ITO, New Delhi V. M/s Hi-Life Exports Pvt. Ltd., New Delhi

ITA 3788/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2111 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-11-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK K SAROHA
• Assessee Lawyers: P K JAIN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B NEW DELHI BEFORE SHRI DEEPAK R SHAH, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ITA NO. 3788/DEL/09 ASSTT. YEAR 2006-07 INCOME-TAX OFFICER, WARD-12(4) C.R. BLDG., NEW DELHI. VS. HI LIFE EXPORTS PVT. LTD. 191A, EKTA MARG, SAINIK FARM, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHOK K SAROHA, DR RESPONDENT BY : SHRI P.K. JAIN, CA ORDER PER DEEPAK R SHAH, ACCOUNTANT MEMBER THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT (A) NEW DELHI DATED 18.6.09 IN AN APPEAL AGAINST ASSTT. F RAMED U/S 143 (3) OF THE INCOME TAX ACT 1961 (THE ACT). 2. THE ONLY ISSUE IN APPEAL IS AGAINST DELETION OF ADDITION OF RS. 9,93,062/- BEING MADE AS CESSATION OF LIABILITY U/S 41(1) OF T HE ACT. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPOR TING TOYS, GAMES FROM ABROAD AND SALE IN INDIA. THE AO NOTED THAT FOLLOWI NG TWO AMOUNTS ARE OUTSTANDING FOR MORE THAN THREE YEARS. 1. SHIV KRUPA ENTERPRISES RS. 2,49,000/- 2. WALT DISNEY CONSUMER PRODUCTS RS. 7,44,062/- ___________________ TOTAL RS. 9,93,062/- ____________________ ITA NO. 3788/DEL/09 ASSTT. YEAR 2006-07 2 4. THE ASSESSEE WAS ASKED TO GIVE EXPLANATION AND S UPPORTING EVIDENCE FOR OUTSTANDING AMOUNT DUE TO THE CREDITORS AND TO FURT HER EXPLAIN WHY THE SAID AMOUNT SHOULD NOT BE DISALLOWED U/S 41(1) OF THE IT ACT, BEING TRADING LIABILITIES INCURRED BY THE ASSESSEE AND FOR WHICH DEDUCTION HA S ALREADY BEEN CLAIMED IN EARLIER YEARS. THE ASSESSEE VIDE HIS LETTER DATED 2 3.10.2008 FILED CONFIRMATION OF M/S. SHIV KRUPA ENTERPRISES. 5. THE AO HELD THAT THE CONFIRMATION FROM SHRI SHIV KRUPA ENTERPRISES DO NOT MENTION THEIR PAN NUMBER. NO REASONS ARE GIVEN FOR OUTSTANDING TRADING LIABILITY FOR MORE THAN THREE YEARS. ACCORDINGLY THE ABOVE SU M WAS TREATED AS CESSATION OF LIABILITY AND ADDED U/S 41 (1) OF THE ACT. 6. LD. CIT (A) HELD THAT THE LIABILITY IS ACKNOWLED GED BY THE ASSESSEE. THE ASSESSEE MADE CLEAR THE LIABILITY ON ACCOUNT OF FIN ANCIAL STRINGENCY AND NOWHERE HAS IT ACKNOWLEDGED THAT AMOUNT ARE NO LONGER PAYA BLE. ACCORDINGLY THE ADDITION WAS DELETED. THE REVENUE IS IN FURTHER APP EAL BEFORE US. 7. LD. DR SUBMITTED THAT OUT OF THE TWO PARTIES, CO NFIRMATION FROM ONLY ONE WAS FILED AND THAT TOO WITHOUT PAN NUMBER. THE REAS ON THAT THE ASSESSEE HAS FINANCIAL STRINGENCY WAS NOT RAISED BEFORE AO. AS P ER THE BALANCE SHEET THE ASSESSEE HAS HUGE INVESTMENT OF RS. 63 LACS IN UNIT S AND MUTUAL FUNDS. THE RESERVES AND SURPLUS IS RS. 18.48 LACS. THOUGH THE ASSESSEE WAS PROVIDED WITH SUFFICIENT OPPORTUNITIES TO PROVE WHETHER THERE WAS ANY DISPUTE WITH THE CREDITORS, THE ASSESSEE DID NOT FURNISH ANY REPLY OR CORRESPON DENCE. THEREFORE THE LIABILITY WHICH WAS OUTSTANDING FOR OVER PERIOD OF THREE YEAR S SHALL BE DEEMED TO HAVE CESSED AND HENCE RIGHTLY ADDED U/S 41 (1) OF THE AC T. ITA NO. 3788/DEL/09 ASSTT. YEAR 2006-07 3 8. LD. COUNSEL FOR ASSESSEE ON THE OTHER HA ND SUBMITTED THAT THE ASSESSEE HAS ACKNOWLEDGED THE LIABILITY AND THEREFORE APPEAR ING IN THE BALANCE SHEET. THERE IS NO FINDING THAT SUCH AMOUNT HAS BEEN PAID AND NOT RECORDED IN THE BOOKS OF ACCOUNTS. THERE IS NO UNILATERAL WRITE BAC K OF SUCH LIABILITIES. IN ABSENCE OF ANY FINDING THAT LIABILITY HAS ACTUALLY CEASED O R WRITTEN BACK BY THE ASSESSEE, THE ADDITION U/S 41`(1) IS NOT WARRANTED. 9. ON CAREFUL CONSIDERATION OF RELEVANT FACT WE ARE INCLINED TO ACCEPT THE FINDING OF LD. COMMISSIONER (A) AND THE SUBMISSION MADE ON BEHALF OF ASSESSEE. FOR SECTION 41 (1) TO APPLY, IT HAS TO BE DEMONSTRA TED THAT THE ASSESSEE HAS EITHER OBTAINED ANY AMOUNT IN RESPECT OF LOSS OR EX PENDITURE EARLIER CLAIMED OR THAT SUCH TRADING LIABILITY IS REMITTED OR HAS CEAS ED. EVEN IF THE LIABILITY IS BARRED BY LIMITATION UNDER THE LIMITATION ACT, THE ASSESSE E ACKNOWLEDGES THE LIABILITY. THE LIABILITY HAS NOT CEASED. THEREFORE THE ADDITIO N MADE U/S 41 (1) WAS RIGHTLY DELETED BY LD. COMMISSIONER (A). 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.12.2009 [RAJPAL YADAV] [DEEPAK.R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER VEENA DATED : COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, D EPUTY REGISTRAR, ITA NO. 3788/DEL/09 ASSTT. YEAR 2006-07 4 ITAT