ITO, New Delhi V. M/s Double Bell Auto Drive Pvt. Ltd., New Delhi

ITA 5831/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0459 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 21-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH B DELHI ] BEFORE SHRI A. D. JAIN, JM AND SHRI K. D. RA NJAN, AM I. T. A. NO. 5831 (DEL) OF 2010 ASSESSMENT YEAR : 2007-08. THE INCOME-TAX OFFICER, M/S. DOUBLE BELL AU TO DRIVE PVT. LTD., W A R D : 10 (4), VS. 28 MO TIA KHAN, JHANDEWALAN ROAD, N E W D E L H I. N E W D E L H I 110 055. P A N / G I R NO. AA A CD 4076 E. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI RAJESH JAIN, C. A.; DEPARTMENT BY : SHRI H. K. LAL, SR. D. R. O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 7-08 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XVIII, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE REPRODUCED AS UNDER :- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.1,01,61,081/- MADE UNDER SECTION 41(1) OF 2 I. T. A. NO. 5831 (DEL) OF 2010 THE I. T. ACT, 1961 AS NO CONFIRMATIONS FROM THE CR EDITORS WERE FURNISHED BEFORE THE AO IN SPITE OF SEVERAL OPPORTUNITIES AFF ORDED TO THE ASSESSEE. 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO DELE TING THE ADDITION OF RS.1,01,61,081/- MADE UNDER SECTION 41(1) OF THE I. T. ACT, 1961 [HEREINA FTER REFERRED TO AS THE ACT]. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS REQUIRED THE ASSESSEE TO FILE CONFIRMATIONS IN RESP ECT OF SUNDRY CREDITORS. IT WAS SUBMITTED BY THE ASSESSEE THAT ALL THE CREDITORS WERE VERY OLD AND B ELONGED TO PERIOD WHEN THE BUSINESS OF THE ASSESSEE WAS AT ITS BOOM. DUE TO HUGE LOSSES AND F INANCIAL INSTABILITY THE ASSESSEE HAD FAILED TO DISCHARGE ITS LIABILITY TOWARDS CREDITORS AND REQUE STED THEM TO EXTEND THE PAYMENT OF THEIR DUES. SINCE THE CREDITORS WERE UN-HAPPY DUE TO NON-RECEIP T OF THEIR CLAIMS, THEY BECAME TOTALLY NON- COOPERATIVE AND WERE NOT WILLING TO PROVIDE THE DET AILS AND CONFIRMATIONS AS DESIRED BY THE ASSESSING OFFICER. HOWEVER, THIS CONTENTION OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER AT THRESH-HOLD AND TREATED THE AMOUNT CHARGEABLE TO TAX UNDER SECTION 41(1) OF THE ACT. 4. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT UNLESS AND UNTIL THE LIABILITY WHICH HAS CEASED OR HAS BEEN REMITTED DURING THE IMPUGNED ASSESSMENT YEAR WAS DEBITED AND CLAIMED IN THE PROFIT AND LOSS ACCOUNT AND ALLOWED IN THE E ARLIER YEARS, IT COULD NOT BE TREATED TO BE AN INCOME UNDER SECTION 41(1) OF THE ACT. THE ASSE SSEE PLACED RELIANCE ON VARIOUS DECISIONS TO SUPPORT HIS CONTENTION. 5. THE LD. CIT (APPEALS) CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE. HE NOTED THAT CREDITORS WERE VERY OLD AND BELONGED TO THE PERIOD WHEN THE ASSESSEE COMPANY WAS IN ITS BOOM PERIOD. SUBSEQUENTLY, DUE TO HUGE LOSSES AND FINAN CIAL INSTABILITY THE ASSESSEE HAD FAILED TO DISCHARGE THE ABOVE LIABILITY ALTHOUGH THE FIGURE O F SUNDRY CREDITORS HAD BEEN REDUCED FROM RS.1,08,12,859/- AS ON 31 ST MARCH, 2006 TO RS.1,01,61,081/- AS ON 31 ST MARCH, 2007. HE FURTHER NOTED THAT THE ASSESSING OFFICER HAD NOT DOUBTED TH E GENUINENESS OF SUNDRY CREDITORS AS THE DETAILS OF SUNDRY CREDITORS ALONG WITH THEIR NAMES, ADDRESS ES AND OTHER PARTICULARS WERE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS AND THE AO HAD NOT MADE ANY ADVERSE REMARKS AGAINST THE SAME IN 3 I. T. A. NO. 5831 (DEL) OF 2010 THE ASSESSMENT ORDER. THE AO HAD ADDED THE AMOUNT ONLY DUE TO LACK OF CONFIRMATIONS OF THE PARTIES. HE HAD NOT CARRIED OUT ANY ENQUIRY TO DIS PROVE THE GENUINENESS OF SUNDRY CREDITORS. HE, THEREFORE, DELETED THE ADDITION. 6. BEFORE US THE LD. SR. DR SUBMITTED THAT SINCE TH E ASSESSEE HAD NOT FILED CONFIRMATIONS FROM THE SUNDRY CREDITORS, THE AO WAS JUSTIFIED IN MAKING THE ADDITION UNDER SECTION 41(1) OF THE ACT AS LIABILITY TO PAY CEASED TO EXIST. ON THE OT HER HAND, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD.CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. UNDER SECTION 41(1) OF THE ACT WHERE AN ALLOWANCE O R DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDI TURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPE CT 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 HIM OR THE VALUE OF BENEFIT ACCRUING TO HIM, SHALL BE DEEM TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABL E TO TAX AS INCOME OF THAT PREVIOUS YEAR WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WH ICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT. THEREFOR E, FOR APPLICABILITY OF PROVISIONS OF SECTION 41(1) OF THE ACT THERE SHOULD BE ALLOWANCE OR DEDUC TION IN RESPECT OF ANY LOSS, EXPENDITURE OR TRADING LIABILITY AND THE ASSESSEE SHOULD HAVE OBTA INED ANY BENEFIT IN RESPECT OF ANY LOSS, EXPENDITURE OR TRADING LIABILITY BY WAY OF REMISSIO N OR CESSATION THEREOF. IN THE CASE BEFORE US, THE ASSESSEE HAD INCURRED TRADING LIABILITY ON ACCOUNT OF PURCHASES, WHICH WERE ALLOWED BY THE ASSESSING OFFICER AS EXPENDITURE. HOWEVER, DUR ING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD NOT OBTAINED ANY BENEFIT IN RESPECT OF THE TRAD ING LIABILITY BY WAY OF REMISSION OR CESSATION. THEREFORE, PROVISIONS OF SECTION 41(1) OF THE ACT A RE NOT APPLICABLE. MOREOVER, IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE TRADE CREDITORS A RE NOT GENUINE. EVEN IF THEY ARE NOT GENUINE, THE ADDITION CANNOT BE MADE IN THE YEAR UNDER CONSI DERATION. THE ADDITION COULD HAVE BEEN MADE IN THE YEAR IN WHICH SUCH TRADING LIABILITY WA S INCURRED BY THE ASSESSEE. MERELY BECAUSE 4 I. T. A. NO. 5831 (DEL) OF 2010 THE SUNDRY CREDITORS ARE OLD, THE ADDITION CANNOT B E MADE BY INVOKING PROVISIONS OF SECTION 41(1) OF THE ACT. THEREFORE, IN OUR CONSIDERED OPI NION, THE LD. CIT (APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION. ACCORDINGLY, WE DO NOT F IND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (APPEALS). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 24 TH FEBRUARY, 2011. SD/- SD/-. [ A. D. JAIN ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24 TH FEBRUARY, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 5 I. T. A. NO. 5831 (DEL) OF 2010