Ameya Engineering Ltd., Ahmedabad V. The Income tax Officer,Ward-2(1), Ahmedabad

ITA 581/AHD/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6459 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y C SURTI
• Assessee Lawyers: BHAVESH SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC AHMEDABAD BEFORE SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER ITA NO.581/AHD/2011 ASSESSMENT YEAR:2007-08 DATE OF HEARING:30.5.11 DRAFTED : 30.5.11 AMEYA ENGINEERING LTD. GROUND FLOOR, ISHITA APARTMENT, NR. GANDHIKUNJ SOCIETY, ELLISBRIDGE, AHMEDABAD PAN NO.AABCA6396E V/S . INCOME TAX OFFICER, CENTRAL WARD-2(1), AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI BHAVESH SHAH, AR RESPONDENT BY:- SHRI Y.C. SURTI, DR O R D E R THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF C OMMISSIONER OF INCOME-TAX(APPEALS)-III, AHMEDABAD IN APPEAL NO. CI T(A)-III/129/ITO/CW- 2(1)/09-10 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE G ROUND:- 1. THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS INS ALLOWING THE APPEAL PARTLY. HE OUGHT TO HAVE ALLOWED THE APPEAL FULLY IN ACCORDANCE WITH THE GROUNDS OF APPEAL RAISED BY THE APPELLANT BEFORE HIM. I.ADDITION ON ACCOUNT OF CESSATION OR REMISSION OF LIABILITY U/S 41(1) OF TRADE CREDITORS OF RS81,911/ - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION TO THE EXTENT OF RS.81,911/- (RS.26,048/- OF HUSAIN HOLDING PVT. LTD. AND RS.55,863/- OF GLOBAL MARINE AGENCIES) OUT OF TOTAL ADDITION OF RS.1,63,037/- AS MADE BY T HE A.O. ON ACCOUNT OF DISALLOWANCE OF CESSATION OR REMISSION O F LIABILITY U/S.41(1) OF THE ACT ON THE FINDING THAT THE TWO CR EDITORS NAMELY ITA NO.581/AHD/2011 A.Y. 2007-08 AMEYA ENGINEERING LTD. V. ITO WD-2(1) ABD PAGE 2 HUSAIN HOLDING AND GLOBAL MARINE AGENCY HAVE WRITTE N OFF THE ACCOUNT OF THE APPELLANT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN FAILING TO CONSIDER THE FACT THAT SIMILAR ADDITION MADE BY THE A.O IN EARLIER A.Y 2003-04 ON ACCOUNT OF CESSATION OR REMI SSION OF LIABILITIES HAS BEEN DELE4TED BY THE HONBLE ITAT V IDE ITS ORDER DATED 23-7-2007. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT IN THE BALANCE- SHEET OF THE ASSESSEE CERTAIN TRADE CREDITORS WERE SHOWN WHICH REMAINED U NCHANGED FOR QUITE LONG PERIOD OF TIME. AO ISSUED NOTICE U/S.133(6) OF THE INCOME-TAX ACT, 1961 TO THE FOLLOWING SIX PARTIES:- SR.NO. NAME OF THE PARTY AMOUNT SHOWN AS OUTSTANDING 1 MANSUKHAI DODIYA RS. 7,630/- 2 DAULONG ROAD MARK RS.6,48,865/- 3 HUSAIN HOLDING PVT. LTD. RS. 26,048/- 4 CONTINENTAL TRADING CO. RS. 6,836/- 5 SOM DUTT BUILDERS LTD. RS. 66,660/- 6 GLOBAL MARINE AGENCIES RS. 55,863/- OUT OF THESE PARTIES AT SR NO.1 NAMELY MANSUKHBHAI DODIYA OF RS.7,630/-, SR NO.4 CONTINENTAL TRADING CO. OF RS.6,836/-, SR NO.5 SOM DUTT BUILDERS LTD. EITHER DID NOT COMPLY WITH THE NOTICES OR THE NOTIC ES COULD NOT BE SERVED BY THE POSTAL AUTHORITIES ON THEM. NO ADDITION WAS MADE IN RESPECT OF THE PARTY AT SR NO.2 DAULONG ROAD MARK OF RS.6,48,865/- BY THE AO. THE REPLY RECEIVED FROM PARTY AT SR. O.3 HUSAIN HOLDING PVTG.LTD. OFRS.26,0 48/- AND GLOBAL MARINE AGENCY OF RS.55,863/- INDICATED THAT THOUGH THE AMO UNTS WERE SHOWN BY THESE PARTIES AS RECEIVABLE FROM THE ASSESSEE, HUSA IN HOLDING PVT. LTD. HAD WRITTEN OFF THE ACCOUNT OF THE ASSESSEE IN THEIR BO OKS OF ACCOUNTS AS ON 31-03- 2004. SIMILARLY, GLOBAL MARINE AGENCIES HAS SHOWN T HE AMOUNT AS RECEIVABLE FROM THE ASSESSEE BUT THE ACCOUNT WAS WRITTEN OFF. FURTHER IN THE BALANCE- SHEET OF THE ASSESSEE AS ON 31-03-2007, THE TOTAL L IABILITY OF RS.12,22,765/- ITA NO.581/AHD/2011 A.Y. 2007-08 AMEYA ENGINEERING LTD. V. ITO WD-2(1) ABD PAGE 3 HAS BEEN SHOWN WHICH INCLUDED THE AMOUNT OUTSTANDIN G FROM THE FOLLOWING THREE PARTIES:- 1 ARASURI STEEL ROLLING MILL RS.1,78,052/- 2 BHAGYALAXMI STEEL ROLLING MILL RS.1,59,526/- 3 MAARADIA CHEMICALS LTD. RS. 73,285/- THESE THREE PARTIES HAS SHOWN OUTSTANDING CREDITORS AS ON 31-03-2003 AS THESE AMOUNTS WERE ALSO OUTSTANDING FOR QUITE LONG TIME AND ASSESSING OFFICER ALSO MADE ADDITION U/S.41(1) OF THE ACT IN RESPECT OF THE ABOVEMENTIONED THREE PARTIES IN ASSESSMENT YEAR 200 3-04 ON THE GROUND THAT SINCE THE AMOUNTS WERE SHOWN AS OUTSTANDING FOR QUI TE LONG TIME AND SOME OF THESE PARTIES HAVE GONE INTO LIQUIDATION AND NO CLA IM FROM LIQUIDATOR HAS BEEN RECEIVED, THEREFORE ACCORDING TO AO THE LIABILITY I N RESPECT OF THE ABOVEMENTIONED THREE PARTIES HAD CEASED. THE MATTER TRAVELED UPTO ITAT LEVEL AND THE HONBLE ITAT VIDE ORDER DATED 23-07-2 007 ALLOWED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT IT CANNOT BE HELD T HAT LIABILITY HAD CEASED TO EXIST IN THE HANDS OF THE ASSESSEE IN THE ABSENCE O F ANY MATERIAL TO THE CONTRARY. IN ASSESSMENT YEAR 2007-08 NO ADDITION HA S BEEN MADE IN RESPECT OF THE ABOVEMENTIONED THREE PARTIES BUT THE ADDITIO N HAS BEEN MADE IN RESPECT OF BALANCE AMOUNT EXCEPT FOR THE PARTY AT S R NO.2 DAULONG ROAD MARK. 4. AGGRIEVED BY THIS ORDER OF ASSESSING OFFICER ASS ESSEE WENT IN APPEAL BEFORE LD. CIT(APPEALS) AND ASSESSEES CONTENTION B EFORE HIM WAS THAT SINCE THE ASSESSEE HAS NOT CREDITED THE PROFIT AND LOSS A CCOUNT BY WRITING BACK THE AMOUNT OF THE ABOVEMENTIONED PARTIES, THERE IS NO C ESSATION OF LIABILITY. THE ASSESSEE-COMPANY IS WILLING TO PAY ITS OUTSTANDING DUES BUT DUE TO CASH CRUNCH THEY COULD NOT BE PAID. FURTHER SINCE THE AS SESSEE HAS NOT WRITTEN BACK THE TRADING LIABILITIES AND CREDITED TO THE PR OFIT AND LOSS ACCOUNT THE PROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE. REL IANCE WAS PLACED ON THE ITA NO.581/AHD/2011 A.Y. 2007-08 AMEYA ENGINEERING LTD. V. ITO WD-2(1) ABD PAGE 4 DECISION OF HONBLE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003- 04, WHEREIN SUCH ADDITION WAS DELETED. 5. TAKING INTO CONSIDERATION THE SUBMISSION OF THE ASSESSEE LD. CIT(APPEALS) PARTLY ALLOWED THE APPEAL OF THE ASSES SEE. 6. FURTHER AGGRIEVED ASSESSEE IS IN APPEAL BEFORE T HE TRIBUNAL. 7. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE REITERATED THE SAME SUBMISSION AS MADE BEFORE LD. CIT(APPEALS) AND ALSO RELIED ON THE ORDER OF HONBLE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04. 8. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF LD. CIT(A). 9. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD I FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT THE TWO CREDITORS HA VE WRITTEN OFF THE AMOUNTS DUE TO THEM FROM THE ASSESSEE IN THEIR BOOKS OF ACC OUNT AS NON RECOVERABLE. IN THE CASE OF HUSAIN HOLDING PVT. LTD. THE AMOUNT OF RS.26,048/- WAS WRITTEN OFF AS ON 31-03-2004 AND IN THE CASE OF GLOBAL MARI NE AGENCIES THE SUM OF RS.55,863/- WAS WRITTEN OFF BEFORE 31-03-2007. IT A MOUNTS TO CESSATION OF LIABILITY AS PER THE PROVISION OF SECTION 41(1) OF THE ACT. THEREFORE THE FACTS OF THIS YEAR ARE NOT SIMILAR TO THE FACTS DURING THE A SSESSMENT YEAR 2003-04, WHEREIN THE CREDITORS HAVE NOT WRITTEN OFF THE AMOU NTS DUE TO THEM IN THEIR BOOKS OF ACCOUNT AND THEREFORE THE DECISION OF THE HONBLE ITAT IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2003-04 IS NOT APPLICAB LE FOR THE YEAR UNDER APPEAL. 10. IN VIEW OF THIS, THE ORDER PASSED BY LD. CIT(A) IS HEREBY UPHELD AND FOR THE SAKE OF BREVITY THE RELEVANT PORTION OF THE ORD ER OF LD. CIT(A) REPRODUCED AS UNDER:- ITA NO.581/AHD/2011 A.Y. 2007-08 AMEYA ENGINEERING LTD. V. ITO WD-2(1) ABD PAGE 5 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT . I FIND THAT THE TWO CREDITORS, NAMELY, HUSAIN HOLDING (WHO HAS WRITTEN OFF THE ACCOUNT OF THE PARTY AS BACK AS ON 31/03/2004) AND GLOBAL MARI NE AGENCY HAS ALSO WRITTEN OFF THE ACCOUNT OF THE APPELLANT BY RS .55,863/-. IN OTHER WORDS, BOTH THESE PARTIES, NAMELY, HUSAIN HOLDING A ND GLOBAL MARINE AGENCIES CANNOT LEGALLY CLAIM ANY AMOUNT FROM THE A PPELLANT. FURTHER, THE AMOUNTS HAVE BEEN SHOWN AS OUTSTANDING FOR MORE THAN 5-6 YEARS. AS THE APPELLANT COULD NOT PAY THE DUES TO THE CRED ITORS, THESE TWO CREDITOR HAS WRITTEN OFF THE ACCOUNT OF THE APPELLA NT IN THEIR BOOKS OF ACCOUNTS. IN MY OPINION, THE ACT OF WRITING OFF THE ACCOUNT OF THE APPELLANT BY THE CREDITORS AMOUNTS TO THE CESSATION OF LIABILITY U/S.41(1) OF THE I.T. ACT. IN THE CASE OF HUSAIN HOLDING, THE AMOUNT WAS WRITTEN OFF AS ON 31/3/2004. THEREFORE, AS ON 31/3/2007 WHEN TH E AO CAME TO KNOW ABOUT SUCH WRITE OFF BY HUSAIN HOLDING PVT. LT D., IN MY OPINION , THIS AMOUNTS TO CESSATION OF LIABILITY U/S.41(1) OF THE ACT. THE ACTION OF THE AO IN TREATING THE AMOUNT OF RS 26,048/- IN RES PECT OF HUSAIN HOLDING PVT. LTD. AND RS.55,863/- IN RESPECT OF GL OBAL MARINE AGENCIES, WHO HAVE WRITTEN OFF THE ACCOUNT OF THE APPELLANT I N THEIR BOOKS OF ACCOUNT PRIOR TO 31/3/2007 IS TAXABLE AS CESSATION OF LIABILITY U/S.41(1) IN THE HANDS OF THE APPELLANT. IN RESPECT OF OTHER PAR TIES, THERE IS NO PROOF WHETHER SUCH PARTIES HAVE WRITTEN OFF THE ACCOUNT O F THE APPELLANT OR STILL SUCH AMOUNTS ARE SHOWN AS RECEIVABLE BY THEM FROM T HE APPELLANT. IN THE ABSENCE OF SUCH FINDING IT CANNOT BE HELD THAT THE LIABILITY IN RESPECT OF SUCH PARTIES HAS CEASED TO EXIST. THE ADDITION M ADE U/S.41(1) IN RESPECT OF SUCH PARTIES CANNOT BE SUSTAINED. IN SHO RT, ADDITION TO THE EXTENT OF RS.26,048/- + RS.55,863/- = RS.81,911/- O NLY IS SUSTAINED. 11. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31/05/2011 SD/- (D.K. TYAGI) (JUDICIAL MEMBER) AHMEDABAD, DATED : 31/05/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 4. THE CIT CONCERNS. 2. THE RESPONDENT. 5. THE DR, ITAT, AHMEDABAD 3. THE CIT(APPEALS)-III, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD