ITO, Ward, Sunam V. Shri Mohinder Pal Singla, Sunam

ITA 606/CHANDI/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7616 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 01-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 201; 13

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, च डीगढ़ I N T H E I N C O M E T A X A P P E L L A T E T R I B U N A L D I V I S I O N B E N C H , “ B ” , C H A N D I G A R H B E F OR E SH R I N . K . SA I N I , V I C E P R E SI D E N T & S H R I S U D H A N S HU SR I V A S T A V A , J U D I C I A L M E M B E R आयकर अपील सं./ ITA No. 606/C H D / 2 0 1 9 नधा रण वष / Assessment Year : 2 0 1 3 - 1 4 The ITO, Ward-Sunam, बनाम Sh. Mohinder Pal Singla, Nr, Gain Market, Geeta Road, Sunam थायी लेखा सं./PAN NO: AGXPS5686H अपीलाथ /Appellant यथ /Respondent Hearing though video Conferencing नधा रती क ओर से/Assessee by : Sh. Sudhir Sehgal, Advocate राज व क ओर से/ Revenue by : Dr. Ranjeet Kaur, Sr. DR स ु नवाई क तार$ख/Date of Hearing : 22.03.2022 उदघोषणा क तार$ख/Date of Pronouncement : 14.06.2022 आदेश/Order P er S u d h an sh u S ri va s ta va , J u d i c i a l M e mb e r : T hi s ap pe al i s p r e f er re d by t h e D e p a rt m e nt a ga i ns t or d er d a t e d 04 . 0 2. 2 01 9 pa s s ed b y th e L d. Co m mi s s i one r o f I n co me T a x (A pp e a ls ) , P a ti a la [ h e re i n a ft e r r e fe rr ed t o a s ‘CI TA )’ ] a nd per ta i ns t o a s s es s me n t ye a r 20 13 -2 0 1 4. 2. 0 T he b ri e f fa c t s o f t he c a s e a re t h a t du ri ng t he ye a r u nd e r c ons i de ra ti o n , t he a s s es s e e w a s a par t n er i n M / s Raj es h Ri c e M i l l s, S una m an d w as al s o e n ga ge d i n t he b u s in es s o f t ra ding. The r e t ur n o f i nc o me w a s fi l e d d e cl a r i n g a n i nc o m e o f R s . 3, 12, 490/ - a nd 2 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam s ub se qu en t l y, a ft e r t he p ro ce s s in g of r e t ur n u/ s 14 3( 1) o f t he I nc o m e T ax A c t , 19 61 ( he r ei n a ft e r ca ll e d 't he A c t' ), t he ca s e w as s e le c t e d un de r CA S S gui de li ne s fo r s cr ut i n y . 2. 1 D uri n g t h e c o u rs e o f a s s es s me n t pr o c e e d i n gs , the A ss es s i ng O ff ic er (A O ) n ot ed t ha t t h e as s e s s ee ha d ra i s e d u nse cu re d lo an s a mou nt i n g t o Rs . 2 , 1 1, 37, 3 8 1 / - o f w hi ch Rs . 1, 12, 37, 38 1/ - ha d be e n ra i s e d fr o m M / s A a di K ri s hn a A gr o F o o ds , S una m a n d R s . 99, 00 , 00 0/ - ha d b ee n r a i s ed fr o m M / s E r ac k T e ch En g in ee ri ng L u dhi a n a . T he a s s es s e e w a s r eq ui r e d t o e xp l a i n t he s a me a nd i t w as th e s ub mis s i o n o f t he a s s e ss e e t ha t t h e s e c re d i t s p e r ta i n e d t o t h e p er io d 2 0 0 3 -0 4 a n d 20 0 5- 06 a n d s i nc e t he n t he y h a v e b ee n ap pe a ri ng i n t he ba l an c e sh e e t s . I t w as fu r t h e r s u b m it t e d t ha t u p t o t h e as s e s s me nt y e ar 201 2- 1 3 , t hes e a m o u n ts w er e s ho w n u n de r ‘s u nd ry c re di t o rs ’, ho w e v e r, s ubs eque nt l y du e t o s o me mi s t a ke , t h e s e a mou n ts w er e s h ow n as ‘u ns e c u red l oa ns ’ . Th e A O de p ut e d th e I n s pe c t or o f I n c o me Ta x t o c on du c t f i e ld i n q ui r i es a nd i t w as r ep o rt e d by t h e Ins p ec t o r t ha t n o fi r m w as e x i sti ng at t he a d d r es s pr o vi de d. Th e r e f o r e , th e A O is s u ed a s ho w c a s e n ot ic e t o t he a s s es s e e pr o pos i ng t o a d d b a c k t h e i mp ug ne d a mou nt o f Rs . 2, 11, 37, 1 8 1/ - as i nc o me o f t h e as s e s s ee . T he a s s es s e e sub mi t te d a n o th er r e pl y be fo r e t h e A O s t at i ng t h at t h e s e cr ed it s p e rt a i n ed t o e a rl i e r y e a rs an d du e to s o m e di s pu t e w i t h t he se pa rt i e s , th e a s s es s e e w a s no l o ng e r ha vi ng a n y bu s in e s s d ea l in gs w i t h t he s e t w o p a r t i es . I t w a s al s o s ub m it t ed t ha t t h e 3 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam l ia bi l i t y t o pa y b a ck t h e a mou nt s t i l l e xi s t e d a n d i t w a s n ot a c as e o f c es s a t i on o f li a bi li t y i n t e r ms o f s e c t i o n 41( 1 ) o f t h e A ct an d, t h e r e fo re , t he a mo un t w a s n o t l i a bl e t o be a d de d t o th e i nc o me o f t h e a s s es s e e. H ow e ver , i t w a s t he vi ew o f t h e A O t ha t t he e x p la nati on s a nd s ub m i s s io ns gi v e n by t he a s se s s e e w e re no t ac c e p ta bl e a n d th a t t h e a s s es s e e ha d dr a f te d t he ba l an ce s h ee t t o s ui t h is pe rs o na l ne ed s a nd , t he re fo re , t h e a m o unt w a s li a bl e t o t he ad de d t o t he i nc o m e o f t h e a s s es s e e. A cc or d in gl y, a ft e r ad di ng t he a m ou nt o f Rs . 2, 11, 37 , 3 81 / - t h e a s s es s men t w as c om p l et ed a t an in c o m e o f Rs . 2, 14, 49 . 8 71/ -. 2. 2 T he a s s e s se e ca rr i e d t he ma tt e r be f or e t h e Ld . F i r st A ppe l la t e A ut h or i t y c h a l l e n g i ng t h e a dd it i o n. T he r e w a s a de la y i n fi l i n g th e a pp e a l be for e t h e Ld. CI T(A ) b ec a u s e i t w a s t h e c o nt e n t i o n o f th e a s s es s e e be for e t he L d. C I T( A ) th at t he a s s es s me n t or de r h a d no t be en s e rve d up on hi m. T he L d. CI T(A ) c on do ne d t he de la y i n fi l i n g t h e a pp e a l be for e hi m a nd a l s o a l l ow e d th e a ppe al o f t he a ss e s s e e on me ri ts . 2. 3 A ga in s t t he co n d o na t io n o f d el ay b y t h e L d. CI T(A ) a nd a g a in s t t he d el e t i o n o f i m pu gn e d a d di t i o n o n me r i t s , t he D ep a rt me n t h as no w a pp r o ac he d t hi s T r i bu n a l ch al l en g i n g t he o rd er o f t h e L d. C IT (A ) by ra i s i n g t h e fo ll ow i n g g ro un ds o f a p pe a l : - 1. Wh e t h e r o n t he fa ct s & i n t he c ir c um s t anc es o f t h e c as e , th e L d . CIT ( A) h as e r r e d i n c o n c l u di ng t h at am ou nt s s ho w n u n de r h e a d ' Su ndr y Cr e d i t or s ' w er e 4 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam ne v er d e b it e d t o Pr of i t & L o s s A cc ou n t of t he as s e sse e i n an y ye ar . 2. Wh e t h e r on t he f a c t s 85 i n th e c i r c u m s t an c e s of t he c as e , t h e L d. CIT ( A ) was r i g ht i n al l o wi ng c o n do n a ti o n of de la y f or f il i n g o f app ea l i n t h i s c as e . 3. Wh e t h e r on t he f a c t s 85 i n th e c i r c u m s t an c e s of t he c as e , t h e L d . CI T ( A) has f a il e d to t a k e c og n iz a nc e o f f ac t t ha t t he Su n dr y Cr ed it or s we r e f o u nd n ot ex i s te nt at t h ei r ad d r es s e s and t h e as s e s se e hi m s e l f f a i l e d t o f i l e c on f i r m e d c op i e s. 4. It i s p r a ye d t h at t he o rd er If L d. C I T (A ) b e s et asi de an d th a t o f t he As s e s s in g O ff i c e r be r e st or e d. 5. T he a pp e l la nt c r a v es l ea ve to a dd or am e n d a n y gr o u nds of a pp e al b ef or e t he a pp e a l i s h ea r d a n d f in al ly d i s pos e d o f . 3. 0 A t t he o ut s e t , t he Ld. S r. D e pa rt me n t a l Re pre s en t a t iv e (S r . D R) s ub m i tt e d th at th e Ld . C I T ( A ) h ad w r on gl y c o n do ned t he d e la y by re c or di ng a fi nd i n g t h at t h e a s se s s me n t o r de r w as n ot s e r ved o r d ee me d t o ha v e be e n s e rv e d ei t he r a t t he a dd r e ss a s pe r t he P A N da t a ba s e or a t t he a dd re s s a s a p pe a ri ng i n r et ur n o f i nc o me a n d, th e r e fo re , t he a s s es s e e w a s pre ve nt e d by a s u ff i c i en t c as e i n no t fi l in g t h e a p p ea l i n t i m e . T h e L d. S r . D R ve he me nt ly a rg u ed t ha t t h i s o bs er va ti o n o f th e L d . CI T(A ) w as fa c t u a l ly i n c or r e c t a n d as pe r r e c o rd s , t h e a s s es s me nt o rde r ha d be e n d ul y s e rv e d o n th e a s s es s e e . T he L d . S r . DR arg u ed t h a t t h e L d. CI T (A ) ha d e rre d o n fa ct s i n c o nd on i n g th e d e lay and , t he re fo r e , 5 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam t he o r de r o f t he L d. C I T( A ) w a s i n v al i d i n e ye s o f l a w a n d w a s l i ab l e t o t he se t as i d e at t h e v er y th re sh ol d i t s e l f. 3. 1 O n m e r i ts , t he L d. S r . D R r el i e d on th e obs e r vat i o ns a n d fi n di ngs o f th e A O i n t hi s r e g a r d an d s u b m i tt e d t h at s i nc e the a ss e s s e e h a d hi mse l f a d m i t t e d t ha t h e ha d no b us i ne s s a ct i vi ti e s w i t h t he s e p a r t i es a ny l on ge r d ue t o di s p u t e s a n d a l s o t h a t h e d id n ot ha v e fu r t h e r i n fo r ma t i o n a b ou t t h e tw o pa r t i e s , i t w as ap p a re nt t ha t t he a s s e s s ee ha d ra i s e d f ic t it i o us l i a bi li t i e s an d h ad i nt ro d u c e d h is ow n u na cc ou n te d m o ne y i nt o t h e b oo ks a c co u nt u n d e r t h e g ar b o f uns ec u r e d l oa ns . I t w as fu r t h e r a r g ue d by t he L d. S r . D R t ha t i t w a s i mp ro ba b l e t ha t t h e tw o pa r t i es w oul d n ot b e ma ki ng a n y e f fo r t s t o r e c o v e r t he a m o u nt d ue fr o m t he a s s es s e e an d w ou l d ra t he r b e s i t t i n g q ui e t ly e ve n a ft e r t he r e h a d be e n s o me al l e ge d di s p ut e b et w e e n t he a s s es s e e a n d t h os e p a r t ie s . I t w as a l s o a rg ue d b y th e L d. S r. D R t h a t t he a s se s s e e h a d n ot fi l e d a n y do c u m e n ta ry e vi de nc es b e for e t h e A O t o e st a bl i sh t he fa c t o f di s p ut e w i th th es e c o nc e rn s . I t w a s a l so hi g hl i gh t e d by t he L d . S r. D R t h a t t h e a s s es s e e ha d n o t fi l ed a n y c o n fi r m e d c op y o f a cc ou nt w i t h t h es e pa r t i es a nd t ha t t hes e t w o pa rt i es h ad al s o not b e e n fi l in g a n y I nc o me T a x Re t ur ns a n d, t h e re for e, i t w a s v er y m u c h ap p a r e nt th a t t he i m p ug n e d a dd i t io n s ha d be e n r ig h tl y ma d e b y t he A O but t h e Ld. CIT (A ) ha d gr os s l y e r re d in d el e ti ng t he a d di ti on . 6 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam 4. 0 In r es p o ns e t o t he a r gu me nt s o f t h e L d. S r. D R, t he L d . A ut ho r i se d Re pre s e nt at i ve (A R ) s u b mi t te d t ha t as fa r a s t h e i ss ue o f co n do n a t i on o f de l ay b y t he L d. C I T (A ) w a s c o nc e rn e d, th e s a m e ha d be e n c on d o ne d by t he L d. CI T ( A ) a ft e r d u l y c ons i de ri ng t he fa c ts on r e c o r d . H e dr ew o ur a tt e n t i o n t o t he p a ge s 4 an d 5 o f t h e o r de r o f t he L d. CI T (A ) a n d s ub m i tt e d t h at t he L d. CI T (A ) h as gi ve n a c a te go ri ca l f in d i n gs i n th is re g a r d t h a t t h e a s s es s me n t o r d e r w a s n ei t he r s er v e d n o r d e e m ed t o h av e be e n s e r ve d e i t he r o n t he a d dr es s as per t he P A N dat a or at t he a d d r es s a s pe r t he r e t u r n o f in c o m e, t he r e f or e , a nd t he a s se ss e e h ad a s u ff i c i en t c au s e fo r n o t fi l i n g th e fi rs t a pp e a l w i t h i n t h e pe r i o d o f li m it a t i o n . T h e L d. A R s u b mi t t e d t ha t t h e L d . C IT ( A ) ha d ri gh t l y cond on e d t he d e l a y a nd h a d a ls o obs e rve d t ha t i f t he d a t e o f s up pl y o f t he c op y o f t he a s s es s men t o r de r i s t o be c ons i de r e d, t he n t h e r e w as no de l a y i n fi l i ng t he a pp ea l b y th e a s s es s e e . 4. 1 O n me ri ts o f th e c a s e, th e L d. A u th o r i s ed Re pr es e n te d (A R) s ub m i tt e d t h a t a l l t he c r e d i ts pe rt ai n e d t o e ar l ie r as s e s s me nt y e a rs as ha v e a l s o b ee n no t e d b y t h e A O i n t he a s s es s m en t o rd e r . I t w as al s o s ub m i tt e d t ha t t he s e w e re no t tr ad i n g l i ab i l i t i e s an d t h e r e w a s n o de d uc t i o n o f t h e s e a m ou nt s b y t he a s s es s e e in e a r l ie r a s s es s me n t ye a r s . T he L d. A R re li e d o n n u me r o us j u d i c i a l pr e ce de nt s in s upp o rt o f h is c on t e n t i o n . 7 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam 5. 0 We ha v e h e a r d t he ri va l s ub m is s i on s a nd ha v e a ls o pe r us e d t h e m at er ia l o n r e c o r d. T h e D ep ar t m e n t h as c ha l l e n ge d th e i mp ug ne d o rd e r on t w o g ro un ds v i z . ( i) t h e c o nd on a ti o n o f d e l ay b y t he L d. CI T ( A ) a n d (i i ) o n t h e m er i t s o f t h e c as e . A s fa r as gr o un d N o. 2 c ha l l en gi ng t h e c on do na ti on o f d e l ay b y t h e L d . CIT ( A ) i s co nc er ne d, a p er us al o f t h e i mpu gne d or d e r s h ow s t h a t t h e Ld . CI T( A ) has gi ve n a c a te go r i c a l fi n d i n g t ha t t he a s s es s e e w a s no t se r v ed w i t h t he as s es sm e nt o r de r a nd a s t he s a me w as no t se rv e d or d ee me d t o h a v e b e e n se rv e d or de e m e d t o ha v e be e n s e rv e d a t t h e ad d re s s a s p e r t h e P A N da ta b a se d o r a t t he a dd r es s a s a ppe a r i n g i n t h e r e t u r n o f i nc o m e. T he Ld. CI T(A ) w en t on t o ho l d t h at , t h us , du e t o n o n -s e r vi c e o f t he as s e ss me nt o r de r, t h e a s s es s e e w a s pre ve nt e d b y a r e a s on a b l e c au s e i n fi lin g th e a pp e a l be fo r e t he L d. CI T( A ) . Thi s ca t eg o r i ca l fi nd in g, a l th o u gh h a s b ee n c ha l l e n g e d by t he L d. S r. D R du r i n g t h e co urs e o f p r oc ee di ngs b e fo r e us , h ow ev e r, s he co u l d not bri ng a ny d o c u m e n t o r e v id e n c e o n re co r d t o es t a b li s h t ha t t he s e fi nd i n g s o f t he Ld. C IT (A ) re g a rd i n g n o n -s e r vi c e o f a s s es s men t or d e r w e re pe rv e rs e . In fa c t, w h en t he Be nc h i n q uir e d f r o m t h e L d. S r . D R i f t he D ep ar t m en t w a s w il l i n g t o c ha l l en ge fi nd in gs o f L d. CI T (A ) vi s -à -v is t h e n on -s er v i c e o f as s e s s me nt ord er by fil i ng a n A ff id av i t on be h a l f o f t he D ep a rt me n t i n t h is r e g a r d, t h e L d. S r. D R re p li e d i n t h e ne g a t i v e . I n s uc h a s i tu at i on, w e a r e o f th e c ons ide r e d vi ew t h at t he D ep ar t m en t is m e r e ly tr yi ng t o g ra b a t s t r aw s t o s ome h ow ma ke a ca s e t ha t t h e c o nd o n at i o n o f de l a y b e i n g b ad in l a w w o uld n u ll i fy t h e F ir s t 8 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam A ppe l la t e O r d e r o n t he m er i t s o f th e c as e . Th e r e fore , w e ou t - r ig h t l y re j ec t t h is co n t e n t i on o f t h e D ep a r t m e n t t ha t t he Ld. CIT (A ) h ad w ron gl y co nd on ed t he de l a y as t he s am e i s no t es t a bli s h e d by a ny do c u m e n ta ry e v i de nc e. We a r e o f t he c o ns i de re d vi ew t h a t th e c on do na ti on o f de l a y l i e s w it hi n th e d is c r e t io nar y p ow er s o f t h e Ld . F i rs t A pp el l a t e A ut ho r i t y a n d he h as e xer ci s e d th e s a me i n fa v ou r o f t he a s s es s e e a ft e r d u l y c o ns i d e ri ng t h e f ac t s a nd r e c o rd. A c co rd i n g l y, gr o un d N o . 2 o f t he D e pa r t me n t ’s a pp e a l s t and s d is m iss e d. 5. 1 Co m i ng t o t h e gr o un d s ch al l e n g i n g t he d e l e t i o n o f a d d i ti on o n m er i t s v iz . G r ou n d N os . 1 a n d 3 , i t i s s ee n t h at th e L d . CI T( A ) h as gi v e n a c at e go ri c a l fi n di ng i n th i s re ga r d i nP ar a 5. 2 o f t he i mp u gn e d or d e r th at ev e n t h e A O ac k n ow l e d ge s th at t h e i mpu gne d a m o un t w er e ne v e r de bi te d t o t h e p r o f it a n d lo s s a c co u nt as a n ex pen di tu r e i n t he y ea r t he y w er e r e c e i ve d. T h e L d. C I T( A ) h as a ls o g i v en a ca t e g or i c a l fi nd i n g t ha t t he a s se s s e e h ad r ec e i v e d t h e i mp u gne d a dv a n c es t hr o ug h ba n ki ng c ha nn e ls in pr e v i o u s ye ar s r e l ev a n t t o as s e s s me n t ye a rs 20 03 - 0 4 a n d 20 06- 0 7 w h ic h w a s a m at t er o f r e c o r d a n d not in di sp u te . I t ha s al s o be e n o bs e r v e d b y t he Ld. C I T ( A ) t h at t he s e a mo u nt wer e s h o w n as s un dr y c r e di t ors u p t o as s e s s me n t y e ar 201 2- 1 3 a n d a s u n s ec ur e d lo a ns du r i n g t he c a p t i o n ed a s s es s m en t y e a r an d th is fa c t i s al s o a m a tt e r o f re c or d a n d n ot i n di s pu te . It has f urt he r be en obs erv e d b y t he L d . CI T(A ) t h a t me re c h a n ge o f n o me nc l at ur e , de l i be ra te or mi s t ak en 9 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam no tw i th s t a n di ng , w ou l d n o t t a n t a m o u nt t o cr e d i t i n t he b oo ks o f a cc o un t o f th e a s s es s e e. T h us , a ft er du l y c ons i de ri ng t he fa ct s o f t h e c as e , th e L d. C IT (A ) re a c h e d t he c on cl us i on t ha t t he i m p ug ned a m ou nt w as no t t ax ab l e u/ s 4 1( 1 ) o f t h e A ct . We fur t h er no t e t h a t t h es e a m ou nt s w e r e s t il l s h o w n a s o ut s ta nd i n g a t t h e en d o f t he re l e van t c ap ti o n e d a s s es s men t y ea r a nd it i s no t t he c as e o f t h e D e pa rt me nt t h at t he s e a mou nt s h ad b e e n w r it t en o ff by t he as s e s s ee s o as t o f al l w i t hi n t h e pu r vi ew o f ri g o rs o f s ec ti o n 4 1( 1) o f t he A c t . T he re fo r e , in o ur c ons i de re d v i ew , t h er e i s no t f au lt i n t h e a c t i on of t he Ld . CI T( A ) i n de l et i n g t he i m p ug n ed a dd i t i o n. 5. 2 It w i l l a l so b e r e l e va nt t o ma k e a r e fe re n ce to t he p r ovi s i on o f s e ct i on 4 1( 1 ) o f th e I nc o me Ta x A c t , 19 6 1. T he re l ev a nt e xt ra c ts o f t h e s a me ar e be i ng r e p r o d uc e d he r e u n de r: " Pr o fi t s c ha r ge a b l e t o t ax . (1 ) Wh er e an a l l ow an c e or de d u c ti on has be e n m a d e i n t he as s e s sm e nt f or an y y e ar i n r e sp ec t of l os s , e xp en d i t ur e o r t r adi ng l i a b il i t y i n c ur r e d by t h e as s e s s ee ( he re i na f t er re f er r e d to as t he f i r st - m en ti on ed p er s o n) a n d s u b s eq u e n t l y d ur i n g a n y pr e v i ou s ye ar — t he f i r s t- m ent i o ne d pe r s on h a s o bt ai n ed , w h e t h e r i n c as h or i n a ny ot he r m anne r w ha t s oe v e r , a ny am o u n t i n r es p ec t o f s u c h l os s or ex pe n di t ur e o r s om e be nef i t i n r e s pe ct o f su ch t r adi ng l i a bi l i t y by wa y o f r e m i s s i on or c e s sa ti o n th e r e o f , t h e a m oun t o bt a i n e d by s u ch p e r s on or th e va l u e o f be ne fi t a c c r u i n g t o 10 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam hi m s ha l l be d e e m ed to be pr o fi t s and ga i ns of bu s in e s s or pr of e ssi on a nd ac c o r di ng l y c har g e a b l e to i nc om e- ta x a s th e i nc om e o f t ha t p r ev i ous y ea r , wh e t h e r t he b us i n e s s or p r of e s s i on i n r es pe c t of wh i c h t he a ll ow a n c e or d e d u c t i o n ha s b ee n m a de i s i n e x i s te n c e i n t h at y ea r o r n ot ; or . . . . . . Ex pl an a t i o n 1 :- F or t he p ur po s e s of t hi s s u b- s e ct i on, t he e x pr e s s i on " l os s or e x p e n di t ur e or s ome be n e f i t i n r e s pe ct o f a ny s uc h tr a d i n g l i ab il i t y by wa y of r em i s s io n or ce s s at io n t h er e of " s h al l i nc l u d e t he r e m i s s i on or c es s at i on of a ny l i a bi l i t y by a u n i l a te r a l ac t by th e fi r s t m e n t io ne d p e r s on u n d e r cl au s e (a) o r t he s u c c e s s or i n b u s in es s u n de r c l a u s e ( b) o f t h a t s ub -s ec t i o n by w ay of wr i t i n g o f f s u ch l i ab i l it y i n hi s ac c ou nt s . " 5. 3 O n pe r us a l o f t h e a f or e s ai d s e ct i o n, it co u l d be s a i d t h a t t he a bo ve pr o vi s i o n e na c t s a d j us t me n t pr o v i s io ns w he r e b y t he r e v e n ue t a kes b a c k w ha t i t has a l r e a dy b ee n a l l ow e d i f t h e fo l l ow i ng tw o c o n d i t i o ns co m e t o pa s s an d as s uc h, t h e u n d e r no t e d c o n di ti o n s n e e d to b e f ul fi l l e d i n o rd e r t o tr ea t t he c e s s at i o n o f a l i a bi l i ty a s i nc o m e u nder s e ct i o n 4 1 (1 ) o f t h e A ct : (i ) T he a s s es s e e ha s t o a v a i l an a l l ow a nc e or d e d uct i o n in a n e ar li e r y e a r i n re s pe c t o f l os s , e xpe ndi t u re or t radi ng l ia bi l i t y; a n d - (i i ) In s ub s e qu en t y ea r, th e as s e s s ee h as t o ob ta in be ne fi t s i n c as h o r a ny ot h e r k i n d i n re s p e c t o f s uc h l os s , e xp e n di t u re a n d t ra di n g l i ab i l it y b y w ay o f r e m is s io n o r c es s a t i on o f l ia bi l it y. 11 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam 5. 4 In t h e pre s e n t c a s e, t h e a s s es s e e ha d n o t d eb i ted t h e a fo re s a i d l ia bi l i t y t o i t s P r o fi t an d L os s a cc ou n t i n a ny o f th e e ar li e r ye a rs (a d m i t t ed by t he A O at P g- 7 a nd b y L d. CI T (A ) a t p g- 9 ) a n d th us , th e qu es t i o n o f r ec e i v in g an y be ne f i t , a ll ow a nc e or d e duc ti on b y t h e a s s es s e e i n ea rl i er y ea rs , as s pe c i fi e d in ( i ) a bo ve, ha s n o t b ee n ful fi l l e d i n t h e i ns t a n t c a s e a n d , t he re fo r e, t h e re l i e s no a p pl i c a t io n o f s e c t i o n 41 (1 ) i n th e i ns t a n t c a s e. F ur th er , t he a s s es s e e h a d a l s o n o t r e c e iv e d a ny b en e fi t e i t h e r i n c as h o r o t h e rw i s e d ur i n g t he re le va nt ye a r. I n fa c t t he s a i d s u m w i l l de c r ea s e t h e c as h i n fl ow s o f t he as s e s s ee i n t h e s ub se qu en t y ea rs . The a s s e s se e ha s n ot w r i t t e n ba c k th e li a bi li t y d u ri ng t he r e l e va nt y ea r a n d t he s a i d l i a bi li t y co n t i n u ed to a p pe a r as t he cl os i n g l ia bi l i t y an d ha s b e e n c a rri e d fo rw a r d t o ne xt y e a r. Th us , c o nd i t io n ( ii ) a bo ve h a s al s o no t be e n fu l fi l l e d. 5. 5 T he r e f o re , i t c a n b e s a i d t ha t b ot h t he c o ndi ti o ns n e e d ed for t h e a pp l i ca ti on o f s ec t i on 4 1 (1 ) o f t he A c t h av e n ot been f u l f il l e d i n t h e i ns t a n t c a s e a n d, t her e f o re , t he a d d i t i o n ma de u nd er s ec t i o n 4 1(1 ) o f t he A ct w ou l d ha v e n o l eg s t o s t a n d a nd h a s be e n r i g h t ly d e l et e d b y th e L d . CI T(A ) . 5. 6 T he H on ' bl e A pe x Co ur t i n t h e c as e o f M a hi nd r a a nd M a hi ndr a L td . a s r e p or te d i n 40 4 I T R 1, ex pl a i ne d t h e p ro v isi ons o f t h e s e ct i o n 41 ( 1) a s un d er :- 12 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam " 15. O n a pe ru s al of t he s a i d pr ov i s i on , i t is ev i de n t t ha t i t is a s in e q u a no n t ha t t h e r e s h ou l d be a n al l ow an ce or de du c ti on c l a im e d b y t he a s s es s e e i n an y a ss e s s m en t f o r a ny y e ar i n r e sp ec t o f lo s s , e xp en d i t ur e o r t r adi ng l ia b il i t y i n c ur r e d by t h e as s e s s ee . T h en , s ubs e qu en t l y, dur i ng an y pr e v i o u s y ea r , i f th e c r ed i t or r e m it s or wa i v es a n y s u c h l ia bi li t y, t h en th e a s s ess e e i s l i a b l e t o pa y t ax un de r Se c ti on 41 of t h e I nc om e T ax A c t . T he o bj e c t iv e be h i n d t hi s Se c t i o n is s im p l e , i t i s m ade t o e ns ur e t ha t t he a s se s s e e doe s n o t ge t a wa y w it h a d o u bl e be n e f i t on ce b y wa y o f d e d u ct i o n a n d a n ot he r b y n ot be i ng t ax ed on t h e be ne f i t r e c e i v e d by hi m i n t h e l at er y e ar wi th r ef e r en c e to de d uc t i o n a l l o w ed e ar l i e r in cas e of r em i s s io n of s uc h li abi l i ty . . . x xx It is i m p or t a nt t o n ot e t h at t h e s a i d p u r ch as e am o un t ha d n ot be e n d e b it e d t o t he t r ad i n g a c c o un t or t o th e pr o fi t or l os s ac co u nt in a ny of t he a s s es s m e nt y ea r s. . . H en ce , w e fi n d n o f or c e in t he ar g u m en t of t he R ev e n ue t ha t t h e c as e of t he Re s po n de n t wo u l d f al l u n de r S ec t i o n 4 1 (1 ) o f th e I T A c t . " 5. 7 T he H on ' bl e P u n j a b & H ar ya n a H i g h C o urt i n t he c as e o f C I T V s . G . P I nt er n a t i o na l L t d i n I TA N o. 61 8 o f 2 01 9 has h el d t h at s i nce t h e a s s es s e e w a s s ho w i ng t h e a fo r e sa i d l i abi l i ti e s in hi s bo o ks an d h a s no t w ri t t e n o f f t h e s a me , th e pr o vi s i o ns o f s e ct i o n 4 1(1) a r e n o t a p pl i c a bl e. 5. 8 F urt he r, i n th e c as e o f CI T V s . S uga u l i S u g ar Wo rk s ( P ) L t d. 23 6 IT R 5 18 ( S C ), th e H on ' bl e A pe x C ou r t he l d a s und e r : (H e ad N o t e s ) 13 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam " Bu s in es s I nc om e - Pr of i ts ch ar g e a bl e t o t ax u n d e r s . 41 ( 1) - T r ans f e r o f a m ou n t t o c a pi t al r e s er v e a cc o u n t- O bt ai ni ng b y as s es s e e of a be n ef i t by v i r t u e o f r e m i s s i on or c e s s a ti o n is s i n e qu a n o n f or ap pl i c a t i o n o f s . 41 (1) - Me r e f a c t t ha t as s e s s ee has m ade an e nt r y of t r ans f er u n il at e ra ll y wi l l n o t e na bl e t he d e p ar t m en t to ap p l y s . 4 1(1 )- As s e s se e c an no t g et r i d o f hi s l i ab i l it y by m a ki n g a n un i l a t e ra l e nt r y- E xp ir y o f p e r io d of l im i t at io n c an no t e xt i n gu i s h t h e d e b t - s e c t i o n 41 (1 ) n ot ap pl i c a bl e . " 5. 9 T he H o n ' b l e D e l h i H i gh C o urt i n t h e c as e o f CIT V s . V ar d h ma n O ve rs e as Lt d. 34 3 IT R 40 8 (D e l. ) b y fol l ow i ng t h e j u d g m ent o f t he H on' bl e S up r e m e C our t i n t he c a se o f CI T V s . S ug auli S u g ar W o rks (P ) L td . ( s up ra ) h as he l d as un de r : - " It i s al s o n e c e s sa r y to be ar i n m i nd t h at i n t h e cas e of C IT V s . Su g a ul i S ug ar Wo r ks ( P) L t d. ( s upr a ) a c on t e n t i o n w as in f ac t a d v a n ce d b e f o r e t he Su pr e m e Co u r t o n be h a l f of t he R e v e n ue t h a t t he l ia b i l i t y to t h e c r ed i t or s r em ai ne d un pa id b y th e as s es s e e f or m o r e t ha n 2 0 y e ar s a nd t he r e wa s pr a c t i ca ll y a c e ss a ti on o f t he de bt w hi ch r e s ul t e d i n a b e n e f it to t he a s se s s ee wh i c h s h ou ld b e b r ou g ht t o t ax un de r s. 4 1(1) . T h is ar g um e nt w as no t gi v en e ff e ct to b y t h e Su pr e m e Co u r t, no r d id it co ns i de r f i t t o ap pl y s . 28( iv ). It w as f ur t he r he ld i n t he a bo ve s ai d ca s es t h a t s e ct i on 4 1( 1 ) w a s t o c om e i n t o pl ay on ly wh e n th e as s e s s ee had o b ta i n ed t he d ed uc t i on i n e a rl i e r y ea r i n c om p ut i ng t he b us i nes s i nc om e a n d i n th e c as e o f ap pel l a nt , no be ne f it has be e n cl ai m e d . ” 14 ITA No. 606-c-2019 (AY 2013-14) – Sh. Mohinder Pal Singla, Sunam 5. 10 T he r e f o re , i n v i e w o f t h e a fo r e s ai d ci t ed j udi c i a l p r e c e d e nt s, w e fi n d n o re a so n t o i n t e r fe r e w i t h t he fi n d i n gs o f t h e Ld . C I T( A ) o n t h e i s s ue a n d w e u p ho l d t he s a me . A c c or di n g l y , gr o u nd N o s . 1, 3 an d 4 a r e a ls o d is m i ss e d. 6. 0 In th e fi n a l r es u lt , t h e a p pe al o f t he D e p ar t m en t s t an ds di s mi s s ed . O rde r p ro no un c e d o n 14. 06. 2 02 2. Sd/- Sd/- ( N. K. SAINI) (SUDHANSHU SRIVASTAVA) Vice President Judicial Member Dated : 14.06.2022 “आर.के.” आदेशक त+ल,पअ-े,षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकरआय ु .त/ CIT 4. आयकरआय ु .त (अपील)/ The CIT(A) 5. ,वभागीय त न1ध, आयकरअपील$यआ1धकरण, च3डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायकपंजीकार/ Assistant Registrar