I.T.O. 17(1)(4), MUMBAI V. INTERNATIONAL TRADE (INDIA), MUMBAI

ITA 4544/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5205 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 03-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 05-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAJID SUPARIWALA IZRFKHZ DH LS

Judgement Text

INTERNATIONAL TRADE (INDIA) - 1 - VK;DJ VIHYH; VF/KDJ.K VKBZ U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUM BAI JH JKTSUNZ FLAG YS[KK LNL; ,OA JH FOOSD OEKZ] U;KF; D LNL; DS LE{K BEFORE SHRI RAJENDRA SINGH ACCOUNTANT MEMBER AND SH RI VIVEK VARMA, JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO. 4544/MUM/2012 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2007-08 I.T.O 17(1)(4), ROOM NO. 112, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL MUMBAI 400 012. CUKE@ VS. INTERNATIONAL TRADE (INDIA) 211/5; KOLSA BUNDER; DARUKHANA MUMBAI. PAN:- AAAFI8815M VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT VIHYKFKHZ DH VKSJ LS @ ASESSEE BY MR. SAJID SUPARIWALA IZR;FKHZ DH VKSJ LS @ REVENUE BY SHRI O.P. SINGH VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER RAJENDRA SINGH, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 16.4.2012 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08 . THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING ADDITION MADE BY AO U/S 41(1) OF THE IT ACT. 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE AS SESSMENT PROCEEDINGS NOTED THAT THERE WERE SUNDRY CREDITORS IN THE NAME OF HANUMAN STEEL TRADERS (RS. 5,02,972/-) AND SIMRAN ENTERPRISES (RS . 8,00,160/-), WHICH WERE PENDING FOR MORE THAN THREE YEARS. AO, THEREFO RE, ASKED THE ASSESSEE TO LQUOKBZ DH RKJH[K @ DATE OF HEARING 3-10-2013 ?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT 3-10-2013 INTERNATIONAL TRADE (INDIA) - 2 - GIVE REASONS FOR THESE OUTSTANDING AND EXPLAIN AS T O WHY THESE SHOULD NOT BE ADDED AS INCOME U/S 41(1). THE ASSESSEE SUBMITTE D THAT IT HAD PURCHASED IRON AND STEELS FROM MANY PARTIES WHO HAD SUPPLIED DEFECTIVE GOODS WHICH WERE STILL LYING IN THE GO-DOWN AND WHI CH WAS THE REASON FOR OUTSTANDING PAYMENTS. AO HOWEVER OBSERVED THAT THE ASSESSEE HAD NOT FURNISHED ANY CONFIRMATION OR ANY LEGAL DOCUMENTS/S UITS FILED BY THE CREDITORS AGAINST THE ASSESSEE. IT WAS ALSO OBSERVE D BY HIM THAT NO CREDITOR COULD WAIT FOR MORE THAN THREE YEARS FOR GETTING PA YMENT. HE, THEREFORE, HELD THAT LIABILITIES HAD CEASED TO EXIST AND ADDED THE SAME U/S 41(1) OF THE IT ACT. 3. IN APPEAL, THE ASSESSEE SUBMITTED THAT ONLY BECA USE THE LIABILITIES WERE PENDING IN THE BALANCE SHEET, IT COULD NOT BE CONCLUDED THAT THE SAME HAD CEASED TO EXIST. THE ASSESSEE HAD NOT MADE ANY UNILATERAL WRITE OFF ENTRY IN THE BOOKS OF ACCOUNTS AND THE AO HAD NOT D ISPUTED THE CLAIM OF THE ASSESSEE THAT THE LIABILITIES WERE OUTSTANDING. THE ASSESSEE PLACED RELIANCE ON THE JUDGMENT OF HONBLE HIGH COURT OF DELHI IN C ASE OF CIT VS. HOTLINE ELECTRONICS LTD (205 TAXMAN 245) IN WHICH IT WAS HE LD THAT IT WAS INCUMBENT UPON THE AO TO MAKE ENQUIRY AND BRING ON RECORD MATERIAL TO SHOW THAT LIABILITIES HAD CEASED TO EXIST. CIT(A) A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT ADDITION U/S 41(1) COULD BE MADE ONLY IF LIABILITY HAD CEASED TO EXIST AND THE BURDE N FOR THIS LAY ON THE ASSESSEE TO PROVE WITH RELEVANT MATERIALS, WHICH HA D NOT BEEN DONE IN THIS CASE. FURTHER, UNDER PROVISO TO SECTION 41(1) THE L IABILITY IS DEEMED TO HAVE CEASED IF THERE WAS UNILATERAL WRITE OFF BY THE ASS ESSEE IN THE BOOKS OF ACCOUNTS WHICH WAS NOT SO IN THIS CASE. CIT(A), THE REFORE, HELD THAT PROVISIONS OF SECTION 41(1) WERE NOT APPLICABLE AND ACCORDINGLY DIRECTED THE AO TO DELETE THE ADDITION, AGGRIEVED BY WHICH THE R EVENUE IS IN APPEAL BEFORE TRIBUNAL. 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECO RDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ADDI TION OF RS. 13,03,132/- ON ACCOUNT OF LIABILITIES U/S 41(1) OF THE IT ACT. IN RELATION TO TWO SUNDRY INTERNATIONAL TRADE (INDIA) - 3 - CREDITORS WHICH WERE PENDING FOR MORE THAN THREE YE ARS. ADDITION U/S 41(1) CAN BE MADE ONLY IF IT IS PROVED THAT THE LIABILITI ES HAVE CEASED TO EXIST. FURTHER, UNDER THE PROVISO TO SECTION 41(1) THE LIA BILITY DEEMED TO HAVE CEASED IF THE SAME HAS BEEN WRITTEN OFF BY THE ASSE SSEE UNILATERALLY. IN THIS CASE THE ASSESSEE HAD NOT WRITTEN OFF THE LIABILITY UNILATERALLY. THEREFORE, BEFORE MAKING ANY ADDITION U/S 41(1) THE BURDEN IS ON THE AO TO PROVE BY MAKING NECESSARY ENQUIRIES THAT THE LIABILITIES HAD CEASED. NO ENQUIRY HAS BEEN MADE IN THIS CASE NOR ANY MATERIAL HAS BEEN PL ACED ON RECORD TO SHOW THAT THERE WAS CEASURE OF LIABILITIES. THE ADDITION MADE U/S 41(1) ONLY ON THE GROUND THAT THE LIABILITIES WERE PENDING FOR MORE T HAN THREE YEARS IS NOT JUSTIFIED IN THE ABSENCE OF ANY MATERIAL TO PROVE T HAT THERE WAS ACTUAL CEASURE OF LIABILITY. WE, THEREFORE, SEE NO INFIRMI TY IN THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY AO AND THE SAME IS UP HELD. 5. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED ON 3-10-2013 SD/- SD/- (VIVEK VARMA) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER SKS SR. P.S, MUMBAI DATED 3-10-2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI