The ACIT, Bhopal V. M/s. Prabhat Goods Transport Services, Bhopal

ITA 411/IND/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9513 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MITRA
• Assessee Lawyers: M C MEHTA; HITESH CHIMNANI CAS
• Keywords: Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER PAN NO. : AAFFP9229H I.T.A.NO.411/IND/2009 A.Y. : 2005-06 AICT, M/S.PRABHAT GOODS 2(1), TRANSPORT SERVICES, BHOPAL BHOPAL APPELLANT RESPONDENT APPELLANT BY : SHRI PRADEEP KUMAR MITRA, SR. DR RESPONDENT BY : SHRI M. C. MEHTA AND SHRI HITESH CHIMNANI, CAS O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 18.5.2009 FOR THE ASSESSMENT YEAR 2 005-06 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME -TAX ACT, 1961. 2. THE ONLY GRIEVANCE OF THE REVENUE RELATES TO THE DE LETION OF ADDITION MADE BY THE ASSESSING OFFICER U/S 41(1) OF THE ACT -: 2: - 2 AMOUNTING TO RS. 47,58,706/- ON ACCOUNT OF CESSATIO N OF LIABILITY. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUS ED. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE FIRM IS ENGAGED IN TRANSPORTATION BUSINESS. DURING THE COURSE OF AS SESSMENT, THE AO FOUND THAT A SUM OF RS. 47,68,706/- WAS INCL UDED IN THE LIABILITY SIDE OF THE BALANCE SHEET, AS AMOUNT DUE TO FIRM/COMPANY IN WHICH ONE OF THE PARTNERS IS INTERE STED, NAMELY, M/S. HEAVY CARGO MOVERS INDIA PRIVATE LIMIT ED ( HCM ). THE AMOUNT SO DUE WAS CONSISTING OF ADVANCE PAYM ENT RECEIVED FROM HCM AMOUNTING TO RS. 27 LAKHS AS ADVA NCE FOR PLOT AND RS. 20,58,706/- AS AMOUNT PAYABLE FOR THE HIRE CHARGES DUE TO HCM. BY OBSERVING THAT THE LIABILITY HAS CEASED DURING THE YEAR, THE AO ADDED BOTH THE AMOUNT IN AS SESSEES INCOME U/S 41(1). 5. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE ABOVE SUBMISSIONS AFTER PERUSING THE IMPUGNED ASSESSMENT ORDER. IN MY CONSIDERED VIEW FOR PROFIT TO BE CHARGEABLE TO TAX -: 3: - 3 U/S 41(1) THERE HAS TO BE REMISSION OR CESSATION OF THE LIABILITIES IN QUESTION. UNILATERAL ACT ON THE PART OF DEBTOR IN MAKING TRANSFER ENTRY CANNOT, BY ITSEL F BRING ABOUT THE CESSATION OF THE LIABILITY. NOR CAN THERE BE REMISSION OR CESSATION OF THE LIABILITY JU ST BECAUSE THE AO THOUGHT IT SO. THERE CAN BE CESSATION OF LIABILITY ONLY WHEN THE LIABILITY HAS FINALLY CEASED WITHOUT THERE BEING A CHANCE OF ITS REVIVAL. HERE THE MATTER IS IN DISPUTE AND SUB-JUDI CE . IT WOULD NOT BE PROPER AND LEGAL ON THE PART OF T HE AO TO REACH A UNILATERAL CONCLUSION THAT THE DISPUTED LIABILITIES HAS CEASED TO EXIST, WHEN THES E HAVE NEITHER BEEN WRITTEN BACK IN THE BOOKS OF THE APPELLANT, NOR WRITTEN OFF IN THE BOOKS OF THE CREDITOR. EVENTUALLY, THEREFORE, NO INCOME COULD BE DEEMED TO HAVE ACCRUED U/S 41(1) OF THE ACT. IN VIEW OF WHAT HAS JUST BEEN STATED, THE ADDITION OF RS. 47,58,706/- IS UNJUSTIFIED AND UNMERITED. THE SAME IS DELETED. -: 4: - 4 6. AGAINST THE ABOVE ORDER OF LD. CIT(A),REVENUE IS I N FURTHER APPEAL BEFORE US. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOU ND FROM RECORD THAT A SUM OF RS. 27 LAKHS WAS DUE AGAINST A DVANCE PAYMENT RECEIVED FOR PLOT. IT IS NOT A TRADE LIABIL ITY, BUT A LIABILITY EXISTING ON ACCOUNT OF CAPITAL RECEIPT. T HE PROVISIONS OF SECTION 41(1) CAN BE ATTRACTED ONLY IN RESPECT O F TRADE LIABILITY, THE BENEFIT OF WHICH HAS BEEN ACCRUED IN FAVOUR OF THE ASSESSEE BY DEBITING RESPECTIVE EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT OF ANY OF THE EARLIER YEARS. THUS, WE DO NOT FIND ANY MERIT IN INVOKING PROVISIONS U/S 41(1) IN RESPE CT OF AMOUNT PAID TO ASSESSEE COMPANY AS ADVANCE AGAINST PLOT, WHICH HAS BEEN SHOWN AS PAYABLE IN THE BALANCE SHEE T. CONFIRMATION OF PARTY MAKING ADVANCE PAYMENT FOR PL OT WAS ALREADY PLACED IN THE PAPER BOOK. 8. WITH REGARD TO HIRE CHARGES PAYABLE AMOUNTING TO RS . 20.58 LAKHS, THE SERVICES FOR WHICH HAVE ALREADY BE EN RENDERED TO THE ASSESSEE COMPANY ON ACCOUNT OF TRUC KS TAKEN ON HIRE FROM THE SISTER CONCERN, AMOUNT OF WHICH WA S SHOWN -: 5: - 5 AS PAYABLE TO M/S. HCM. HOWEVER, DUE TO SOME DISPUT E AMONGST PARTNERS, THE SAME WAS NOT ACTUALLY PAID AN D SHOWN AS A LIABILITY IN THE BALANCE SHEET. THERE CAN BE C ESSATION OF LIABILITY ONLY WHEN THE LIABILITY HAS FINALLY CEASE D WITHOUT THERE BEING A CHANCE OF ITS REVIVAL. HERE THE MATTER IS I N DISPUTE AND SUB-JUDICE, FOR THIS REASON, THE AMOUNT WAS NOT ACT UALLY PAID. HOWEVER, CONFIRMATION FROM THE HCM WAS FOUND TO BE PLACED ON RECORD TO THE EFFECT THAT THIS AMOUNT WAS RECEIV ABLE FROM ASSESSEE COMPANY. WE HAD VERIFIED THE CONFIRMATION. NEITHER THE ASSESSEE NOR M/S. HCM HAD PASSED ANY ENTRY IN T HEIR BOOKS OF ACCOUNT TO THE EFFECT THAT LIABILITY HAS C EASED. WITHOUT ANY ACT EITHER ON THE PART OF THE ASSESSEE OR THE T RADE CREDITORS AND WITHOUT THERE BEING ANY ENTRY IN THE RESPECTIV E BOOKS OF ACCOUNT, THERE IS NO JUSTIFICATION FOR PRESUMING TH AT SINCE LIABILITY IS OUTSTANDING, THE SAME BEING CEASED. 9. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) FOR DELETING THE ADDITION MADE U/S 41(1) OF THE ACT AFTER RECORDING DETAILED FINDING AT PARAS 4 & 4.1 OF THE APPELLATE ORDER, WHICH HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT. -: 6: - 6 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22 ND MARCH, 2011. CPU* 233