The ITO, Ward- 1(2), Bhavnagar V. M/s. Alcock Ashdown Gujarat Ltd., Bhavnagar

ITA 615/AHD/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6510 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 10-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Section: 201

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI AMARJIT SINGH , ACCOUNTANT MEMBER AND MS MADHUMITA ROY, JUDICIAL MEMBER ./ ITA NO. 615/AHD/2016 & / ASSTT. YEAR: 2011 - 201 2 INCOME TAX OFFICER, WARD - 1(2) , BHAVNAGAR - 364001 VS . M/S. ALCOCK ASHDOWN GUJARAT LTD., OLD PORT P.B. NO.28, BHAVNAGAR - 364001. PAN: AABCA7983J (APPLICANT) (RESPONENT) REVENUE BY : SHRI L.P. JAIN, SR.D.R, ASSESSEE BY : MS ARTI N. SHAH, A.R / DATE OF HEARING : 20 / 12 / 201 9 / DATE OF PRONOUNCEMENT: 25 / 02 /201 9 / O R D E R PER MS MADHUMITA ROY, JUDICIAL MEMBER : THE INSTANT APPEA L FILED BY THE REVENUE IS AGAINST THE ORDER DATED 14.12.2015, PASSED BY THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) - 6, AHMEDABAD, ARISING OUT OF THE ORDER DATED 24.01.2014 PASSED BY THE I.T.O WARD - I(2), BHAVNAGAR , FOR THE ASSESSMENT YEAR 2011 - 12 , WHEREBY AND WHERE UNDER THE ADDITION TO THE TUNE OF RS.88 , 95 , 360 / - MADE UNDER SECTION 41(1) OF THE ACT BY THE ASSESSING OFFICER WAS DELETED . ITA NO. 615/AHD/2016 A.Y. 2011 - 2012 2 2. THE A SSESSEE IS A GOVERNMENT COMPANY. O N VERIFICATION OF BOOKS OF ACCOUN TS IT WAS FOUND THAT THERE ARE 61 CREDITORS W H ERE BALANCES REMAINED OUTSTANDING SINCE LAST 4 TO 6 YEAR S AND NO DEBT/CREDIT WERE MADE WITH THOSE PARTIES ACCOUNTS. THE LIST OF THOSE CREDITORS W H ERE BALANCES ARE OUTSTANDING SINCE 31.03.2011 AN D NO PAYMENT WERE MADE TILL DATE WAS FURNISHED B Y THE ASSESSEE BEFORE THE LD.AR. A SHOW CAUSE WAS ALSO ISSUED AS TO WHY THOSE CREDITORS SHOULD NOT BE TREATED AS CESSATION OF LIABILITY U/S.41(1) OF THE ACT AND SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE CASE OF THE ASSESSEE WAS THIS THAT COMPANY IS OWNED BY GOVERNMENT AND INVOLVED IN MANUFACTURING OF VESSELS COMPLETION OF WHICH USED TO TAKE 3 TO 5 YEAR S TIME AND AS PER THE PROVISIONS , PAYMENT IS MADE UPON SUCH COMPLETION OF THE VESSELS AND THEREFORE PAYMENT S TO THOSE CREDITORS WERE DELAYED. THOSE CREDITORS DID NOT CONTACTED THE ASSESSEE SINCE LAST 5 TO 6 YEAR S FOR PAYMENT AND THE LD.AO CAME TO THE CONCLUSION THAT THEY MIGHT HAVE CLAIMED THEIR DEBTS AS LIA BILITIES ARE CEASED . HENCE THE E NTIRE AMOUNT OF 88,95,360/ - WAS MADE TO BE CHARGEABLE TO TAX U/S.41(1) OF THE ACT AND THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. IN APPEAL SUCH ADDITION WAS DELETED BY THE LD.CIT (A). HENCE , THE INSTANT APPEAL PREFERRED BY THE REVENUE IS BEFORE US . 3. AT THE TIME OF HEARING OF INSTANT APPEAL THE LD.ADVOCATE APPEARING FOR THE ASSESSEE SUBMITTED THAT THE CREDITORS NEVER VOLUNTARY GAVE UP THE CLAIM AND THUS REMISSION OF LIABILITY DOES NOT AROSE. IT WAS FURTHER ARGUED BY THE LD.AR, THAT THE ONUS IS UPON THE REVENUE TO PROVE THAT THE LIABILIT Y HAS CEASED FINALLY , NEITHER THERE IS ANY POSSIBILITY OF THEIR REVIVAL ANY MORE. THUS ADDITION AP PLYING PROVISIONS U/S. 41(1) OF THE ACT IS NOT SUSTAINABLE. IN S UPPORT OF THE ARGUMENT HE ALSO RELIED ON THE FOLLOWING JUDGMENTS. J.K SYNTHETIC 199 TTR 14 (SUPREME COURT) GUJARAT HIGH COURT VS. SILVER COTTON LTD. 125 TAXMAN 741. ITA NO. 615/AHD/2016 A.Y. 2011 - 2012 3 3.2 IT WAS FURTHER CONTE NDED BY HIM THAT SINCE THERE IS NO COGENT REASON AND MATERIAL EVIDENCE IN SUPPORT WITH THE LIABILITIES AS CEASED TO EXIST THE FINDING OF THE LD.AO IS ERRONEOUS ON ASSUMPTION BASIS . H E THEREFORE RELIED UPON THE ORDER PASSED BY THE LD.CIT (A) DELETING SUCH ADDIT ION. H OWEVER, THE DEPARTMENT AL REPRESENTATIVE RELIED UPON THE ORDER PASSED BY THE LD.AO. 4. WE HAVE HEARD THE PARTIES, PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT APPEARS FROM THE RECORD THAT SINCE THE LIABILITY WAS OUTSTANDING FOR MORE THAN 4 Y EARS THE LD.AO MERELY ON ASSUMPTION BASIS HAS TREATED THE SAME AS CEASED TO EXIST BUT NO MATERIAL EVIDENCE ON RECORD IS FOUND WHICH CAN ESTABLISH THAT THE LIABILITIES IS EITHER BEEN CEASED OR REMITTED. THERE WAS NO INQUIRY CONDUCTED BY THE LD. AO IN RESPE CT OF THOSE CREDITORS LIST OF WHICH WAS DULY FURNISHED BY THE ASSESSEE . T HERE IS NO IOTA OF EVIDENCE TO S HOW THAT LIABILITY WAS NOT GENUINE . MORE SO , SINCE THE ASSESSEE A GOVERNMENT COMPANY , GENUINENESS OF CREDITORS SEEMS TO BE TRUE. 4.1 IN ABSENCE OF ANY EVIDENCE IN SUPPORT OF THE CONTENTION THA T LIABILITY HAVE CEASED TO EXIST THE FINDIN GS OF THE LD.AO CANNOT SUSTAIN PARTICULARLY WHEN THE GEN UINENESS OF THOSE CREDITORS ARE NOT IN QUESTION . T HUS TREATING THE LIABILITIES AS CEASED TO EXIST ON PRESUMPTION BASIS AS MADE BY TH E AO IS NOT SUSTAINABL E IN THE EYE OF LAW AND ADDITION THEREOF IS UNCALLED FOR. 4.2 THE LD.CIT (A) HAS TAKEN INTO CONSIDERATION THE ENTIRE ASPECT OF THE MATTER AS OBSERVE D BY US . HE ALSO TOOK NOTE OF THE RATIO LAID DOWN BY THE HON BLE SC PASSED IN THE MA TTER OF J.K. SYNTHETIC REPORTED IN 199 ITR 14(SC) WHERE IT HAS BEEN DECIDED THAT IF THERE IS N O POSSIBILITY OF REVIVAL OF DEBT IN FUTURE THEN ONLY LIABILITIES CAN BE TREATED AS CEASED . F URTHER THAT IF THERE IS NO ITA NO. 615/AHD/2016 A.Y. 2011 - 2012 4 COGENT REASON AND MATERIAL EVIDENCE IN SUPPO RT THAT LIABILITIES HAS CEASED TO EXISTS THEN LIABILITIES CANNO T BE TREATED AS CEASED TO EXIST . REMISSION AND CESSATION ARE IMPORTANT FACTOR, IF THE REMISSION HAS NOT BEEN GRANTED BY THE CREDITORS THEN THE SAME CANNOT BE TREATED AS CEASED LIABILITIES AS A LSO DECIDED BY THE HON BLE APEX COURT IN THE CASE OF GUJARAT HIGH COURT VS. SILVER COTTON LTD AND CO - ORDINATE OF BENCH OF ITAT IN THE CASE OF NEW COMMERCIAL MILLS LIMITED VS. DCIT 73 TTJ 893. THE RATIO OF THE JUDGMENT S WAS F OLLOWED BY THE LD. CIT(A) . R EMISSION O F LIABILITIES ONLY ARISES WHEN TH E CREDITORS VOLUNTARILY BE GIVE UP THE CLAIM AN D THE L IABILITY CEASED TO EXIST IN THE EYE OF LAW AND THUS THE LD. CIT(A) ULTIMATELY DELETED THE ADDITION AS MADE BY THE LD.AO. 4.3 IN T HE LIGHT OF THE ABOVE DISCUSSION WE DO NOT FIND ANY INFI RMITY IN THE IMPUGNED ORDER PASSED BY THE FIRST APPELLATE AUTHORITY WARRANT ING INTERFERENCE BY US . THE QUESTION IS ACCORDINGLY ANSWERED IN THE AFFIRMATIVE I.E IN FAVOUR OF THE ASSESSEE AND A GAINST THE REVENUE. CONSEQUENTLY , THE APPEAL FAIL S AND IS ACCORDIN GLY DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE COURT ON 25 /02/2019 AT AHMEDABAD. - SD - - SD - ( AMARJIT SINGH ) ACCOUTANT MEMBER ( MS MADHUMITA ROY ) JUDICIAL MEMBER (TRUE COPY) AHMEDABAD; DATED 25 / 02 /201 9 MANISH ITA NO. 615/AHD/2016 A.Y. 2011 - 2012 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , / DR, ITAT, 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD