The ITO, Vijayawada V. M/s. Sai Ganesh Builders,

ITA 455/VIZ/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8657 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 21-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVASA RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 455 / VIZ /201 6 (ASST. YEAR : 20 1 0 - 11 ) ITO, WARD - 2(4), VIJAYAWADA. V S . M/S. SAI GANESH BUILDERS, D.NO. 6 - 65, GODAVARRU, KANKIPADU MANDAL, KRISHNA DISTRICT. PAN NO. ABPFS 6099 B (APPELLANT) (RESPONDENT) C.O.NO. 05/VIZ/2017 ( ITA NO. 455 / VIZ /201 6 ) (ASST. YEAR : 20 10 - 11 ) M/S. SAI GANESH BUILDERS, D.NO.6 - 65, GODAVARRU, KANKIPADU MANDAL, KRISHNA DISTRICT. VS. ITO, WARD - 2(4), VIJAYAWADA. PAN NO. ABPFS 6099 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI V. SRINIVASA RAO SR. DR DATE OF HEARING : 12 / 0 3 /201 8 . DATE OF PRONOUNCEMENT : 28 / 03 /201 8 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH IS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF 2 INCOME TAX (APPEALS) , VIJAYAWADA , DATED 31 /0 8 /201 6 FOR THE ASSESSMENT YEAR 20 1 0 - 11 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT ASSESSEE IS A PARTNERSHIP FIRM , HAD OBTAINED UN SECURED LOAN OF RS. 28,96,000/ - FROM ONE SRI Y. ANIL . IN THE ASSESSMENT ORDER , THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS OBTAINED UNSECURED LOAN FOR THE ASSESSMENT YEAR 2009 - 10 FOR FREE OF INTEREST, THE SAME IS NOT REPAID . IN THE CASE OF OTHER UNSECURED CREDITORS , THE ASSESSEE HAS ALREADY PAID THE PRIN CIPAL AMOUNT ALONG WITH INTEREST. THEREFORE, THE AMOUNT BORROWED BY THE ASSESSEE - FIRM WITH INTEREST FREE IS NOTHING, BUT CESSATION OF LIABILITY AND A CCORDINGLY, THE SAME IS ADDED TO THE INCOME OF THE ASSESSEE FIRM. 3 . ON APPEAL, LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT A SUM OF RS. 28,96,000/ - IS SHOWING AS OUTSTANDING UNSECURED LOAN FROM SRI ANIL IN THE LIABILITY SIDE OF THE BALANCE SHEET AS ON 31/03/2009 . 4 . ON BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN THE APPEAL BEFORE THE TRIBUNAL. 5. LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 6 . LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE IS NO CESSATION OF LIABILITY IN THIS CASE AND , THEREFORE, SECTION 41(1) HAS 3 NO APPLICATION. HE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD.CIT(A). 7 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIA L AVAILABLE ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW. 8 . THE ASSESSEE - FIRM HAS BORROWED FUNDS , FROM ONE SRI ANIL , A SUM OF RS. 28,96,000/ - THROUGH BANKING CHANNEL . TO THAT EFFECT, THE ASSESSEE HAS OBTAINED CONFIRMATION LETTER AND SUBMITTED BEFORE THE ASSESSING OFFICER. THE GENUINENESS OF THE LOAN IS NOT DOUBTED. THE CASE OF THE ASSESSING OFFICER IS THAT THE ASSESSEE HAS BORROWED THE ABOVE AMOUNT AND ALSO BORROWED FROM FOUR OTHER PERSONS ALSO FOR THE SAME A SSESSMENT YEAR. THE ASSESSEE HAS REPAID TO FOUR OTHER PERSONS AND NOT REPAID THIS AMOUNT , WHICH IS INTEREST FREE. THEREFORE, THE ASSESSING OFFICER IS OF THE OPINION THAT IT IS CESSATION OF LIABILITY AND ACCORDINGLY, THE SAME IS ADDED IN THE HANDS OF THE ASSESSEE FIRM . WE HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND FIND THAT THE ASSESSING OFFICER WITHOUT CONSIDERING SECTION 41(1) SIMPLY MADE THE ADDITION . SECTION 41(1) PROVIDES THAT W HERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMEN T FOR ANY YEAR IN RESPECT OF (I) LOSS, (II) EXPENDITURE OR (III) TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, THE ASSESSEE HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, (I) 4 ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR (II) SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF . THEN, THE AMOUNT OBTAINED BY THE ASSESSEE OR THE AMOUNT OF LIABILITY WHICH IS EXCEEDING SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME - TAX AS THE INCOME OF THAT PREVIOUS YEAR, IT MAY BE MENTIONED THAT THE BUSINESS OR PROFESSION IN RESPECT OF WHICH , THE ALLOWANCE OR DEDUCTION AS EARLIER BENEFIT MA Y OR MA Y NOT BE IN EXISTENCE IN THE PREVIOUS YEAR , IN WHICH SUCH AMOUNT IS OBTAINED OR BENEFIT TED , IT IS ACCRUED TO HIM . T O ATTRACT SECTION 41(1), THE ASSESSEE HAS TO CLAIM DEDUCTION IN EARLIER YEAR IN RESPECT OF LOSS OR ANY EXPENDITURE OR OTHERWISE, THE ASSESSEE HAS TO CLAIM SAME BENEFIT IN RESPECT OF TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF . 9. IN THE PRESENT CASE, THE ASSESSEE HAS BORROWED THE AMOUNT FROM ONE SRI ANIL. IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IT HAS BEEN SHOW N AS OUTSTANDING UNSECURED LOAN IN THE LIABILITY SAID OF THE BALANCE SHEET. IN THIS CASE, THE ASSESSEE HAS NOT CLAIMED ANY LOSS IN EARLIER YEAR OR EXPENDITURE AND ALSO NOT CLAIMED ANY TRADING LIABILITY BY WAY OF REMISSION OR CESSATION. THEREFORE, 5 SECTION 41(1) HAS NO APPLICATION TO THE ASSESSEES CASE. WE FIND THAT THE ASSESSING OFFICER SIMPLY MADE THE ADDITION UNDER SECTION 41(1) WITHOUT EXAMINING WHETHER THIS SECTION APPLIES OR NOT. THE LD. CIT(A) HAS RIGHTLY CONSIDERED SECTION 41(1) AND HELD THAT ADDITION CANNOT BE MADE. WE FIND NO INF IR MITY IN THE ORDER OF THE LD. CIT(A). THUS, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. 10 . IN REGARD TO CROSS OBJECTION FILED BY THE ASSESSEE IS CONCERNED, IT IS ONLY SUPPORT IVE TO THE ORDER OF THE LD. CIT(A). IN VIEW OF OUR DECISION IN THE APPEAL FILED BY THE REVENUE, THE C.O. FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND ACCORDINGLY IS DISMISSED. 11 . IN THE RESULT, APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY T HE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 2 8 T H DAY OF MARCH , 201 8 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 8 T H MARCH , 201 8 . VR/ - COPY TO: 1. THE ASSESSEE - M/S. SAI GANESH BUILDERS, D.NO.6 - 65, GODAVARRU, KANKIPADU MANDAL, KRISHNA DISTRICT. 2. THE REVENUE ITO, WARD - 2(4), VIJAYAWADA. 3. THE PR. CIT , VIJAYAWADA. 4. THE CIT(A) , VIJAYAWADA. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.