SHRI GOPALDAS GARG, Ujjain V. The DCIT 1(1), Ujjain

ITA 373/IND/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5689 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK RANUPRIYA
• Assessee Lawyers: R P MORYA
• Keywords: Period of limitation
• Section: 143(3); 133(6)

Judgement Text

GOPALDAS GARG ITA NO. 373/IND/2014. 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., ..!', #$ # !% BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER I.T.A. NO. 373/IND/2014 ASSESSMENT YEAR: 2010-11 GOPALDAS GARG UJJAIN :: APPELLANT VS DCIT 1(1) UJJAIN :: RESPONDENT REVENUE BY SHRI SHARAD JAIN & SHRI ASHOK RANUPRIYA ASSESSEE BY SHRI R.P. MORYA ! ' #$ DATE OF HEARING 6.10.2016 %&'( #$ DATE OF PRONOUNCEMENT 28.10.2016 * O R D E R PER SHRI D.T. GARASIA, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 28.2.2014 OF THE LEARNED CIT(A), UJJAIN. GOPALDAS GARG ITA NO. 373/IND/2014. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 15.9.2010. THE ASSESSMENT WAS REOPENED U/S 143(2) OF THE ACT AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. THE ASSESSING OFFI CER HAS MADE THE ADDITION OF RS. 26,69,342/- U/S 41(1) OF THE ACT ON ACCOUNT OF CESSATION OF OUTSTANDING LIABILITY PAYABLE AS ON 31 ST MARCH, 2010 TO 7 DIFFERENT CREDITORS OUT OF WHICH 5 CREDITORS DID NOT TURN UP. THEREFORE, THE ASSESSING OFFICER MADE THE ADDITION BY OBSERVING AS UNDER :- NAME AMOUNT (RS.) BASIS FOR MAKING ADDITION BY A.O. ALLIED PROPACK ASHOK TRADERS BALAKRISHNA ENTERPRISES SHRI KRISHNA ENTERPRISES SUBHASH PATTAL BHANDAR 2,76,149 2,83,365 3,57,129 5,30,584 3,14,800 (I) NOTICES U/S 133(6) RETURNED UNSERVED (II) DOCUMENTARY EVIDENCES I.E. CONFIRMATION LETTERS FROM CREDITORS NOT FILED. (III) CURRENT ADDRESSES, CONTACT NOS. ETC OF CREDITORS NOT SUBMITTED (IV) NO SATISFACTORY REPLY GIVEN BY THE APPELLANT THAT WHY THE LIABILITIES ARE OUTSTANDING FROM LONG TIME (V)THE APPELLANT IS NOT IN TOUCH WITH THE CREDITOR/ IS NOT AWARE OF WHEREABOUTS OF THE CREDITORS. THEREFORE, AS PER THE LD. A.O., THE LIABILITIES CANNOT BE SAID GOPALDAS GARG ITA NO. 373/IND/2014. 3 TO BE STILL OUTSTANDING. (IV) DUE TO ABOVE REASONS, AS PER THE LD. A.O., THE LIABILITIES HAVE CEASED TO EXIST AS ON 31.03.2010, THEREFORE PROVISIONS OF SECTION 41(1) ARE ATTRACTED. THE MATTER WAS CARRIED IN APPEAL TO THE LEARNED CIT(A) AN D THE LEARNED CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE . 3. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN CASE OF M/S REEMA TRADING COMPANY, THE ASSESSEE HAS MADE TOTAL PAYMENT OF RS. 541785/- AND THE PAYMENT HAS BEEN MADE THROUGH BANKING CHANNEL AND THE ENTIRE PAYMENT IS SETTLED. THEREFORE, NO ADDITIO N SHOULD BE MADE. IN CASE OF KALURAM SATYANARAYAN THE ASSESSEE HAS PAID RS. 90,000/- AND RS. 2,75,530/- IS STILL PAYAB LE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SECTION 41(1) OF THE ACT IS APPLICABLE TO UNPAID EXI STING LIABILITY AND NOT ALREADY PAID LIABILITY. THEREFORE, IN CASE OF REEMA TRADING COMPANY, NO LIABILITY IS PENDING, THEREFO RE, THE APPEAL MAY BE ALLOWED. IN RESPECT OF KALURAM GOPALDAS GARG ITA NO. 373/IND/2014. 4 SATYANARAIN THE ASSESSEE HAS PAID SOME OF THE AMOUNTS AND NO LIABILITY IS PENDING AS ON 1.4.2006, THEREFORE, NO ADDITION COULD BE MADE IN THE HANDS OF THESE TWO PARTIE S. IN RESPECT OF FIVE PARTIES THE SUMMONS WERE RETURNED UNSERVED BUT SECTION 41(1) OF THE ACT IS NOT APPLICA BLE BECAUSE NOWHERE THE ASSESSING OFFICER HAS ESTABLISHED THAT THIS LIABILITY IS NOT PAYABLE. THE ADDITION HAS BEEN M ADE MERELY ON THE BASIS OF NON-TRACEABILITY OF CREDITOR. N OWHERE IT IS ESTABLISHED AND CONCLUDED THAT DUE TO ALLEGED CESSATION OF LIABILITY, THE ASSESSEE HAS OBTAINED ANY BEN EFIT IN THE ASSESSMENT YEAR 2010-11. THEREFORE, THE APPEAL M AY BE ALLOWED. HE RELIED UPON THE DECISION IN THE CASE OF NITIN S. GARG VS, ACIT; 40 SOT 253; DCT VS. ALLIED LEATHER (P) LTD.; 32 SOT 549; ITO VS. BHAVESH PRINTS (P) LTD.; 1 42 TTJ (AHD.) AND CIT VS. MIRAA PROCESSORS (P) LTD.; 81 CCH 86 (GUJ.), THEREFORE, AS PER THE DECISION OF THE HON'BL E GUJARAT HIGH COURT AND VARIOUS DECISIONS OF THE TRIBUNAL IT WAS GOPALDAS GARG ITA NO. 373/IND/2014. 5 HELD THAT THE LIABILITY HAS BEEN CEASED OR NOT CANNOT BE DECIDED BY CONSIDERING THE ASSESSEES CASE ALONE, BUT IT HAS TO BE DECIDED ONLY IF THE CREDITOR IS BEFORE THE CO NCERNED AUTHORITY. 4. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE DECISION OF THE BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SHAILESH D. SHAN AND HE ALSO RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. CHIPSOFT TECHNOLOGY; 82 CCI 304 DEL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT AS PER THE SUBMISSION OF THE ASSESSEE IN RESPECT OF TWO PARTIES, THE ASSESSEE HAS ALREADY PAID THE LIABILITY AND WHEN THE ASSESSEE HAS ALREADY PAID THE LIABILITY, NO ADDITION CAN B E MADE IN CASE OF RIMA TRADING COMPANY ADDITION OF RS.541785/-. THEREFORE, WE DELETE THE SAME. IN RESPE CT OF KALURAM SATYANARAYAN AND 5 CREDITORS THE ASSESSEE DID GOPALDAS GARG ITA NO. 373/IND/2014. 6 NOT PRODUCE THE CREDITORS AND IN THE CASE OF 5 CREDIT ORS THE LETTER WAS NOT SERVED. THE ISSUE IN CONTROVERSY IS C OVERED BY THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. CHIPSOFT TECHNOLOGY PVT. LTD. (SUPRA), WH EREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER :- 8. ON THE OTHER HAND, THIS COURT HAS CONSIDERED KES ORAM (SUPRA) WHICH UPHOLDS A VIEW THAT FAVOURS THE REVENUE. A SIMILAR VIEW WAS SPELT OUT IN COMMISSIONER OF INCOME TAX V AGARPARA CO. LTD 1986 158 ITR 78: '26. WHETHER A TRADING LIABILITY THAT WAS ONCE INCU RRED CEASES TO EXIST FOR THE PURPOSE OF SECTION 41(1) HAS TO BE DECIDED IN THE LIGHT OF THE PROVISIONS OF THE INCOME-TAX ACT , 1961, AND THE STATUTE, IF ANY, GOVERNING SUCH LIABILITY. THE ASSESSEE WHO MAINTAIN S HIS ACCOUNTS ON THE MERCANTILE BASIS WOULD BE ITA-598/2011 PAGE 6 E NTITLED TO A DEDUCTION IN RESPECT OF BONUS IN THE YEAR IN WHICH A LIABILITY ARISES UNDER THE STATUTE, OR THE EMPLOYEES' CLAIM FOR BONU S IS ADMITTED BY THE ASSESSEE OR IS SETTLED BY AN AGREEMENT BETWEEN THE PARTIES OR IS ADJUDICATED UPON BY AN AWARD. UNDER SECTION 36(1)(II) OF THE INCOME- TAX ACT, 1961, PAYMENT OF BONUS TO THE EMPLOYEES IS AN ALLOWABLE DEDUCTION. UNDER THE PAYMENT OF BONUS ACT , 1965, LIABILITY TO PAY BONUS HAS BECOME A STATUTORY OBLIGATION IMPOSED UPO N THE EMPLOYER COVERED BY THE SAID ACT. UNDER THE BONUS ACT BONUS IS PAYABLE WITHIN A PERIOD OF EIGHT MONTHS FROM THE CLOSE OF THE ACCO UNTING YEAR UNLESS THERE IS A DISPUTE REGARDING SUCH PAYMENT, IN WHICH CASE IT IS PAYABLE WITHIN A MONTH FROM THE DATE OF THE AWARD BECOMING ENFORCEABLE. CONTRAVENTION OF ANY OF THE PROVISIONS OF THE BONUS ACT OR THE RULES MADE THEREUNDER IS PUNISHABLE WITH IMPRISONMENT FOR A TERM WHICH MAY EXTEND TO SIX MONTHS OR WITH FINE WHICH MAY EXT END TO RS. 1,000 OR WITH BOTH. AS THE LIABILITY FOR BONUS BECAME A S TATUTORY ONE, A PROVISION MADE THEREFOR OR EVEN WHERE NO PROVISION IS MADE, IN THE MERCANTILE ACCOUNTING, THE AMOUNT PAYABLE IS ALLOWA BLE IF THE SAME IS IN ACCORDANCE WITH THE LAW ABOUT THE PAYMENT OF BON US. ANY PROVISION OVER AND ABOVE THAT PAYABLE UNDER THE BONUS ACT SHALL NOT BE ALLOWABLE TO THE EXTENT OF SUCH EXCESS. IT IS NO T THE CASE OF THE ASSESSEE BEFORE US THAT TIME TO PAY BONUS WAS EXTEN DED OR ANY DISPUTE AS REGARDS PAYMENT OF BONUS HAS BEEN RAISED. THE AS SESSEE HAS PROVIDED FOR BONUS FOR ITS EMPLOYEES BUT A PART OF THE BONUS SO PROVIDED FOR THREE SEVERAL YEARS REMAINED UNCLAIMED . ONCE BONUS HAS GOPALDAS GARG ITA NO. 373/IND/2014. 7 BEEN OFFERED BY THE EMPLOYER, BUT REMAINS UNDRAWN, IT CANNOT BE SAID THAT THE LIABILITY SUBSISTS EVEN AFTER THE EXPIRY O F THE TIME PRESCRIBED BY THE STATUTE, PARTICULARLY WHEN THERE IS NO DISPU TE PENDING REGARDING THE PAYMENT OF BONUS. IN THE CONTEXT OF S UCH FACTS AND CIRCUMSTANCES, IT MAY BE INFERRED THAT UNCLAIMED OR UNPAID BONUS IS AN EXCESS OF THE REQUIREMENT OF THE ASSESSEE AND, T HEREFORE, TO THAT EXTENT, IN ANY EVENT, THE LIABILITY HAS CEASED.' 9. TWO ASPECTS ARE TO BE NOTICED IN THIS CONTEXT. T HE FIRST IS THAT THE VIEW THAT LIABILITY DOES NOT CEASE AS LONG AS IT IS REFLECTED IN THE BOOKS, AND THAT MERE LAPSE OF THE TIME GIVEN TO THE CREDITOR OR THE ITA- 598/2011 PAGE 7 WORKMAN, TO RECOVER THE AMOUNTS DUE, DOES NOT EFFACE THE LIA BILITY, THOUGH IT BARS THE REMEDY. THIS VIEW, WITH RESPECT IS AN ABSTRACT AND THEORETICAL ONE, AND DOES NOT GROUND ITSELF IN REALITY. INTERPRETATION OF LAW S, PARTICULARLY FISCAL AND COMMERCIAL LEGISLATION IS INCREASINGLY BASED ON PRA GMATIC REALITIES, WHICH MEANS THAT EVEN THOUGH THE LAW PERMITS THE DEBTOR T O TAKE ALL DEFENCES, AND SUCCESSFULLY AVOID LIABILITY, FOR ABSTRACT JURISTIC PURPOSES, HE WOULD BE SHOWN AS A DEBTOR. IN OTHER WORDS, WOULD BE ILLOGICAL TO SAY THAT A DEBTOR OR AN EMPLOYER, HOLDING ON TO UNPAID DUES, SHOULD BE GIVE N THE BENEFIT OF HIS SHOWING THE AMOUNT AS A LIABILITY, EVEN THOUGH HE W OULD BE ENTITLED IN LAW TO SAY THAT A CLAIM FOR ITS RECOVERY IS TIME BARRED, A ND CONTINUE TO ENJOY THE AMOUNT. THE SECOND REASON WHY THE ASSESSE'S CONTENT ION IS UNACCEPTABLE IS BECAUSE WITH EFFECT FROM 1-4-1997 BY VIRTUE OF FINANCE ACT , 1996 (NO.2), AN EXPLANATION WAS ADDED TO SECTION 41 WHICH SPELLS OUT THAT 'LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF' SHALL INCLUDE THE R EMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY THE FIRST MENT IONED PERSON UNDER CLAUSE'. THE EXPRESSION 'INCLUDE' IS SIGNIFICANT; PARLIAMENT DID NOT USE THE EXPRESSION 'MEANS'. NECESSARILY, EVEN OMISSION TO PAY, OVER A PERIOD OF TIME, AND THE RESULTANT BENEFIT DERIVED BY THE EMPLOYER/ASSESSE W OULD THEREFORE QUALIFY AS A CESSATION OF LIABILITY, ALBEIT BY OPERATION OF LA W. 10. THE SUBMISSION OF THE ASSESSE THAT NO PERIOD OF LIMITATION IS PROVIDED FOR UNDER THE INDUSTRIAL DISPUTES ACT , AS A RESULT OF WHICH IT IS EXPOSED TO LIABILITY AT ANY TIME, IS INSUBSTANTIAL AND UNPERSU ASIVE. THIS IS BECAUSE IN THE NEDUNGADI BANK LTD. VS K.P. MADHAVANKUTTY AIR 2000 SC 839 THE SUPREME COURT HELD THAT EVEN THOUGH UNDER THE ACT NO PERIOD OF LIMITATION HAS BEEN PRESCRIBED, A STALE D ISPUTE ONE WHERE THE EMPLOYEE APPROACHES THE FORUM UNDER THE ACT AFTER A N INORDINATE DELAY CANNOT BE ENTERTAINED AND ADJUDICATED. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THEN ACTIO N OF THE LEARNED CIT(A). GOPALDAS GARG ITA NO. 373/IND/2014. 8 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 28 OCTOBER, 2016. SD/- SD/- ( ..!') (..) #$ (O.P.MEENA) (D.T.GARASIA) ACCOUNTANT MEMBER J UDICIAL MEMBER (') / DATED : 28 OCTOBER, 2016. DN/ GOPALDAS GARG ITA NO. 373/IND/2014. 9