, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 4870/MUM/2013 ( / ASSESSMENT YEAR : 2008 - 09 THE ITO 18(2)(3), PIRAMAL CHAMBERS, PAREL, MUMBAI - 400 012 / VS. M/S. MAHAVIR ENTERPRISES, 216, SHAH & NAHAR INDL. ESTATE, DR. E. MOSES ROAD, WORLI, MUMBAI - 400 018 ./ ./ PAN/GIR NO. : AAAFM 1550F ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI JEETENDRA KUMAR / RESPONDENT BY : SHRI VIPUL B. JOSHI / DATE OF HEARING : 17 . 0 3 .2015 / DATE OF PRONOUNCEMENT : 20 .03 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) - 16 MUMBAI DT. 1.4.2013 PERTAINING TO ASSESSMENT YEAR 2008 - 09. ITA. NO. 4870/M/2013 2 2. THE FIRST TWO GROUNDS RELATE TO THE DELETION OF THE ADDITION MADE BY THE AO U/S. 41(1) OF THE ACT AND THE THIRD GROUND RELATES TO THE VIOLATION OF RULE 46A BY THE LD. CIT(A) BY ADMIT TING ADDITIONAL EVIDENCES. 3. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF BUILDER AND PROPERTY DEVELOPER. THE RETURN FOR THE YEAR WAS TAKEN FOR SCRUTINY ASSESSMENT. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, ON PERUSAL OF BALANCE SHEET , THE ASSESSING OFFICER NOTICED THAT UNDER THE HEAD SUNDRY CREDITORS, THERE IS AN ITEM IN THE NAME OF M/S. VENUS CONSTRUCTION CO. AMOUNTING TO RS. 15,61,785/ - . THE AO OBSERVED THAT THE AMOUNT IS OUTSTANDING FOR MORE THAN 1 0 TO 12 YEARS. IT WAS EXPLAINED BY THE ASSESSEE THAT THE AMOUNT IS OUTSTANDING BECAUSE THE PARTY HAS NOT COMPLIED ALL THE TERMS AND CONDITIONS. THE AO OBSERVED THAT THE ASSESSEE HAS NOT FILED ANY CONFIRMATION FROM THE SAID CONTRACTOR. THE AO WAS CONVIN CED THAT THE AMOUNT SHOWN AS OUTSTANDING HAS TO BE TREATED AS BUSINESS INCOME OF THE ASSESSEE U/S. 41(1) OF THE ACT AND HE ACCORDINGLY ADDED RS. 15,61,785/ - . 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE AO. IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE ASSESSEE HAS NOW SETTLED THE ACCOUNT BY MAKING THE PAYMENTS TO THE SAID PARTY. THE ASSESSEE ALSO FILED CONFIRMATION FROM THE SAID PARTY FOR HAVING RECEIVED THE SAID OUTSTANDING PAYMEN T. AFTER VERIFYING AND SATISFYING HIMSELF, THE LD. CIT(A) DELETED THE ADDITION. 5. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY STATED THAT THE LD. CIT(A) HAS DELETED THE ADDITIONS ON THE EVIDENCES FILED BY THE ASSESSEE ITA. NO. 4870/M/2013 3 WHICH WERE NEVER FILED BEFORE THE AO. IT IS THE SAY OF THE LD. DR THAT THE LD. CIT(A) DID NOT EVEN CARE TO CALL FOR A REMAND REPORT. THE LD. DR CONCLUDED BY SAYING THAT THE LD. CIT(A) HAS GROSSLY VIOLATED RULE 46 A. 7. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT EVEN IF THE PAYMENT PART IS IGNORED, THE PROVISIONS OF SEC. 41(1) OF THE ACT CANNOT BE APPLIED ON THE FACTS OF THE CASE. THE LD. COUNSEL FURTHER STATED THAT THE LIABILITY OF THE ASSESSEE NEVER CEASED TO EXIST. IT IS VERY MUCH ALIVE AND THEREFORE THE ACTION OF THE AO ON THE POINT OF LAW IN ITSELF IS BAD. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL RELIED ON THE DECISIONS OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS NITIN S. GARG 208 TAXMAN 16, CIT VS MIRAA PROCESSORS (P) LTD. 208 TAXMAN 93, DELHI HIGH COURT IN THE CASE OF CIT VS JAIN EXPORTS PVT. LTD. 217 TAXMAN 54. IT IS THE SAY OF THE LD. COUNSEL THAT THE DETAILS OF PAYMENT FILED BEFORE THE LD. CIT(A) WERE ONLY TO SUBSTANTIATE THE CLAIM THAT THE LIABILITY HAS NOT CEASED TO EXIST THEREFORE ADDITION U/S. 41(1) CANNOT BE MADE. 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDICIAL DECISIONS BROUGHT TO OUR NOTICE. IT IS AN UNDISPUTED FACT THAT THE LIMITATION PERIOD OF 3 Y EARS HAVE EXPIRED IN RESPECT OF THE IMPUGNED LIABILITY BUT AT THE SAME TIME WE HAVE TO SAY THAT THERE IS NO SUCH LIMITATION PROVIDED IN SEC. 41(1) OR IN ITS EXPLANATION - 1. IN THE ABSENCE OF ANY EVIDENCE OF CESSATION OF LIABILITY , THE M ERE FACT THAT THE LIABILITIES WERE OUTSTANDING FOR MORE THAN 3 YEARS AND WERE TIME BARRED IS NOT A SUFFICIENT GROUND FOR ADDITION U/S. 41(1) OF THE ACT. 8.1. IN SO FAR AS THE ISSUE OF DISCHARGING THE ONUS IS CONCERNED, WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS ITSELF, THE ASSESSEE HAD FILED CONFIRMATION LETTER FROM THE SAID CREDITOR. THE GENUINENESS OF THE ITA. NO. 4870/M/2013 4 TRANSACTION ENTERED WITH M/S. VENUS CONSTRUCTION CO., IS NOT ASSAILED BEFORE US AND THE ONLY CONTROVERSY IS WHETHER THERE HAS BEEN CESSATION OF LIABILITY OWNED BY THE ASSESSEE TO M/S. VENUS CONSTRUCTION CO. WE, FAILED TO UNDERSTAND WHY THIS QUESTION HAS ARISEN WHEN THE DEBT HAS BEEN ACKNOWLEDGED BY THE ASSESSEE AND THE LIABILITY IS ALSO CONFIRMED BY THE CREDITOR. IT IS ALSO NOT A CASE THAT THE ASSESSEE HAS WRITTEN OFF THE LIABILITY TO PAY M/S. VENUS CONSTRUCTION CO., WHICH COULD INVOKE EXPLANATION - 1 TO SEC. 41(1) OF THE ACT. 8.2. HONBLE SUPREME COU RT IN THE CASE OF BOMBAY DYEING & MANUFACTURING CO. LTD. AIR 1958 SC 328 HAS CLEARLY HELD THAT EVEN IN CASES WHERE THE REMEDY OF A CREDITOR IS BARRED BY LIMITATION THE DEBT ITSELF IS NOT EXTINGUISHED BUT MERELY BECOMES UNENFORCEABLE. THE HONBLE HIGH COU RT OF BOMBAY IN THE CASE OF J.K. CHEMICALS LTD 62 ITR 34 HAS CATEGORICALLY HELD THAT IN ORDER TO ATTRACT THE PROVISIONS OF SEC. 41(1) OF THE ACT, IT IS NECESSARY THAT THERE SHOULD HAVE BEEN A CESSATION OR REMISSION OF LIABILITY. CESSATION OF LIABILITY MAY OCCUR EITHER BY THE REASON OF THE LIABILITY BECOMING UNENFORCEABLE IN LAW BY THE CREDITOR COUPLED WITH DEBTOR DECLARING HIS INTENTION NOT TO HONOUR ITS LIABILITY OR BY A CONTRACT BETWEEN THE PARTIES OR BY DISCHARGE OF THE DEBT. IN THE PRESENT CASE, THE A SSESSEE IS ACKNOWLEDGING THE DEBT PAYABLE TO M/S. VENUS CONSTRUCTION CO. AND THERE IS NO MATERIAL TO INDICATE THAT THE PARTIES HAVE CONTRACT ED TO EXTINGUISH THE LIABILITY. IN OUR CONSIDERED VIEW, IT CANNOT BE CONCLUDED THAT THE DEBT OWNED BY THE ASSESSEE TO M/S. VENUS CONSTRUCTION CO . , IS EXTINGUISH. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE JUDICIAL DECISIONS DISCUSSED HEREINABOVE, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE WHICH WE DISMISSED. ITA. NO. 4870/M/2013 5 9. BEFORE CLOSING THE GRIEVANCE TH AT THE LD. CIT(A) HAS ADMITTED ADDITIONAL EVIDENCES DO NOT HAVE ANY FORCE PER SE AS WE HAVE HELD THAT THE PROVISIONS OF SEC. 41(1) IN ITSELF DO NOT APPLY ON THE FACTS OF THE CASE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. OR DER PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH, 2015 SD/ - SD/ - SD/ - ( VIJAY PAL RAO ) (N.K. BILLAIYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 20 TH MARCH, 2015 . . ./ RJ , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI