ACIT CEN CIR 17 &28, MUMBAI V. BEAUTIFUL JEWELLERS P. LTD, MUMBAI

ITA 4827/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3981 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-10-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 20-08-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NARESH KUMAR BALODIA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 4827/MUM/2009 (ASSESSMENT YEAR: 2005-06) DCIT, CIRCLE 3(1) M/S. BEAUTIFUL JEWELLERS PVT. LTD . ROOM NO. 607, 6TH FLOOR 101/103, MITTAL COURT, 'A' WING AAYAKAR BHAVAN, M.K. ROAD VS. NARIMAN POINT, MUMBAI 400021 MUMBAI 400020 PAN - AAACB 4198 B APPELLANT RESPONDENT APPELLANT BY: SHRI NARESH KUMAR BALODIA RESPONDENT BY: SHRI JITENDRA JAIN O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) III, MUMBAI DATED 18.06.2009. 2. REVENUE HAS RAISED THE FOLLOWING GROUND: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .6,04,31,810/- MADE BY ASSESSING OFFICER U/S 41(1) ON ACCOUNT OF REMISSION/CESSATION OF LIABILITIES. 3. BRIEFLY STATED, IN THE COURSE OF ASSESSMENT PROCEED INGS, ASSESSEE WAS REQUIRED TO GIVE DETAILS OF LIABILITIES APPEARING I N THE BALANCE SHEET, INCLUDING THE DATES SINCE WHEN THESE LIABILITIES WE RE OUTSTANDING. ON PERUSAL OF THE DETAILS FILED BY THE ASSESSEE, THE A .O. FOUND THAT THE LIABILITIES HAVE CONTINUED TO REMAIN IN THE BOOKS OF ASSESSEE F OR A LONG TIME. A.O. HAS CONSIDERED ALL THE OUTSTANDING LIABILITIES PERTAINI NG TO CREDITORS FOR GOODS, EXPENSES AND OTHER CREDITORS AS WELL AS ADVANCE FRO M CUSTOMERS BUT HAS NOT TAKEN INTO CONSIDERATION THE AMOUNT DUE TO COMPANY UNDER THE SAME MANAGEMENT, WHICH AMOUNT HAS NOT BEEN CONSIDERED FO R MAKING THE ADDITION TO INCOME. IN ACCORDANCE WITH THIS, HE HAS CONSIDERED THE TOTAL AMOUNT OF ` 604,31,810/- FOR MAKING ADDITION UNDER SECTION 41(1 ) AS THE ITA NO. 4827/MUM/2009 M/S. BEAUTIFUL JEWELLERS PVT. LTD. 2 ASSESSEE HAS NOT FURNISHED ANY SATISFACTORY EXPLANA TION OR CONFIRMATION FROM THE SAID CREDITORS AND ACCORDINGLY MADE THE AD DITION. THE A.O. CONCLUDED THAT LIABILITIES HAD CEASED TO EXIST SINC E COMPLETE DETAILS OF PARTIES TO WHOM THESE LIABILITIES WERE PAYABLE WERE NOT PROVIDED AND SINCE THE LIABILITIES ARISING IN THE NEAR PAST HAVE NOT R EMAINED OUTSTANDING AT ALL. 4. THE ASSESSEE CONTESTED BEFORE THE CIT(A) THAT THE A SSESSING OFFICERS CONCLUSION THAT LIABILITY CEASED TO EXIST SINCE THE SE HAVE NOT BEEN PAID OVER A LONG TIME IS ERRONEOUS. THE LEARNED COUNSEL HAS ALS O CONTENDED THAT WHETHER LIABILITY HAS BEEN ALLOWED AS EXPENDITURE I N THE EARLIER ASSESSMENT YEARS HAS NOT BEEN BROUGHT ON RECORDS. HE ALSO CONT ENDED THAT ALL THE LIABILITIES THAT THE A.O. IS TAKING OF ARE NOT TRAD ING LIABILITIES. IN SUCH A SITUATION, IT HAS BEEN CONTENDED THAT THE ADDITIONS NEEDS TO BE DELETED. 5. THE CIT(A) HAS DELETED THE ADDITION BY HOLDING AS U NDER: - 4.4 I HAVE PERUSED THE FACTS OF THE CASE, I FIND T HAT THE ISSUE OF CESSATION OF LIABILITY DOES NOT GET ESTABLISHED IN THE FACTS OF APPELLANTS CASE. THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIG H COURT IN THE CASE OF J.K. CHEMICALS LTD. AND HON'BLE SUPREME COURT IN THE CASE OF SAGAULI SUGAR WORKS LTD. IS CATEGORICALLY SUGGESTIVE OF THE FACT THAT UNLESS THE DEBTOR CONSCIOUSLY AND SPECIFICALLY AGREES FOR CESS ATION OF LIABILITY OR THE LIABILITY CEASES BY VIRTUE OF OPERATION OF LAW OR A GREEMENT, IT CANNOT BE SAID TO HAVE CEASED. IN THE INSTANT CASE, THERE IS NOTHING ON THIS ACCOUNT. IT IS A SIMPLE CASE OF LIABILITY CONTINUING TO STAN D IN THE BOOKS OF APPELLANT. FROM THIS MERE FACT IT CANNOT BE CONCLUD ED THAT LIABILITIES HAVE CEASED. FURTHER, IT IS ALSO RELEVANT TO POINT OUT T HAT SECTION 41(1) REQUIRES THE BENEFIT TO BE OBTAINED BY ASSESSEE. IN THE INST ANT CASE THIS IS MISSING. A PERUSAL OF THE ORDER OF ASSESSMENT REVEA LS THAT ASSESSING OFFICER HAS NOT MADE ANY ATTEMPT TO ESTABLISH THAT THE LIABILITIES ADDED BACK WERE ACTUALLY ALLOWED AS DEDUCTION IN ANY OF T HE EARLIER YEARS. IN ABSENCE OF ANY FINDINGS, MAKING OF ADDITIONS IS NOT JUSTIFIED. IN VIEW OF THE ABOVE, AFTER CONSIDERING INTO ACCOUNT ALL THE F ACTS OF THE FACTS, I AM OF THE VIEW THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, SECTION 41(1) CANNOT BE INVOKED. THE ADDITION MADE IS DELETED. 6. REFERRING TO THE CONTENTIONS MADE BEFORE THE CIT(A) AND THE FINDINGS OF THE CIT(A) THE LEARNED D.R. SUBMITTED THAT THE ASSE SSEE HAS NEVER FURNISHED ANY DETAILS AND EVEN THE BALANCE SHEET FURNISHED IN THE PAPER BOOK IS A PROVISIONAL BALANCE SHEET. ITA NO. 4827/MUM/2009 M/S. BEAUTIFUL JEWELLERS PVT. LTD. 3 7. THE LEARNED COUNSEL SUBMITTED THAT THE COMPANY IS N OT HAVING ANY BUSINESS ACTIVITY AND THERE IS NO CREDIT TO THE P & L ACCOUNT AND DUE TO LIQUIDITY CRUNCH MANY OF THE AMOUNTS HAVE NOT BEEN PAID. HE FURTHER HAS NO OBJECTION IF THE MATTER IF SEND BACK TO THE FILE OF THE CIT(A) TO EXAMINE THE ISSUE ON FACTUAL BASIS AS THE DETAILS INDICATE THAT AN AMOUNT OF ` 5,43,52,108/- PERTAINS TO CREDIT OF GOODS AND AN AM OUNT OF ` 1,88,54,702/- PERTAINS TO EXPENSES. SINCE THE ISSUE IS NOT EXAMIN ED ON FACTUAL BASIS AND DECIDED ONLY ON LEGAL PRINCIPLES, IN THE INTEREST O F JUSTICE WE RESTORE THE ISSUE BACK TO THE FILE OF THE CIT(A) TO CONSIDER WH ETHER THE EXPENSES CLAIMED IN VARIOUS YEARS HAVE BEEN ALLOWED TO THE ASSESSEE OR NOT SINCE THERE IS NO BUSINESS ACTIVITY AND ALSO TO EXAMINE THE CREDIT FO R GOODS WHETHER THE SAME HAS BEEN PAID ON A LATER STAGE OR THE LIABILITIES H AVE INDEED BEEN CEASED. THE CIT(A) IS DIRECTED TO GIVE PROPER OPPORTUNITY TO TH E ASSESSEE TO SUPPORT OF ITS CONTENTIONS AND TO THE AO AND AFTER EXAMINING THE F ACTS THE ISSUE CAN BE DECIDED ACCORDINGLY. FOR THIS PURPOSE, THE GROUND I S CONSIDERED ALLOWED. 8. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH NOVEMBER 2010. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 4 TH NOVEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) III, MUMBAI 4. THE CIT III, MUMBAI CITY 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.