The Income Tax Officer, BATALA V. Sh. Parminder Pal Singh, BATALA

ITA 375/ASR/2014

• Counselvise Citation: 37520914 RSA 2014
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 06-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R C CHOPRA
• Keywords: Period of limitation; Deemed to accrue or arise in india

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.375(ASR)/2014 ASSESSMENT YEAR:2006-07 PAN :ABLPS6124R INCOME TAX OFFICER, VS. SH.PARMINDER PAL SINGH, PR OP. WARD-2(4), BATALA. GURU NANAK WATCH & ELECTRONIC S, BATALA. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.TARSEM LAL, DR RESPONDENT BY:SH.R.C.CHOPRA, CA DATE OF HEARING:29/01/2015 DATE OF PRONOUNCEMENT:26/02/2015 ORDER PER B.P.JAIN,AM: THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), JAMMU, DATED 10.03.2014 FOR THE ASSESSMENT YEAR 200 6-07. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(APPEALS) ERRED IN LAW WHILE DELETING THE ADDITI ON OF RS.12,17,890/- MADE BY THE AO ON ACCOUNT OF CESSATI ON OF TRADE LIABILITY AND IGNORING THE FACT THAT THE LIABILITY SHOWN BY THE ASSESSEE IN HIS BOOKS DOES NOT BY ITSELF GO TO PROV E THAT THERE WAS ANY ACTUAL LIABILITY. ITA NO.375(ASR)/2014 2 2. THE APPELLANT CRAVES LEAVES TO AMEND OR ADD ANY OR MORE GROUND(S) OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE AO HAD ADDED RS.11,23,710/- AS CESSATION OF LIABILITY DUE TO M/S. SAMEER ASSOCI ATES (P) LTD. U/S 41(1) OF THE ACT, ON THE BASIS OF THE REASONS THAT THE DEBT HAD BECOME LEGALLY BARRED BY LIMITATION AND THERE WERE NO TRANSACTION OF PURC HASE OR PAYMENT SINCE LONG. THE ASSESSEE MISLED THE DEPARTMENT BY GIVING THE LATEST ADDRESS OF THE PARTY FOR THE REASONS WHICH ARE FULLY UNDERSTANDABL E. THE DEPARTMENT HAS DISCHARGED ITS ONUS, IF ANY, BY WRITING AT THE ADDR ESS OF THE PARTY AS GIVEN BY THE ASSESSEE TO THE DEPARTMENT. THE DEPARTMENT HAS ALSO CONDUCTED INQUIRIES THROUGH ITS FIELD STAFF. THE ASSESSEE WAS DULY CONF RONTED WITH THE MATERIAL INFORMATION REGARDING SHIFTING OF THE PARTY FROM MO HALI TO DELHI AND EVEN THEN THE ASSESSEE DID NOT GIVE ANY LATEST ADDRESS O F THE PARTY. LEGALLY, WHEN A DEBIT BECOMES BARRED BY LIMITATION NO LIABILITY M EANS CESSATION OF LIABILITY. IT IS A FACT THAT THE ASSESSEE HAS SHOWN THE LIABIL ITY IN HIS BOOKS OF ACCOUNT DOES NOT BY ITSELF GO TO PROVE THAT THERE WAS ANY A CTUAL LIABILITY. 3. THE LD. CIT(A) FOLLOWED THE DECISION OF THE HON BLE SUPREME COURT, IN THE CASE OF MAHABIR COLD STORAGE VS. CIT 188 ITR 91, WHERE IT HAS BEEN HELD THAT THE ENTRIES IN THE BOOKS OF ACCOUNT OF THE APPELLANT WOULD AMOUNT TO AN ACKNOWLEDGMENT OF THE LIABILITY WITHIN THE ME ANING OF SECTION 18 OF THE LIMITATION ACT, 1962, AND EXTEND THE PERIOD OF LIMITATION FOR THE ITA NO.375(ASR)/2014 3 DISCHARGE OF THE LIABILITY AS DEBIT. SIMILAR VIEW TAKEN BY THE HONBLE DELHI HIGH COURT, IN THE CASE OF CIT VS. VARDMAN OVERSEAS LTD. ITA NO.774/2009 DATED 23.12.2011. THE LD. CIT(A) OBSERVED THAT TH E GOODS WORTH RS.7,50,000/- WERE GIVEN BACK TO THE PARTY AND VAT CREDIT IN THIS REGARD WAS REVERSED. ACCORDINGLY, THE LD. CIT(A) WAS OF TH E VIEW THAT THE ADDITION U/S 41(1) OF THE ACT WAS NOT TENABLE AS UNILATERA L ACTION CANNOT BRING ABOUT A CESSATION OR REMISSION OF THE LIABILITY BEC AUSE IT CAN OCCUR EITHER BY OPERATION OF LAW OR THE DEBTOR UNEQUIVOCALLY DECLA RING HIS INTENTION, OR BY A CONTRACT BETWEEN THE PARTIES OR BY DISCHARGE OF THE DEBT, WHICH IS NOT PRESENT IN THE CASE AND ACCORDINGLY, THE LD. CIT(A) DELETED THE ADDITION SO MADE BY THE AO. 4. THE LD. DR, RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER, WHEREAS THE LD. COUNSEL FOR THE ASSESSEE, MR. R.C.CHOPRA, C A, RELIED UPON THE SUBMISSIONS MADE BEFORE THE AO AND THE LD. CIT(A) AND THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE UNDISPUTED FACTS IN THE PRESENT CASE ARE THAT T HE BALANCE OUTSTANDING AS AT 31.03.2002 PAYABLE TO M/S. SAMEER ASSOCIATES (P ) LTD., WAS RS.11,23,710/-. IT WAS SUBMITTED BEFORE THE AO THAT THE GOODS WORTH RS.7,50,000/- WERE RETURNED TO THE PARTY IN THE MON TH OF APRIL, 2007. THERE WAS A DISPUTE WITH THE PARTY WITH REGARD TO ITS QUA LITY AND DISPUTE REMAINED ITA NO.375(ASR)/2014 4 UNRESOLVED. AT THE OUTSET, THE AO HAS NOT CONSIDERE D THAT GOODS WORTH RS.7,50,000/- WERE RETURNED IN APRIL, 2007 AND THE EXPLANATION GIVEN BY THE ASSESSEE THAT THERE WAS A DISPUTE WITH M/S. SAMEER ASSOCIATES (P) LTD. WITH REGARD TO THE QUALITY AND THE ASSESSEE WAS READY TO SETTLE THE MATTER. HOWEVER, THE AO MADE A PRESUMPTION THAT ACTUALLY TH ERE WAS NO LIABILITY DUE TO M/S. SAMEER ASSOCIATES (P) LTD., WHICH HAS C EASED TO EXIST. SINCE DEBT HAD BECOME BARRED BY LIMITATION AND THE ASSESS EE HAD MISLED THE DEPARTMENT BY NOT GIVING THE LATEST ADDRESS IN THIS REGARD. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS F OLLOWED THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF MAHABIR COLD STORAGE VS. CIT (SUPRA) AND DECISION OF HONBLE DELHI HIGH COURT, I N THE CASE OF CIT VS. VARDMAN OVERSEAS LTD. (SUPRA), WHERE IT HAS BEEN HE LD THAT ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WOULD AMOUNT TO AC KNOWLEDGMENT OF LIABILITY U/S 18 OF THE LIMITATION ACT, 1963 AND EXTEND THE PERIOD LIMITATION FOR THE DISCHARGE OF THE LIABILITY AS DE BT. ACCORDINGLY, THE FINDING OF THE AO THAT THE DEBT IS BARRED BY LIMITATION DO NOT FIND FAVOUR TO THE REVENUE, ESPECIALLY WHEN THE GOODS WORTH RS.7,50,00 0/- WERE GIVEN BACK TO SAMEER ASSOCIATES (P) LTD., AND NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD BY THE DEPARTMENT. ALSO, THE ASSESSEE WHET HER IN CASH OR IN ANY OTHER MANNER WHATSOEVER HAS NOT OBTAINED ANY BENEFI T OF SUCH TRADING ITA NO.375(ASR)/2014 5 LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. THEREFORE, SUCH A LIABILITY CANNOT TAKE THE CHARACTER OF DEEMED INCOME CHARGEAB LE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION U/S 41 (1). OUR VIEWS FIND SUPPORT FROM THE DECISION OF VARIOUS COURTS OF LAW, AS UNDER: I) KOHINOOR MILLS CO. LTD. VS. CIT (1963) 49 ITR 5 78 (BOM.) II) J.K. CHEMICALS LTD. VS. CIT (1966) 62 ITR 34 ( BOM.) III) BARODA TRADES LTD. V. CIT (1965) 57 ITR 490, 497 (G UJ) IV) GANNON DUNKERLEY & CO. V. CIT (1976) 102 ITR 428 (B OM.) V) LIQUIDATOR, MYSORE P. LTD. V. CIT (1978) 114 ITR 85 3 (KARN.) VI) CIT V. B.N. ELIAS & CO. PVT. LTD. (1986) 160 ITR 45 (CAL) VII) CIT V. PRE-STRESSED CONCRETE CO. (S.I. ) PR. LTD. ( 1986) 162 ITR 314 (MAD.) VIII) CIT V. CHASE BRIGHT STEEL LTD. (1989) 177 ITR 128, 134 (BOM). IX) AMBICA MILLS LTD. V. CIT (1964) 54 ITR 167 (GUJ) X) SADABHAKTI PRAKASHAN PRINTING PRESS P. LTD. (1966) 62 ITR 35, 41 (BOM). XI) CIT V. SUGAULI SUGAR WORKS P. LTD. (1983) 140 ITR 2 86 (CAL.) 6. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE DECISIONS OF VARIOUS COURTS OF LAW REFERRED TO HERE INABOVE, WE ARE OF THE VIEW THAT ANY UNCLAIMED LIABILITY WHICH IS SHOWN AS SUBSISTING DEBT IN THE ANNUAL BALANCE SHEET OF THE ASSESSEE, SUCH ACTION O N THE PART OF THE ASSESSEE AMOUNTS TO ACKNOWLEDGMENT BY THE ASSESSEE WITHIN T HE MEANING OF SECTION ITA NO.375(ASR)/2014 6 19 OF THE LIMITATION ACT, 1908 CORRESPONDING TO SEC TION 18 OF THE LIMITATION ACT, 1963 AND THE ASSESSEE IS NOT LIABLE TO ATTRACT THE PROVISION OF SECTION 41(1) OF THE ACT. THUS, IN THE FACTS AND CIRCUMSTAN CES OF THE PRESENT CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY DELETED THE ADDITION SO MADE BY THE AO. HENCE, THE SOLE GROUND RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N ITA NO.375(ASR)/2014 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26TH FEBRUARY, 2015. SD/- SD/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26TH FEBRUARY, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.PARMINDER PAL SINGH, BATALA 2. THE ITO WARD 2(4), BATALA. 3. THE CIT(A), ASR. 4. THE CIT, ASR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.