Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 9581 (ITAT-AMRITSAR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
10 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-09-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
Not Allotted
Assessment Year
2012-2013
Appeal Filed On
23-10-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER ITA NO.546(ASR)/2015 ASSESSMENT YEAR:2012-13 PAN : AAKFS4870J DY. COMMR. OF INCOME TAX, VS. M/S. SADGURU LAND FIN ANCE, CIRCLE-5, AMRITSAR. 3 RD FLOOR, SRK MALL, 14-KENNEDY AVENUE, AMRITSAR. (APPELLANT) (RESPONDENT) C.O. NO.01(ASR)/2016 (ARISING OUT OF ITA NO. 546(ASR)/2015) ASSESSMENT YEAR:2012-13 M/S. SADGURU LAND FINANCE, VS. DY. COMMR. OF INCOME TAX, 3 RD FLOOR, SRK MALL, 14-KENNEDY CIRCLE-5, AMRITSAR. AVENUE AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. RAHUL DHAWAN, DR RESPONDENT BY: SH. P.N. ARORA, ADVOCATE DATE OF HEARING: 21/09/2016 DATE OF PRONOUNCEMENT: 26/09/2016 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-2, AMRITSAR, DATED 31.08.2015 FOR THE ASSESS MENT YEAR 2012-13. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION AGAINST THE APPEAL FILED BY THE REVENUE WHICH, HOWEVER, ARE SUPPORTIVE TO THE O RDER OF THE LD. CIT(A). ITA NO.546/ASR/2015 CO NO.01/ASR/2016 2 2. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE R EPRODUCED AS UNDER: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)-2, AMRITSAR ERRED IN DELETING THE ADDITION O F RS. 33,56,272/- MADE BY THE ASSESSEE OFFICER AFTER APPL YING COST INFLATION INDEX TO UNCLAIMED ADVANCES RECEIVED BY A SSESSEE LONG AGO AGAINST BOOKING OF PLOTS. II) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)- 2, AMRITSAR ERRED IN HOLDING THAT PROVISION S OF INDEXTION AS WELL AS PROVISIONS OF SECTION 41(1) AR E NOT APPLICABLE IN THIS CASE WITHOUT CONSIDERING THE FAC T THAT SAID ADVANCE REMAINED UNCLAIMED FOR ALMOST 20 YEARS IN S PITE OF LEGAL NOTICES GIVEN BY ASSESSEE FIRM TO THOSE PERSO NS. III) ON THE FACTS AND THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)- 2, AMRITSAR ERRED BY RELYING UPON THE DECIS ION OF HONBLE ITAT, AMRITSAR IN THE CASE OF INTERNATIONAL ENGG CORPN (REGD) VS ITO WARD3(L), AMRITSAR IN ITA NO. 433(ASR)/2012 FOR AY 2007-08 DATED 15.02.2013 WHICH IS DISTINGUISHABLE ON FACTS AS IN THAT CASE THE AO MAD E ADDITION ON ACCOUNT OF CESSATION OF LIABILITIES OF SUNDRY CREDITORS OUTSTANDING FOR MORE THAN ONE YEAR BY INV OKING THE PROVISIONS OF SECTION 41(1) OF THE ACT AS THE ASSES SEE HAD FAILED TO FURNISH THE CONFIRMED COPIES OF ACCOUNTS, PAN AND OTHER DETAILS OF THE SUNDIY CREDITORS DURING ASSESS MENT. IV) ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A)- 2, AMRITSAR ERRED IN DELETING THE ADDITION OF RS. 4,55,768/- MADE BY AO BEING % OF THE SALES CONSIDE RATION ON WHICH COMMISSION IS CHARGED WITHOUT APPRECIATION THE FACT THAT ASSESSEE HAD ADMITTED THAT IT HAS BEEN CH ARGING COMMISSION @ 1% TO 2%, HOWEVER, IT HAD SHOWN COMMIS SION INCOME ONLY @ 1% AND DID NOT PRODUCE THE RELEVANT R ECORD OF COMMISSION DURING ASSESSMENT. 3. THE BRIEF FACTS, AS NOTED IN THE ASSESSMENT ORDE R ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF RESIDENTIAL COLONY ON BEHALF OF DIFFERENT LAND-OWNERS AND SELLING OF P LOTS AND IS ALSO EARNING COMMISSION ON SALE OF SUCH PLOTS. THE CASE OF THE A SSESSEE WAS SELECTED ITA NO.546/ASR/2015 CO NO.01/ASR/2016 3 FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS, TH E AO OBSERVED THAT THE ASSESSEE HAD IN ITS BALANCE SHEET OUTSTANDING A DVANCES AGAINST THE BOOKING OF PLOTS AND SOME OF THE ADVANCES WERE OUT STANDING FOR ALMOST 20 YEARS. THEREFORE, THE ASSESSEE WAS CONFRONTED ON THE ISSUE THAT WHY THE SALE DEEDS OF PLOTS HAD NOT BEEN REGISTERED AGA INST THESE ADVANCES AND THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE ADV ANCES SHOULD NOT BE TREATED AS INCOME OF THE FIRM. THE ASSESSEE SUBM ITTED THAT THE ADVANCES WERE RECEIVED AGAINST THE BOOKING OF PLOTS . THE AO OBSERVED THAT DESPITE EFFORTS, ON THE PART OF FIRM, THESE PE RSONS HAD NOT COME FORWARD TO TAKE BACK THESE ADVANCES. THEREFORE, HE ASSUMED THAT THESE ADVANCES NOW STAND FORFEITED BY THE FIRM. THE AO F URTHER OBSERVED THAT SINCE THESE ADVANCES WERE LYING WITH THE ASSESSEE FOR THE LAST SO MANY YEARS AND THE FIRM HAD BEEN USING THE MONEY WITHOUT PAYING ANY TAXES THEREON, HE APPLIED THE COST INFLATION INDEX FOR D ETERMINING THE PRESENT VALUE OF MONEY AND IN RESPECT OF EACH ADVANCE CALCU LATED SEPARATELY THE INDEXED VALUE FOR THE YEAR UNDER CONSIDERATION AND MADE AN ADDITION OF RS.33,56,272/- . 4. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAD DE CLARED COMMISSION ON SALE OF PLOTS TO THE EXTENT OF RS.9,1 1,536/-. THEREFORE, THE ASSESSEE WAS DIRECTED TO FURNISH DETAILS OF COMMISS ION RECEIVED. THE AO OBSERVED THAT THE ASSESSEE FIRM HAD CHARGED COMMISS ION ON SALE, UNIFORMALLY AT THE RATE 1% ON SALE CONSIDERATION OF PLOTS AND THEREFORE, THE ASSESSEE WAS CONFRONTED ON THE ISSUE AND THE LD. COUNSEL FOR THE ITA NO.546/ASR/2015 CO NO.01/ASR/2016 4 ASSESSEE SUBMITTED THAT THE ASSESSEE WAS GETTING CO MMISSION @ 1% TO 2%. THEREFORE, THE AO ASSUMED THAT THE ASSESSEE MUS T BE GETTING COMMISSION ON FEW PLOTS @ 1% AND ON FEW PLOTS @ 2%. THEREFORE, THE ADDITION OF RS.4,55,768/- WAS MADE TO THE BUSINESS INCOME OF THE ASSESSEE ASSUMING THE RATE OF COMMISSION @ 1 % 5. AGGRIEVED WITH THE ORDER, THE ASSESSEE FILED APP EAL BEFORE THE LD. CIT(A) AND FILED VARIOUS SUBMISSIONS. THE LD. CIT(A ) TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE, DEL ETED BOTH THE ADDITIONS BY HOLDING AS UNDER: DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THERE WERE LONG STANDING ADVANCES AGAINST THE BOOKI NG OF PLOTS . SOME OF THE ADVANCES HAD BEEN STANDING ON LIABILITY SIDE OF THE BALANCE SHEET SINCE 1987. MOST OF THE ADVANCES WERE RECEIVED IN THE FY 1990-91 TO 1993-94 I.E ALMOST 20 YEARS AGO. THE AO OBSERVED THAT NO PLOTS HAVE BEEN REGISTERED AGAINST THESE AD VANCES WHICH WERE OUTSTANDING FOR MORE THAN 20 YEARS AND DESPITE VARIOUS EFFORTS ON T HE PART OF THE FIRM AND LEGAL NOTICES ISSUED TO THEM, THESE PERSONS NOT COME FORWARD TO TAKE BACK THESE ADVANCE S. THEREFORE THE AO ASSUMED THAT THESE PERSONS ARE NOT LIKELY TO COME FORWARD TO GET THEIR PLOTS REGISTERED IN FUTURE ALSO. THEREFOR E THE AO HELD THAT THESE ADVANCES LYING WITH THE ASSESSEE FIRM SHOWN A S OUTSTANDING ON THE LIABILITY SIDE OF THE BALANCE SHEET DESERVES TO BE FORFEITED AND TREATED AS INCOME OF THE ASSESSEE FIRM. THE AO DETERMINED THE REAL VALUE OF THE ADVANCES BY APPLYING THE COST INFLATION INDEX. AS THE ASSESSEE HAD RECEI VED MONEY DURING DIFFERENT FINANCIAL YEARS AND HAD ALSO FORFEITED SO ME PORTION OF THE ADVANCES DURING THE PREVIOUS YEARS, HENCE THE AO CA LCULATED THE VALUE OF MONEY IN FY 2011-12 AS GIVEN IN THE ASSESS MENT ORDER AND WORKED OUT THE REAL VALUE OF ADVANCES IN FY 2011-12 AT RS 33,56,272/- AND ADDED THE SAME TO THE TOTAL INCOME. IN THE WRITTEN SUBMISSIONS IT WAS EXPLAINED THAT TH E APPELLANT IS THE REGISTERED FIRM AND THE MAIN JOB OF THE FIRM WAS TO DEVELOP PLOTS AND TO MAINTAIN THE SAME ON BEHALF OF PLOT HO LDERS WHO ARE CO- OWNERS OF THE SAID LAND. THE ASSESSEE GETS THE EXPE NSES REIMBURSED WHICH HAVE BEEN SPENT BY THE APPELLANT FIRM ON BEHA LF OF THE PLOT ITA NO.546/ASR/2015 CO NO.01/ASR/2016 5 HOLDERS. THE ASSESSEE FIRM ONLY GETS COMMISSION ON THE SALE OF PLOTS AND THE MAIN SOURCE OF INCOME OF THE APPELLANT IS C OMMISSION INCOME. THE APPELLANT POINTED OUT THAT DURING THE Y EAR UNDER CONSIDERATION, THE ASSESSEE FIRM HAS NOT RECEIVED A NY ADVANCE AND RATHER THE ASSESSEE FIRM RECEIVED ADVANCES FROM CER TAIN PEOPLE APPROXIMATELY TWENTY YEARS BACK AGAINST THE BOOKING OF PLOTS ON BEHALF OF THE PLOT HOLDERS. THE ASSESSEE FIRM HAD RECEIVED ADVANCE IN DIFFERENT FINANCIAL YEARS, THEREFORE THE AO APPLIED THE INDEX METHOD AN D ACCORDINGLY ASSESSED THE REAL VALUE OF ADVANCES IN FY 2011-12 A T RS 33,56,272/-. I AM IN AGREEMENT WITH THE APPELLANT T HAT THE AO HAD FAILED TO APPRECIATE THAT THE PROVISION OF INDEX IN APPLIED ON THOSE CASES WHERE THE CAPITAL GAIN IS INVOLVED AND AS SUC H THIS INDEX METHOD WILL NOT APPLY AT ALL IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. MOREOVER, THE AO HAS HIMSELF ACCEPTED IN ORDER THAT ALL THESE ADVANCES WERE APPROXIMATELY MORE THAN 20 YEARS OLD AND NOT ONE OF THE ADVANCES UNDER CONSIDERATION WAS TAKEN DURIN G THE YEAR UNDER CONSIDERATION. THE AO HAS ALSO NOT GIVEN ANY FINDING THAT THE SAID COPIES OF ACCOUNTS ARE FALSE OR FRAUDULENT. FURTHER THE APPELLANT RIGHTLY POINTED OUT THAT THE PROVISIONS OF SECTION 41(1) ARE NOT AT ALL APPLICABLE IN THIS CAS E. IT WAS POINTED OUT THAT UNDER THE SAME AND SIMILAR CIRCUMSTANCES THE A DDITION MADE BY THE AO WAS DELETED BY THE HONBLE ITAT, AMRITSAR BENCH IN THE CASE OF THE INTERNATIONAL ENGINEERING CORPN. (REGD) VS ITO IN ITA NO. 433(ASR)/2012 DATED 15-02-2013 RELATING TO THE ASSE SSMENT YEAR 2007-08. THAT THE DEPARTMENT WENT IN APPEAL AGAINST THE SAID DECISION BEFORE THE HONBLE PUNJAB AND HARYANA HIGH COURT AND THE APPEAL OF THE DEPARTMENT WAS DISMISSED. THE SAID LIABILITY PERTAINS TO PRECEDING YEARS AS I S ACCEPTED BY THE AO HIMSELF IN THE ASSESSMENT ORDER WHEN AT THE BOTTOM OF PAGE 4 OF THE ASSESSMENT ORDER THAT ...THESE ADVAN CES ARE LYING WITH THE ASSESSEE FIRM FROM THE LAST APPROXIM ATELY 20 YEARS AND THE FIRM HAS BEEN USING THE MONEY WITHOUT PAYING ANY TAXES OVER IF. THE ASSESSEE HAS NOT OBTAINED ANY BENEFIT OUT OF SU CH LIABILITY WHICH HAS NOT CEASED TO BE A LIABILITY AND THE ASSE SSEE HAS NOT WRITTEN BACK SUCH LIABILITY UNILATERALLY IN ITS BOO KS OF ACCOUNTS. THEREFORE SUCH LIABILITY CANNOT BE A SUBJECT MATTER OF SECTION 41(1) OF THE ACT, AS ALSO HELD BY THE HONBLE ITAT, AMRITSAR E CASE OF ITA NO.546/ASR/2015 CO NO.01/ASR/2016 6 INTERNATIONAL ENGG. CORPN (REGD) VS ITO, WARD 3(1), R IN ITA NO. 433(ASR)/2012 FOR AY 2007-08 DATED 15-02-2013. ACCORDINGLY IN VIEW OF THE ABOVE DISCUSSION HERE WA S NO BASIS WITH THE AO TO MAKE THE SAID ADDITION OF RS.33,56,2 72/- WHICH IS ACCORDINGLY DELETED. IV) THE GROUND OF APPEAL NO.5 IS AGAINST THE ADDITI ON OF RS.455,768/-ON ACCOUNT OF LESS RATE OF COMMISSION C HARGED BY THE ASSESSEE FIRM. THE AO HAD EARNED INCOME ON ACCOUNT OF COMMISSION O N SALE BROKERAGE OF RS 911,536/- . THE ASSESSEE WAS ASKED BY THE AO TO PROVIDE DETAILS OF COMMISSION RECEIVED. AS PER THE DETAILS SUBMITTED THE AO OBSERVED THAT THE ASSESSEE FIRM HAD CHARGED COMMISSION ON SALE UNIFORMLY @ 1% OF SALE CONSIDERATION OF PLOTS. AS STATED BY THE ASSESSEE, IT WAS GETTING COMMISSION ON THOSE PLOTS SOLD BY THEM @ 1% TO 2% AT THE PREVAILING RATES FROM THE HOLDERS O F THOSE PLOTS. IN THE ABSENCE OF ANY RECORD OF COMMISSION EARNED GIVE N BY THE ASSESSEE FURNISHING THE COMMISSION CHARGED ON SALE OF EACH PLOT, THE AO CHARGED COMMISSION @ LAND HALF PERCENT ON EA CH PLOT SOLD BY THE ASSESSEE. THEREFORE THE AO MADE THE ADDITION OF L H% OF THE COMMISSION INCOME SHOWN BY THE ASSESSEE AT RS 911,5 36/- OR RS 455,768/- WHICH WAS ADDED BACK TO THE BUSINESS INCO ME DECLARED BY THE ASSESSEE. IN THE GROUNDS OF APPEAL IT WAS STATED BY THE ASSES SEE THAT COMPLETE DETAILS OF COMMISSION RECEIVED WERE DULY F ILED BY THE ASSESSEE BEFORE THE AO IN THE ASSESSMENT PROCEEDING S AND HENCE CHALLENGED THE ADDITION BEING WITHOUT ANY BASIS. TH E SAID DETAILS WERE ALSO FILED BY THE APPELLANT IN THE PRESENT APP EAL PROCEEDINGS WHEREIN THE ASSESSEE HAD FURNISHED COMPLETE DETAILS NAMELY THE NAME AND ADDRESS OF THE PARTY TO WHOM THE PLOTS WER E SOLD IN THE YEAR UNDER CONSIDERATION, PLOT NUMBERS SOLD, DATE, AREA, AMOUNT OF ALE CONSIDERATION, AND COMMISSION @ 1% WHICH TOTALE D TO RS ,526/- OF THE GROSS SALE AMOUNT OF RS 9,11,52,614/-. IT IS OBSERVED THAT THE AO HAS MADE THE SAID ADDITI ON OF RS.455,768/- WITHOUT POINTING OUT EVEN A SINGLE INS TANCE WHERE THE COMMISSION WAS CHARGED BY THE APPELLANT AT MORE THA N ONE PERCENT OF THE SALE CONSIDERATION OF THE PLOTS SOLD AND HAD MADE THE SAID ADDITION ON BASIS OF MERE PRESUMPTION/ ESTIMATION. THEREFORE THE SAID ADDITION OF RS 455,768/- CANNOT BE SUSTAINED A ND IS DELETED. (V) THE GROUND OF APPEAL NO 5 ARE AGAINST THE CHARG ING OF INTEREST U/S 234B AND 234C OF THE ACT. THE CHARGING OF INTEREST ITA NO.546/ASR/2015 CO NO.01/ASR/2016 7 UNDER THESE SECTIONS IS MANDATORY BUT CONSEQUENTIAL IN NATURE AND THEREFORE THE AO IS DIRECTED TO RE-COMPUTE THE INTE REST UNDER THESE SECTIONS (IF ANY) AFTER GIVING EFFECT TO THIS ORDER . 7. IN THE RESULT, APPEAL IS ALLOWED. 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. DR, AT THE OUTSET, INVITED OUR ATTENTION TO PB 3-4 FILED BY THE ASSESSEE AND ON FURTHER SPECIFIC ATTENTION WAS INVITED TO PB-4 WHEREIN IT WAS MENTIONED THAT THE ASSESSEE HAD FORF EITED THE EARNEST MONEY OF PLOT ALLOTTED TO SH. KANWAR KUMAR KAPOOR. HE FURTHER DREW OUR ATTENTION TO PB-13, WHEREIN IT HAS BEEN MENTIONED T HAT ON 14.11.2006 THE EARNEST MONEY OF RS.27,500/- WAS FORFEITED VID E LETTER DATED 14.11.2006. THE LD. DR ALSO INVITED OUR ATTENTION T O PB-14, WHERE A SIMILAR LETTER WAS WRITTEN TO MR. SUNEEL KHURANA, W AS PLACED. IN VIEW OF THESE FACTS, THE LD. DR SUBMITTED THAT SINCE THE AM OUNTS HAD BEEN FORFEITED, THEREFORE THE LIABILITY HAD CEASED AND AS SUCH THE AMOUNTS WERE TAXABLE UNDER SECTION 41(1) OF THE I.T.ACT. HE PLACED RELIANCE ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ATLAS CYCLE INDUSTRIES VS. COMMISSIONER OF INCOME TAX, RE PORTED IN 128 ITR 60 FOR THE PROPOSITION THAT WHERE FORFEITURE OF DEPO SITS WAS MADE, THE AMOUNTS WERE TAXABLE UNDER SECTION 41(1) OF THE ACT . 8. AS REGARDS THE OTHER ISSUE RELATING TO COMMISSI ON DECLARED BY THE ASSESSEE, THE LD. DR SUBMITTED THAT THE ASSESSEE I TSELF HAD SUBMITTED THAT THEY WERE CHARGING COMMISSION @ 1% TO 2%, WHE REAS IT HAD DECLARED COMMISSION INCOME @ 1%, THEREFORE THE AO H AD RIGHTLY ITA NO.546/ASR/2015 CO NO.01/ASR/2016 8 ESTIMATED INCOME FROM HALF OF THE PLOTS @ 1% AND ON HALF OF PLOTS @ 2%. IN VIEW OF THE ABOVE, THE LD. DR PRAYED THAT T HE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE A.O. BE U PHELD. 9. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE AO HAD CALCULATED THE PRESENT VALUE OF ADV ANCES LYING WITH THE ASSESSEE BY APPLYING COST INFLATION INDEX, WHICH I S NEVER HEARD OF , AS COST INFLATION INDEX IS APPLIED ONLY ON THE TRANSAC TIONS OF SALE. HE FURTHER ARGUED THAT THE ASSESSEE HAD NOT FORFEITED THE ADVANCES RECEIVED FROM VARIOUS CUSTOMERS AND THE ADVANCES RECEIVED WERE OUTSTANDING IN THE BOOKS OF ACCOUNT AND IN THE BALANCE SHEET AND THEREFORE, THE QUESTION OF THEIR FORFEITURE DOES NOT ARISE AT ALL. IT WAS SUBMITTED THAT WITHOUT WRITING BACK THE LIABILITIES THE ADDITION CAN NOT BE MADE U/S 41(1) OF THE ACT. HE SUBMITTED THAT FACT THAT DEPO SITS WERE NOT FORFEITED, IS APPARENT FROM THE FACT THAT WERE REFERRED IN THE BALANCE SHEET AND THE AO NOTICED SUCH ADVANCES FROM BALANCE SHEET ITSELF . THEREFORE, THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. 10. TO SUPPORT ITS CASE, THE LD. COUNSEL FOR THE AS SESSEE RELIED UPON THE DECISION OF ITAT, AMRITSAR BENCH, IN THE CASE OF TH E INTERNATIONAL ENGG. CORPN. (REGD.), PASSED IN ITA NO.433/ASR/2012, FOR THE A.Y. 2007-08, DATED 15.02.2013. HE FURTHER INVITED OUR ATTENTION TO PB-2 FOR THE PROPOSITION THAT THE PLOTS WERE REGISTERED IN THE NAME OF VARIOUS PERSONS IN THE SUCCEEDING YEARS AND ALSO SOME PLOTS WERE CA NCELLED AND THE NECESSARY REFUNDS WERE MADE. IN THIS CONNECTION, OU R ATTENTION WAS ITA NO.546/ASR/2015 CO NO.01/ASR/2016 9 INVITED TO SL. NO.4 AND SUBMITTED THAT ON 16.04.201 4 PLOT WAS REGISTERED IN FAVOUR OF THIS PERSON. SIMILARLY, OUR ATTENTION WAS INVITED TO SL. NOS. 6, 11, 17 & 18 AND SUBMITTED THAT IN ALL THESE CASES T HE PLOTS WERE REGISTERED ON SUBSEQUENT DATES, WHICH ITSELF PROVE THAT THE LIABILITY HAD NOT CEASED TO EXIST AND IT WAS WRONG ON THE PART OF THE LD. DR TO AGUE THAT THESE ADVANCES HAD BEEN FORFEITED. THEREFORE, HE SUBMITTED THAT THE CASE LAW RELIED ON BY THE LD. DR WAS DISTINGUISHAB LE ON FACTS. 11. AS REGARDS THE ISSUE OF COMMISSION, THE LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT COMPLETE DETAILS FROM WHOM THE COMMISSION WAS RECEIVED WERE FILED WITH THE AUTHORITIES BELOW. HE INVITED OUR ATTENTION TO PB-105 TO 107, WHERE THE COPY OF SUCH LIST WAS PLACED. THE LD. COUNSEL SUBMITTED THAT THE AO WAS NOT ABLE TO POINT OUT AS TO FROM WHOM THE ASSESSEE HAD RECEIVED COMMISSION @ 2%. HE SUBMITTED THAT THE AO HAD MADE THE ADDITION ON THE BASIS OF SURMIS ES AND CONJECTURES AND THEREFORE, THE LD. CIT(A) HAS RIGHTLY DELETED THE SAME. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS A FACT AS NOTED IN THE ASSESSMENT ORDER THAT ADVANCES WERE NOT RECEIVED BY THE ASSESSEE IN THE PRESENT YEAR AND THESE WERE OUTSTANDING FOR THE LA ST SO MANY YEARS. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE VIDE WRIT TEN SUBMISSIONS TO LD. CIT(A), PLACED AT PB-1, 1A & 1B, HAD SUBMITTED THE COMPLETE NAMES OF THE PERSONS IN FAVOUR OF WHOM THE PLOTS WERE REGIS TERED IN THE SUCCEEDING YEAR AND THE LD. CIT(A) DID NOT FIND AN YTHING ADVERSE IN THE ITA NO.546/ASR/2015 CO NO.01/ASR/2016 10 SUBMISSIONS OF THE ASSESSEE. THE DECLARATION OF SUC H ADVANCES IN THE BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION ITSE LF PROVES THAT THE ASSESSEE HAD NOT FORFEITED THE SAID ADVANCES AND HA D ADJUSTED A PART OF THEM IN THE SUCCEEDING YEAR AGAINST THE SALE DEEDS OF PLOTS. THEREFORE, PROVISIONS OF SECTION 41(1) OF THE ACT ARE NOT APPL ICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, AS THE ASSESSEE HAD NOT WRITTEN BACK THESE ADVANCES IN ITS BOOKS OF ACCOUNT. THE ACTION OF THE AO INCREASING THE VALUE OF THESE ADVANCES BY APPLYING COST INFL ATION INDEX IS NOT AT ALL JUSTIFIED, AS COST INFLATION INDEX IS NEVER APPLIE D ON THE AMOUNT OF ADVANCES LYING WITH A PERSON. THE LD. CIT(A) HAS RI GHTLY ALLOWED THE RELIEF TO THE ASSESSEE. THE LD. CIT(A) HAS ALSO RELIED ON THE DECISION OF ITAT, AMRITSAR BENCH, IN THE CASE OF THE INTERNATIONAL E NGG. CORPN. (REGD.) VS. INCOME TAX OFFICER, IN ITA NO.433/ASR/2012, DA TED 15.02.2013. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PART OF THE F INDINGS OF THE ITAT, AMRITSAR IS REPRODUCED BELOW: 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS NOT SUBMITTED CONFIRMATION OF COPIES OF ACCOUNTS, BOOK S OF ACCOUNT AND THEREFORE, THE ARGUMENTS MADE BY THE LD. DR AND THE FINDINGS OF BOTH THE AUTHORITIES BELOW TO THAT EXTENT ARE NOT D ISPUTED. BUT AT THE SAME TIME, THERE IS ALSO NO DISPUTE THAT THE ASSESS EE HAS SUBMITTED COPIES OF ACCOUNTS IN THE CASE OF SUNDRY CREDITORS AMOUNTING TO RS.14,74,763/-, WHERE THE BALANCES SHOWN ARE OUTSTA NDING AS PER LAST YEAR I.E. WHICH HAS BEEN BROUGHT FORWARD FROM THE PRECEDING YEAR EXCEPT PROVISIONS OF INTEREST IN THE RESPECTIV E YEARS AND IN THE IMPUGNED YEAR WHICH HAS NOT BEEN DISALLOWED BY THE AO. THE LIABILITY PERTAINS TO THE PRECEDING YEAR, AS IS EVI DENT FROM PAGES 6 TO 21 WHERE COPIES OF ACCOUNTS OF ALL SUNDRY CREDITORS ARE PLACED ON RECORD AND WERE AVAILABLE BEFORE BOTH THE AUTHORITI ES BELOW. THE SAID BALANCES ARE OUTSTANDING IN THE FOLLOWING YEAR S AS WELL IS A MATTER OF RECORD AND THERE IS NO DISPUTE TO THE SAI D FACT. THE ITA NO.546/ASR/2015 CO NO.01/ASR/2016 11 ASSESSEE HAS NOT OBTAINED ANY BENEFIT OUT OF SUCH L IABILITY WHICH IS NOT CEASED TO BE A LIABILITY AND THE ASSESSEE HAS N OT WRITTEN BACK SUCH LIABILITY UNILATERALLY IN ITS BOOKS OF ACCOUNT . THEREFORE, SUCH LIABILITY CANNOT BE A SUBJECT MATTER OF SECTION 41 (1) OF THE ACT. IT IS ALSO A MATTER OF RECORD IN THE ORDER OF THE A.O. W HERE THE ASSESSEE HAD MADE SOME PAYMENTS DURING THE ASSESSMENT YEARS 2008-09 & 2009-10, WHICH THE AO AT PAGE 2 HAS MENTIONED IN HI S ORDER. INSPITE OF SUCH FACTS ON RECORD, THE MATTER DID NOT FIND FA VOUR TO THE AO AND CONFIRMATION MADE BY THE LD. CIT(A) IN A SUMMARY MA NNER IS NOT JUSTIFIED. THE ASSESSEE IS ASSESSED TO INCOME-TAX R EGULARLY, IS ON RECORD AND SUNDRY CREDITORS ARE OUTSTANDING AS PER LAST YEAR FOR WHICH ASSESSMENT RECORD WAS AVAILABLE WITH THE AO W HICH WAS ARGUED BY THE LD. COUNSEL AND WAS NOT REBUTTED BY T HE LD. DR IN THIS RESPECT. EVEN IF CONFIRMATION COPIES OF ACCOUNTS AN D BOOKS OF ACCOUNT ARE NOT PRODUCED, THE COPIES OF AUDITED ACC OUNTS FOR THE IMPUGNED YEAR AND THE ASSESSMENT RECORD OF PRECEDIN G YEAR WAS AVAILABLE WITH THE A.O. THE AO CANNOT MAKE THE ASSE SSMENT ON CONJECTURES, SURMISES OR ON THE BASIS OF SUSPICION. THE AO HAS NOT GIVEN ANY FINDINGS THAT THE SAID COPIES OF ACCOUNT AS FALSE OR FRAUDULENT. THEREFORE, THE ASSESSMENT HAS TO BE MAD E ON THE BASIS OF SUCH COPIES OF ACCOUNT WHEN THEY ARE NOT PROVED FALSE OR FRAUDULENT. NOTWITHSTANDING THE FACT, THE REJECTION OF BOOKS OF ACCOUNT, THE MATTER DISCLOSED BY THE ASSESSEE, OTH ER MATERIAL HAS TO BE COLLECTED BY THE AO WHICH SHOULD HAVE FORMED TH E BASIS OF COMPUTATION OF INCOME. IN THE PRESENT CASE, THE ASS ESSEE HAVING SUBMITTED THE COPIES OF ACCOUNTS AND COMPLETE POSTA L ADDRESSES OF ALL THE PARTIES IS A MATTER OF RECORD AND THE AO HA S NOT COLLECTED ANY ADVERSE MATERIAL. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N. ARORA HAS INVITED OUR ATTENTION THAT BY MISTAKE AT PB-2 , THE ASSESSEE HAD WRITTEN CONFIRMED COPY OF ACCOUNT WHICH WAS EXPLAIN ED TO THE AO AND WHICH IS PART OF THE ASSESSMENT ORDER AT PAGE 2 ON THE HEARING DATED 16.12.2009, WHICH IN FACT WERE COPIES OF ACCO UNT. 11. AS REGARDS THE ADDITION OF RS.26,30,038/-, ALL THE BALANCES ARE OUTSTANDING FOR THE LAST MANY YEARS AS APPEARIN G FROM PB 22 TO 33 AND 97 TO 99 AND ALSO ALL THE PERSONS I.E. SMT. UJJAL KAUR, SMT. MANJIT KAUR & SMT. RAYAM KAUR ARE ASSESSED TO TAX A S PER COPY OF ACKNOWLEDGMENT OF INCOME TAX RETURN AT PB-75, 76 & 77 ALONGWITH PAN IS PLACED ON RECORD. THE AO AFTER APPLYING HIS MIND HAS MADE THE ADDITION OF FAMILY LOANS OF RS.26,30,038/- WHIC H HAS BEEN CONFIRMED BY THE LD. CIT(A). THE ARRANGEMENTS MADE BY THE LD. DR HAS NO SUBSTANCE IN THE MATTER IN THIS REGARD. THE ASSESSEE HAVING PROVED THE IDENTITY, CAPACITY AND CREDITWORTHINESS OF SAID PERSONS AND THEREFORE, CANNOT BE SUBJECT MATTER OF ADDITION . THUS, BOTH THE ADDITIONS OF RS.14,74,763/- AND RS.26,30,038/- HAV E WRONGLY BEEN CONFIRMED BY THE LD. CIT(A) AND THE SAME ARE DIRECT ED TO BE DELETED. ITA NO.546/ASR/2015 CO NO.01/ASR/2016 12 12. AS REGARDS THE DISALLOWANCE OF CAR EXPENDITURE AND CAR DEPRECIATION, THE AO HAS NOT MADE ANY DISCUSSION IN THE BODY OF THE ORDER AND HAS SIMPLY DISALLOWED EXPENSES WITHOUT AP PLICATION OF MIND, WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A). N O SUCH DISALLOWANCE CAN BE MADE WITHOUT PASSING A REASONED ORDER. THEREFORE, SUCH ADDITION MADE, IS DIRECTED TO BE DE LETED. THUS, GROUNDS NO. 8 TO 11 OF THE ASSESSEE ARE ALLOWED. 13. THE REVENUE HAS SPECIFICALLY TAKEN A GROUND OF APPEAL THAT CASE LAW OF INTERNATIONAL ENGINEERING CORPN. (REGD.) WAS NOT APPLICABLE TO THE FACTS & CIRCUMSTANCES OF THE PRESENT CASE. HOWEVER, WE FIND THAT IN THAT CASE THE ASSESSEE HAD TAKEN GROUND NO.8 FOR ADDITIO N U/S 41(1) OF THE ACT. FOR THE SAKE OF CONVENIENCE, THIS GROUND OF AP PEAL IS REPRODUCED BELOW: 8. THAT THE LD. CIT(A) DID NOT APPRECIATE THAT THE BOOKS OF ACCOUNTS WERE DULY PRODUCED BEFORE THE A.O. AT THE TIME OF HEARING OF THE CASE WHICH WAS TAKEN UP SEVERAL TIMES AND AL L THE INFORMATION AS DESIRED BY THE AO WERE FURNISHED AND THERE WAS NO JUSTIFICATION IN CONFIRMING THE ADDITION OF RS.14,7 4,763/- ON ACCOUNT OF CESSATION OF LIABILITIES BY INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT. THAT THIS LIABILITY WAS N OT THE LIABILITY WHICH CAME INTO EXISTENCE FOR THE FIRST TIME DURING THE YEAR UNDER CONSIDERATION, BUT IT AS A LIABILITY WHICH WAS STIL L PAYABLE BY THE ASSESSEE AND THERE WAS NO EARTHLY REASON FOR CONFIR MING THE ADDITION OF RS.14,74,763/-. 14. WE FIND THAT THIS GROUND OF APPEAL ALONGWITH GR OUND NOS. 9 TO 11 HAS BEEN ALLOWED BY THE TRIBUNAL. THEREFORE, THE GR OUND OF APPEAL OF THE REVENUE THAT THE CASE LAW RELIED ON BY THE ASSESSEE WAS DISTINGUISHABLE DOES NOT HAVE ANY FORCE. THE LD. DR HAD ALSO RELIE D UPON THE CASE LAW OF ATLAS CYCLE INDUSTRIES VS. CIT, DECIDED BY THE HON BLE PUNJAB& HARYANA ITA NO.546/ASR/2015 CO NO.01/ASR/2016 13 HIGH COURT. THE FACTS OF THE CASE LAW RELIED ON BY THE LD. DR ARE DISTINGUISHABLE, AS IN THAT CASE THE SECURITY AMOU NTS OF EMPLOYEES WERE FORFEITED AND THEREFORE, THE HONBLE HIGH COURT HAD RIGHTLY HELD THE DEPOSITS TO BE TAXABLE U/S 41(1) OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE HAS NOT FORFEITED THE ADVANCES, AS IT HAD BEEN DECLARING THE LIABILITIES IN ITS BALANCE SHEET. THE ASSESSEE THO UGH IN VARIOUS LETTERS HAD BEEN THREATENING THE PROSPECTIVE BUYERS THAT TH EIR SECURITY DEPOSITS WILL BE FORFEITED BUT DID NOT ACTUALLY FORFEIT THE SAME, AS IT CONTINUED TO DECLARE SUCH ADVANCES IN THE BALANCE SHEET. 15. WE FURTHER FIND THAT THE HONBLE DELHI HIGH COU RT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. JAIN EXPORTS PVT. LT D., IN ITA NO.235/2013 DATED 24.05.2013, UNDER SIMILAR FACTS A ND CIRCUMSTANCES HAS HELD THAT THE LIABILITY ON ACCOUNT OF CREDITORS , WHICH WERE BEING DECLARED BY THE ASSESSEE FOR THE LAST MORE THAN 25 YEARS IN FAVOUR OF THE ASSESSEE, BY HOLDING THAT THE LIABILITY HAD NOT CEA SED TO EXIST. THE RELEVANT FINDINGS OF THE HONBLE DELHI HIGH COURT F ROM PARA 10 ONWARDS ARE REPRODUCED HEREUNDER : 10. WE ARE UNABLE TO APPRECIATE THE STAND TAKEN ON BEHALF OF THE REVENUE, WHICH HAS, APPARENTLY, NOT BEEN CONSISTENT . THE ASSESSING OFFICER, INTER-ALIA, ADDED A SUM OF ` 1,57,15,137, BEING THE AGGREGATE OF THE AMOUNTS SHOWN AS PAYABLE TO VARIOUS SUNDRY C REDITORS, AS INCOME UNDER SECTION 41(1) OF THE ACT. WHILST THE ASSESSING OFFICER HELD THAT THE LIABILITIES DUE TO THE SUNDRY CREDITO RS HAD CEASED, THE GENUINENESS OF THE INITIAL TRANSACTION ON ACCOUNT O F WHICH THE AMOUNTS WERE PAYABLE TO VARIOUS CREDITORS WAS NOT M ADE AN ISSUE. THE ONLY ISSUE RAISED BY THE ASSESSING OFFICER WAS THAT SINCE THE OUTSTANDING BALANCES HAD REMAINED STATIC ON THE BOO KS OF THE ASSESSEE FOR SEVERAL YEARS (IN THE CASE OF M/S ELEP HANTA OIL & VANASPATI LTD. FOR OVER 25 YEARS), THERE WAS NO POS SIBILITY OF ANY ITA NO.546/ASR/2015 CO NO.01/ASR/2016 14 CLAIM BEING MADE BY THE CREDITORS AND THE AMOUNT OF LIABILITIES OUTSTANDING WERE LIABLE TO BE ADDED AS INCOME OF TH E ASSESSEE. 11. THE CIT (APPEALS) DID NOT ACCEPT THE REASONING OF THE ASSESSING OFFICER AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER WITH RESPECT TO AMOUNTS REFLECTED AS PAYABL E TO VARIOUS SUNDRY CREDITORS ON THE GROUND THAT ASSESSEE COMPAN Y CONTINUED TO REFLECT THE AMOUNTS PAYABLE EVEN IN THE SUBSEQUENT PERIODS. THE CIT (APPEALS) HELD THAT THERE COULD BE NO CESSATION OF LIABILITY AS THE ASSESSEE COMPANY CONTINUED TO ACKNOWLEDGE ITS DEBT TOWARDS THE CREDITORS. HOWEVER, THE CIT (APPEALS) CONCLUDED THA T THE AMOUNT OUTSTANDING TO THE CREDIT OF M/S ELEPHANTA OIL & VA NASPATI LTD. WAS NOT GENUINE AS THE ASSESSEE COULD NOT PRODUCE ANY C ONFIRMATION OR EVIDENCE OF THE ORIGINAL TRANSACTION WHICH WAS UNDE RTAKEN IN 1984- 1985. IT IS RELEVANT FOR US TO NOTICE THAT THE REVE NUE DID NOT PREFER ANY APPEAL AGAINST THE ORDER OF THE CIT (APPEALS), AND THUS, ACCEPTED HIS DECISION THAT THERE WAS NO CESSATION O F LIABILITY IN CASES WHERE THE ASSESSEE COMPANY CONTINUED TO ACKNO WLEDGE THE AMOUNT OWED BY IT TO ITS CREDITORS. 12. THE QUESTION WHETHER THERE HAD BEEN ANY CESSATI ON OF LIABILITY WAS THUS NOT BEFORE THE TRIBUNAL AS THE T RIBUNAL WAS ONLY CONSIDERING THE CORRECTNESS OF THE DECISION OF THE CIT (APPEALS) WHEREIN THE TRANSACTION GIVING RISE TO THE LIABILIT Y PAYABLE TO M/S ELEPHANTA OIL & VANASPATI LTD. HAD BEEN DOUBTED. TH E TRIBUNAL CAME TO THE CONCLUSION, AND RIGHTLY SO, THAT THE BO OKS OF THE ASSESSEE HAD BEEN EXAMINED IN THE PAST AND IT WOULD NOT BE CORRECT TO ACCEPT A PART OF THE ACCOUNT RELATING TO A PARTY AND REJECTING ANOTHER PART OF THE ACCOUNT. WHEREAS, THE PART OF T HE ACCOUNT RELATING TO DEALINGS WITH M/S ELEPHANTA OIL & VANAS PATI LTD. WHICH RESULTED IN THE AMOUNT BEING RECEIVABLE FROM M/S EL EPHANTA OIL & VANASPATI LTD. WAS ACCEPTED BY THE CIT (APPEALS), T HE AMOUNT PAYABLE TO THE SAME ENTITY WAS REJECTED. ACCORDINGL Y, THE TRIBUNAL DELETED THE ADDITION OF ` 1,53,48,850/- CONFIRMED B Y THE CIT (APPEALS). 13. THE GENUINENESS OF THE TRANSACTION ENTERED INTO BY THE ASSESSEE IN 1984-85 WITH M/S ELEPHANTA OILS & VANAS PATI LTD. IS NOT BEING ASSAILED BEFORE US AND THE ONLY CONTROVER SY SOUGHT TO BE RAISED BEFORE US IS WHETHER THERE HAS BEEN CESSATIO N OF LIABILITY OWED BY THE ASSESSEE TO M/S ELEPHANTA OIL & VANASPA TI LTD. IN OUR VIEW, THAT QUESTION DOESN'T ARISE IN THE PRESENT CA SE SINCE THE DECISION OF THE CIT (APPEALS) THAT THERE IS NO CESS ION OF LIABILITY IN CASES WHERE THE DEBT HAS BEEN ACKNOWLEDGED BY THE A SSESSEE COMPANY HAS ALREADY BEEN ACCEPTED BY THE REVENUE. H OWEVER, AS THE QUESTION WHETHER THERE IS ANY CESSATION OF LIAB ILITY IN THE ITA NO.546/ASR/2015 CO NO.01/ASR/2016 15 RELEVANT PREVIOUS YEAR WARRANTING AN ADDITION IN TE RMS OF SECTION 41(1) OF THE ACT HAS BEEN URGED ON BEHALF OF THE REVENUE , WE CONSIDER IT APPROPRIATE TO EXAMINE THE SAME. 14. SECTION 41(1) OF THE ACT IS RELEVANT AND IS QUOTED BELOW:- '41. PROFITS CHARGEABLE TO TAX- (1) WHERE AN ALLOWA NCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RES PECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE AS SESSEE (HEREINAFTER REFERRED TO AS THE FIRST-MENTIONED PER SON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR,- (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHE R IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RE SPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENE FIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND G AINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE T O INCOME- TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER TH E BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT ; OR (B) THE SUCCESSOR IN BUSINESS HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPE CT OF WHICH LOSS OR EXPENDITURE WAS INCURRED BY THE FIRST - MENTIONED PERSON OR SOME BENEFIT IN RESPECT OF THE TRADING LIABILITY REFERRED TO IN CLAUSE (A) BY WAY OF REMIS SION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY THE SUCCE SSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRUING TO THE SU CCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME- TAX AS THE INCOME OF THAT PREVIOUS YEAR. EXPLANATIO N 1. - FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSION 'L OSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF' SHALL INCLUDE THE REMISSION OR CESSATION OF ANY LIABILITY BY A UN ILATERAL ACT BY THE FIRST MENTIONED PERSON UNDER CLAUSE (A) OR T HE SUCCESSOR IN BUSINESS UNDER CLAUSE (B) OF THAT SUB- SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS.' 15. INDISPUTABLY, EXPLANATION 1 TO SECTION 41(1) OF THE ACT, WHICH WAS INSERTED, W.E.F. 01.04.1997 IS NOT APPLIC ABLE, AS THE ASSESSEE HAS NOT WRITTEN OFF THE LIABILITY TO PAY M /S ELEPHANTA OIL & VANASPATI LTD. IN ITS BOOKS OF ACCOUNTS. ITA NO.546/ASR/2015 CO NO.01/ASR/2016 16 16. THE SUPREME COURT IN THE CASE OF CIT V. SUGAULI SUGAR WORKS (P ). LTD.: [1999] 236 ITR 518 (SC) HAS HELD THAT SECTION 41(1) OF THE ACT CONTEMPLATES OBTAINING BY THE ASSESSEE A N AMOUNT EITHER IN CASH OR ANY OTHER MANNER OR ANY BENEFIT BY WAY O F CESSATION OR REMISSION OF LIABILITY. IN ORDER TO COME WITHIN THE SWEEP OF SECTION 41(1) IT IS NECESSARY THAT THE BENEFIT DERIVED BY AN ASS ESSEE RESULTS FROM CESSATION OR REMISSION OF A TRADING LIABILITY. THE RELEVANT EXTRACT FROM THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT V. SUGAULI SUGAR WORKS (P .) LTD. (SUPRA) IS QUOTED BELOW: '3. IT WILL BE SEEN THAT THE FOLLOWING WORDS IN THE SECTION ARE IMPORTANT: 'THE ASSESSEE HAS OBTAINED, WHETHER IN C ASH OR IN ANY OTHER MANNER WHATSOEVER ANY AMOUNT IN RESPECT O F SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF S UCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY HIM'. THUS, THE SECTION CONTEMPLATES OB TAINING BY THE ASSESSEE OF AN AMOUNT EITHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER OR A BENEFIT BY WAY OF REMISSION OR CESSATION AND IT SHOULD BE OF A PARTICULAR AMOUNT O BTAINED BY HIM. THUS, THE OBTAINING BY THE ASSESSEE OF A BENEF IT BY VIRTUE OF REMISSION OR CESSATION IS SINE QUA NON FOR APPLI CATION OF THIS SECTION.' 17. THE ONLY ISSUE THAT NEEDS TO BE CONSIDERED IS W HETHER THE LIABILITY TOWARDS M/S ELEPHANTA OIL & VANASPATI LTD . HAS CEASED ON ACCOUNT OF EFFLUX OF TIME. 18. THE SUPREME COURT IN THE CASE OF ' BOMBAY DYEING AND MANUFACTURING CO. LTD.' V. STATE OF BOMBAY : 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 EXTINGU ISHED BUT MERELY BECOMES UNENFORCEABLE. THE COURT OBSERVED AS UNDER: - 'THE POSITION THEN IS THAT, UNDER THE LAW, A DEBT S UBSISTS NOTWITHSTANDING THAT ITS RECOVERY IS BARRED BY LIMITATION..........' 19. THIS VIEW HAS ALSO BEEN TAKEN BY THE SUPREME CO URT IN THE CASE OF CIT V. SUGAULI SUGAR WORKS P. LTD . (SUPRA). IN THE SAID CASE, IT WAS CONTENDED ON BEHALF OF THE REVENUE THA T THE LIABILITY HAS COME TO AN END AS THE CREDITORS IN THE SAID CASE HA D NOT TAKEN ANY ACTION TO RECOVER THE AMOUNTS DUE TO THEM FOR TWENT Y YEARS. THE SUPREME COURT AFFIRMED THE DECISION OF THE BOMBAY H IGH COURT IN THE CASE OF J. K. CHEMICALS LTD. V. CIT : [1966] 62 ITR 34 (BOM) WHEREIN THE WORDS 'CESSATION OR REMISSION' HAD BEEN INTERPRETED. THE SUPREME COURT QUOTED THE FOLLOWING PASSAGE FROM THE JUDGMENT ITA NO.546/ASR/2015 CO NO.01/ASR/2016 17 OF THE BOMBAY HIGH COURT IN THE SAID CASE OF J. K. CHEMICALS LTD. V. CIT (SUPRA): - 'THE QUESTION TO BE CONSIDERED IS WHETHER THE TRANS FER OF THESE ENTRIES BRINGS ABOUT A REMISSION OR CESSATION OF IT S LIABILITY. THE TRANSFER OF AN ENTRY IS A UNILATERAL ACT OF THE ASSESSEE, WHO IS A DEBTOR TO ITS EMPLOYEES. WE FAIL TO SEE HO W A DEBTOR, BY HIS OWN UNILATERAL ACT, CAN BRING ABOUT THE CESS ATION OR REMISSION OF HIS LIABILITY. REMISSION HAS TO BE GRA NTED BY THE CREDITOR. IT IS NOT IN DISPUTE, AND IT INDEED CANNO T BE DISPUTED, THAT IT IS NOT A CASE OF REMISSION OF LIABILITY. SI MILARLY, A UNILATERAL ACT ON THE PART OF THE DEBTOR CANNOT BRI NG ABOUT A CESSATION OF HIS LIABILITY. THE CESSATION OF THE LI ABILITY MAY OCCUR EITHER BY REASON OF THE OPERATION OF LAW, I.E ., ON THE LIABILITY BECOMING UNENFORCEABLE AT LAW BY THE CRED ITOR AND THE DEBTOR DECLARING UNEQUIVOCALLY HIS INTENTION NOT TO HONOUR HIS LIABILITY WHEN PAYMENT IS DEMANDED BY THE CREDITOR, OR A CONTRACT BETWEEN THE PARTIES, OR BY DISCHARGE OF TH E DEBT-THE DEBTOR MAKING PAYMENT THEREOF TO HIS CREDITOR. TRAN SFER OF AN ENTRY IS NEITHER AN AGREEMENT BETWEEN THE PARTIES N OR PAYMENT OF THE LIABILITY. WE HAVE ALREADY HELD IN K OHINOOR MILLS' CASE [1963] 49 ITR 578 (BOM) THAT THE MERE F ACT OF THE EXPIRY OF THE PERIOD OF LIMITATION TO ENFORCE IT, D OES NOT BY ITSELF CONSTITUTE CESSATION OF THE LIABILITY. IN THE INSTA NT CASE, THE LIABILITY BEING ONE RELATING TO WAGES, SALARIES AND BONUS DUE BY AN EMPLOYER TO HIS EMPLOYEES IN AN INDUSTRY, THE PROVISIONS OF THE INDUSTRIAL DISPUTES ACT ALSO ARE ATTRACTED AND FOR THE RECOVERY OF THE DUES FROM THE EMPLOYER, UNDER SECTION 33C(2) OF THE INDUSTRIAL DISPUTES ACT, NO BAR OF LIMITATION COMES IN THE WAY OF THE EMPLOYEES.' AFTER QUOTING THE ABOVE PASSAGE, THE SUPREME COURT HELD AS UNDER:- 'THIS JUDGMENT HAS BEEN QUOTED BY THE HIGH COURT IN THE PRESENT CASE AND FOLLOWED. WE HAVE NO HESITATION TO SAY THAT THE REASONING IS CORRECT AND WE AGREE WITH THE SAME .' 20. IN ORDER TO ATTRACT THE PROVISIONS OF SECTION 41(1) OF THE ACT, IT IS NECESSARY THAT THERE SHOULD HAVE BEEN A CESSA TION OR REMISSION OF LIABILITY. AS HELD BY THE BOMBAY HIGH COURT, IN THE CASE OF J. K. CHEMICALS LTD. (SUPRA), CESSATION OF LIABILITY MAY OCCUR EITHER BY THE REASON OF THE LIABILITY BECOMING UNENFORCEABLE IN L AW BY THE CREDITOR COUPLED WITH DEBTOR DECLARING HIS INTENTION NOT TO HONOUR HIS LIABILITY, OR BY A CONTRACT BETWEEN PARTIES OR BY DISCHARGE OF THE DEBT. IN THE PRESENT CASE, THE ASSESSEE IS ACKNOWLEDGING THE DEB T PAYABLE TO M/S ELEPHANTA OIL & VANASPATI LTD. AND THERE IS NO MATERIAL TO INDICATE THAT THE PARTIES HAVE CONTRACTED TO EXTING UISH THE LIABILITY. ITA NO.546/ASR/2015 CO NO.01/ASR/2016 18 THUS, IN OUR VIEW IT CANNOT BE CONCLUDED THAT THE D EBT OWED BY THE ASSESSEE TO M/S ELEPHANTA OILS & VANASPATI LTD. STO OD EXTINGUISHED. 21. ALTHOUGH, ENFORCEMENT OF A DEBT BEING BARRED BY LIMITATION DOES NOT IPSO FACTO LEAD TO THE CONCLUSION THAT THE RE IS CESSATION OR REMISSION OF LIABILITY, IN THE FACTS OF THE PRESENT CASE, IT IS ALSO NOT POSSIBLE TO CONCLUDE THAT THE DEBT HAS BECOME UNENF ORCEABLE. IT IS WELL SETTLED THAT REFLECTING AN AMOUNT AS OUTSTANDI NG IN THE BALANCE SHEET BY A COMPANY AMOUNTS TO THE COMPANY ACKNOWLED GING THE DEBT FOR THE PURPOSES OF SECTION 18 OF THE LIMITATION ACT, 1963 AND, THUS, THE CLAIM BY M/S ELEPHANTA OIL & VANASPATI LT D. CAN ALSO NOT BE CONSIDERED AS TIME BARRED AS THE PERIOD OF LIMIT ATION WOULD STAND EXTENDED. EVEN, OTHERWISE, IT CANNOT BE STATED THAT M/S ELEPHANTA OIL & VANASPATI LTD. WOULD BE UNABLE TO CLAIM A SET -OFF ON ACCOUNT OF THE AMOUNT REFLECTED AS PAYABLE TO IT BY THE ASSESS EE. ADMITTEDLY, WINDING UP PROCEEDINGS AGAINST M/S ELEPHANTA OIL & VANASPATI LTD. ARE PENDING AND THERE IS NO CERTAINTY THAT ANY CLAI M THAT MAY BE MADE BY THE ASSESSEE WITH REGARD TO THE AMOUNTS REC EIVABLE FROM M/S ELEPHANTA OIL & VANASPATI LTD. WOULD BE PAID WI THOUT THE LIQUIDATOR CLAIMING THE CREDIT FOR THE AMOUNTS RECE IVABLE FROM THE ASSESSEE COMPANY. IT IS WELL SETTLED THAT IN ORDER TO ATTRACT THE PROVISIONS OF SECTION 41(1) OF THE ACT, THERE SHOULD HAVE BEEN AN IRREVOCABLE CESSION OF LIABILITY WITHOUT ANY POSSIB ILITY OF THE SAME BEING REVIVED. THE ASSESSEE COMPANY HAVING ACKNOWLE DGED ITS LIABILITY SUCCESSIVELY OVER THE YEARS WOULD NOT BE IN A POSITION TO DEFEND ANY CLAIM THAT MAY BE MADE ON BEHALF OF THE LIQUIDATOR FOR CREDIT OF THE SAID AMOUNT REFLECTED BY THE ASSESSEE AS PAYABLE TO M/S ELEPHANTA OIL & VANASPATI LTD. 22. WE MAY ALSO ADD THAT, ADMITTEDLY, NO CREDIT ENT RY HAS BEEN MADE IN THE BOOKS OF THE ASSESSEE IN THE PREVI OUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2008- 2009. THE OUT STANDING BALANCES REFLECTED AS PAYABLE TO M/S ELEPHANTA OIL & VANASPATI LTD. ARE THE OPENING BALANCES WHICH ARE BEING CARRI ED FORWARD FOR SEVERAL YEARS. THE ISSUE AS TO THE GENUINENESS OF A CREDIT ENTRY, THUS DOES NOT ARISE IN THE CURRENT YEAR AND THIS ISSUE C OULD ONLY BE EXAMINED IN THE YEAR WHEN THE LIABILITY WAS RECORDE D AS HAVING ARISEN, THAT IS, IN THE YEAR 1984-1985. THE DEPARTM ENT HAVING ACCEPTED THE BALANCES OUTSTANDING OVER SEVERAL YEAR S, IT WAS NOT OPEN FOR THE CIT (APPEALS) TO CONFIRM THE ADDITION OF THE AMOUNT OF RS.1,53,48,850/- ON THE GROUND THAT THE ASSESSEE CO ULD NOT PRODUCE SUFFICIENT EVIDENCE TO PROVE THE GENUINENESS OF THE TRANSACTIONS WHICH WERE UNDERTAKEN IN THE YEAR 1984-85. ITA NO.546/ASR/2015 CO NO.01/ASR/2016 19 15. WE FURTHER FIND THAT THE ASSESSEE DURING THE SU BSEQUENT YEARS HAD ADJUSTED THE ADVANCES AGAINST SALE OF PLOTS AS IS A PPARENT FROM PB-2, WHERE AGAINST SL. NOS. 4, 6, 11, 17 & 18 THE PLOTS WERE SOLD AND THE AMOUNT OF DEPOSIT WAS ADJUSTED. THE FACT OF PART OF ADVANCES HAVING BEEN ADJUSTED IN SUBSEQUENT YEARS ITSELF PROVES THAT THE LIABILITY HAD NOT CEASED AND THEREFORE, ALSO, THE ADDITION U/S 41(1) OF THE ACT WAS NOT JUSTIFIED AND THE LD. CIT(A) HAS RIGHTLY DELETED T HE SAME. 16. THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCU MSTANCES AND IN VIEW OF JUDICIAL PRECEDENTS, WE DO NOT FIND ANY INF IRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS UPHELD. THEREFORE, GROUND NOS. 1 TO 3 OF THE REVENUE ARE DISMISSED. 17. COMING TO GROUND NO.4, REGARDING COMMISSION REC EIVED BY THE ASSESSEE, WE FIND THAT THE ASSESSEE HAD FILED COMPL ETE DETAILS OF NAMES AND ADDRESSES OF THE PERSONS FROM WHOM IT HAD RECE IVED COMMISSION @ 1% OF THE SALES CONSIDERATION. THE A.O. ASSUMED CO MMISSION TO BE 2% IN FEW CASES AND 1% IN FEW CASES AND ARBITRARILY M ADE AN ADDITION OF RS.4,55,768/-. THE AO DID NOT BOTHER TO EXAMINE ANY OF THE PERSONS FROM WHOM THE COMMISSION WAS RECEIVED TO FIND OUT T HE RATE OF COMMISSION. THEREFORE, THE LD. CIT(A) HAS RIGHTLY D ELETED THE ADDITION. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CA SE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORD INGLY GROUND NO.4 OF THE REVENUE IS DISMISSED. 18. IN NUTSHELL, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ITA NO.546/ASR/2015 CO NO.01/ASR/2016 20 16. AS REGARDS C.O. OF THE ASSESSEE, SINCE WE HAVE ALREADY UPHELD THE ORDER OF THE LD. CIT(A), THE SAME IS ALSO DISMISSED AS IT IS ONLY SUPPORTIVE TO THE ORDER OF THE LD. CIT(A) AND NO OTHER GRIEVAN CE HAS BEEN RAISED. 17. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AS WELL AS C.O. OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/09/2 016. SD/- SD/- (N.K. CHOUDHRY) (T.S. KAPOOR ) JUDICIAL MEMBER ACCOUNTANT MEMBER /SKR/ DATED: 26/09/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. SADGURU LAND FINANCE, AMRITSAR. 2. THE DCIT, CIRCLE-1, ASR. 3. THE CIT(A), ASR. 4. THE CIT, ASR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.
