ACIT, New Delhi V. M/s. G.N. Builders (P) Ltd., New Delhi

ITA 628/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61598 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 06-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Keywords: Period of limitation
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI C BENC H BEFORE SHRI U.B.S. BEDI, JM & SHRI A.N. PAHUJA, A M ITA NO.628/DEL/2012 ASSESSMENT YEAR:2007-08 ACIT, CIRCLE 12(1), NEW DELHI V/S . M/S G.N. BUILDERS (P) LTD., D-300, DEFENCE COLONY, NEW DELHI-24 [PAN : AAACG 0024 D) (APPELLANT) (RESPONDENT) ASSESSEE BY NONE REVENUE BY SHRI SAT PAL SINGH, DR DATE OF HEARING 10-04-2012 DATE OF PRONOUNCEMENT 10-04-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 06.02.2012 BY THE REVENUE AGAI NST AN ORDER DATED 15.11.2011 OF THE LEARNED CIT(A)-V, NEW DELHI , RAISES THE FOLLOWING GROUNDS:- 1) WHETHER LEARNED CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E ADDITION OF ` `17,55,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CESSATION OF LIABILITY. 2) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT ANY TIME OF THE HEARING. 2. AT THE OUT SET, NONE APPEARED ON BEHALF OF TH E ASSESSEE NOR ANY REQUEST FOR ADJOURNMENT WAS RECEIVED. CONSIDERING THE NATURE O F ISSUE, THE BENCH DECIDED TO DISPOSE OF THE APPEAL AFTER HEARING THE LD. DR. ITA NO.628/DEL./2012 2 3. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THA T RETURN DECLARING INCOME OF ` `41,63,000/- FILED ON 12.12.2007 BY THE ASSESSEE, A REAL ESTATE DEVELOPER, AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS SELECTED F OR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ISSUED ON 15.09.2008. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE FOLLOWING LIABILITIES APPEARED IN THE BALANCE SHEET OF THE PRECEDING TWO YEARS BUT THE ASSESSEE DID NOT FILE ANY CONFIRMATION: [IN ] 1. SMT. MAYA DEVI `6,50,000 2. SH. V.P. SINGH `6,05,000 3.SMT. MUNISHA V.P. SINGH `5,00,000 TOTAL: `17,65,000 3.1 TO A QUERY BY THE AO AS TO WHY THESE LIABILITI ES BE NOT ADDED TO THE INCOME, THE ASSESSEE REPLIED VIDE LETTER DATED 17.1 2.2009 THAT THESE PERSONS HAD ADVANCED THE AFORESAID AMOUNTS FOR BOOKING OF S PACE UNDER CONSTRUCTION AT GURGAON IN THE EARLIER YEARS. WHILE ENCLOSING PHOTO COPIES OF RECEIPTS ISSUED TO THE AFORESAID THREE PERSONS, THE ASSESSEE PLEADED T HAT BUILDING IN GURGAON APPEARED IN THE CLOSING STOCK AND HAD NOT BEEN SOLD AND, THEREFORE, THESE LIABILITIES EXISTED EVEN IN THE YEAR UNDER CONSIDER ATION ALSO. SINCE THERE WAS NEITHER ANY REMISSION NOR CESSATION OF LIABILITY, THE AMOUNT COULD NOT BE ADDED TO THE INCOME, THE ASSESSEE PLEADED. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND ADDED THE AFORESAID AMOUNT ON THE GROUND THAT THE ASSESSEE DID NOT SUBMIT ANY CONFIRMATION FROM THESE PARTIES WHILE IN RESPECT OF SMT. MAYA DEVI, ONLY THE ADDRESS WAS MENTIONED AND COPY OF RECEIPT WAS NOT FILED. ACCORDINGLY, WHILE CONCLUDING THAT THESE LI ABILITIES CEASED TO EXIST, THE AO ADDED THE AMOUNT OF ` ` 17,55,000/- TO THE TOTAL INCOME. ITA NO.628/DEL./2012 3 4. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION WHILE REFERRING TO DECISION IN SUGAULI SUGAR WORKS (P) LTD. REPORTED IN 236 ITR 518 (SC), IN THE FOLLOWING TERMS: 3.3 I HAVE CAREFULLY GONE THROUGH THE WRITTEN SUB MISSION AS WELL AS THE ASSESSMENT ORDER. IT IS SEEN THAT IN THE IN STANT CASE THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION OR LOSS ON A CCOUNT OF THESE LIABILITIES EITHER IN THE EARLIER YEAR OR IN THE INSTANT YEAR. THE ASSESSEE HAS ALSO NOT DERIVED ANY BENEFIT ON ACCOUN T OF REMISSION OF LIABILITY OR CESSATION OF LIABILITY AT THE END O F THE INSTANT YEAR. MOREOVER, THE LIABILITY HAS NOT BEEN WRITTEN OFF AN D IS STILL REFLECTED IN THE BALANCE SHEET. THE LEARNED ASSESSING OFFICER H AS ALSO NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT EITHER THERE WAS REMISSION OF DEBT OR CESSATION OF LIABILITY. I AM OF THE VIEW THAT NONE OF THE CONDITIONS SPECIFIED U/S 41 OF THE ACT HAS B EEN SATISFIED AND THEREFORE THERE IS NO JUSTIFICATION FOR ASSESSING O FFICER TO MAKE THE IMPUGNED ADDITION IN THE HANDS OF THE ASSESSEE ON T HE ALLEGATION OF CESSATION OF LIABILITY. IT IS ALSO SEEN THAT THE A SSESSEE HAS ACTUALLY REPAID THESE LIABILITIES IN THE SUBSEQUENT YEAR AND DOCUMENTARY EVIDENCES IN THE FORM OF BANK STATEMENTS OF THE ASS ESSEE AND ITS BALANCE SHEET AS ON 31.3.2011 TO SHOW THAT THE ASSE SSEE HAS DULY PAID BACK THESE LIABILITIES IN SUBSEQUENT YEARS BY ACCOUNT PAYEE CHEQUES WAS ALSO SHOWN. THEREFORE, THIS ALSO PROVE S THAT THESE LIABILITIES WERE DULY EXISTING LIABILITIES AND NO A DDITION U/S 41 COULD BE MADE IN THE HANDS OF THE ASSESSEE. THE DECISION IN THE CASE OF SUGAULI SUGAR WORKS (P) LTD. IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE MORE SO WHEN THE LIABILITY HAS NOT BEEN WR ITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR MERELY SUPP ORTED THE ORDER OF THE AO. 6. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE AO INVOKED PROVISIONS O F SEC.41(1)(A) OF THE ACT WHILE CONCLUDING THAT THE AFORESAID LIABILI TIES OF ` 17,55,000/- CEASED TO EXIST IN THE YEAR UNDER CONSIDERATION. TH E PROVISIONS OF SEC. 41(1)(A) STIPULATE THAT WHERE AN ALLOWANCE OR DEDU CTION 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 AN Y PREVIOUS YEAR, THE ITA NO.628/DEL./2012 4 ASSESSEE OBTAINS, WHETHER IN CASH OR IN ANY OTHER M ANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SO ME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEME D TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY, CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROF ESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENC E IN THAT YEAR OR NOT. INDISPUTABLY, THE ASSESSEE DID NOT RECEIVE ANY BENE FIT NOR THE AMOUNT HAS BEEN TRANSFERRED TO PROFIT AND LOSS ACCOUNT NOR EVEN WR ITTEN OFF AND THUS, THE AMOUNT DID NOT BECOME THE ASSESSEE'S OWN MONEY. RATHER THE ASSESSEE PLEADED BEFORE THE AO THAT THE AFORESAID LIABILITIES SUBSISTED IN THE YEAR UNDER CONSIDERATION WHILE THE LD. CIT(A) OBSERVED THAT THE DOCUMENTARY EVIDENCES IN THE FORM OF BANK STATEMENTS OF THE ASSESSEE AND ITS BALANCE SHEET AS ON 31.3.2011 REFLECTED THAT THE ASSESSEE DULY PAID BACK THESE LIABILITIES IN S UBSEQUENT YEARS BY ACCOUNT PAYEE CHEQUES . THE AO DID NOT MAKE ANY INDEPENDENT ENQUIRIES NOR BROUGHT ANY OTHER EVIDENCE ON RECORD TO ESTABLISH THE AFORE SAID LIABILITIES HAD CEASED TO EXIST OR WERE REMITTED BY THE CREDITORS IN THE YEAR UNDER CONSIDE RATION. IN THESE CIRCUMSTANCES, AS CONCLUDED BY THE HONBLE GUJRAT H IGH COURT IN CIT VS. BHARAT IRON AND STEEL INDUSTRIES (1993) 199 ITR 67 (GUJ) ( FB), THE PROVISIONS OF SEC. 41(1)(A) ARE NOT ATTRACTED. 6.1 HONBLE GUJRAT HIGH COURT IN THE CASE OF CI T VS. SILVER COTTON MILLS CO. LTD., 254 ITR 728(GUJ) HELD THAT SIMPLY BECAUSE THE PERIOD OF LIMITATION HAD COME TO AN END FOR THE PURPOSE OF FILING A SUIT FOR RECOVERY OF THE SAID AMOUNT OR FOR TAKING APPROPRIATE ACTION AGAINST THE ASSESSEE, IT CANNOT BE SAID THAT THERE WAS A CESSATION OF LIABILITY. THE LIABILITY STILL R EMAINS, THOUGH IT MAY NOT BE ENFORCEABLE AT LAW ON ACCOUNT OF THE PROVISIONS OF THE LAW OF LIMITATION. RELYING UPON THE DECISION IN THE CASE OF SUGAULI SUGAR WOR KS (P.) LTD. [1999] 236 ITR 518 .SC), HONBLE HIGH COURT FURTHER HELD THAT UNLESS THERE IS A CESSATION OF LIABILITY OR THERE IS A REMISSION OF LIABILITY BY T HE CREDITOR, THE LIABILITY SUBSISTS AND, THEREFORE, EVEN IF THE ENTRIES ARE MADE TO WRITE BA CK THE EXPENDITURE, THE AMOUNT ITA NO.628/DEL./2012 5 SO WRITTEN BACK CANNOT BE ADDED IN THE INCOME OF TH E ASSESSEE AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT. 6.2 HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CHASE BRIGHT STEEL LTD.,177 ITR 128(BOMBAY) WHILE RELYING UPON THEIR JUDGMENT IN J. K. CHEMICALS LTD. VS. CIT, [1966] 62 ITR 34 HELD THAT T HE LIABILITY OF AN ASSESSEE DOES NOT CEASE MERELY BECAUSE THE LIABILITY HAS BECOME BARRE D BY LIMITATION. THE LIABILITY CEASES WHEN IT HAS BECOME BARRED BY LIMITATION AND THE ASSESSEE HAS UNEQUIVOCALLY EXPRESSED ITS INTENTION NOT TO HONOUR THE LIABILITY EVEN WHEN DEMANDED. 6.3 HONBLE SUPREME COURT IN THE CASE OF BOMBAY DYEING & MANUFACTURING CO. LTD. V. STATE OF BOMBAY, AIR 1958 SC 328, IN PA RA 23 OF THEIR DECISION OBSERVED AS FOLLOWS : ' 23. IT HAS BEEN ALREADY MENTIONED THAT WHEN A DEB T BECOMES TIME BARRED, IT DOES NOT BECOME EXTINGUISHED BUT ONLY UNENFORCEABLE IN A COURT OF LAW. ' 6.4 HONBLE SUPREME COURT IN THE CASE OF SUGAU LI SUGAR WORKS (P.) LTD. [1999] 236 ITR 518 HELD THAT UNLESS THERE IS A CESS ATION OF LIABILITY, INCOME CANNOT BE ADDED AS PER THE PROVISIONS OF SECTION 41 (1) OF THE ACT. SIMILARLY, HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. C HETAN CHEMICALS PVT. LTD. 267 ITR 770 (GUJ) HELD THAT : ON A READING OF THE PROVISIONS, IT IS APPARENT THA T BEFORE THE SECTION CAN BE INVOKED, IT IS NECESSARY THAT AN ALLOWANCE OR A DEDUCTION HAS BEEN GRANTED DURING THE COURSE OF ASSESSMENT FOR ANY YEA R IN RESPECT OF LOSS, EXPENDITURE OR TRADING WHICH IS INCURRED BY THE ASS ESSEE, AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE OBTAINS, WHETHER IN CASH OR IN ANY OTHER MANNER, ANY AMOUNT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION OF SUCH LIABILITY. IN THAT CASE, EITHER THE AMOUNT OBTAINED BY THE ASSESSEE OR THE VALUE OF THE BENEFIT OCCURRING TO THE ASSESSEE CAN BE DEEMED TO THE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND CAN BE BROUGHT TO TAX AS INCOME OF T HE PREVIOUS YEAR IN WHICH SUCH AMOUNT OR BENEFIT IS OBTAINED. IN THE FA CTS OF THE CASE ON HAND, WITHOUT ENTERING INTO THE ASPECT AS TO WHETHER THE LIABILITY TO REPAY THE LOANS WOULD BE A TRADING LIABILITY OR NOT, IT IS AN ADMITTED POSITION THAT THERE ITA NO.628/DEL./2012 6 HAD BEEN NO ALLOWANCE OR DEDUCTION IN ANY OF THE PR ECEDING YEARS AND, HENCE, THERE IS NO QUESTION OF APPLYING THE PROVISI ON AS SUCH. SECTION 28 OF THE ACT DEALS WITH PROFITS AND GAINS OF BUSINESS OR PROFESSION AND CLAUSE (IV) THEREOF SAYS THAT THE VA LUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION SHALL BE CHARGEABLE AS INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN THE FACTS OF THE PRESENT CASE, IT CANNOT BE SAID THAT THE ASSESSEE-C OMPANY WAS CARRYING ON BUSINESS OF OBTAINING LOANS AND THAT THE REMISSI ON OF SUCH LOANS BY THE CREDITORS OF THE COMPANY WAS A BENEFIT ARISING FROM SUCH BUSINESS. 6.5 HONBLE JURISDICTIONAL HIGH COURT IN CIT VS . VARDHMAN OVERSEAS LTD., 16 TAXMAN.COM 350(DELHI) WHILE REFERRING THE JUDGMENT OF THE HONBLE SUPREME COURT IN SUGAULI SUGAR WORKS (P.) LTD. (SUPRA) AND A NUMBER OF OTHER DECISIONS UPHELD THE FINDINGS OF THE TRIBUNAL ,HOLDING THAT SINCE AMOUNTS PAYABLE TO SUNDRY CREDITORS WERE NOT CREDITED TO ASSESSEE'S PR OFIT AND LOSS ACCOUNT AND WERE STILL SHOWN AS OUTSTANDING AT END OF RELEVANT YEAR AND THE ASSESSEE HAVING NOT UNILATERALLY WRITTEN BACK ACCOUNTS OF SUNDRY CR EDITORS IN ITS PROFIT AND LOSS ACCOUNT, PROVISIONS OF SEC. 41(1) WERE NOT ATTRACTE D.. 6.6 IN THE LIGHT OF VIEW TAKEN BY THE HONBLE SUPREM E COURT AND JURISDICTIONAL HIGH COURT IN THE AFORESAID DECISIONS, IT IS APPA RENT THAT UNLESS THERE IS A CESSATION OF LIABILITY OR THERE IS A REMISSION OF LIABILITY BY THE CREDITOR, THE LIABILITY SUBSISTS AND THE ASSESSEE HAVING NOT UNILATERALLY WRITTEN BACK ACCOUNTS OF THE AFORESAID CREDITORS IN ITS PROFIT AND LOSS ACCOUNT, THE PROVISIONS OF SECTION 41(1) OF THE ACT AND EXPLANATION 1 THERETO, ARE NOT ATTRA CTED. IN THE INSTANT CASE, THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE HAS OBTAINE D ANY BENEFIT EITHER BY WAY OF REMISSION OR CESSATION OF ANY LIABILITY WHILE THE AFORESAID LIABILITIES ARE CONTINUALLY ADMITTED BY THE ASSESSEE IN THEIR BALANCE SHEET . I N THESE CIRCUMSTANCES, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT (A) NOR BROUGHT TO OUR NOTICE ANY CONTRARY DECISION, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A) . THEREFORE, GROUND NO. 1 IN THE APPEAL IS DISMISSED. ITA NO.628/DEL./2012 7 7. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERM S OF RESIDUARY GROUND NO.2 IN THE APPEAL, ACCORDINGLY, THIS GROUND IS DISMISSED. 8. NO OTHER PLEA OR ARGUMENT WAS RAISED BEFORE US. 9. IN THE RESULT, APPEAL IS DISMISSED. SD/- SD/- (U.B.S. BEDI) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. M/S G.N. BUILDERS (P) LTD., D-300, DEFENCE COLO NY, NEW DELHI- 2. AC.I.T., CIRCLE 12(1), , NEW DELHI. 3. CIT CONCERNED. 4. CIT(A)-V, NEW DELHI 5. DR, ITAT,C BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT