ACIT RG 6(2), MUMBAI V. EXPO GAS CONTAINERS LTD, MUMBAI

ITA 6271/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4273 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 03-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABANIKANT NAYAK
• Assessee Lawyers: MARLON REGO
• Keywords: Additional evidence

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , !'#$ , % &' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./I.T.A. NO.6271/MUM/2011 ( ( ( ( ( / ASSESSMENT YEAR : 2007-08 THE ACIT, RANGE 6(2), AAYAKAR BHAVAN, MUMBAI-400 020 M/S. EXPO GAS CONTAINERS LTD., 150, SHERIFF DEVJI STREET, MUMBAI-400 003 ') % ./ *+ ./PAN/GIR NO. : AAAFE 1419R ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY : ` SHRI ABANIKANT NAYAK -.), 0 / /RESPONDENT BY : SHRI MARLON REGO 0 12% / DATE OF HEARING :04.07.2013 34( 0 12% / DATE OF PRONOUNCEMENT : 10.7.2013 &5 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)-12, MUMBAI DT.30.06.2011 PERTAINING TO A.Y. 2007-08. 2. THE REVENUE HAS RAISED TWO SUBSTANTIVE GROUNDS O F APPEAL. THE SUM AND SUBSTANCE OF THE REVENUES GRIEVANCE IS THA T THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S. 41(1) OF T HE ACT IN RESPECT OF OUTSTANDING CREDITORS OF RS. 39,52,717/- OUT OF THE TOTAL CREDITORS OF RS. 45,14,976/-. WHILE DOING SO, THE LD. CIT(A) HAS AC CEPTED ADDITIONAL EVIDENCE WHICH WAS NEVER PRODUCED BEFORE THE AO. ITA NO.6271/M/2011 2 3. THE ASSESSEE IS A MANUFACTURER OF PRESSURE VESSE LS, CYLINDERS AND SITE CONSTRUCTION. WHILE SCRUTINIZING THE RETURN O F INCOME, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FILE DETAILS OF SUNDR Y CREDITORS. ON PERUSING SUCH DETAILS OF SUNDRY CREDITORS, THE AO OBSERVED T HAT CERTAIN BALANCES ARE BEING CARRIED FORWARD FOR THE LAST 3 YEARS WITH NO TRANSACTION THEREIN. THE ASSESSEE WAS ASKED TO FILE CONFIRMATION WITH REGARD TO ALL SUCH SUNDRY CREDITORS WHO LIABILITY IS BEING CARRIED FORWARD FR OM THE LAST THREE YEARS WITHOUT HAVING ANY TRANSACTION. THE ASSESSEE FILED A DETAILED REPLY DT. 19.11.2009 AND EXPLAINED THAT DUE TO FINANCIAL CRUN CH AND SOME DISPUTE OF OLD CREDITORS, THE ASSESSEE COULD NOT REPAY THE OUTSTANDING LIABILITIES. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE HAD INCURRE D HUGE LOSSES AND THEREFORE WAS NOT IN A POSITION TO CLEAR OLD CREDIT ORS. ON RECEIVING NO CONFIRMATION, THE AO ADDED THE ENTIRE AMOUNT OF SUN DRY CREDITORS AMOUNTING TO RS. 45,14,977/- U/S. 41(1) OF THE ACT. 4. THE ASSESSEE STRONGLY AGITATED THIS MATTER BEFOR E THE LD. CIT(A). THE ASSESSEE REITERATED THAT IT COULD NOT PAY ALL C REDITORS DUE TO DISPUTE AND LIQUIDITY CRUNCH. THE ASSESSEE ALSO SUBMITTED A PARTY-WISE CHART AND PARTY-WISE COPY OF ACCOUNT OF ALL THE SUNDRY CREDIT ORS WHICH CLEARLY SHOW THAT MOST OF THE SUNDRY CREDITORS HAVE BEEN PAID. AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF THE ASSESSEE, THE LD. CIT( A) OBSERVED THAT THE CESSATION OF LIABILITY COME INTO EFFECT ONLY WHEN T HE AMOUNT IS WRITTEN BACK TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AND IF THE ASSESSEE DOES NOT OFFER THE SAID AMOUNT TO TAX, THEN THE AO IS NO T JUSTIFIED IN TAXING THE SAID AMOUNT UNDER THE HEAD CESSATION OF TRADE LIABI LITY U/S. 41(1) OF THE ACT. THEREAFTER, THE LD. CIT(A) RELIED UPON CERTAI N DECISIONS WHICH ARE EXHIBITED AT PAGE-8 OF HIS ORDER. THE LD. CIT(A) F URTHER OBSERVED THAT FOR INVOKING SECTION 41(1) OF THE ACT, IT IS VERY N ECESSARY TO FIRST ESTABLISH BY WAY OF EVIDENCE THAT THE RECEIPTS ARE INCOME OF THE ASSESSEE AND THAT ITA NO.6271/M/2011 3 THERE HAS BEEN A CESSATION OF LIABILITY. IN THIS C ASE, IT IS SEEN THAT IT HAS BEEN ESTABLISHED BY THE AO THAT THERE ARE TRADE LIA BILITY PENDING AS FAR AS THE ASSESSEE IS CONCERNED. HOWEVER IT HAS TO BE ES TABLISHED THAT THE LIABILITY OF THE ASSESSEE HAS CEASED TO EXIST AND T HERE IS NO POSSIBILITY OF THIS LIABILITY BEING REVIVED IN FUTURE. THE LD. CI T(A) FURTHER NOTED THAT IN CASE OF 5 PARTIES, COMPLETE PAYMENT OF LIABILITY HA S BEEN MADE AS ON 31.3.2010. THE LD. CIT(A) FINALLY CONCLUDED THAT T HE AO WAS NOT JUSTIFIED IN INVOKING SEC. 41(1) OF THE ACT. THE A DDITIONS MADE WERE NOT JUSTIFIED AND ACCORDINGLY DELETED THE ADDITION. 5. AGGRIEVED BY THIS FINDING OF THE LD. CIT(A), REV ENUE IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE WHILE SUPPOR TING THE FINDINGS OF THE AO SUBMITTED THAT THE LD. CIT(A) HAS ADMITTE D SUCH ADDITIONAL EVIDENCES WHICH ARE IN CONTRAVENTION OF RULE 46A, 7. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REI TERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. A PERUSAL OF THE ASSESSM ENT ORDER CLEARLY SHOWS THAT THE AO HAS MADE ADDITIONS ONLY ON THE PREMISE THAT THE LIABILITIES ARE OUTSTANDING FOR MORE THAN 3 YEARS. THIS ITSELF CAN NOT BE A SOLE GROUND FOR MAKING ADDITIONS U/S. 41(1) OF THE ACT BECAUSE WHER E THE AMOUNTS REPRESENTS TIME BARRING, TRADING LIABILITY OF THE A SSESSEE THERE IS NEITHER REMISSION NOR CESSATION OF THE TRADING LIABILITY I N AS MUCH AS THE LAW OF LIMITATION MERELY BARS THE REMEDY BUT DOES NOT WIP E OUT THE LIABILITY. AT THE MOST SUCH LIABILITY CANNOT BE ENFORCEABLE BUT N OT EXTINGUISHED. THE REMISSION OF THE LIABILITY ARISES WHEN THE CREDITOR VOLUNTARILY GIVES UP THE CLAIM. THE CESSATION OF SUCH LIABILITY ARISES ONLY WHEN IT CEASES TO EXIST ITA NO.6271/M/2011 4 IN THE EYE OF LAW FOR ALL INTENTS AND PURPOSES. WH EN THE DEBT BECOMES BARRED BY TIME, THE CREDITOR WOULD NOT BE ABLE TO R ECOVER THE AMOUNT BY ENFORCING HIS RIGHT IN COURT. BUT THE RIGHT WILL N OT COME TO AN END NOR WILL BE THE LIABILITY CEASE TO EXIST. THEREFORE, I N OUR HUMBLE OPINION, THE AO HAS GROSSLY ERRED IN INVOKING PROVISIONS OF SEC. 41(1) OF THE ACT. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY, 2013 . &5 0 4( % 6 7&8 10.7.2013 4 0 9 SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) / PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; 7& DATED 10 /07/2013 . . ./ RJ , SR. PS &5 &5 &5 &5 0 00 0 -1! -1! -1! -1! :!(1 :!(1 :!(1 :!(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. !<9 -1 , , / DR, ITAT, MUMBAI 6. 9= > / GUARD FILE. &5 &5 &5 &5 / BY ORDER, .!1 -1 //TRUE COPY// ? ?? ? / @ @ @ @ * * * * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI