ITO, New Delhi V. M/s Multiplze Zones India Pvt. Ltd., New Delhi

ITA 4793/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3619 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 17-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 18-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C PANCHOLI
• Assessee Lawyers: LOKENDRAJIT SINGH
• Keywords: Unexplained cash credit; Depreciation; Question of law
• Section: 143(3); 142(1); 260A; 68; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E: NEW DELHI BEFORE SHRI C.L.SETHI, JM & SHRI B.C. MEENA, AM I.T. A. NO.4793/DEL OF 2009 ASSESSMENT YEAR: 2004-05 INCOME-TAX OFFICER, VS MULTIPLE ZONES INDIA P. LTD ., WARD-5(4), NEW DELHI. C-40. OKHLA INDUSTRIAL AREA , PHASE-II, NEW DELHI. PAN: AAACM8638D APPELLANT RESPONDENT APPELLANT BY: SHRI P.C. PANCHOLI, SR. DR RESPONDENT BY: SHRI LOKENDRAJIT SINGH, ADVOCATE ORDER PER C.L. SETHI, JM THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 12 .10.2009 PASSED BY THE LD. CIT(A) IN THE MATTER OF AN ASSESSMENT MADE BY THE AO U/S 143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT) FOR THE ASSESSM ENT YEAR 2004-05. 2. GROUND NO.1 RAISED BY THE REVENUE IS GENERAL IN NATURE AND NO SPECIFIC ARGUMENT WAS MADE IN RELATION THERETO, HENCE, IT IS REJECTED. 3. GROUND NOS.2 & 2.1 IS DIRECTED AGAINST CIT(A)S ORDER IN DELETING THE ADDITION OF RS.15 LACS, BEING THE AMOUNT OF LOAN RE CEIVED FROM SHRI GOKUL TANDON. GROUNDS RAISED BY THE REVENUE READ AS UNDE R: 2 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS DELETED THE ADDITION OF RS.15 LACS MADE BY THE AO U/S 68 BEING THE BOGUS CREDITS RECEIVED FROM SHRI GOKUL TANDON. 2.1 THE LD. CIT(A) IGNORED THE FACT THAT THE ASSESSEE DID NOT DISCHARGE THE ONUS OF PROVING THE CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. 4. THE RETURN OF INCOME FILED BY THE ASSESSEE ON 13 .10.2004 DECLARING TOTAL INCOME AT RS. NIL UNDER NORMAL COMPUTATION OF INCOME WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) WERE ISS UED BY THE AO, WHICH WERE COMPLIED WITH BY THE ASSESSEE BY FILING SUBMIS SIONS AND DETAILS AND EXPLAINING THE CASE. BOOKS OF ACCOUNTS OF THE ASSE SSEE WERE PRODUCED, WHICH WERE TEST CHECKED BY THE AO. IN THE COURSE O F ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT ASSESSEE HAS CLAIMED TO HAVE RECEIVED AN UNSECURED LOAN OF RS.15 LACS. THE ASSES SEE WAS ASKED TO SUBSTANTIATE THE SAID LOAN BY ESTABLISHING GENUINEN ESS OF THE TRANSACTION, IDENTITY OF THE CREDITOR, CREDITWORTHINESS OF THE C REDITOR WITH IMMEDIATE SOURCE OF THE FUNDS IN HIS HANDS DULY SUPPORTED BY DOCUMENTARY EVIDENCES. THE ASSESSEE FILED CONFIRMATION OF LOAN TAKEN FROM THE CREDITOR AND ALSO FILED A COPY OF THE INCOME-TAX RETURN OF THE CREDITOR PER TAINING TO THE ASSTT. YEAR 2004-05. THE AO STATED THAT CREDITOR WAS A SALARIE S PERSON, AND HAS DECLARED 3 TOTAL INCOME OF RS.3,20,640/- FOR THE SAID PERIOD. THE AO THEM OBSERVED THAT NO PROOF OF THE IMMEDIATE SOURCE OF THE FUND O F RS.15 LACS IN THE HANDS OF THE LOAN CREDITOR HAS BEEN FURNISHED. THE AO AL SO NOTICED THAT FROM THE LEDGER ACCOUNT OF THE CREDITOR, NAMELY, SHRI GOKUL TANDON APPEARING IN THE BOOKS OF THE ASSESSEE, IT WAS REVEALED THAT CHEQUES OF RS.5 LACS AND RS.2,50,000/- ISSUED BY HIM TO THE ASSESSEE WERE DI SHONOURED BY THE BANK. THE AO HAD TAKEN A VIEW THAT ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE CREDITWORTHINESS OF THE LOAN CREDITOR. THE AO, THE REFORE, TREATED THE SUM OF RS.15 LACS AS UNEXPLAINED MONEY IN THE HANDS OF THE ASSESSEE WITHIN THE MEANING OF SECTION 68 OF THE ACT. 5. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LEARNED CIT(A). THE ASSESSEE FILED A WRITTEN SUBMISSION VI DE LETTER DATED 25.9.2007 ALONG WITH A BANK ACCOUNT OF SHRI GOKUL TANDON. TH E ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT THE CREDITOR WAS A REGULAR I NCOME-TAX PAYEE AND HIS PARTICULARS ABOUT INCOME-TAX RETURNS WERE FURNISHED BEFORE THE AO. IT WAS FURTHER SUBMITTED THAT THE TRANSACTIONS OF THE PAYM ENTS RECEIVED AND REPAYMENT OF LOAN WERE MADE THROUGH BANKING CHANNEL S BY ACCOUNT PAYEE CHEQUES. IT WAS FURTHER POINTED OUT THAT THERE WER E SUFFICIENT FUNDS AVAILABLE IN THE BANK ACCOUNT OF THE CREDITOR, WHO ADVANCED T HE AMOUNT OF LOAN IN QUESTION. IN ORDER TO ADMIT THE BANK ACCOUNT OF TH E CREDITOR FOR 4 CONSIDERATION, THE ASSESSEE ALSO FILED A SEPARATE A PPLICATION UNDER RULE 46A OF INCOME-TAX RULES. HE FURTHER SUBMITTED THAT THE CHEQUE OF RS.5 LACS AND RS.2,50,000/-, WHICH WERE DISHONOURED WERE NOT ISSU ED BY SHRI GOKUL TANDON BUT THEY WERE ISSUED BY THE ASSESSEE TO SHRI GOKUL TANDON TOWARDS REPAYMENT OF LOAN TAKEN FROM GOKUL TANDON. IT WAS, THEREFORE, SUBMITTED THAT THE OBSERVATION OF THE AO IN THIS REGARD IS MI SCONCEIVED. 6. THE ASSESSEES SUBMISSIONS IN THE LIGHT OF THE O BSERVATIONS MADE BY THE AO AND THE VARIOUS EVIDENCES FURNISHED BY THE A SSESSEE, WERE CONSIDERED BY THE LEARNED CIT(A), WHO HAD OBSERVED THAT THE AS SESSEE HAS NOT ONLY FILED CONFIRMATION LETTERS BUT HAS ALSO FILED COPY OF RET URN OF THE CREDITOR, AND, THEREFORE, THE AO WAS NOT JUSTIFIED IN MAKING THE A DDITION ON THE GROUND THAT IMMEDIATE SOURCE OF RS.15 LACS WAS NOT EXPLAINED AS IT WAS NOT FOR THE ASSESSEE TO PROVE IMMEDIATE SOURCE AS THE SAME WAS NOT WITHIN THE CONTROL OF THE ASSESSEE. HOWEVER, THE COPY OF BANK ACCOUNT IN DICATES THE SOURCE OF RS.15 LACS AND THE AO WAS GIVEN AN OPPORTUNITY TO G O THROUGH THIS BANK ACCOUNT AND TO GIVE HIS COMMENTS. THE CIT(A), THER EFORE, DELETED THE ADDITION. 7. HENCE, THE DEPARTMENT IS IN APPEAL. 5 8. THE LEARNED DR HAS REITERATED THE OBSERVATIONS A ND THE REASONS GIVEN BY THE AO IN MAKING THE ADDITION OF RS.15 LACS ON A CCOUNT OF ALLEGED LOAN TAKEN FROM SHRI GOKUL TANDON. 9. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, REITERATED ALL THE SUBMISSIONS AND CONTENTIONS THAT WERE MADE BEFO RE THE AO AS WELL AS BEFORE THE CIT(A), AND HAS RELIED UPON THE VARIOUS EVIDENCES FILED IN SUPPORT OF THE ASSESSEES CASE. 10. WE HAVE CONSIDERED RIVAL CONTENTIONS OF BOTH TH E PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 11. IT IS NOT IN DISPUTE THAT THE TRANSACTION OF LO AN TAKEN FROM GOKUL TANDON HAS BEEN EFFECTED THROUGH BANKING CHANNELS B Y ACCOUNT PAYEE CHEQUES. IT IS ALSO NOT IN DISPUTE THAT THE ASSESS EE HAS FILED CONFIRMATION FROM THE CREDITOR. THE ASSESSEE HAD ALSO ABLE TO P ROVE THE IDENTITY OF THE CREDITOR BY FILING HIS INCOME-TAX RETURN AND PAN. IT IS, THUS, NOT IN DISPUTE THAT THE CREDITOR IS ASSESSED TO TAX AND IS AN EXIS TING INCOME-TAX ASSESSEE UNDER THE INCOME-TAX DEPARTMENT. THE AO HAS MADE T HE ADDITION MAINLY FOR THE REASONS THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN IMMEDIATE SOURCE OF RS.15LACS IN THE HANDS OF SHRI GOKUL TAND ON. IN THIS RESPECT, THE ASSESSEE HAD PRODUCED A STATEMENT OF BANK ACCOUNT O F GOKUL TANDON BEFORE THE CIT(A), A COPY OF WHICH WAS FORWARDED TO THE AO FOR HIS EXAMINATION 6 AND COMMENTS. WE HAVE GONE THROUGH THE BANK ACCOUN T OF MR. GOKUL TANDON MAINTAINED WITH STANDARD CHARTERED BANK. TH E ACCOUNT IS A CURRENT ACCOUNT WITH ACCOUNT NO.522-0-515776-5 IN THIS ACCO UNT, THERE WAS A DEBIT BALANCE OF RS.15,122/- ON 27 TH MAY, 2003. IT WAS AN OD LIMIT ACCOUNT. IN THIS ACCOUNT, THERE IS A DEBIT ENTRY OF RS.10 LACS VIDE INTERNAL TRANSFER BY CHEQUE NO.907029 MAKING THE TOTAL DEBIT BALANCE TO RS.10,15,122/-. THEREAFTER, THE BANK CHARGED INTEREST OF RS.6524.68 ON 31 ST MAY, 2003 MAKING THE TOTAL DEBIT OF RS.10,21,646.68. THE CHE QUE NO.907029 OF RS.10 LACS WITHDRAWN FROM THE SAID BANK ACCOUNT BY SHRI G OKUL TANDON WAS ISSUED TO THE ASSESSEE, AS WOULD BE APPEARING FROM THE LEDGER ACCOUNT OF GOKUL TANDON APPEARING IN THE BOOKS OF ASSESSEE WHE RE THE SUM OF RS.10 LACS HAS BEEN CREDITED IN THE ACCOUNT ON 28.5.2003 ON ACCOUNT OF AMOUNT RECEIVED FROM HIM VIDE CHEQUE NO.907029. IT IS, TH US, CLEAR THAT THE SUM OF RS.10 LACS WAS PAID BY GOKUL TANDON BY OVERDRAWING THE AMOUNT OF HIS BANK ACCOUNT WITH STANDARD CHARTERED. SIMILARLY, TH E AMOUNT OF RS.5 LACS RECEIVED ON 5.7.2003 HAS BEEN WITHDRAWN BY GOKUL TA NDON FROM HIS BANK ACCOUNT BY CHEQUE NO.907033, WHICH IS REFLECTED IN THE BANK ACCOUNT AND WAS PAID TO THE PRESENT ASSESSEE. THE AFORESAID AM OUNT OF RS.10 LACS RECEIVED ON 28.5.2003 HAS BEEN REPAID BY THE ASSESS EE ON 4.6.2003 TO GOKUL TANDON AND THAT AMOUNT HAS BEEN DULY CREDITED IN TH E GOKUL TANDON 7 AFORESAID BANK ACCOUNT WITH STANDARD CHARTERED. SI MILARLY, THE PAYMENT OF RS.5 LACS RECEIVED ON 5.7.2003 HAS BEEN REPAID ON 9 .7.2003 (RS.2,50,000) AND 29.9.2003 (RS.2,50,000). IT IS, THUS, CLEAR TH AT ASSESSEE HAS BEEN ABLE TO ESTABLISH THE CREDITWORTHINESS OF SHRI GOKUL TANDON AS WELL AS THE GENUINENESS OF THE TRANSACTION. WE, THEREFORE, UPH OLD THE ORDER OF CIT(A) BY HOLDING THAT HE HAS RIGHTLY DELETED THE ADDITION OF RS.15 LACS. 12. GROUNDS NO.3 AND 3.1 RAISED BY THE REVENUE READ AS UNDER: 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS DELETED THE ADDITION OF RS.2,63,000/- AND RS.1,03,663/-, BEING THE UNEXPLAINED LIABILITIES IN RESPECT OF M/S VISION INFOSYSTEM P. LTD. AND ALLIED ELECTRONICS AND MAGNATE LTD. RESPECTIVELY. 3.1 THE LD. CIT(A) IGNORED THE FACT THAT THEE ARE SQUARED UP ENTRIES AND REPAYMENT HAS BEEN MADE IN CASH BY SPLITTING UP THE AMOUNT LESS THAN RS.20,000/- ON VARIOUS DATES. 13. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE LIABILITY OF RS.2,63,000/- AD OF RS.1,03,663/- STANDING IN THE NAME OF M/S VISION INFOSYSTEM P. LTD. AND ALLIED ELECTRONICS AN D MAGNATE LTD. RESPECTIVELY HAS BEEN SQUARED UP IN THE ACCOUNTS OF THE ASSESSEE BY WAIVING OF SHOWING VARIOUS PAYMENTS IN CASH IN THE DENOMINA TION OF RS.20,000/- OR LESS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE STATED THAT THE AFORESAID LIABILITY HAS BEEN SETTLED BY MAKING CASH PAYMENT INASMUCH AS THE 8 PAYEE WAS IN CASH CRUNCH DURING THE YEAR AND CHEQUE S ISSUED TO THIS PARTY WERE BEING BOUNCED AGAIN AND AGAIN AND SO THE SETTL EMENT WAS MADE BY MAKING PAYMENT IN CASH ON VARIOUS DATES. THE AFORE SAID EXPLANATION OF THE ASSESSEE WAS NOT FUND ACCEPTABLE TO THE AO INASMUCH AS THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE OR PARTICULARS ABOUT THE PAYMENT MADE IN CASH AS WELL AS TO THE GENUINENESS OF THE LIABILITY REPAID IN CASH BY INSTALMENTS. THE AO ALSO STATED THAT ASSESSEE WOUL D BE SEPARATELY LIABLE FOR PENALTY U/S 271E FOR SHOWING THE PAYMENT IN CASH OF RS.20,000/- ON VARIOUS DATES. 14. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE LD. CIT(A). THESE TWO LIABILITIES REPRESENTED BROUGHT FORWARD LIABILITIES ON ACCOUNT OF EXPENSES INCURRED IN EARLIER YEARS, AND, THEREFORE, THESE LIABILITIES CANNOT BE TREATED AS UNEXPLAINED CASH CREDIT IN THE YEAR UNDER CONSIDERATION WITHIN THE MEANING OF SECTION 68 OF THE ACT. IT WAS FURTHER SUBMITTED THAT EXPENSES INCURRED RESULTING IN THE LIABILITIES IN Q UESTION HAVE BEEN ACCOUNTED FOR IN THE EARLIER YEARS, AND THE SAME HAS BEEN SET TLED DURING THE YEAR UNDER APPEAL. IN THIS RESPECT, LEDGER ACCOUNT OF THE AFO RESAID TWO CREDITORS ENDING ON 31.3.2002 AND 31.3.2003 WERE FURNISHED TO SHOW A ND ESTABLISH THAT THE LIABILITIES WERE OLD LIABILITIES CARRIED FORWARD FR OM EARLIER YEARS. IN THIS RESPECT, THE ASSESSEE RELIED UPON THE DECISION OF H ONBLE DELHI HIGH COURT IN 9 THE CASE OF CIT VS USHA STUD AGRICULTURAL FARMS LTD ., 301 ITR 384 (DEL) AND THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS PARMESHWAR BOHRA, 301 ITR 404 (RAJ). 15. CONSIDERING THE FINDINGS RECORDED BY THE AO AND THE SUBMISSIONS MADE BY THE ASSESSEE, THE LEARNED CIT(A) DELETED TH E ADDITION BY OBSERVING THAT HE FOUND HIMSELF IN AGREEMENT WITH THE ASSESSE E COMPANY AS, ON PERUSAL OF THE COPIES OF THE ACCOUNT OF THE CONCERNED PARTI ES, IT WAS REVEALED THAT THE LIABILITY IN THESE CASES HAD BEEN CARRIED FORWARD F ROM FINANCIAL YEAR 2000-01 AND DURING THE YEAR UNDER CONSIDERATION, THESE LIAB ILITIES HAVE ONLY BEEN PAID BACK. THE CIT(A) FURTHER OBSERVED THAT THE LIABILIT IES IN THE NAME OF THE AFORESAID PARTIES SHOULD HAVE BEEN EXAMINED IN THE YEARS IN WHICH THE LIABILITIES WERE CREATED. 16. BEING AGGRIEVED WITH THE CIT(A)S ORDER, THE RE VENUE IS IN APPEAL BEFORE US. 17. THE LEARNED DR SUBMITTED THAT ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO PROVE THAT THIS LIABILITY HAVE ACTUALLY BEEN DISCHARGED BY WAY OF MAKING PAYMENT TO THE CONCERNED CREDITORS. HE FURT HER SUBMITTED THAT THE LIABILITIES HAVE BEEN CLAIMED TO HAVE BEEN DISCHARG ED DURING THIS YEAR BY MAKING PAYMENT THEREOF BUT THE ASSESSEE HAS NOT SUB MITTED ANY IOTA OF EVIDENCE OF ACTUAL PAYMENT MADE TO THOSE CONCERNS. HE, THEREFORE, 10 SUBMITTED THAT SINCE THE LIABILITIES WERE INCURRED FOR THE EXPENSES INCURRED IN EARLIER YEARS, AND HAVE BEEN CLAIMED TO BE NO MORE OUTSTANDING, THE SAME AMOUNTED TO BE INCOME OF THE ASSESSEE OF THE CURREN T YEAR IN WHICH THE ASSESSEE HAS CLAIMED THAT THESE LIABILITIES ARE NO MORE PAYABLE BY THE ASSESSEE. HE, THEREFORE, SUBMITTED THAT ON THIS CO UNT, THE ADDITION MADE BY THE AO IS TO BE UPHELD. 18. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AND CONTENTIONS THAT WERE MADE BEFORE THE AO AS WELL AS BEFORE LEARNED CIT(A), AND HAD RELIED UPON THE DECISIONS CITED BEFORE THE LEARNED CIT(A). 19. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF BOT H THE PARTIES AND HAVE CAREFULLY GONE THROUGH THE MATERIAL ON RECORD. THE ORDERS OF THE AUTHORITIES BELOW HAVE BEEN CAREFULLY PERUSED. 20. WE HAVE PERUSED THE LEDGER ACCOUNT OF M/S VISIO N INFOSYSTEM P. LTD. AND ALLIED ELECTRONICS AND MAGNATE LTD. AS APPEARIN G IN THE ASSESSEES BOOKS OF ACCOUNTS. IN THE CASE OF M/S VISION INFOS YSTEM P. LTD., THERE WAS AN OPENING LIABILITY OF RS.4,60,000/- PAYABLE BY TH E ASSESSEE AS ON 1.4.2000 OUT OF WHICH THE SUM OF RS.2 LACS WERE PAID BY CHEQ UE DURING FINANCIAL YEAR 2000-01 LEAVING BALANCE OF RS.2,60,000/- AS ON 31.3 .2001, WHICH HAS BEEN CONTINUED UPTO 31.3.2003. THUS, THE LIABILITY OF RS .2,63,000/- HAS BEEN CARRIED FORWARD FROM 31.3.2001 TO 31.3.2003, WHICH WAS PAYABLE BY THE 11 ASSESSEE. DURING THE YEAR UNDER CONSIDERATION I.E. DURING THE FINANCIAL YEAR 2003-04 RELEVANT TO THE ASSTT. YEAR 2004-05, THE AS SESSEE HAS SQUARED UP THIS LIABILITY BY SHOWING THE PAYMENT IN CASH AS UNDER: 8.3.04 20,000 9.3.04 15,000 12.3.04 20,000 16.3.04 20,000 18.3.04 20,000 20.3.04 20,000 22.3.04 20,000 25.3.04 20,000 26.3.04 20,000 27.3.2004 20,000 29.3.04 20,000 30.3.04 20,000 31.3.04 8,000 TOTAL 2,63,000 21. FROM THE STAND TAKEN BY THE ASSESSEE, IT IS THU S CLEAR THAT BROUGHT FORWARD LIABILITY OF RS.2,63,000/- IS NO MORE PAYAB LE BY THE ASSESSEE AT THE END OF THE YEAR I.E. AS ON 31.3.2004. THE ASSESSEE S CASE IS THAT THE ASSESSEE HAS LIQUIDATED OR DISCHARGED THIS LIABILITY OF RS.2 ,63,000/- BY MAKING PAYMENT IN CASH TO THE CONCERNED PARTY. IN REPLY T O THE QUERY ASKED BY THE AO AS TO WHY THE PAYMENT WAS MADE IN CASH, THE ASSE SSEE SUBMITTED THAT THE 12 CONCERNED PARTY WAS IN FINANCIAL CRUNCH AND SINCE C HEQUES ISSUED TO THESE PARTIES WERE BEING BOUNCED AGAIN AND AGAIN, THE PAY MENTS HAD TO BE MADE IN CASH. IN THE LIGHT OF THIS SUBMISSION OF THE ASSES SEE, NOW A QUESTION ARISES AS TO WHETHER THE ASSESSEE HAS ACTUALLY MADE THE PAYME NT IN CASH TO THE CONCERNED PARTY. THE ASSESSEE HAS NOT FURNISHED ANY IOTA OF EVIDENCE TO CONFIRM THAT THESE PAYMENTS WERE MADE TO THE CONCER NED PARTY. NO COPY OF ACKNOWLEDGEMENT RECEIPT OF MONEY BY THE CONCERNED P ARTY HAS BEEN PRODUCED. NO CONFIRMATION OF ACCOUNT HAS ALSO BEEN FILED. WE FAIL TO UNDERSTAND THAT AS TO WHY THE ASSESSEE HAS NOT OBTA INED ANY RECEIPT AGAINST PAYMENT MADE BY THE ASSESSEE IN CASH TO THE CONCERN ED PARTY. IT IS TOTALLY AGAINST THE COMMON PRACTICE BEING FOLLOWED IN THE L INE OF BUSINESS WHENEVER ANY PARTY MAKES ANY PAYMENT TO ANOTHER PARTY, RECEI PTS ARE GENERALLY TAKEN OR OTHERWISE A CONSOLIDATED CONFIRMATION OF ACCOUNT IS OBTAINED. THE ASSESSEE HAS ALSO NOT FURNISHED THE NAME OF THE CON CERNED PERSON, WHO RECEIVED THE PAYMENT FOR AND ON BEHALF OF THE CONCE RNED COMPANY. THESE SEEMS TO BE MERE BOOK ENTRIES OF PAYMENT PASSED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT WITHOUT BEING SUPPORTED BY ANY PIE CE OF EVIDENCE. THE ASSESSEE HAS ALSO NOT FURNISHED ANY DETAILS ABOUT T HE CHEQUES, WHICH ARE CLAIMED TO HAVE BEEN BOUNCED IN RESPECT OF THE PAYM ENT MADE BY CHEQUE BY THE ASSESSEE TO THE AFORESAID CREDITOR. NO SUCH EN TRY OF DEBITING THE CHEQUE 13 AND THEN CREDITING THE SAME BACK ON ITS BOUNCED HAS BEEN MADE IN THE LEDGER ACCOUNT OF M/S VISION INFOSYSTEMS P. LTD. THE ASSE SSEE HAS MADE ONLY A WILD STATEMENT THAT THE CREDITOR WAS RUNNING UNDER A FINANCIAL CRUNCH, AND ASSESSEE HAD TO MAKE THE PAYMENT IN CASH AS THE PAY MENTS MADE EARLIER BY CHEQUES WERE BEING BOUNCED AGAIN AND AGAIN WITHOUT GIVING ANY IOTA OF EVIDENCE OR DETAILS IN SUPPORT THEREOF. IT IS, THE REFORE, HARDLY BELIEVABLE THAT SUCH CASH PAYMENTS IN THE DENOMINATION OF RS.20,000 /- OR SO ON VARIOUS DATES WERE MADE IN CASH BY THE ASSESSEE TO THE CONC ERNED CREDITOR. FROM THE CONDUCT OF THE ASSESSEE, IT APPEARS THAT THE LIABIL ITY OF RS.2,63,000/- PAYABLE BY ASSESSEE TO OF M/S VISION INFOSYSTEM P. LTD. HAS ACTUALLY BEEN CEASED TO EXIST, AND IN ORDER TO AVOID THE SAME TO BE INCLUDE D IN ASSESSEES TOTAL INCOME, THE ASSESSEE HAS ADOPTED A STRATEGY OF MAKI NG A CLAIM THAT THE LIABILITY HAS BEEN DISCHARGED BY THE ASSESSEE BY WA Y OF PAYMENT, THOUGH, IN FACT, THIS LIABILITY HAS ACTUALLY NOT BEEN DISCHAR GED BY MAKING PAYMENT BUT, THE LIABILITY HAS OTHERWISE CEASED TO EXIST IN THE YEAR UNDER CONSIDERATION, AND ASSESSEE INSTEAD OF WRITING OFF THE SAME AND CR EDITING THE SAME IN THE PROFIT AND LOSS ACCOUNT, HAS FALSELY SHOWN THE LIAB ILITY BEING DISCHARGED ON PAYMENT. THE ASSESSEE HAS NOT FILED ANY EVIDENCE OR CONFIRMATION FROM M/S VISION INFOSYSTEMS P. LTD. TO SHOW THAT THEY HAD DI SCHARGED THE LIABILITY ON RECEIVING THE PAYMENT THEREOF, OR THE LIABILITY WAS STILL IN FORCE. WE, 14 THEREFORE, TAKE A VIEW THAT THE LIABILITY OF RS.2,6 3,000/- INCURRED BY THE ASSESSEE ON ACCOUNT OF THE EXPENSES, WHICH WERE CLA IMED AS DEDUCTION IN THE EARLIER YEAR, HAS BEEN CEASED TO EXIST IN THE YEAR UNDER CONSIDERATION, AND SINCE THIS LIABILITY WAS CREATED IN RELATION TO THE BUSINESS ACTIVITY OR WAS CLAIMED AS DEDUCTION IN EARLIER YEAR, SAME IS LIABL E TO BE INCLUDED AS INCOME IN THE HANDS OF THE ASSESSEE EITHER U/S 41(1) OF TH E ACT OR IN THE LIGHT OF THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE C ASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS (1996), 222 ITR 344, WHERE IT HAS BEEN HELD THAT IF AN AMOUNT IS RECEIVED IN THE COURSE OF TRADING T RANSACTION, EVEN THOUGH IT IS NOT TAXABLE IN THE YEAR OF RECEIPT, AS BEING OF REVENUE CHARACTER, THE AMOUNT CHANGES ITS CHARACTER WHEN THE AMOUNT BECOME S ASSESSEES OWN MONEY BECAUSE OF LIMITATION OR BY ANY STATUTORY OR CONTRACTUAL RIGHT; AND WHEN SUCH A THING HAPPENS, COMMONSENSE DEMANDS THAT THE AMOUNT SHOULD BE TREATED AS INCOME OF THE ASSESSEE. IN THE PRESE NT CASE, THE AFORESAID LIABILITY CREATED FOR THE EXPENSES CLAIMED TO HAVE BEEN INCURRED IN EARLIER YEAR HAS CEASED TO EXIST IN THE CURRENT YEAR, AND S INCE IT IS NO MORE PAYABLE BY THE ASSESSEE TO THE CREDITOR AS CONTEMPLATED BY THE ASSESSEE HIMSELF, THE LIABILITY SINCE CEASED IS LIABLE TO BE INCLUDED AS INCOME IN THE HANDS OF THE ASSESSEE. 15 22. NOW, COMING TO THE OTHER AMOUNT OF RS.1,03,663/ -, THE FACTS ARE THAT THE AFORESAID LIABILITY HAS BEEN CARRIED FORWARD FR OM EARLIER YEAR AND HAS BEEN SHOWN AS OPENING BALANCE AS ON 1.4.2000, WHICH HAS BEEN CONTINUED UPTO 1.4.2003. THEREAFTER, DURING THE YEAR UNDER CO NSIDERATION, ASSESSEE HAS CLAIMED THAT THIS AMOUNT HAS BEEN REPAID IN CASH AS UNDER: 2.3.04 20,000 3.304 20,000 4.3.04 20,000 5.3.04 20,000 6.3.04 20,000 8.3.04 3663 31.3.04 TOTAL 1,03,663 23. IN THIS CASE ALSO, THE ASSESSEE INCURRED THIS L IABILITY ON ACCOUNT OF EXPENSES INCURRED IN EARLIER YEARS. HOWEVER, DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS CLAIMED THAT THIS L IABILITY HAS CEASED TO EXIST INASMUCH AS THE SAME HAS BEEN LIQUIDATED BY MAKING PAYMENT IN CASH. NOW, THE QUESTION ARISES WHETHER THE LIABILITY HAS ACTUA LLY BEEN LIQUIDATED BY MAKING PAYMENT AS CLAIMED BY THE ASSESSEE. IN THIS CASE ALSO, NO IOTA OF EVIDENCE OR DETAIL HAS BEEN FURNISHED AS IN THE CAS E OF M/S VISION INFOSYSTEMS P. LTD. THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH AND PROVE THAT THE ASSESSEE HAS ACTUALLY MADE THE PAYMENT TO M/S ALLIED ELECTRONICS AND MAGNATE LTD. SINCE THE ASSESSEE HAS CLAIMED THA T THIS LIABILITY IS NO 16 MORE PAYABLE BUT AT THE SAME TIME, THE ASSESSEE HAS FAILED TO PROVE AND ESTABLISH THAT IT HAS BEEN REPAID AND DISCHARGED, T HE LIABILITY IN QUESTION, SHALL BE CONSIDERED TO BE CEASED IN THE YEAR UNDER CONSIDERATION, AND SINCE THIS LIABILITY WAS INCURRED IN THE COURSE OF CARRYI NG ON ASSESSEES BUSINESS ACTIVITY OR SINCE THE SAME WAS INCURRED TOWARDS EXP ENSES CLAIMED AS DEDUCTION IN EARLIER YEARS, THIS LIABILITY SINCE CE ASED TO EXIST IS LIABLE TO BE INCLUDED IN ASSESSEES INCOME U/S 41(1) OF THE ACT OR UNDER THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CI T VS. T.V. SUNDARAM IYENGAR & SONS (1996), 222 ITR 344. 24. IN THE LIGHT OF THE DISCUSSION MADE ABOVE, WE, THEREFORE, CONFIRM THE ADDITION OF RS.2,63,000/- AND RS.1,03,663/- ON ACCO UNT OF LIABILITIES CEASED TO EXIST. 25. BEFORE PARTING WITH THIS ISSUE, WE, HOWEVER, AG REE WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THIS A MOUNT CANNOT BE ADDED AS INCOME IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED CREDIT INASMUCH AS THE CREDIT HAS NOT BEEN CREATED IN THE YEAR UNDER CONSI DERATION, BUT HAS BEEN CARRIED FORWARD FROM EARLIER YEAR, BEING CREATED IN EARLIER YEARS TOWARDS EXPENSES INCURRED BY THE ASSESSEE, AS WAS HELD BY T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS USHA STUD AG RICULTURAL FARMS LD. (SUPRA) AND OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS 17 PARMESHWAR BOHRA (SUPRA). HOWEVER, SINCE THE LIABI LITY CARRIED FORWARD FROM EARLIER YEAR HAD CEASED TO EXIST IN THE YEAR U NDER CONSIDERATION AND, THE ASSESSEES CLAIM THAT THIS LIABILITY HAS BEEN LIQUI DATED BY MAKING PAYMENT IN CASH, HAS NOT BEEN FOUND TO BE CORRECT AND TRUE, WE TREAT THE AMOUNT AS INCOME OF THE ASSESSEE WITHIN THE MEANING OF SECTIO N 41(1) OF THE ACT OR OTHERWISE WITHIN THE MEANING OF LAW LAID DOWN BY TH E HONBLE SUPREME COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR & SONS (SUPRA), AND NOT AN UNEXPLAINED CREDIT GENERATED DURING THE CURRENT YEAR U/S 68 OF THE ACT. 26. IN SUPPORT OF THE VIEW WE HAVE TAKEN ABOVE IN U PHOLDING THE ADDITION OF RS.2,63,000/- AND RS.1,03,663/- BY APPLYING THE PROVISIONS OF SECTION 41(1) OR BY APPLYING THE LAW LAID OWN BY HONBLE SU PREME COURT IN THE CASE OF CIT VS T.V. SUNDARAM IYENGAR & SONS (SUPRA) AS A GAINST UNEXPLAINED CREDIT DEALT WITH BY THE CIT(A), ON THE SAME SET OF FACTS BORNE OUT OF THE ORDERS OF THE AUTHORITIES BELOW AND CONTENTIONS OF THE ASSESSEE, A GAINFUL REFERENCE MAY BE MADE TO A DECISION OF HONBLE JURI SDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT VS JINDAL EQUIPMENTS LEASI NG AND CONSULTANCY SERVICES LTD. (2010) 37 DTR 172 (DEL) WHERE THE DEP ARTMENT WAS ALLOWED TO AMEND MEMO OF APPEAL FOR THE PURPOSE OF RAISING A NEW PLEA ON SAME SET OF FACTS TO SUPPORT THE ADDITION UNDER SECTION 28(I V) OF THE ACT AS AGAINST 18 SECTION 41(1) OR 28(IV) INITIALLY APPLIED BY THE AO . IN THIS DECISION, THE HONBLE DELHI HIGH COURT HAS OBSERVED AND HELD AS U NDER: 3.THE REVENUE HAS FILED THIS APPEAL U/S 260A OF THE ACT RAISING THE FOLLOWING QUESTION OF LAW : WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED TRIBUNAL ERRED IN HOLDING THAT THE DECREASE IN LOAN LIABILITY OF RS.1,46,53,065/- WAS NOT REMISSION/CESSATION OF LIABILITY AND HENCE NOT TAXABLE U/S 41(1) OF THE ACT? 4.THEREAFTER, THE REVENUE FILED AMENDED MEMO OF APPEAL RAISING THE FOLLOWING QUESTION OF LAW: WHETHER THE AMOUNT OF LOAN WRITTEN OFF BY THE SISTER CONCERN OF THE ASSESSEE IS INCOME OF THE ASSESSEE WITHIN THE MEANING OF SECTION 28 OF THE I.T. ACT, 1961? 5.WE HEARD LEARNED COUNSEL FOR THE PARTIES ON THE QUESTION RAISED IN THE APPEAL/AMENDED MEMO OF APPEAL. IN FACT, INSOFAR AS QUESTION OF LAW RAISED INITIALLY IN THE APPEAL WITH REGARD TO ADDITION UNDER SECTION 41 OF THE ACT IS CONCERNED, LEARNED COUNSEL FOR THE APPELLANT/REVENUE CONCEDED THAT SECTION 41 HAS NO APPLICABILITY TO THE FACTS OF THI S CASE. PRECISELY, THIS WAS THE REASON FOR AMENDING THE MEMO OF APPEAL AND AS THE ATTEMPT OF THE REVENUE IS THAT THE AFORESAID AMOUNT CAN STILL BE TREATED AS INCOME AT THE HANDS OF ASSESSEE WITHIN THE MEANING OF SECTION 28 OF THE ACT IS NOT APPLICABLE, THEREFORE, IT IS THIS ASPECT WHICH WE ARE REQUIRED TO DISCUSS IN THE PRESENT APPEAL. BEFORE WE VENTURE INTO THE ARENA WHERE THIS CONTROVERSY IS FOUGHT BETWEEN THE PARTIES ON MERITS, IT WOULD BE NECESSARY TO DEAL WITH THE 19 PRELIMINARY SUBMISSION OF THE LEARNED COUNSEL FOR THE RESPONDENT, WHO HAS ARGUED THAT THE REVENUE IS NOT ENTITLED TO TAKE UP THIS GROUND FOR THE FIRS T TIME IN THIS APPEAL. HIS SUBMISSION WAS THAT ADDITION FOR THE AMOUNT OF LOAN WRITTEN OFF BY JSPL WAS MADE BY THE AO IN THE ASSESSMENT U/S 41(1) OF THE ACT. IN APPEAL, THE CIT(A) SUSTAINED THE ADDITION IN TERMS OF SECTION 41(1) R.W.S. 28(1) OF THE ACT. THE TRIBUNAL DELETED THE ADDITION HOLDING THAT SECTION 41(1) HAD NO APPLICABILITY SINCE THE LOAN OBTAINED FROM JSPL HAD NEITHER BEEN CLAIMED NOR ALLOWED DEDUCTION IN THE EARLIER ASSESSMENTS OF THE ASSESSEE. HE THUS ARGUED THAT IT IS SETTLED LAW THAT THE BASIS OF ASSESSMENT AS ADOPTED BY THE AO CANNOT BE VARIED BY THE TRIBUNAL AND/OR BY THE HIGH COURT, WHICH UNLIKE THE CIT(A) HAVE NO POWER TO ENHANCEMENT. THE REVENUE CANNOT BE ALLOWED TO CHANGE THE VERY FOUNDATION ON WHICH THE ASSESSMENT WAS BASED, TO THE PREJUDICE AND DETRIMENT OF THE ASSESSEE, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF MCORP GLOBAL (P) LTD. VS CIT (2009) 222 CTR (SC) 110 : (2009) 19 DTR (SC) 153: (2009) 309 ITR 434 (SC). IT WAS ALSO POINTED OUT THAT THOUGH THE CIT(A) HAD SUSTAINED THE ADDITION IN TERMS OF SECTION 4191) R/W.S 28(1) OF THE ACT, HE HAD ONLY INVOKED CL.(I) OF SECTION 28 OF THE ACT AND NOT CL.(IV) THEREOF. IN THIS BEHALF, FURTHER SUBMISSION OF THE LEARNED COUNSEL WAS THAT CL(I) OF S. 28 STIPULATES THAT THE PROFITS AND GAINS OF BUSINESS OR PROFESSION WHICH WAS CARRIED BY THE ASSESSEE DURING THE PREVIOUS YEAR SHALL BE TREATED AS INCOME CHARGEABLE TO INCOME-TAX UNDER THE HEAD OF PROFIT AND GAINS OF BUSINESS OR PROFESSION. THE COMPUTATION OF PROFITS AND GAINS REFERRED TO IN S.28(I) HAS TO BE IN TERMS OF SS.30 TO 43D AS IS MANDATED BY S. 29 OF THE ACT. THUS ON THIS BASIS, THE SUBMISSION WAS THAT THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO U/S 41(1) OF THE ACT 20 READ WITH SECTION 28(I) OF THE ACT, WHICH DOES NOT CREATE ANY SEPARATE CHARGE. ON THE OTHER HAND, S.28(IV) DEALS WITH ALTOGETHER DIFFERENT ASPECT, VI Z: (IV) THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION. 6.THE ARGUMENT, THEREFORE, WAS THAT DIFFERENT CLAUSES OF S.28 ARE INDEPENDENT AND MUTUALLY EXCLUSIVE AND IT IS NOT OPEN TO THE DEPARTMENT TO SEEK TO JUSTIFY THE ADDITION WITH REFERENCE TO S.28(IV) OF THE ACT AND ALTOGETHER DIFFERENT PROVISION. 7.WE DO NOT FIND ANY MERIT IN THIS PRELIMINARY SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE. THE AO HAD MADE THE ADDITION IN TERMS OF SECTION 41(1) OF THE ACT READ WITH S.28(I) OF TH E ACT, WHICH WAS UPHELD BY THE CIT(A). NO DOUBT, THE TRIBUNAL HAS HELD THAT S.41(1) DOES NOT APPLY TO WHICH LEGAL POSITION IS CONSTITUTED (SIC- CONCEDED) BY THE LEARNED COUNSEL FOR THE REVENUE BEFORE US, THE REVENUE STILL WANTS THAT THE ADDITION BE SUSTAINED UNDER PROVISIONS OF CL.(IV) OF S.28 OF THE ACT. THE REVENUE IS NOT DISPUTING THE FACTS ON THE BASIS OF WHICH DECISION OF THE TRIBUNAL IS BASED. SUBMISSION IS THAT ON THESE VERY FACTS, PROVISIONS OF S.28(IV) OF THE ACT SHALL BE ATTRACTED. IT IS A PURE QUESTION OF LAW AND, THEREFORE,, THE AMENDED GROUND AS RAISED BY THE REVENUE CAN BE ALLOWED. THE POSITION IN MCORP GLOBAL (P) LTD. (SUPRA) WAS ENTIRELY DIFFERENT. IN THAT CASE, THE TRANSACTION IN QUESTION WAS TREATED AS LEASE TRANSACTION IN THE EARLIER ASSESSMENT YEARS AND DEPRECIATION WAS GRANTED ON THAT BASIS. HOWEVER, IN THE ASSESSMENT YEAR IN QUESTION, THE SAME VERY TRANSACTION WAS TREATED AS FINANCIAL TRANSACTION AND DEPRECIATION WAS DISALLOWED. IT 21 WAS IN THIS BACKDROP, THE SUPREME COURT OPINED THAT THE DEPRECIATION GIVEN TO THE ASSESSEE COULD NOT BE WITHDRAWN MORE SO WHEN THE FINDING OF THAT THAT THE TRANSACTION IN QUESTION WAS LEASED AND NOT FINANCIAL TRANSACTION HAD BECOME FINAL AND HAD NOT BEEN CHALLENGED. 27. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED IN THE MANNER AS INDICATED ABOVE. 28. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2010. (B.C. MEENA) (C.L. SET HI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 TH JUNE, 2010 VIJAY COPY TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A)-VIII, NEW DELHI 5. DR ASSISTANT REGISTRAR