON 07.02.2003 AN D 31.12.2007 TO FREEZE THE AMOUNT AND CONVERT IT INTO UNSECURED LOA N. THE ASSESSEE COMPANY IS CLAIMING THIS TRADING LIABILITY SINCE 20 03. AS THE ASSESSEE COMPANY HAS NOT MADE PAYMENT TO ITS CREDITOR I.E UEM LNC., USA AND ALSO THE CREDITOR HAS NOT PURSUED FOR PAYMENTS, THE ONLY SAFE CONCLUSION THAT CAN BE INFERRED IS TH AT THERE IS A CASE OF REMISSION OR CESSATION OF TRADING LIABILITY AND THE REFORE, THESE BALANCES NOW NEED TO BE ADDED BACK AS INCOME UNDER SECTION 41 {L} OF THE INCOME TAX ACT, 1961. IN THE CASE OF TV SUNDRAM AIYANGAR & SONS 222 ITR 3 44 THE HON'BLE SUPREME COURT HAS HELD THAT UNCLAIMED CREDIT BALANC ES CHANGES ITS CHARACTER AND BECOMES ASSESSEE'S MONEY AND LD. SUPR EME COURT TREATED THE UNCLAIMED BALANCES AS INCOME OF THE ASS ESSEE. IN THE CASE OF ACIT VS. PHEONIX MILLS LTD (2001) (8 0M) 83 ITO 65 IT WAS HELD THAT THE ONUS IS ON ASSESSEE TO PROVE THAT THE LIABILITY IS NOT CEASED. WHEN ASSESSEE DID NOT BRING COGENT EVIDENCE TO ESTABLISH THAT THE LIABILITY HAD NOT FACTUALLY CEASED BY PRODUCING THE PARTIES OR OTHERWISE THE AMOUNTS WERE INADMISSIBLE UNDER SECTI ON 41 {L} ON READING OF EXPLANATION 1 OF SECTION 41, IT IS VE RY CLEAR THAT IN THE CASE OF ASSESSEE THERE IS REMISSION OF TRADING LIAB ILITY, NOW NEEDS TO BE ADDED BACK AS INCOME. ACCORDINGLY LIABILITY OF R S.7,53,38,715/-AND RS.5,49,78,022/- TOTALING TO RS.13,03,16,737/- IN R ESPECT OF TO UEM LNC., USA NEEDS TO BE ADDED BACK AS INCOME UNDER SE CTION 41 (1). THUS, DISALLOWANCE ON THIS ACCOUNT COMES TO RS.13,0 3,16,737/-. (DISALLOWANCE RS.13,03,16,737/-) 6. AGGRIEVED WITH THE ASSESSMENT ORDER, THE ASSESSE E FILED APPEAL BEFORE LD. CIT(A). LD. CIT(A) AFTER GOING THROUGH THE SUB MISSIONS OF THE ASSESSEE AND AFTER OBTAINING REMAND REPORT FROM THE A.O., DE ALT WITH THE VARIOUS ADDITIONS MADE BY A.O. AS UNDER: (I) ADDITION ON ACCOUNT OF DISALLOWANCE OF VEHICL E EXPENSES: 8 ITA NO.3413,3674/DEL/2013 IN THIS REGARD IT IS FOUND THAT SIMILAR ISSUE WAS INVOLVED IN AY 2008- 09 ALSO, WHEREIN, I HAVE DECIDED THE ISSUE VIDE ORD ER DATED 21.03.2012 AND I HAVE FOUND THAT THERE IS NO CASE O F MAKING AD HOC DISALLOWANCE WHEN ACCOUNTS ARE AUDITED AND DETAILS HAVE BEEN MA DE AVAILABLE. AS FACTS AND CIRCUMSTANCES OF THE CASE REMAIN THE SAME, I AM INCLINED TO AGREE WITH THE VIEW OF THE APPELLANT THAT THERE IS NO CASE OF MAKING DISALLOWANCE IN CASE OF THE CORPORAT E ASSESSEE. GROUND NO.2 OF THE APPEAL IS ALLOWED. (II) ADDITION ON ACCOUNT OF DIFFERENCE IN BALANCES: IN THIS REGARD IT HAS BEEN CONTENDED THAT BALANCE CONFIRMATION RECEIVED FROM KIRLOSKAR BROTHERS UNDER SECTION 133( 6) OF THE IT ACT AT THE TIME OF THE ASSESSMENT PROCEEDINGS HAS BEEN IGN ORED 'AND ADDITION OF RS.IO,94,714/- HAS BEEN MADE ON ACCOUNT OF DIFFE RENCE BETWEEN BALANCE AS PER APPELLANT'S FINANCIAL STATEMENT AND AS PER CONFIRMATION. I HAVE GONE THROUGH THE FINDING OF TH E AO IN THIS REGARD AND APPELLANT'S SUBMISSIONS. IN THE REMAND REPORT D ATED 4.1.2013- AO HAS VERY SPECIFICALLY MENTIONED THAT OBJECTION T O ADDITION OF RS.L0,94,714/- IS AN AFTERTHOUGHT AND IT IS DEVOID OF MERIT. IN THE REMAND REPORT AO HAS FURTHER MENTIONED THAT ASSESSE E'S EXPLANATION WITH REGARD TO WRONG RECORDING OF PURCHASES OF RS.9 ,88,S87/- AND IT HAS BEEN REVERSED IN ASSESSMENT YEAR 20 I 0-11. IN THIS REGARD IT IS FOUND THAT THIS EXPLANATION HAS BEEN FOUND TO BE AN AFTERTHOUGHT BY THE AO. I AGREE WITH THE VIEW OF AO IN THIS REGARD AND I FOUND THAT THERE IS SUFFICIENT CAUSE TO MAKE THE ADDITION IN T HIS REGARD. IN VIEW OF THE ABOVE DISCUSSION, THIS GROUND OF APPEAL DESERVE S TO BE DISMISSED. THE CASE LAWS RELIED UPON BY THE ID. A R OF THE APP ELLANT ARE DISTINGUISHABLE ON THE FACTS OF THE CASE. (III) ADDITION ON ACCOUNT OF SUNDRY CREDITORS U/S 4 1(1): 6.1 I HAVE GONE THROUGH THE FINDING OF THE A.O. IN THE ASSESSMENT ORDER, WHEREIN, HE HAS MADE AN ADDITION OF RS.1,14,38,593 /- U/S. 41 (L) OF THE IT ACT. DETAILED ANALYSIS HAS BEEN SUBMITTED DURING TH E COURSE OF THE APPELLATE PROCEEDINGS, WHEREIN, APPELLANT HAS GIVEN TOTAL BRE AK UP OF THE PERSONS FROM WHOM CONFIRMATION HAS BEEN RECEIVED WHICH IS AVAILA BLE AT ANNEXURE-13 OF 9 ITA NO.3413,3674/DEL/2013 THE PAPER BOOK AMOUNTING TO RS.66,02,696/- AND THER E ARE PERSONS FROM WHOM CONFIRMATION HAS NOT BEEN RECEIVED TILL THE DA TE OF HEARING AMOUNTING TO RS.48,35,897/-. AFTER TAKING IN TO ALL THE REPL IES AND EVEN CONFIRMATION RECEIVED DURING THE COURSE OF THE APPELLATE PROCEED INGS OUT OF TOTAL OF RS.L,14,38,593/-, AN AMOUNT OF RS.48,35,897/- PERTA INING TO THREE PERSONS, AS UNDER, HAS NOT BEEN CONFIRMED. S. NO. NAME OF PARTY ADDRESS PAN/TIN AMOUNT (RS.)____ 1 PURSHOTTAM ENGINEERS CONTRU LINK ROAD, AAAC02100 L 1,949,624 P. LTD. CUTTACK - 753012 2 M/S WINDSOR SATHYAM 61/2, U R NAGAR, PARK 3304/ 364617 2,486,900 ENGINEERING ROAD, ANNANAGAR WEST EXTN. CHENNAI-600101 3.M/S HINDUSTAN CHEMICALS E-82A, GANESLI NAGAR,ACG PB3759H3,99,373 AND INDL. ENGG. WORKS PANDAV NAGAR, DELHI- 110092 TOTAL 4,835,897 6.2 SO, AFTER TAKING IN TO ACCOUNT THE DETAILS FILE D VIDE ADDITIONAL EVIDENCE AND AFTER ADMITTING THE ADDITIONAL EVIDENCE AND GIV ING CREDIT OF THE SAME, AN AMOUNT OF RS.48,35,897/- WILL REMAIN UNEXPLAINED BE CAUSE APPELLANT HAS FAILED TO FURNISH FULL CONFIRMATION EVEN TILL THE D ATE OF THE LAST HEARING. SO, IN MY CONSIDERED OPINION, OUT OF ADDITION OF RS.L,14,3 8,593/-, AN ADDITION OF RS.48,35,597/- IS SUSTAINED. THE APPELLANT GETS A R ELIEF OF RS.66,02,696/-. THIS GROUND IS PARTLY ALLOWED. (IV) ADDITION U/S 41(1) ON ACCOUNT OF UNSECURED LOA N: 7.1 I HAVE GONE THROUGH THE FINDING OF THE AO IN T HE ASSESSMENT ORDER AND IN THE REMAND REPORT AND WRITTEN SUBMISSION OF THE LD. AR OF THE APPELLANT FROM TIME TO TIME. THE APPELLANT HAS SUBMITTED THE DISTINCTION OF THE JUDGMENT RELIED UPON BY THE AO BY STATING THAT AO H AS WRONGLY RELIED ON THE JUDGMENT OF T.V SUNDRAM AIYANGAR & SONS, 222 ITR 34 4 AND PHOENIX MILLS LTD. (2002) 83 !TO 65. I HAVE GONE THROUGH THE CHAR T AND I FOUND THAT CASE 10 ITA NO.3413,3674/DEL/2013 OF THE AO IS VERY STRONG, WHEREIN, HE HAS BEEN ABLE TO DEMONSTRATE THROUGH REMAND REPORT, WHEREIN, HE HAS SUBMITTED HIS ARGUME NT ILL THIS REGARD VIDE PARA-A, B, C & 0 AND HE HAS FOUND THAT EVEN AFTER A LAPSE OF AROUND 9 MONTHS FROM THE RECEIPT OF THE R.B.I. APPROVAL AND HE HAS ALSO ATTACHED COPY OF THE THERE FOREIGN REMITTANCE CERTIFICATES FOR RE FERENCE ON RECORD. THUS, AO HAS MADE ADDITION OF RS.13,03,16,737/- ON FOLLOW ING: PURCHASE OF MACHINERY FOR U.K. BASED COMPANY IN 2003. : RS.7,53,38,715/- PURCHASE OF MACHINERY FOR U.K. BASED COMPANY IN 2007. RS.5,49,78,022/- TOTAL RS.13,03, 16,737/- THIS IS CLEARLY HIT BY PROVISIONS OF SECTION 41(1). THE CASE LAWS RELIED UPON BY AO IS FOUND TO BE SUPPORTING THE CASE. THE APPEL LANT HAS FAILED TO DISTINGUISH THE CASE LAWS. IN VIEW O .THE ABOVE DIS CUSSION, I AM IN FULL AGREEMENT WITH THE FINDING OF THE AO IN THIS REGARD . GROUND NO. 5 AND 6 OF THE APPEAL ARE DISMISSED. 7. AGGRIEVED WITH THE ORDER OF LD. CIT(A), BOTH THE PARTIES ARE UNDER APPEAL BEFORE US. 8. AT THE OUTSET, LD. A.R. INVITED OUR ATTENTION TO APPLICATION FILED BY ASSESSEE UNDER RULE 29 OF ITAT RULES FOR BRINGING O N RECORD ADDITIONAL EVIDENCE AND SUBMITTED THAT THOUGH EVIDENCE SOUGHT TO BE BROUGHT ON RECORD, IS RELEVANT FOR DECIDING GROUND NO.3 OF ASSESSEES APPEAL, YET HE DID NOT PRESS FOR THE SAME. LD. D.R. HAS ALSO STRONGLY OBJ ECTED TO THE APPLICATION FOR ADDITIONAL EVIDENCE. IN VIEW OF THE STAND TAKEN BY BOTH PARTIES, APPLICATION UNDER RULE 29 FILED BY ASSESSEE IS REJECTED. LD. A .R. ALSO SUBMITTED THAT HE WILL NOT BE PRESSING GROUND NO.3.1 OF ASSESSEES AP PEAL. IN VIEW OF THE ABOVE, GROUND NO.3.1 OF ASSESSEES APPEAL IS DISMIS SED AS NOT PRESSED. 11 ITA NO.3413,3674/DEL/2013 9. ARGUING UPON THE ADDITIONS MADE BY A.O. AND CONF IRMED BY LD. CIT(A), ON ACCOUNT OF OUTSTANDING SUNDRY CREDITORS, THE LD. A.R. ARGUED THAT ADDITIONS MADE U/S 41(1) WERE NOT JUSTIFIED AS VARI OUS COURTS HAVE HELD THAT FOR MAKING ADDITIONS U/S 41(1), THE LIABILITY MUST HAVE CEASED TO EXIST AND IN THE PRESENT CASE, THE LIABILITY HAD NOT CEASED TO E XIST AS THE ASSESSEE WAS REFLECTING THE SAME IN ITS BALANCE SHEETS CONTINUOU SLY. IT WAS SUBMITTED THAT A.O. HAD MADE THE ADDITIONS ONLY ON THE BASIS THAT CONFIRMATIONS COULD NOT BE FILED AND REGARDING OTHER ADDITIONS U/S 41 FOR U NSECURED LOANS RELATING TO UEM INC., THE LD.A.R. SUBMITTED THAT ASSESSEE HAD I MPORTED VARIOUS MACHINES FROM ITS HOLDING COMPANY AND FURTHER HOLDI NG COMPANY HAD MADE CERTAIN PAYMENTS ON BEHALF OF ASSESSEE COMPANY AND ASSESSEE WAS TO PAY FOR THESE LIABILITIES AND SINCE THE ASSESSEE WAS NOT HA VING SUFFICIENT FUNDS, THESE LIABILITIES WERE FROZEN & IT WAS AGREED THAT PREFER ENCE SHARES BE ISSUED TO HOLDING COMPANY AGAINST LIABILITIES BUT THE PROPOSA L DID NOT GO THROUGH AND, THEREFORE, THE LIABILITY WAS CLASSIFIED UNDER THE H EAD UNSECURED LOANS AND RESERVE BANK OF INDIA WAS APPROACHED FOR REPAYMENT OF ABOVE LOANS BUT DUE TO LATE APPROVAL BY RESERVE BANK OF INDIA, ONLY PAR TIAL AMOUNT COULD B REMITTED AND WHOLE AMOUNT COULD NOT BE REMITTED AN D LD. CIT(A) WITHOUT CONSIDERING THESE FACTS UPHELD THE ADDITION. OUR AT TENTION WAS DRAWN TO PAPER BOOK PAGES 32-54 WHERE VARIOUS COMMUNICATIONS IN THE FORM OF LETTERS WERE PLACED. IN VIEW OF THESE LETTERS, LD. A.R. SU BMITTED THAT M/S. UEM INC. VIDE LETTER DATED 30.04.2002 AND 11.01.12 HAVE CONFIRMED THAT USD 15,39,095/- WAS DUE TO BE RECEIVED FORM ASSESSEE CO MPANY AND IN THIS RESPECT, WE WERE TAKEN TO PAPER BOOK PAGE 38. THE LD. A.R. SUBMITTED THAT LIABILITY OF THE COMPANY WAS NEVER WRITTEN BACK & I N FACT THE ASSESSEE 12 ITA NO.3413,3674/DEL/2013 COMPANY CONTINUED ITS EFFORTS TO DISCHARGE THE LIAB ILITY EITHER BY CONVERSION INTO PREFERENCE SHARES OR BY DIRECTLY REMITTING TO UEM USA & AFTER THE ASSESSEE DID NOT GET PERMISSION FOR ISSUE OF PREFER ENCE SHARES IT APPROACHED ICICI BANK FOR REPATRIATION OF THE AMOUNT WHO APPRO ACHED RESERVE BANK OF INDIA FOR ITS SANCTION. OUR ATTENTION WAS INVITED TO PAPER BOOK PAGES 52-54 WHERE COPIES OF SUCH LETTERS WERE PLACED. OUR ATTEN TION WAS ALSO INVITED TO PAPER BOOK PAGES 74-76 WHERE A COPY OF APPROVAL GRA NTED BY RBI TO ICICI BANK AND FURTHER COPY OF LETTER WRITTEN BY ASSESSEE TO ICICI BANK DIRECTING IT TO MAKE PAYMENTS WAS PLACED. 10. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, I T WAS SUBMITTED THAT A.O. HAS MADE ADDITIONS ON ACCOUNT OF SUNDRY CREDIT ORS SIMPLY BECAUSE CONFIRMATIONS COULD NOT BE FILED AND SECONDLY ON TH E BASIS THAT ASSESSEE B MUTUAL CONSENT WITH LENDERS HAD FREEZED THE LIABILI TY WHICH WAS NOT LEGAL AS ASSESSEE CONTINUED TO REFLECT THE LIABILITIES IN IT S BALANCE SHEET AND THESE WERE NOT WRITTEN OFF & THEY HAD NOT CEASED TO EXIST. TO SUPPORT HIS ARGUMENTS, LD. A.R. RELIED UPON THE FOLLOWING CASE LAWS: CIT VS JAIN EXPORTS (P) LTD. 217 TAXMAN 0054 DELHI HIGH COURT CHIEF COMMISSIONER OF INCOME TAX VS KESARIA TEA CO . LTD. 254 ITR 434 (S.C.) CIT VS SUGAULI SUGAR WORKS (P) LTD. 236 ITSR 518 (S .C.) CIT VS VARDHMAN OVERSEAS LTD. 343 ITR 408 (DELHI H. C.) 11. THE LD. A.R. ALSO RELIED UPON THE SUBMISSIONS M ADE BEFORE LD. CIT(A) SPECIFICALLY WITH REGARD TO CONTENTIONS DIST INGUISHING THE CASE LAW RELIED UPON BY A.O. IT WAS SUBMITTED THAT CASE LAW S RELIED UPON BY A.O. WERE NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. LD. A.R. ALSO 13 ITA NO.3413,3674/DEL/2013 RELIED UPON THE CASE LAWS NOTED AT SL.NO.1 TO 13 OF THE PAPER BOOK DATED 02.04.2014 FILED BY ASSESSEE. 12. WITH RESPECT O ADDITION MADE BY A.O. ON ACCOUNT OF DIFFERENCE OF BALANCE AS PER ASSESSEES BOOKS AND AS PER CONFIRMA TION OF M/S. KIRLOSKAR BROTHERS, LD. A.R. SUBMITTED THAT DIFFERENCE WAS DU LY EXPLAINED TO LD. CIT(A) AND LD. CIT(A) HAD OBTAINED REMAND REPORT AL SO. IT WAS SUBMITTED THAT ASSESSEE HAD BY MISTAKE RECORDED A PURCHASE OF RS.9,88,887/- FROM THE ABOVE SAID PARTY AND WHEN MISTAKE CAME TO ITS NOTIC E, IT HAD REVERSED IT IN THE SUCCEEDING YEAR AND THEREFORE, TAX EFFECT IN CL AIMING EXTRA PURCHASES IN THIS YEAR WAS NULLIFIED IN THE SUCCEEDING YEAR WHEN PURCHASES WERE REDUCED BY AN EQUIVALENT AMOUNT. IT WAS SUBMITTED THAT BOT H THE A.O. AND LD. CIT(A) WITHOUT COMMENTING UPON THE MERITS OF FACTS, HAD DISMISSED IT AS AFTERTHOUGHT WHICH IS NOT JUSTIFIED AS THERE IS NO TAX EFFECT AS TAX RATES IN BOTH THE YEARS ARE THE SAME. LD. A.R. RELIED UPON THE C ASE LAW OF CIT VS VISHNU INDUSTRIAL GASES (P) LTD. ITR 229/1988 WITH THE PRO POSITION THAT IF EXPENDITURE IS ALLOWABLE IN PRINCIPLE, THE YEAR OF ITS ALLOWABILITY SHOULD NOT BE DISPUTED IF THE TAX RATES IN THE YEARS UNDER CON SIDERATION WERE SAME. 13. LD. D.R. ON THE OTHER HAND SUBMITTED THAT ADDIT ION AGITATED BY LD. A.R. IN GROUND NO.I WAS AN AGREED ADDITION AND THER E ARE NUMBER OF JUDGEMENTS WHICH SAY THAT APPEAL CANNOT BE FILED AG AINST AGREED ADDITIONS. POINTING OUT TO PAPER BOOK PAGE I, LD. D.R. SUBMITT ED THAT IN THE ACCOUNT OF KIRLOSKAR BROTHERS, THERE IS NO REVERSAL OF ENTRY O F RS.9,88,887/- AS CLAIMED BY LD. A.R. ARGUING UPON GROUND NO.2, LD. D.R. SUB MITTED THAT REMAND REPORT OF A.O. PLACED AT PAPER BOOK 201 IS DATED 04 .01.2013 AND EVEN AFTER SUCH A LONG PERIOD, THE CONFIRMATIONS FROM THESE PA RTIES WAS NOT FILED AND 14 ITA NO.3413,3674/DEL/2013 THEREFORE, IN THE ABSENCE OF CONFIRMATIONS HOW THE AUTHORITIES CAN SAY THAT BALANCES REPRESENTED BALANCES ON ACCOUNT OF GENUINE BUSINESS TRANSACTIONS. 14. AS REGARDS THE ADDITION U/S 41(1) ON ACCOUNT OF UNSECURED LOAN OF UEM INC., LD. D.R. ARGUED THAT LIABILITY REPRESENT ED A TRADING LIABILITY AS THE ASSESSEE WAS IMPORTING VARIOUS KINDS OF MACHINE RIES AND THEREFORE WHEN THE LIABILITY WAS CONVERTED INTO UNSECURED LOANS, T HE TRADING LIABILITY CEASED TO EXIST AND THEREFORE PROVISIONS OF SECTION 41(1) WERE APPLICABLE. LD. D.R. ARGUED TO THE EXTENT THAT THESE BEING INTERNATIONAL TRANSACTIONS SHOULD ALSO HAVE BEEN BROUGHT TO TAX AS INTERNATIONAL TRANSACTI ONS. LD. D.R. FURTHER FORCEFULLY ARGUED THAT THE CASE SHOULD BE REMITTED BACK TO A.O. FOR READJUDICATION AS THERE ARE NUMBER OF DOCUMENTS WHI CH WERE NOT BEFORE A.O. JOINING IN AS REJOINDER, LD. A.R. SUBMITTED T HAT EVEN IF ASSESSEE HAD AGREED FOR SOME ADDITIONS BUT ON FINDING THE MISTAK E AND ON BEING SATISFIED WITH RECONCILIATION OF BALANCES THE ASSESSEE CAN RE CTIFY ITS MISTAKE AND ARGUE THAT ENTRY OF RS.9,88,887/- WAS NOT BOGUS BUT IT WA S DUE TO HUMAN MISTAKE WHICH IS CURABLE. 15. REGARDING PRAYER OF LD. D.R. FOR REMITTING BACK THE ISSUE OF ADDITIONS U/S 41(1), THE LD. A.R. SUBMITTED THAT HE WAS ON T HE LEGAL ISSUE AS TO WHETHER UNDER THESE FACTS AND CIRCUMSTANCES, ADDITI ONS CAN BE MADE U/S 41(1) WHEN THE ASSESSEE WAS CONTINUING TO REFLECT T HE LIABILITIES IN ITS BALANCE SHEET AND THESE WERE NOT WRITTEN OFF IN THE BOOKS O F ACCOUNTS. THEREFORE, IT WAS SUBMITTED THAT IN VIEW OF DECISIONS OF VARIOUS COURTS THE ISSUE OF ASSESSEE CAN BE DECIDED AS PER LAW. HE FURTHER SUB MITTED THAT HE WILL NOT BE RELYING UPON ANY DOCUMENTS IN THE PAPER BOOK EXCEPT CASE LAWS. 15 ITA NO.3413,3674/DEL/2013 16. ARGUING UPON REVENUES APPEAL, THE LD. A.R. REL IED UPON THE ORDER OF A.O. WHEREAS LD. A.R. RELIED UPON THE ORDER OF LD. CIT(A). 17. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. FIRST, WE TAKE UP REVENUES APPE AL. WE FIND THAT LD. CIT(A) HAS DELETED THE ADDITION ON ACCOUNT OF VEHIC LE REPAIR & MAINTENANCE BY HOLDING AS UNDER: IN THIS REGARD I IS FOUND THAT SIMILAR ISSUE WAS INVOLVED IN ASSESSMENT YEAR 2008-09 ALSO, WHEREIN, I HAVE DECID ED THE ISSUE VIDE ORDER DATED 21.03.2012 AND I HAVE FOUND THAT THERE IS NO CASE OF MAKING AD HOC DISALLOWANCE WHEN ACCOUNTS ARE AUDITE D AND DETAILS HAVE BEEN MADE AVAILABLE. AS FACTS AND CIRCUMSTANC ES OF THE CASE REMAIN THE SAME, I AM INCLINED TO AGREE WITH THE VI EW OF THE APPELLANT THAT THERE IS NO CASE OF MAKING DISALLOWANCE IN CAS E OF THE CORPORATE ASSESSEE. GROUND NO.2 OF THE APPEAL IS ALLOWED. 18. HOWEVER, WE FIND THAT IN ASSESSMENT YEAR 2008-0 9, THE ISSUE OF DISALLOWANCE OF VEHICLE EXPENSES WAS NOT IN DISPUTE AND LD. CIT(A) IN ITS ORDER DATED 21.03.2012 HAS NOT ADJUDICATED ON THIS ISSUE. THEREFORE, RELIANCE MADE BY LD. CIT(A) IN HIS ORDER FOR ASSESSMENT YEAR 2008-09 IS MISPLACED. HOWEVER, WE FIND THAT DURING ASSESSMENT PROCEEDINGS , THE ASSESSEE HAD FURNISHED COMPLETE INFORMATION REGARDING VEHICLE EX PENSES AS NOTED BY A.O. IN PARA 3 AND A.O. DID NOT FIND ANY DISCREPANCY IN THE SAME. HE JUST DISALLOWED 10% OF EXPENSES ON AD-HOC BASIS WHICH IS NOT AS PER LAW AS A.O. HAD NOT MADE ANY ADVERSE COMMENTS ON THE DETAILS OF EXPENSES. IN VIEW OF THE ABOVE, GROUND 1 OF REVENUES APPEAL IS DISMISSE D. 19. IN GROUND NO.2, THE LD. CIT(A) HAS PARTLY ALLOW ED THE RELIEF OUT OF ADDITION U/S 41(1) OF THE ACT IN VIEW OF BALANCE CO NFIRMATIONS FILED BY ASSESSEE RELATING TO AMOUNT OF RS.66,02,696/-. SIN CE THE ADDITION U/S 41(1) 16 ITA NO.3413,3674/DEL/2013 WAS MADE ONLY ON THE BASIS OF NON FILING OF BALANCE CONFIRMATIONS, THE RELIEF ALLOWED BY LD. CIT(A) ON ACCOUNT OF RECEIPT OF BALA NCE CONFIRMATION IS JUSTIFIED AND WE ARE IN AGREEMENT WITH THE FINDINGS OF LD. CIT(A). IN VIEW OF THE ABOVE GROUND NO.2 OF REVENUES APPEAL IS ALS O DISMISSED. 20. IN VIEW OF THE ABOVE, APPEAL FILED BY THE REVEN UE IS DISMISSED. 21. NOW, COMING TO THE APPEAL FILED BY ASSESSEE, GR OUND NO.1 RELATES TO THE ADDITION CONFIRMED BY LD. CIT(A) FOR AN AMOUNT OF RS.10,94,714/-. WE FIND THAT LD. CIT(A) HAD CONFIRMED THE SAID ADDITIO N BY HOLDING AS UNDER: IN THIS REGARD IT HAS BEEN CONTENDED THAT BALANCE CONFIRMATION RECEIVED FROM KIRLOSKAR BROTHERS UNDER SECTION 133( 6) OF THE IT ACT AT THE TIME OF THE ASSESSMENT PROCEEDINGS HAS BEEN IGN ORED 'AND ADDITION OF RS.1 0,94,714/- HAS BEEN MADE ON ACCOUNT OF DIFF ERENCE BETWEEN BALANCE AS PER APPELLANT'S FINANCIAL STATEMENT AND AS PER CONFIRMATION. I HAVE GONE THROUGH THE FINDING OF TH E AO IN THIS REGARD AND APPELLANT'S SUBMISSIONS. IN THE REMAND REPORT D ATED 4. 1.20 13- AO HAS VERY SPECIFICALLY MENTIONED THAT OBJECTION T O ADDITION OF RS.10,94,714/- IS AN AFTERTHOUGHT AND IT IS DEVOID OF MERIT. IN THE REMAND REPORT AO HAS FURTHER MENTIONED THAT ASSESSE E'S EXPLANATION WITH REGARD TO WRONG RECORDING OF PURCHASES OF RS.9 ,88,887/- AND IT HAS BEEN REVERSED IN ASSESSMENT YEAR 20 I 0-11. IN THIS REGARD IT IS FOUND THAT THIS EXPLANATION HAS BEEN FOUND TO BE AN AFTERTHOUGHT BY THE AO. I AGREE WITH THE VIEW OF AO IN THIS REGARD AND I FOUND THAT THERE IS SUFFICIENT CAUSE TO MAKE THE ADDITION IN T HIS REGARD. IN VIEW OF THE ABOVE DISCUSSION, THIS GROUND OF APPEAL DESERVE S TO BE DISMISSED. THE CASE LAWS RELIED UPON BY THE ID. AR OF THE APPE LLANT ARE DISTINGUISHABLE ON THE FACTS OF THE CASE. 22. AT PAPER BOOK PAGE 1, IS THE COPY OF ACCOUNT OF KIRLOSKAR BROTHERS FROM 01.04.2008 TO 31.03.2010 COVERING THE TWO YEAR S. FROM THE COPY OF ACCOUNT WE FIND THAT ON 31.03.2009, AN AMOUNT OF RS .9,88,887/- WAS CREDITED TO THIS ACCOUNT. THE LD. A.R. HAD ARGUED THAT THIS AMOUNT WAS REVERSED IN 17 ITA NO.3413,3674/DEL/2013 THE SUCCEEDING YEAR WHICH WE FIND TO BE CORRECT AS CAN BE SEEN FROM THE COPY OF ACCOUNT WHERE THIS ENTRY HAS BEEN REVERSED ON 31.03.2010. THE LD. CIT(A) HAD MADE THE CONFIRMATION OF ADDITION ON THE BASIS OF REMAND REPORT OF A.O. WHEREIN HE HAD ALLEGED THAT THE EXPLANATION OF ASSESSEE WAS AFTER THOUGHT. A.O. DID NOT FURNISH ANY ADVERSE COMMENTS ON THE EXPLANATION OF ASSESSEE. LD. A.R. HAD ARGUED THAT REPORTING OF LO WER PROFITS IN ASSESSMENT YEAR 2009-10 BY AN AMOUNT OF RS.9,88,887/- HAS BEEN COMPENSATED IN ASSESSMENT YEAR 2010-2011 BY AN EQUAL AMOUNT AND SI NCE THE TAX RATES IN BOTH YEAS WERE SAME, THERE IS NO TAX LOSS TO THE RE VENUE. W FIND THAT ASSESSEE HAS THOUGH FILED COPY OF ACCOUNTS OF SAID PARTY SHOWING REVERSAL OF SUCH ENTRY BUT HAS NOT FILED ANY EVIDENCE TO DEMONS TRATE THAT THE CONTRA ENTRY HAS BEEN REDUCED FROM PURCHASES IN SUCCEEDING YEAR. IN VIEW OF THE ABOVE, THE GROUND NO.1 OF ASSESSEES APPEAL NEEDS TO BE RE ADJUDICATED BY A.O. WHO WILL VERIFY FROM THE ACCOUNTS OF SUCCEEDING YEAR AB OUT THE FACT OF REDUCTION FORM PURCHASES. IN VIEW OF THE ABOVE, GROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSES. 23. GROUND NO.2 & 3 RELATES TO ADDITION U/S 41(1) O F THE ACT. GROUND NO.2 RELATES TO ADDITION SUSTAINED Y LD. CIT(A) ON ACCOUNT OF ADDITIONS U/S 41(1) OF THE ACT FOR FAILURE OF CREDITORS TO FILE N ECESSARY CONFIRMATIONS AND GROUND NO.3 RELATES TO ADDITION SUSTAINED BY LD. CI T(A) ON ACCOUNT OF ALLEGED CESSATION OF LIABILITY DUE TO UEM INC. WE FIND THAT LD. CIT(A) HAS SUSTAINED THE ADDITION ON ACCOUNT OF CREDITORS ONLY ON ACCOUNT OF THE FACT THAT SOME CONFIRMATIONS COULD NOT BE FILED AS FOR SOME O F THE ADDITIONS ON SIMILAR GROUNDS, THE LD. CIT(A) HAS GIVEN RELIEF ON ACCOUNT OF RECEIPT OF CONFIRMATIONS. THE AUTHORITIES BELOW HAS NOT EXAMI NED THE FACTS CORRECT AS 18 ITA NO.3413,3674/DEL/2013 THEY SHOULD HAVE CONSIDERED OTHER ASPECTS ALSO SUCH AS THAT ASSESSEE HAD BEEN REFLECTING THE LIABILITIES ON ACCOUNT OF SUCH CREDITORS IN ITS BALANCE SHEET AND NOWHERE THE LIABILITIES WERE WRITTEN BACK. AS REGARDS ADDITION ON ACCOUNT OF UNSECURED LOANS, RELATING TO UEM INC., T HE AUTHORITIES BELOW FAILED TO TAKE NOTE OF THE FACT THAT LENDER HAD CON FIRMED THE BALANCES DUE TO ASSESSEE AND ASSESSEE WAS CONTINUOUSLY MAKING EFFOR TS TO REPATRIATE THE DUES TO FOREIGN COMPANY. IN FACT, A PART OF AMOUNT OF L OANS WAS REPATRIATED ALSO AND THEREFORE, THERE IS NO CASE FOR MAKING ADDITION S U/S 41(1) OF THE ACT. A NUMBER OF COURTS HAS HELD THAT ADDITION U/S 41(1) U NDER THESE FACTS AND CIRCUMSTANCES IS NOT PERMISSIBLE UNDER LAW. THE HO N'BLE DELHI HIGH COURT IN THE CASE OF CIT VS JAIN EXPORTS 217 TAXMAN 0054 HAS HELD AS UNDER: SECTION 41(1) OF THE ACT IS RELEVANT AND IS QUOTED BELOW;- '41. PROFITS CHARGEABLE TO TAX -(1) WHERE AN ALLOWA NCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RES PECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE AS SESSEE (HEREINAFTER REFERRED TO AS THE FIRST-MENTIONED PERSON) AND SUBS EQUENTLY DURING ANY 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 TRADING LIABILITY BY WAY OF (EMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACC RUING TO HIM SHALL BE DEEMED, TO BE PROFITS AND GAINS OF BUSINESS OR P ROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENC E IN THAT YEAR OR NOT; OR (B THE SUCCESSOR IN BUSINESS HAS OBTAINED, WHETHE R IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF WHICH 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 19 ITA NO.3413,3674/DEL/2013 WAY OF REMISSION OF CESSATION THEREOF, THE AMOUNT OBTAINED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCR UING TO THE SUCCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME TA X AS THE INCOME OF THAT PREVIOUS YEAR. EXPLANATION 1. - FOR THE PURPOSES OF THIS SUB-SECTI ON, THE EXPRESSION 'LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF SHALL INCLUDE THE REMISSION OR CESSATION OF ANY LIABILITY BY A UNILAT ERAL ACT BY THE FIRST MENTIONED PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE (B) OF THAT SUB-SECTION BY WAY OF WRITING OF F SUCH LIABILITY IN HIS ACCOUNTS.' 15. INDISPUTABLY, EXPLANATION 1 TO SECTION 41(1) OF THE ACT, WHICH WAS INSERTED, W.E.F 01.04.1997 IS NOT APPLICABLE, AS TH E ASSESSEE HAS NOT WRITTEN OFF THE LIABILITY TO PAY M/S ELEPHANTA OIL & VANASPATI LTD. IN ITS BOOKS OF ACCOUNT. 16. THE SUPREME COURT IN THE CASE OF CIT V. SUGAULI SUGAR WORKS (P). LTD. (1999) 236 ITR 5L8/102 TAXMAN 713 HAS HELD THAT SEC TION 41(1) CONTEMPLATES OBTAINING BY THE ASSESSEE AN AMOUNT EI THER IN CASH OR ANY OTHER MANNER OR ANY BENEFIT BY WAY OF CESSATION OR REMISSION OF LIABILITY. IN ORDER TO COME WITHIN THE SWEEP OF SEC TION 41(1) IT IS NECESSARY THAT THE BENEFIT DERIVED BY AN ASSESSEE R ESULTS FROM CESSATION OR REMISSION OF A TRADING LIABILITY. THE RELEVANT EXTRACT FROM THE DECISION OF THE SUPREME COURT IN THE CASE OF SU GAULI SUGAR WORKS (P.) LTD. (SUPRA) IS QUOTED BELOW: 3. IT WILL BE SEEN THAT THE FOLLOWING WORDS IN THE SECTION ARE IMPORTANT, THE ASSESSEE HAS OBTAINED, WHETHER IN. CASH OR IN A NY OTHER MANNER WHATSOEVER ANY AMOUNT IN RESPECT OF SUCH LOSS OR EX PENDITURE OF SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY HIM'. THU S, THE SECTION CONTEMPLATES OBTAINING BY THE ASSESSEE OF AN AMOUNT EITHER IN CASH OR IN -ANY OTHER MANNER WHATSOEVER OR ~ BENEFIT BY WAY OF REMISSION OR CESSATION AND IT SHOULD BE OF A PARTICULAR AMOUNT O BTAINED BY HIM. THUS, THE OBTAINING BY THE ASSESSEE OF A BENEFIT BY VIRTUE OF REMISSION OR CESSATION' IS SINE QUA NON FOR APPLICATION OF T HIS SECTION.' 20 ITA NO.3413,3674/DEL/2013 17. THE ONLY ISSUE THAT NEEDS TO BE CONSIDERED IS WHETHER THE LIABILITY TOWARDS M/S ELEPHANTA OIL & VANASPATI LTD. HAS CEAS ED ON ACCOUNT OF EFFLUX OF TIME. 18. THE SUPREME COURT IN THE CASE OF ' BOMBAY DYEI NG & MFG. CO. LTD. V. STATE OF BOMBAY AIR 1958 SC 328 HAS CLEARLY HELD THAT EVEN IN CASES WHERE THE REMEDY OF A CREDITOR IS BARRED BY L IMITATION THE DEBT ITSELF IS NOT EXTINGUISHED BUT MERELY BECOMES UNENF ORCEABLE. THE COURT OBSERVED AS UNDER:- ' THE POSITION THEN IS THAT, UNDER THE LAW, A DEBT SUBSISTS NOTWITHSTANDING THAT ITS RECOVERY IS BARRED BY LIMI TATION. 19. THIS VIEW HAS ALSO BEEN TAKEN BY THE SUPREME CO URT IN THE CASE OF SUGAULI SUGAR WORKS P. LTD., (SUPRA). IN THE SA ID CASE, IT WAS CONTENDED ON BEHALF OF THE REVENUE THAT THE LIABILI TY HAS COME TO AN END AS THE CREDITORS IN THE SAID CASE HAD NOT TAKEN ANY ACTION TO RECOVER THE AMOUNTS DUE TO THEM FOR TWENTY YEARS. THE HON'BLE SUPREME COURT AFFIRMED THE DECISION OF THE BOMBAY H IGH COURT IN THE CSE OF J. K. CHEMICALS LTD. VS CIT (1996) 62 ITR 34 WHEREIN THE WORDS CESSATION OR REMISSION HAD BEEN INTERPRETED . THE SUPREME COURT QUOTED THE FOLLOWING PASSAGE FROM THE JUDGEME NT OF THE BOMBAY HIGH COURT IN THE SAID CASE OF J.K. CHEMICAL S LTD. (SUPRA). 'THE QUESTION TO BE CONSIDERED IS WHETHER THE TRANS FER OF THESE ENTRIES BRINGS ABOUT A REMISSION OR CESSATION OF ITS LIABIL ITY. THE TRANSFER OF AN ENTRY IS A UNILATERAL ACT OF THE ASSESSEE, WHO I S A DEBTOR TO ITS EMPLOYEES. WE FAIL TO SEE HOW A DEBTOR, BY HIS OWN UNILATERAL ACT, CAN BRING ABOUT THE CESSATION OR REMISSION OF HIS LIABI LITY. REMISSION HAS TO BE GRANTED BY THE CREDITOR. IT IS NOT IN DISPUTE , AND IT INDEED CANNOT BE DISPUTED, THAT IT IS NOT A CASE OF REMISSION OF LIABILITY. SIMILARLY, A UNILATERAL ACT ON THE PART OF THE DEBTOR CANNOT BRI NG ABOUT A CESSATION OF HIS LIABILITY. THE CESSATION OF THE LIABILITY MA Y OCCUR EITHER BY REASON OF THE OPERATION OF LAW, I.E., ON THE LIABIL ITY BECOMING UNENFORCEABLE AT LAW BY THE CREDITOR AND THE DEBTOR DECLARING UNEQUIVOCALLY HIS INTENTION NOT TO HONOUR HIS LIABI LITY WHEN PAYMENT IS DEMANDED BY THE CREDITOR, OR A CONTRACT BETWEEN THE PARTIES, OR BY DISCHARGE OF THE DEBT-THE DEBTOR MAKING PAYMENT THE REOF TO HIS CREDITOR. TRANSFER OF AN ENTRY IS NEITHER AN AGREEM ENT BETWEEN THE 21 ITA NO.3413,3674/DEL/2013 PARTIES NOR PAYMENT OF THE LIABILITY. WE HAVE ALREA DY HELD IN KOHINOOR MILLS' CASE [1963)49 ITR 578(BOM) THAT THE MERE FAC T OF THE EXPIRY OF THE PERIOD OF LIMITATION TO ENFORCE IT, DOES NOT BY ITSELF CONSTITUTE CESSATION OF THE LIABILITY. IN THE INSTANT CASE, TH E LIABILITY BEING ONE RELATING TO WAGES, SALARIES AND BONUS DUE BY AN EMP LOYER TO HIS EMPLOYEES IN AN INDUSTRY, THE PROVISIONS OF THE IND USTRIAL DISPUTES ACT ALSO ARE ATTRACTED AND FOR THE RECOVERY OF THE DUES FROM THE EMPLOYER, UNDER SECTION 33C(2) OF THE INDUSTRIAL DISPUTES ACT , NO BAR OF LIMITATION COMES IN THE WAY OF THE EMPLOYEES. AFTER QUOTING THE ABOVE PASSAGE, THE SUPREME COURT HELD AS UNDER:- 'THIS JUDGMENT HAS BEEN QUOTED BY THE HIGH COURT IN THE PRESENT CASE AND FOLLOWED. WE HAVE NO HESITATION TO SAY' THAT TH E REASONING IS CORRECT AND WE, AGREE WITH THE SAME. 20. IN ORDER TO ATTRACT THE PROVISIONS OF SECTION 4 1(1) OF THE ACT, IT IS NECESSARY THAT THERE SHOULD HAVE BEEN A CESSATION O R REMISSION OF LIABILITY. AS HELD BY THE BOMBAY HIGH COURT, IN THE CASE OF J.K. CHEMICALS LTD. (SUPRA) I CESSATION OF LIABILITY MAY OCCUR EITHER BY THE REASON OF THE LIABILITY BECOMING UNENFORCEABLE IN L AW BY THE CREDITOR COUPLED WITH DEBTOR DECLARING HIS INTENTION NOT TO HONOUR HIS LIABILITY, OR BY A CON T R AC T BETWEEN PARTIES OR BY DISCHARG E OF THE DEBT. IN THE PRESENT CASE, THE ASSESSEE IS ACKNOWLEDGING THE DEB T PAYABLE TO M/S. ELEPHENTA VANASPATI LTD. AND THERE IS MATERIAL TO I NDICATE THAT THE PARTIES HAVE CONTRACTED TO EXISTING LIABILITY. THU S, IN OUR VIEW IT CANNOT BE CONCLUDED THAT THE DEBT OWED BY THE ASSES SEE TO M/S ELEPHENTA OILS & VANASPATI LTD. STOOD EXTINGUISHED. 21. ALTHOUGH, ENFORCEMENT OF A DEBT BEING BARRED BY LIMITATION DOES NOT IPSO FACTO LEAD TO THE CONCLUSION THAT THE RE 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 UNENF ORCEABLE. IT IS WELL SETTLED THAT REFLECTING AN AMOUNT AS OUTSTANDING IN THE BALANCE SHEET BY A COMPANY AMOUNTS TO THE COMPANY ACKNOWLEDGING T HE DEBT FOR THE PURPOSES OF SECTION 1(3 OF THE LIMITATION ACT, 1963 AND, THUS, THE CLAIM BY M/S ELEPHANTA OIL & VANASPATI LTD. CAN ALS O NOT BE CONSIDERED AS TIME BARRED AS THE PERIOD OF LIMITATI ON WOULD STAND EXTENDED. EVEN, OTHERWISE, IT CANNOT BE STATED THAT . M/S ELEPHANTA OIL & VANASPATI LTD. WOULD BE UNABLE TO CLAIM A SET ON ACCOUNT OF THE AMOUNT REFLECTED AS PAYABLE TO IT BY THE ASSESSEE. ADMITTEDLY, WINDING 22 ITA NO.3413,3674/DEL/2013 UP PROCEEDINGS AGAINST M/S ELEPHANTA OIL & VANASPAT I LTD. ARE PENDING AND THERE IS NO CERTAINTY THAT ANY CLAIM TH AT MAY BE MADE BY THE ASSESSEE WITH REGARD TO THE AMOUNTS RECEIVABLE FROM M/S ELEPHANTA OIL & VANASPATI LTD. WOULD BE PAID WITHOU T THE LIQUIDATOR CLAIMING THE CREDIT FOR THE AMOUNTS RECEIVABLE FROM THE ASSESSEE COMPANY. IT IS WELL SETTLED THAT IN ORDER TO ATTRAC T THE PROVISIONS OF SECTION 41(1) OF THE ACT, THERE SHOULD HAVE BEEN AN IRREVOCABLE CESSION OF LIABILITY WITHOUT ANY POSSIBILITY OF THE SAME BEING REVIVED. THE ASSESSEE-COMPANY HAVING ACKNOWLEDGED ITS LIABIL ITY 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 T HE SAID AMOUNT REFLECTED BY THE ASSESSEE AS PAYABLE TO M/S ELEPHAN TA OIL & VANASPATI LTD. 22. WE MAY ALSO ADD THAT, ADMITTEDLY, NO CREDIT ENT RY 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 T HE OPENING BALANCES WHICH ARE BEING CARRIED FORWARD FOR SEVERA L 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 IN THE YEAR WHEN THE LIABILITY WAS RECORDED AS HAVING ARISEN, THAT I S, IN THE YEAR 1984- 1985. THE DEPARTMENT HAVING ACCEPTED THE BALANCES O UTSTANDING 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 G ROUND THAT THE ASSESSEE COULD NOT PRODUCE SUFFICIENT EVIDENCE TO P ROVE THE GENUINENESS OF THE TRANSACTIONS WHICH WERE UNDERTAK EN IN THE YEAR 1984-85. 23. THE PRESENT APPEAL DOES NOT DISCLOSE ANY SUBSTA NTIAL QUESTION OF LAW FOR OUR CONSIDERATION AND IS, ACCORDING, DISMIS SED. *IN FAVOUR OF ASSESSEE. 24. THE CASE LAW OF CIT VS VARDHMAN OVERSEAS LTD. 3 43 ITR 408 ALSO SUPPORTS THE CASE OF ASSESSEE WHEREIN THE HONBLE C OURT WHILE HOLDING IN FAVOUR OF ASSESSEE HAS ALSO DISTINGUISHED THE CASE LAW OF HON'BLE SUPREME 23 ITA NO.3413,3674/DEL/2013 COURT IN CIT VS T.V. SUNDRAM IIYENGAR. THE RELEVAN T FINDINGS OF THE DECISION ARE REPRODUCED BELOW: 17. IN THE CASE BEFORE US, AS RIGHTLY POINTED OUT BY THE TRIBUNAL, THE ASSESSEE HAS NOT TRANSFERRED THE SAID AMOUNT FROM T HE CREDITORS' ACCOUNT TO ITS PROFIT AND LOSS ACCOUNT. THE LIABILI TY WAS SHOWN IN THE BALANCE SHEET AS ON 315T MARCH, 2002. THE ASSESSEE BEING A LIMITED COMPANY, THIS AMOUNTED TO ACKNOWLEDGING THE DEBTS I N FAVOUR OF THE CREDITORS. SECTION 18 OF THE LIMITATION ACT, 1963 P ROVIDES FOR EFFECT OF ACKNOWLEDGEMENT IN WRITING. IT SAYS WHERE BEFORE TH E EXPIRATION OF THE PRESCRIBED PERIOD FOR A SUIT IN RESPECT OF ANY PROP ERTY OR RIGHT, AN ACKNOWLEDGEMENT OF LIABILITY IN RESPECT OF SUCH PRO PERTY OR RIGHT HAS BEEN MADE IN WRITING SIGNED BY THE PARTY AGAINST WH OM SUCH PROPERTY OR RIGHT IS CLAIMED, A FRESH PERIOD OF LIMITATION S HALL COMMENCE FROM THE TIME WHEN THE ACKNOWLEDGEMENT WAS SO SIGNED. IN AN EARLY CASE, IN ENGLAND, IN JONES VS. BELLGROVE PROPERTIES, (194 9) 2KB 700, IT WAS HELD THAT A STATEMENT IN A BALANCE SHEET OF A COMPA NY PRESENTED TO A CREDITOR- SHARE HOLDER OF THE COMPANY AND DULY SIGN ED BY THE DIRECTORS CONSTITUTES AN ACKNOWLEDGEMENT OF THE DEB T. IN MAHABIR COLD STORAGE V.CIT (1991) 188ITR 91, THE SUPREME CO URT HELD: 'THE ENTRIES IN THE BOOKS OF ACCOUNTS OF THE APPELL ANT WOULD AMOUNT TO AN ACKNOWLEDGEMENT OF THE LIABILITY TO ME SSRS. PRAYAGCHAND HANUMANMAL WITHIN THE MEANING OF SECTIO N 18 OF THE LIMITATION ACT, 1963, AND EXTEND THE PERIOD OF LIMITATION FOR THE DISCHARGE OF THE LIABILITY AS DEBT.' IN SEVERAL JUDGMENTS OF THIS COURT, THIS LEGAL POSI TION HAS BEEN ACCEPTED. IN DAYA CHAND UTTAM PRAKASH JAIN VS. SANT OSH DEVI SHARMA 67 (1997) DLT 13, S.N.KAPOOR 1. APPLIED THE PRINCIPLE IN A CASE WHERE THE PRIMARY QUESTION WAS WHETHER A SUIT UNDER ORDER 37 CPC COULD BE FILED ON THE BASIS OF AN ACKNOWLEDGEME NT. IN LARSEN & TUBRO LTD. V. COMMERCIAL ELECTRIC WORKS AND ORS. 67 (1997) DLT 387 A SINGLE JUDGE OF THIS COURT OBSERVED THAT IT I S WELL SETTLED THAT A BALANCE SHEET OF A COMPANY, WHERE THE DEFENDANTS HA D SHOWN A PARTICULAR AMOUNT AS DUE TO THE PLAINTIFF, WOULD CO NSTITUTE AN ACKNOWLEDGEMENT WITHIN THE MEANING OF SECTION 18 OF THE LIMITATION 24 ITA NO.3413,3674/DEL/2013 ACT. IN RISHI PAL GUPTA V. S.J. KNITTING & FINISHIN G MILLS PVT. LTD. 73 (1998) DLT 593, THE SAME VIEW WAS TAKEN. THE LAST T WO DECISIONS WERE CITED BY GEETA MITTAL, J. IN S.C. GUPTA V. ALL IED BEVERAGES COMPANY PVT. LTD. (DECIDED ON 30/4/2007) AND IT WAS HELD THAT THE ACKNOWLEDGEMENT MADE BY A COMPANY IN ITS BALANCE SH EET HAS THE EFFECT OF EXTENDING THE PERIOD OF LIMITATION FOR TH E PURPOSES OF SECTION 18 OF THE LIMITATION ACT. IN AMBIKA MILLS LTD. AHME DABAD V. CIT GUJARAT (1964) 54ITR 167, IT WAS FURTHER HELD THAT A DEBT SHOWN IN A BALANCE SHEET OF A COMPANY AMOUNTS TO AN ACKNOWLEDG EMENT FOR THE PURPOSE OF SECTION 19 OF THE LIMITATION ACT AND IN ORDER TO BE SO, THE BALANCE SHEET IN WHICH SUCH ACKNOWLEDGEMENT IS MADE NEED NOT BE ADDRESSED THE CREDITORS. IN LIGHT OF THESE AUTHORIT IES, IT MUST BE HELD THAT IN THE PRESENT CASE, THE DISCLOSURE BY THE ASS ESSEE COMPANY IN ITS BALANCE SHEET AS ON 3151 MARCH, 2002 OF THE ACCOUNT S OF THE SUNDRY CREDITORS AMOUNTS TO AN ACKNOWLEDGEMENT OF THE DEBT S IN THEIR FAVOUR FOR THE PURPOSES OF SECTION 18 OF THE LIMITATION AC T. THE ASSESSEE'S LIABILITY TO THE CREDITORS, THUS, SUBSISTED AND DID NOT CEASE NOR WAS IT REMITTED BY THE CREDITORS. THE LIABILITY WAS ENFORC EABLE IN A COURT OF LAW. 18. THE JUDGMENT OF THE SUPREME COURT IN CIT V. SUG AULI SUGAR WORKS (P) LTD. (SUPRA) WAS FOLLOWED AND APPLIED BY A THREE JUDGES BENCH OF THE SUPREME COURT IN CHIEF COMMISSIONER OF INCOME TAX V. KESARIA TEA CO. LTD. (SUPRA). THE ASSESSEE IN THIS CASE WAS ENGAGED IN THE BUSINESS OF TEA, SPICES ETC AND MADE PROVISI ON IN ITS ACCOUNT FOR THE YEARS FROM 1978 TO 1981 FOR THE PURCHASE TAX LI ABILITY. THE TAX LIABILITY WAS IN DISPUTE WITH THE SALES TAX DEPARTM ENT. IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1985-86, ON TH E BASIS OF AN ORDER IN THE KERALA STATE'S SPECIAL LEAVE PETITION FILED BEFORE THE SUPREME COURT, THE ASSESSEE WROTE BACK A SUM OF ~ 14,65,997 /- OUT OF THE PROVISION FOR THE PURCHASE TAX LIABILITY. THE ASSES SING OFFICER BROUGHT THIS AMOUNT TO TAX UNDER SECTION 41(1). ON APPEAL, THE CIT(APPEALS) HELD THAT ONLY AN AMOUNT OF ~1,25,46,534/- COULD BE BROUGHT TO TAX UNDER SECTION 41(1). ON FURTHER APPEAL BY THE ASSES SEE, THE TRIBUNAL HELD THAT EVEN THIS AMOUNT COULD NOT BE BROUGHT TO TAX SINCE THE SALES TAX DEPARTMENT WAS PURSUING THE MATTER EVEN AS LATE AS IN 1993 AND CASES WERE STILL PENDING DECISION BEFORE SALES TAX AUTHORITIES AND THAT 25 ITA NO.3413,3674/DEL/2013 THE MATTER HAD NOT BEEN CONCLUDED BY THE DECISION O F THE KERALA HIGH COURT. THE TRIBUNAL THUS HELD THAT THERE WAS NO EXT INGUISHMENT OF THE STATUTORY LIABILITY AND, THEREFORE, THE WRITE BACK COULD NOT BE ASSESSED UNDER SECTION 41 (1). THE KERALA HIGH COURT AFFIRME D THE DECISION OF THE TIRBUNAL [(2000) 243 ITR 362]. THE REVENUE CARR IED THE MATTER IN APPEAL TO THE SURPEME COURT. APPLYING ITS EARLIER J UDGMENT IN CIT V. SUGAULI SUGAR WORKS (P) LTD. (SUPRA) IT WAS HELD TH AT BECAUSE THERE WERE CERTAIN ISSUES WHICH HAD A BEARING ON THE LIAB ILITY TO PAY PURCHASE TAX WHICH STILL REMAINED DISPUTED BETWEEN THE ASSESSEE AND THE SALES TAX DEPARTMENT. 19. SINCE STRONG RELIANCE WAS PLACED BY THE LEARNED STANDING COUNSEL FOR THE INCOME-TAX DEPARTMENT ON THE JUDGMENT OF TH E SUPREME COURT IN CIT VS T. V. SUNDARAM IYENGAR & SONS (SUPRA), IT IS NECESSARY TO REFER TO THE SAME IN SOME DETAIL. IN THAT CASE, THE ITO FOUND THAT FOR THE ASSESSMENT YEARS 1982-83 AND 1983-84 THE ASSESS EE HAD TRANSFERRED AMOUNTS OF RS.17,381 AND RS.38,975 RESP ECTIVELY TO ITS PROFIT AND LOSS ACCOUNTS FOR THE RESPECTIVE ACCOUNT ING YEARS. HOWEVER THESE AMOUNTS WERE NOT INCLUDED IN THE TOTAL INCOME IN THE RETURNS FILED BY THE ASSESSEE. IT WAS EXPLAINED THAT THE AM OUNTS WERE PAYABLE BY THE ASSESSEE-COMPANY TO ITS CUSTOMERS BUT SINCE THEY WERE NOT CLAIMED BY THEM, THEY WERE TRANSFERRED TO THE PROFI T AND LOSS ACCOUNT. THE ITO REJECTED THE EXPLANATION. HE HELD THAT BECA USE THE SURPLUS IN THE ACCOUNTS OF THE CREDITORS AROSE ON ACCOUNT OF T RADING TRANSACTIONS, IT HAD THE CHARACTER OF INCOME AND HAD TO BE ADDED TO THE TOTAL INCOME FOR TAX PURPOSES. THE CIT(A) AND THE TRIBUNAL DELET ED THE ADDITIONS HOLDING THAT NEITHER SECTION 41 (1) NOR SECTION 28 APPLIED, AS THE AMOUNTS REPRESENTED EXCESS TRADING ADVANCES GIVEN B Y THE CUSTOMERS TO THE ASSESSEE AND THAT SINCE AT THE TIME THEY WER E RECEIVED THEY WERE CAPITAL RECEIPTS THEY COULD NOT CHANGE CHARACTER AN D BECOME ASSESSABLE AS REVENUE RECEIPTS. AT THE INSTANCE OF THE REVENUE, THE FOLLOWING QUESTION OF LAW WAS REFERRED TO THE HIGH COURT OF MADRAS: 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE APPELLATE TRIBUNAL IS RIGHT IN LAW IN DELETING THE ADDITION MADE BY THE INCOME-TAX OFFICER REPRESENTING UNCLAIMED SUNDRY CR EDIT BALANCES WRITTEN BACK TO THE PROFIT AND LOSS ACCOUNT BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION?' 26 ITA NO.3413,3674/DEL/2013 THE QUESTION FOR DECISION WHICH AROSE BEFORE THE SU PREME COURT, IN THE WORDS OF THE COURT ITSELF (PAGE 347 OF 222 ITR) WAS THAT 'EVEN THOUGH THE DEPOSITS WERE OF CAPITAL NATURE AT THE P OINT OF TIME OF RECEIPT BY THE ASSESSEE, COULD THEIR CHARACTER CHAN GE BY EFFLUX OF TIME?' THE SUPREME COURT THEREAFTER REFERRED TO SEV ERAL AUTHORITIES INCLUDING THE CELEBRATED DECISION OF THE COURT OF A PPEAL IN ENGLAND IN THE CASE OF MORLEY V TATTERSALL (1939) 7 ITR 316, A ND THE TEST PROPOUNDED BY LORD GREENE IN THAT CASE THAT THE TAX ABILITY OF THE RECEIPT WAS FIXED WITH REFERENCE TO ITS CHARACTER A T THE MOMENT IT WAS RECEIVED AND NOT AT ANY SUBSEQUENT POINT OF TIME AN D NOT BECAUSE THE RECIPIENT TREATED IT SUBSEQUENTLY IN HIS INCOME ACC OUNT AS HIS OWN, AND ALSO TO SOME DECISIONS OF COURTS IN INDIA IN WH ICH, THE PRINCIPLE WAS APPLIED AND ULTIMATELY HELD AS UNDER: 'IN OTHER WORDS, THE PRINCIPLE APPEARS TO BE THAT I F AN AMOUNT IS RECEIVED IN THE COURSE OF TRADING TRANSACTION, EVEN THOUGH IT IS NOT TAXABLE IN THE YEAR OF RECEIPT AS BEING OF REVE NUE CHARACTER, THE AMOUNT CHANGES ITS CHARACTER WHEN THE AMOUNT BE COMES THE ASSESSEE'S OWN MONEY BECAUSE OF LIMITATION OR BY AN Y OTHER STATUTORY OR CONTRACTUAL RIGHT. WHEN SUCH A THING H APPENS, COMMONSENSE DEMANDS THAT THE AMOUNT SHOULD BE TREAT ED AS INCOME OF THE ASSESSEE. XX XX XX XX XX XX XX IN THE PRESENT CASE, THE MONEY WAS RECEIVED BY THE ASSESSEE IN THE COURSE OF CARRYING ON HIS BUSINESS. ALTHOUGH IT WAS TREATED AS DEPOSIT AND WAS OF CAPITAL NATURE AT THE POINT O F TIME IT WAS RECEIVED, BY EFFLUX OF TIME THE MONEY HAS BECOME TH E ASSESSEE'S OWN MONEY. WHAT REMAINS AFTER ADJUSTMENT OF THE DEP OSITS HAS NOT BEEN CLAIMED BY THE CUSTOMERS. THE CLAIMS OF TH E CUSTOMERS HAVE BECOME BARRED BY LIMITATION. THE ASSESSEE ITSE LF HAS TREATED THE MONEY AS ITS OWN MONEY AND TAKEN THE AM OUNT TO ITS PROFIT AND LOSS ACCOUNT. THERE IS NO EXPLANATION FR OM THE ASSESSEE WHY THE SURPLUS MONEY WAS TAKEN TO ITS PRO FIT AND LOSS ACCOUNT EVEN IF IT WAS SOMEBODY ELSE'S MONEY. IN FA CT, AS ATKINSON 1. POINTED OUT THAT WHAT THE ASSESSEE DID WAS THE COMMONSENSE WAY OF DEALING WITH THE AMOUNTS.' 27 ITA NO.3413,3674/DEL/2013 20. IT MAY AT ONCE BE NOTICED THAT THE DECISION CAN NOT BE UNDERSTOOD AS EXPLAINING THE CONDITIONS OF APPLICABILITY OF SE CTION 41 (I) OF THE ACT, FOR THE SIMPLE REASON THAT THE SECTION WAS NOT INVOKED BY THE REVENUE AUTHORITIES IN THAT CASE AND THERE WAS A FI NDING OF THE APPELLATE AUTHORITIES TO THE EFFECT THAT NEITHER SE CTION 41 (1) NOR SECTION 28 WAS ATTRACTED TO THAT CASE. THAT WAS A C ASE OF CERTAIN DEPOSITS BEING RECEIVED BY THE ASSESSEE. AT THE TIM E OF THE RECEIPT THEY WERE ADMITTEDLY TREATED AS CAPITAL IN NATURE, AND T HE ASSESSEE CREDITED THEM TO SEPARATE ACCOUNTS. IN DUE COURSE OF TIME, T HEY WERE DEPLETED BY ADJUSTMENTS MADE FROM TIME TO TIME. THE BALANCE IN THE ACCOUNTS REMAINED UNCLAIMED FOR A LONG TIME AND IN THE ACCOU NTS FOR THE ACCOUNTING PERIODS RELEVANT TO THE ASSESSMENT YEARS 1982- 83 AND 1983-84, THE BALANCE REMAINING IN THE ACCOUNTS WAS TAKEN TO THE CREDIT OF THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE COULD NOT EXPLAIN WHY THE BALANCE WAS TAKEN TO ITS PROFIT AND LOSS AC COUNT EVEN THOUGH THE MONEY BELONGED TO SOMEBODY ELSE. IT WAS IN THES E CIRCUMSTANCES THAT THE SUPREME COURT APPLIED A COMMON SENSE VIEW OF THE MATTER AND HELD THAT THE ASSESSEE HAD BECOME RICHER BY THE AMOUNT TRANSFERRED TO THE PROFIT AND LOSS ACCOUNT. THE MAT TER WAS THUS DECIDED ON GENERAL PRINCIPLES AND ON THE FOOTING TH AT THE ASSESSEE COMMITTED AND OVERT ACT INDICATING THAT IT HAD APPR OPRIATED THE BALANCES IN THE DEPOSIT AMOUNTS BELONGING TO ITS CU STOMERS AS ITS OWN MONIES AND WAS NOT ABLE TO EXPLAIN WHY IT TOOK THE STEP. THE GENERAL PRINCIPLES AND THE COMMON SENSE POINT OF VIEW WERE APPLIED TO DECIDE THE CASE. SECTION 41 (1) SPECIFICALLY DEALS WITH AM OUNTS THAT WERE ALLOWED AS DEDUCTION IN THE PAST ASSESSMENTS AS TRA DING LIABILITIES, WHICH IN A LATER YEAR CEASE OR ARE REMITTED BY THE CREDITORS. IF AND WHEN THERE IS EVIDENCE IN A PARTICULAR LATER YEAR T O SHOW THAT THE LIABILITY HAS CEASED OR HAS BEEN REMITTED, THE SAME CAN BE BROUGHT TO TAX AS PROVIDED IN SECTION 41 (1). IN THIS MANNER T HE STATUTE PRESCRIBES THAT ALL DEDUCTION FOR A TRADING LIABILITY ALLOWED EARLIER CAN BE BROUGHT TO TAX ON THE GROUND THAT THE LIABILITY TO PAY THE SAME HAS BEEN REMITTED OR CEASED. 21. ANOTHER DISTINGUISHING FEATURE IN THE PRESENT C ASE IS THAT THE SUNDRY CREDITORS CONTINUE TO BE SHOWN IN THE ASSESS EE'S BALANCE SHEET AS ON 31.3.2002. IN THE CASE BEFORE THE SUPREME COU RT IN CIT VS. T. V.SUNDARAM IYENGAR (SUPRA), THE ASSESSEE TOOK A POS ITIVE STEP OF 28 ITA NO.3413,3674/DEL/2013 TRANSFERRING THE UNCLAIMED BALANCES IN THE DEPOSIT ACCOUNTS TO ITS PROFIT AND LOSS ACCOUNT, AN ACT, WHICH WAS CONSIDER ED TO BE OF CONSIDERABLE SIGNIFICANCE IN DEMONSTRATING THE INTE NTION OF THE ASSESSEE TO APPROPRIATE THE MONEY BELONGING TO THE DEPOSITORS AS ITS OWN MONIES. THAT CASE WAS DEALING WITH ITEMS OF REC EIPT RECEIVED IN THE COURSE OF THE BUSINESS OF THE ASSESSEE, THOUGH OF CAPITAL NATURE AT THE TIME WHEN THEY WERE RECEIVED. THE PRESENT CASE IS ONE OF A TRADING LIABILITY BEING EARLIER ALLOWED AS A DEDUCTION AND WHICH IS SOUGHT TO BE RECALLED UNDER SECTION 41 (1) OF THE ACT. AT THE COST OF REPETITION IT MAY BE ADDED THAT IN CIT VS. KESARIA TEA CO. LTD. ( SUPRA) THE REVENUE SOUGHT TO RAISE THE ARGUMENT BASED ON THE J UDGMENT OF THE SUPREME COURT IN CIT VS. T. V.SUNDARAM IYENGAR (SUP RA), BUT IT WAS REJECTED BY THE SUPREME COURT HOLDING THAT THE DECI SION WAS OF NO RELEVANCE TO THE QUESTION INVOLVED IN THE CASE BEFO RE THEM, WHICH WAS ABOUT THE APPLICABILITY OF SECTION 41 (1), AND BECA USE THE FACTUAL MATRIX AND THE PROVISION OF LAW CONSIDERED THEREIN WERE ENTIRELY DIFFERENT. FOR THESE REASONS WE ARE UNABLE TO GIVE EFFECT TO THE ARGUMENT OF THE LD. STANDING COUNSEL BASED ON THE J UDGMENT OF THE SUPREME COURT IN CIT VS. T. V.SUNDARAM IYENGAR (SUP RA). 22. THE OTHER JUDGMENT WHICH THE ID. STANDING COUNS EL FOR THE INCOME TAX DEPARTMENT RELIED UPON BEFORE US IS OF THIS COU RT IN JAY ENGINEERING WORKS LTD. V. CIT (SUPRA). A PERUSAL OF THE JUDGMENT SHOWS THAT THOUGH SECTION 41 (1) WAS INVOKED TO TAX AMOUNTS THAT WERE UNILATERALLY WRITTEN BACK TO THE PROFIT AND LO SS ACCOUNT OF THE ASSESSEE, THIS COURT HAD APPLIED THE JUDGMENT OF TH E SUPREME COURT IN CIT VS. T. V.SUNDARAM IYENGAR (SUPRA) TO HOLD THAT THE UNCLAIMED LIABILITIES WRITTEN BACK WERE TAXABLE UNDER SECTION 41 (1). A PERUSAL OF QUESTION NO.3 REFERRED TO THIS COURT UNDER SECTION 256(1) OF THE ACT SHOWS THAT THERE IS A SPECIFIC REFERENCE TO SECTION 41 (1) OF THE ACT. HOWEVER, THIS JUDGMENT CANNOT BE INVOKED TO THE PRE SENT CASE FOR THE SIMPLE REASON THAT IN THE PRESENT CASE, THE ASSESSE E DID NOT WRITE BACK THE SUNDRY CREDITORS TO ITS PROFIT AND LOSS ACCOUNT , A FINDING WHICH IS NOT DISPUTED BY THE REVENUE. THE JUDGMENT OF THIS C OURT IN JAY ENGINEERING WORKS LTD. V. CIT (SUPRA) IS THEREFORE DISTINGUISHABLE. 23. IN THE COURSE OF HIS ARGUMENTS, THE LEARNED STA NDING COUNSEL REFERRED TO SECTION 28(IV) OF THE ACT, ACCORDING TO WHICH 'THE VALUE OF 29 ITA NO.3413,3674/DEL/2013 ANY BENEFIT OR PERQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSI ON' SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD 'PROFITS A ND GAINS OF BUSINESS OR PROFESSION'. HE SUBMITTED THAT SINCE TH E AMOUNTS REMAINED UNPAID TO THE SUNDRY CREDITORS FOR A PERIO D OF 4 YEARS OR MORE, THE MONIES WERE AVAILABLE TO THE ASSESSEE IN ITS BUSINESS WHICH AMOUNTED TO A BENEFIT ARISING FROM THE BUSINESS CAR RIED ON BY THE ASSESSEE. THE CONTENTION SEEMS ATTRACTIVE AT FIRST BLUSH BUT CANNOT BEAR SCRUTINY. THE PROVISIONS OF SECTION 41 (L) HAV E BEEN SPECIFICALLY INCORPORATED IN THE ACT TO COVER A PARTICULAR FACT SITUATION. THE SECTION APPLIES WHERE A TRADING LIABILITY WAS ALLOW ED AS A DEDUCTION IN AN EARLIER YEAR IN COMPUTING THE BUSINESS INCOME OF THE ASSESSEE AND THE ASSESSEE HAS OBTAINED A BENEFIT IN RESPECT OF SUCH TRADING LIABILITY IN A LATER YEAR BY WAY OF REMISSION OR CE SSATION OF THE LIABILITY. IN SUCH A CASE THE SECTION SAYS THAT WHA TEVER BENEFIT HAS ARISEN TO THE ASSESSEE IN THE LATER YEAR BY WAY OF REMISSION OR CESSATION OF THE LIABILITY WILL BE BROUGHT TO TAX I N THAT YEAR. THE PRINCIPLE BEHIND THE SECTION IS SIMPLE. IT IS A PRO VISION INTENDED TO ENSURE THAT THE ASSESSEE DOES NOT GET AWAY WITH A D OUBLE BENEFIT ONCE BY WAY OF DEDUCTION IN AN EARLIER ASSESSMENT YEAR A ND AGAIN BY NOT BEING TAXED ON THE BENEFIT RECEIVED BY HIM IN A LAT ER YEAR WITH REFERENCE TO THE LIABILITY EARLIER ALLOWED AS A DED UCTION. IN CIT, MYSORE V. LAKSHMAMMA, (1964) 52LTR 789 HEGDE, J., ( AS HE THEN WAS) SPEAKING FOR THE MYSORE HIGH COURT OBSERVED TH AT SECTION 10(2A) OF THE INDIAN INCOME TAX ACT, 1922, WHICH IS THE FORE-RUNNER OF SECTION 41 (1) OF THE PRESENT ACT, WAS INTRODUCE D W.E.F. 01.4.1955 TO GET OVER THE JUDGMENT OF THE BOMBAY HIGH COURT IN M OHSIN REHMAN PENKAR V. CIT (J 948) J 6 ITR J 83 HOLDING THAT REM ISSION OF A LIABILITY IN A SUBSEQUENT ASSESSMENT YEAR IN RESPECT OF WHICH THE ASSESSEE HAD OBTAINED A DEDUCTION IN AN EARLIER ASSESSMENT YEAR, CAN NEVER BECOME INCOME FOR THE PURPOSE OF TAXATION, WHERE THE ASSES SEE MAINTAINS ACCOUNTS IN THE MERCANTILE SYSTEM OF ACCOUNTING. TH US, IT MAY BE SEEN THAT SECTION 10(2A) OF THE INDIAN INCOME TAX ACT, 1 922 AND SECTION 41 (1) OF THE PRESENT ACT OF 1961 WERE INTENDED ONL Y TO GOVERN A PARTICULAR FACTUAL SITUATION. SECTION 28(IV), ON TH E OTHER HAND, IS A GENERAL PROVISION WHICH BRINGS TO ASSESSMENT THE VA LUE OF ANY BENEFIT OR PERQUISITE ARISING TO THE ASSESSEE FROM THE BUSI NESS CARRIED ON BY 30 ITA NO.3413,3674/DEL/2013 HIM. IF, AS CONTENDED BEFORE US BY THE LEARNED STAN DING COUNSEL FOR THE REVENUE, THE ALLEGED BENEFIT ENJOYED BY THE ASSESSE E BY UTILIZING THE AMOUNTS PAYABLE TO THE SUNDRY CREDITORS IN ITS OWN BUSINESS FOR A PERIOD OF FOUR YEARS OR MORE IS TO BE BROUGHT TO TA X UNDER SECTION 28(IV), NOTWITHSTANDING THAT THE CONDITIONS OF SECT ION 41 (L), WHICH GOVERN THE FACTUAL SITUATION, ARE NOT SATISFIED, TH EN IT WOULD RENDER THE LATTER SECTION OTIOSE OR A DEAD LETTER. IF WE ACCEP T THE ARGUMENT OF THE LEARNED STANDING COUNSEL FOR THE REVENUE, IT WOULD ALSO INTRODUCE AN ELEMENT OF UNCERTAINTY OR SUBJECTIVENESS IN ASCERTA INING AS TO WHAT WOULD BE THE LAPSE OF TIME THAT WOULD BE NECESSARY TO RENDER A LIABILITY TO PAY THE CREDITORS INEFFECTIVE, WHICH W OULD RESULT IN AN ALLEGED BENEFIT TO THE ASSESSEE. MOREOVER, IF AFTER THE TAXING OF THE AMOUNT U/S 28(IV) ON THE GROUND THAT CONSIDERABLE T IME HAS ELAPSED FROM THE DATE OF THE DEBT DURING WHICH THE ASSESSEE HAD THE BENEFIT OF THE MONIES IN HIS BUSINESS, IT IS FOUND THAT IN ANO THER LATER YEAR THE CREDITOR HAS RECOVERED THE MONEY FROM THE ASSESSEE, THERE IS NO PROVISION IN THE ACT TO ALLOW DEDUCTION FOR SUCH PA YMENT. THE SECTION CANNOT BE MADE SUBJECT TO SUCH VAGARIES OR SUBJECTI VENESS IN ITS APPLICABILITY. IT IS ALSO NECESSARY TO BEAR IN MIND THAT IN THE CASE OF CIT V. SUGAULI SUGAR WORKS (P) LTD. (SUPRA) A CONTE NTION WAS IN FACT ADVANCED BEFORE THE SUPREME COURT ON BEHALF OF THE REVENUE THAT THE LIABILITY TO THE CREDITORS REMAINED UNPAID BY THE A SSESSEE FOR MORE THAN 20 YEARS AND THERE WAS PRACTICALLY A CESSATION OF THE DEBT WHICH RESULTED IN A BENEFIT TO THE ASSESSEE WHICH SHOULD BE BROUGHT TO TAX UNDER SECTION 41 (1). THIS ARGUMENT WAS NOT GIVEN E FFECT TO BY THE SUPREME COURT, NOR DID IT CONSIDER FIT TO APPLY SEC TION 28(IV). IT IS A WELL SETTLED RULE OF INTERPRETATION OF STATUTES THA T A CONSTRUCTION THAT REDUCES ONE OF THE TWO PROVISIONS IN A STATUTE TO A USELESS LUMBER OR A DEAD LETTER WOULD NOT AMOUNT TO A HARMONIOUS CONSTR UCTION AND THAT A FAMILIAR APPROACH IN SUCH CASES IS TO FIND OUT WHIC H ONE OF THE TWO PROVISIONS IS A SPECIAL PROVISION MADE TO GOVERN A CERTAIN SITUATION AND TO EXCLUDE THAT SITUATION FROM THE APPLICABILIT Y OF THE GENERAL PROVISION. IF WE APPLY THIS RULE OF INTERPRETATION TO THE CASE BEFORE US, WE MUST NECESSARILY HOLD THAT WHILE SECTION 28(IV) WOULD APPLY GENERALLY TO ALL BENEFITS OR PERQUISITES WHICH ARIS E TO THE ASSESSEE FROM THE BUSINESS CARRIED ON BY HIM, THE BENEFIT WH ICH HE OBTAINS BY WAY OF REMISSION OR CESSATION OF A TRADING LIABILIT Y IN A LATER YEAR, IN 31 ITA NO.3413,3674/DEL/2013 RESPECT OF WHICH HE HAS OBTAINED A DEDUCTION IN AN EARLIER YEAR IN COMPUTING THE BUSINESS INCOME, SHOULD BE GOVERNED B Y SECTION 41 (1) WHICH IS THE SPECIFIC PROVISION GOVERNING THE FACTU AL SITUATION AND NOT BY SECTION 28(IV). THIS WAY THERE WOULD BE NO CONFL ICT BETWEEN THE TWO PROVISIONS AND BOTH WILL BE GIVEN EFFECT TO. - 24. WE MAY CLARIFY THAT IN THE PRESENT CASE WE ARE NOT CONCERNED WITH EXPLANATION-L TO SECTION 41(1)(A). OUR JUDGMENT IS ONLY ON THE APPLICABILITY OF CLAUSE (A) OF SUB-SECTION (1) OF S ECTION 41 AND AS TO WHAT CREDITORS REMAINED UNPAID BY THE ASSESSEE FOR MORE THAN 20 YEARS AND THERE WAS PRACTICALLY A CESSATION OF THE DEBT WHICH RESULTED IN A BENEFIT TO THE ASSESSEE WHICH SHOULD BE BROUGH T TO TAX UNDER SECTION 41(1). THIS ARGUMENT WAS NOT GIVEN EFFECT T O BY THE SUPREME COURT, NOR DID IT CONSIDER FIT TO APPLY SECTION 28( IV). IT IS A WELL SETTLED RULE OF INTERPRETATION OF STATUTES THAT A CONSTRUCT ION THAT REDUCES ONE OF THE TWO PROVISIONS IN A STATUTE TO A USELESS LUM BER OR A DEAD LETTER WOULD NOT AMOUNT TO A HARMONIOUS CONSTRUCTION AND T HAT A FAMILIAR APPROACH IN -SUCH CASES IS TO FIND OUT WHICH ONE OF THE TWO PROVISIONS IS A SPECIAL PROVISION MADE TO GOVERN A CERTAIN SIT UATION AND TO EXCLUDE THAT SITUATION FROM THE APPLICABILITY OF TH E GENERAL PROVISION. IF WE APPLY THIS RULE OF INTERPRETATION TO THE CASE BEFORE US, WE MUST NECESSARILY HOLD THAT WHILE SECTION 28(IV) WOULD AP PLY GENERALLY TO ALL BENEFITS OR PERQUISITES WHICH ARISE TO THE ASSESSEE FROM THE BUSINESS CARRIED ON BY HIM, THE BENEFIT WHICH HE OBTAINS BY WAY OF REMISSION OR CESSATION OF A TRADING LIABILITY IN A LATER YEAR, I N RESPECT OF WHICH HE HAS OBTAINED A DEDUCTION IN AN EARLIER YEAR IN COMP UTING THE BUSINESS INCOME, SHOULD BE GOVERNED BY SECTION 41 (1) WHICH IS THE SPECIFIC PROVISION GOVERNING THE FACTUAL SITUATION AND NOT B Y SECTION 28(IV). THIS WAY THERE WOULD BE NO CONFLICT BETWEEN THE TWO PROVISIONS AND BOTH WILL BE GIVEN EFFECT TO WHAT WOULD CONSTITUTE REMISSION OR CESSATION OF A TRADING LIABILITY. IT MAY BE NOTED T HAT IN THE PRESENT CASE, THE ASSESSEE HAS NOT UNILATERALLY WRITTEN BAC K THE ACCOUNTS OF THE SUNDRY CREDITORS IN ITS PROFIT AND LOSS ACCOUNT. 25. F OR THE ABOVE REASONS WE ANSWER THE SUBSTANTIA L QUESTION OF LAW IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED WITH NO ORDER AS T O COSTS.' 32 ITA NO.3413,3674/DEL/2013 25. THE CASE LAWS RELIED BY A.O. FOR MAKING ADDITIO NS U/S 41(1) ARE DISTINGU9ISHABLE ON THE FACTS AND CIRCUMSTANCES. I N THE CASE OF T V SUNDRAM IIYENGAR & SONS 222 ITR 344, THE ASSESSEE ITSELF HA D CREDITED TO ITS P & L ACCOUNT. THE UNCLAIMED RECEIPTS WHICH IS NOT THE C ASE IN THE PRESENT APPEAL. SIMILARLY IN PHOENIX MILES LTD. THE ASSESSEE HAD CR EDITED TO ITS P & L ACCOUNT UNCLAIMED OUTSTANDING BALANCES THEREFORE, T HIS CASE LAW IS ALSO WRONGLY RELIED UPON BY A.O. 26. THEREFORE, KEEPING IN VIEW ALL FACTS AND CIRCUM STANCES AND KEEPING IN VIEW THE JUDICIAL PRECEDENTS RELIED UPON BY LD. A.R., THE ADDITION U/S 41(1) IS NOT WARRANTED. THEREFORE, WE ALLOW GROUND NO.2 & 3 OF APPEAL FILED BY ASSESSEE. 27. IN NUTSHELL THE APPEAL FILED BY REVENUE IS DISM ISSED WHILE APPEAL FILED BY ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPO SES. 26. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOV., 2014. SD./- SD./- (I.C. SUDHIR) (T.S. KAP OOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 21 ST NOV., 2014 SP COPY FORWARDED TO:- THE APPELLANT THE RESPONDENT THE CIT THE CIT (A)-, NEW DELHI. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). 33 ITA NO.3413,3674/DEL/2013 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER