BALAJI INFOTECH SERVICES, MUMBAI V. ITO WD 12(1)(1), MUMBAI

ITA 5066/MUM/2010

• Counselvise Citation: 506619914 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 17-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P C MAURYA
• Keywords: Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, MUMBAI. BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.5066 / MUM/2010 ASSESSMENT YEAR: 2005-06 BALAJI INFOTECT SERVICES, .. APPELLANT 1, GROUND FLOOR, VARDHMAN CHAMBERS, 17, CAWASJI PAT EL ST., FORT, MUMBAI-001. PA NO.AACFB 9176 E VS INCOME TAX OFFICER 12(1)(1) .. RESPONDENT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: VIPUL JOSHI, FOR THE APPELLANT P.C.MAURYA , FOR THE RESPONDENT DATE OF HEARING : 20.12.2011 DATE OF PRONOUNCEMENT : 28 -12-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT H AS CHALLENGED CORRECTNESS OF CIT(A)S ORDER DATED 31 ST OCTOBER, 2010, IN THE MATTER OF ASSESSMENT UNDER S ECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESS MENT YEAR 2005-06 ON THE FOLLOWING GROUNDS: I .T.A NO.5066 / MUM/2010 ASSESSMENT YEAR: 2005-06 2 1. THE LD CIT(A) ERRED IN FACTS AND IN LAW AND UND ER THE CIRCUMSTANCES IN ERRONEOUSLY CONFIRMING THE SUM OF RS.10 LAKHS AS IN COME TAXABLE UNDER SECTION 41 OF THE I.T.ACT. 2. THE LD CIT (A) FURTHER ERRED IN APPRECIATING THE NATURE OF TRANSACTIONS AND ALSO ERRED IN CONCEDING THE AR FOR THE APPELLANT HA S CONSENTED TO TREAT THE LIABILITY OF RS.10 LACS AS CESSATION OF LIABILITY U /S.41 OF THE I.T.ACT, 1961. 2. VIDE LETTER DATED 20 TH DECEMBER, 2011, THE ASSESSEE HAS RAISED THE FOLLOW ING ADDITIONAL GROUND AS WELL: 1 THE LD CIT(A) ERRED IN CONFIRMING THE ADDITION M ADE BY THE AO ON AN ALL TOGETHER DIFFERENT GROUND WITHOUT COMPLYING WIT H THE PROVISIONS OF THE ACT AND THE PRINCIPLE OF NATURAL JUSTICE. 2. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ADDIT ION U/S.28(IV) WAS NOT CALLED FOR. 3. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERI AL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE IS A FRANCHISE FOR PROVIDING COMP UTERIZED INFORMATION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.10,00,000 FROM INDIAN INFO CHEM PVT. LTD., ON 16.6.2000 AS ADVANCE AGAINST GROSS CONSIDERATION OF RS.25,00,000 ON TERMINATION OF FRANCHISE. THE ASSESSING OFFICER NOTICED THAT THE SAID AMOUNT WAS SHOWN AS PAYABLE FOR OVER SIX YEARS, AND BY NOW THE LIABILITY TO REPAY THE SA ME MUST HAVE SEIZED. ACCORDINGLY, HE PROCEEDED TO BRING IT TO TAX U/S.41(1) OF THE AC T. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT SUCC ESS. THE CIT(A) HELD THAT THE RECEIPT IN QUESTION, WHICH ASSESSEE HAD NO INTENTIO N TO REPAY, WAS TAXABLE U/S.28(IV), AND, IN SUPPORT OF THIS STAND, REASONED AS FOLLOWS: IT IS THEREFORE, QUITE EVIDENT THAT THERE IS NO IN TENTION ON THE PART OF THE APPELLANT TO DISCHARGE THE LIABILITY. NOR IS THERE ANY EVIDENCE FILED TO SHOW THAT THE CREDITOR HAS MADE ANY CLAIM TO RECOVER THE SAID AMOUNT FROM THE APPELLANT. THUS, IN THE PRESENT APPELLANTS CASE T HE AMOUNT IS JUSTIFIABLY A CESSATION OF LIABILITY. THE BOMBAY HIGH COURT IN C IT VS. GENERAL ELECTRODES & EQUIPMENTS LTD (1985) 155 ITR 78(BOM) HAS RECOGNIZE D THAT THE BENEFIT OF EXTINCTION OF LIABILITY WHICH HAD CONTINUED UN-DISC HARGED IS COVERED U/S.28(IV) OF THE I.T.ACT. IN PROTOS ENGINEERS CO LTD VS. CIT(1995) 211 ITR I .T.A NO.5066 / MUM/2010 ASSESSMENT YEAR: 2005-06 3 919(BOM), IT WAS HELD THAT ADVANCES AGAINST PUBLIC SUPPLIES (UNCLAIMED BALANCES) RECEIVED IN EARLIER YEARS HAD A CLOSE AND DIRECT NEXUS WITH THE BUSINESS AND DEFINITELY AMOUNTED TO A BENEFIT U/S.2 8(IV). THE NATURE OF THE TRANSACTION IN THE PRESENT CASE SHOWS THAT IT HAS A CLOSE AND DIRECT NEXUS WITH THE BUSINESS OF THE APPELLANT. WITH EFFLUX OF TIME THE CHARACTER OF THE RECEIPT HAS CHANGED AND IT IS NO LONGER PAYABLE AND THUS ACCRUES, AS A BENEFIT TO THE APPELLANT. IN VIEW OF THE FACTUAL AND LEGAL POSITION, THE AMOUNT OF RS.10 LACS RECEIVED IS LIABLE TO BE BROUGHT TO TAX U/S.28 (IV) OF THE I.T.ACT. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS A LSO THE APPLICABLE LEGAL POSITION. 6. WE HAVE NOTED THAT THE AMOUNT IN QUESTION WAS RE CEIVED IN THE YEAR 2000, RELEVANT TO THE ASSESSMENT YEAR 2001-02, AND THAT N OTHING HAPPENED DURING THE RELEVANT PREVIOUS YEAR SO AS TO PROVOKE ITS TAXABI LITY U/S.28(IV). THE YEAR BEFORE US IS NEITHER THE YEAR OF RECEIPT NOR A YEAR IN WHICH ANY MATERIAL DEVELOPMENT TOOK PLACE SO AS TO ALTER THE CHARACTER OF RECEIPT. IT IS NOT THE CASE OF THE REVENUE THAT LIABILITY HAS CEASED IN THE RELEVANT PREVIOUS YEAR, AND, FOR THE SAID REASON, THE AMOUNT BECAME TAXABLE. IN ANY EVENT, TAXABILITY U/ S.41(1) COULD NOT INVOKED AS NEITHER THERE WAS A CESSATION OF LIABILITY NOR THE SAID AMOUNT WAS EVER CLAIMED AS DEDUCTION IN COMPUTATION OF INCOME. THERE IS THUS NO LEGALLY SUSTAINABLE BASIS FOR IMPUGNED TAXABILITY OF INCOME. WE, THEREFORE, UPHO LD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPU GNED ADDITION OF RS.20 LAKHS. 7. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 28 TH DECEMBER, 2011 SD/- (N.V.VASUDEVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 28 TH DECEMBER 2011 I .T.A NO.5066 / MUM/2010 ASSESSMENT YEAR: 2005-06 4 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-23 4. COMMISSIONER OF INCOME TAX,XII , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH B MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI