DCIT CENTRAL CIRCLE-3, MUMBAI V. LAWRENCE DYES & PETROCHEMICAL PVT. LTD., MUMBAI

ITA 6520/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3711 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 06-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI BEFORE SHRI R.C. SHARMA, AM AND SHRI SANDEEP GOSAIN , JM ./ I.T.A. NO. 6520/MUM/2013 ( / ASSESSMENT YEAR: 2010-11) DY. C.I.T., CENTRAL CIRCLE-3, R.NO.905, PRATISTHA BHAVAN, MARINE LINES, MUMBAI-20. / VS. M/S LAWRENCE DYES& PETROCHEMICALS PVT. LTD. 305, AGH CHAMBERS, 379/381, NARSI NATHA STREET, MUMBAI-400 009. ./ ./PAN/GIR NO. AAACL 4864C ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI MANOJ KUMAR / RESPONDENT BY : SHRI VIMAL PUNMIYA / DATE OF HEARING : 29/12/2015 !'# / DATE OF PRONOUNCEMENT : 04/03/2016 $% / O R D E R PER SANDEEP GOSAIN, J. M.: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 36, DATED 29 .08.2013 FOR A.Y. 2010-11 THEREBY CIT(A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESEE AGAINST THE ORDER OF AO DATED 14.12.2012 ON THE GROUNDS OF APPEAL MEN TIONED HEREIN BELOW. 2 ITA NO. 6520/MUM/2013 (A.Y. 2010-11) DCIT VS. M/S LAWRENCE DYES& PETROCHEMICALS PVT. LT D. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.44,78,815/- U/ S 41(1) BEING AMOUNT DUE TO SHRI THOMOS DMELLO STATING THAT THE ISSUE IS COVER ED BY SETTLEMENT COMMISSION ORDER FOR A.Y. 1997-98 TO 2004-05, WHEN THE ASSESSM ENT YEAR INVOLVED HERE IS A.Y. 2010-11. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT CLEARLY BRINGING OUT THE FACTS, AS TO HOW THE SETTLEMENT COMMISSIONS ORDER COVERED THE SAID ISSUE ALSO. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN STATING THAT THE ISSUE IS COVERD BY SETTLE MENT COMMISSION ORDER FOR A.Y. 1997-98 TO A.Y. 2004-05, WHEN THE AMOUNT INVOL VED IN THE SAID ORDER AND A.Y. 2010-11 ARE DIFFERENT. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND AND/OR TO ALTER, ANY OF THE GROUNDS OF APPEAL, IF NEED BE. 5. THE APPELLANT, THEREFORE, PRAYS THAT ON THE GOUNDS STATED ABOVE, THE ORDER OF THE CIT(A)-36, MUMBAI MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY SHOWN TO HAVE BEEN ENGAGED IN THE BUSINESS OF TRADING IN DYES AND CHEM ICALS. THE ASSESSEE E-FILED 3 ITA NO. 6520/MUM/2013 (A.Y. 2010-11) DCIT VS. M/S LAWRENCE DYES& PETROCHEMICALS PVT. LT D. RETURN OF INCOME FROM A.Y. 2010-11 ON 23.09.2010 TH EREBY SHOWING LOSS AT RS.12,55,392/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT. SUBSEQUENTLY THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE I.T. ACT WAS ISSUED AND SERVED ON THE ASSESSEE. AFTER SE EKING REPLY FROM THE ASSESSEE, AO PASSED ORDER OF ASSESSMENT THEREBY MAKING ADDITI ONS ON ACCOUNT OF CESSATION OF LIABILITY U/S 41(1) OF RS.44,78,815/-. 3. AGGRIEVED BY THE ORDER OF THE AO, REVENUE FILED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) CONSIDERING THE CASE OF THE A SSESSEE AND DELETED THE ADDITION VIDE ORDER DATED 14.12.2012. 3.1 AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESS EE FILED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREIN ABOVE. 4. AT THE VERY OUTSET, LD. DR REPRESENTING THE REVE NUE SUBMITTED THAT ON PERUSAL OF BALANCE SHEET FOR YEAR ENDING 31.3.10, THE ASSES SEE HAS SHOWN CERTAIN CURRENT LIABILITIES AND OUT OF THOSE IT HAS BEEN SHOWN THAT RS.44,78,815/- PERTAINS TO M/S. BHARAT CHEMICALS & PAINT INDUSTRIES WHICH COMPRISIN G A SUM OF RS.29,45,538/- RECEIVED IN THE NAME OF THE FIRM AND RS.15,33,277/- TOWARDS PERSONAL ACCOUNT AGGREGATING TO RS.44,78,815/-. ALTHOUGH THE CONFIRM ATION WAS SUBMITTED BY THE 4 ITA NO. 6520/MUM/2013 (A.Y. 2010-11) DCIT VS. M/S LAWRENCE DYES& PETROCHEMICALS PVT. LT D. ASSESSEE BUT THE SAME WAS NOT BEARING THE SEAL AND STAMP OF THE FIRM. IN ADDITION COPY OF ACCOUNTS IN THE BOOKS OF BHARAT CHEMICALS & PAINT INDUSTRIES HAD BEEN FURNISHED AND IT WAS STATED THAT THE LIABILITY STAN DS LONG BACK SINCE 1997 AND THE ASSESSEE WAS UNABLE TO PROVIDE ANY DETAILS. IT WAS FURTHER SUBMITTED BY THE LD. DR THAT M/S. BHARAT CHEMICALS & PAINT INDUSTRIES IS TH E PROPRIETARY CONCERN OF SHRI THOMAS MDEMELO ONE OF THE DIRECTOR OF THE ASSESSEE COMPANY. THE SAID COMPANY IS CLOSED AND NO BUSINESS ACTIVITIES ARE CARRIED OU T FROM THE SAID CONCERN. IT WAS THE SPECIFIC STAND TAKEN BY THE LD. DR THAT ON VERIFICA TION OF THE RECORDS OF SHRI. THOMAS M DMELLO , IT WAS NOTICED THAT HE IS NOT SH OWING ANY AMOUNT IN HIS DEBIT SIDE OF HIS BALANCE SHEET PERTAINING TO THE COMPANY I.E. M/S. LAWRENCE DYES & PETROCHEMICALS PVT. LTD. THEREFORE, AFTER CONSIDERI NG THE FACTS THE AO HAS RIGHTLY HELD THAT THE UNPAID LIABILITY OF RS.44,78,815/- IS NOTHING BUT JUST AN ENTRY IN THE BOOKS OF THE ASSESSEE SHOWING ON DATE 31.3.2010 HEN CE THE SAID AMOUNT WAS RIGHTLY CONSIDERED AS CESSATION OF LIABILITY AND AC CORDINGLY TAXED U/S 41(1) OF THE I.T. ACT. LD. DR FURTHER SUBMITTED THAT THE CIT(A) HAS MERELY DELETED THE ADDITIONS ON THE GROUND THAT THE MATTER IS COVERED BY SETTLEM ENT ORDER FOR A.Y. 1997-98 TO 2004-05 WHEREAS THE PRESENT ASSESSMENT YEAR INVOLVE S HERE IS A.Y. 2010-11. IN SUCH CIRCUMSTANCES, THE LD. CIT(A) ERRED IN NOT CLE ARLY BRINGING OUT THE FACTS AS TO HOW THE SAID SETTLEMENT COMMISSION ORDERS COVERED T HE SAID ISSUE. 5 ITA NO. 6520/MUM/2013 (A.Y. 2010-11) DCIT VS. M/S LAWRENCE DYES& PETROCHEMICALS PVT. LT D. 5. ON THE OTHER HAND THE LD. AR REPRESENTING THE AS SESSEE RELIED UPON THE ORDERS PASSED BY THE CIT(A) AND SUBMITTED THAT THE AO HAD WRONGLY MADE ADDITION U/S 41(1) AS THE SAME WAS NOT TRADING LIABILITY AND WAS UNSECURED LOAN FROM A DIRECTOR AND IT WAS FURTHER SUBMITTED THAT UNSECURED LOAN RE CEIVED WAS NOT A NEW LOAN BUT WAS VERY OLD AND THE SAME WAS CONFIRMED BY LOANER. THE LD. AR ALSO RELIED UPON THE DOCUMENTS SUBMITTED DURING THE COURSE OF CIT(A) HEARING WHEREIN CHART OF LOANS RECEIVED FROM THE DIRECTORS WAS REFERRED AND THE SAID CHART CONTAINS THE DETAILS FROM THE FINANCIAL YEAR 1997-98 TO FINANCIA L YEAR 1999-2010. IT WAS ALSO SUBMITTED THAT THE BALANCE SHEET OF THE COMPANY CON TAINS THE NAME OF ASSSSEE IN ALL THESE YEARS. THE ASSESSMENT OF THE ASSESSEE AS WELL AS THE COMPANY HAS BEEN COMPLETED U/S 143(3) FOR ALL THE ABOVE YEARS. AND I N THIS RESPECT EXTRACTS FROM THE BALANCE SHEET OF THE COMPANY OF THE FEW YEARS WERE ALSO PLACED BEFORE THE CIT(A). IT WAS SUBMITTED BY THE LD. AR THAT THE ASSESSEE HA D BORROWED HUGE AMOUNT FORM CANARA BANK AND ONE OF THE CONDITION OF THE LOAN SA NCTIONED IS THAT THE COMPANY WILL NOT REPAY THE LOANS OF DIRECTOR AND ASSOCIATES TILL THE BANK LOAN CONTINUE AND IN THIS RESPECT COPY OF SANCTION LETTER WAS ALSO PLACE D ON RECORD BEFORE CIT(A). IT WAS ALSO SUBMITTED THAT THE HONBLE SETTLEMENT COMMISSI ON HAS PASSED A COMPOSITE ORDER IN THE CASE OF ASSSSEE AND OTHER ASSOCIATES. THE ORDER PASSED PERTAINS TO A.Y. 1997-98 TO 2004-05 WHEREIN THE TOTAL INCOME DETERMI NED BY THE HONBLE 6 ITA NO. 6520/MUM/2013 (A.Y. 2010-11) DCIT VS. M/S LAWRENCE DYES& PETROCHEMICALS PVT. LT D. SETTLEMENT COMMISSION WAS RS.2,28,27,843/- THE HON BLE SETTLEMENT COMMISSION PASSED COVERING ALL ISSUES. 6. WE HAVE HEARD THE COUNSELS OF BOTH THE PARTIES A ND ALSO PERUSED THE MATERIAL ON RECORD AND ORDERS PASSED BY REVENUE AUTHORITIES. WE HAVE NOTICED THAT THE AO WHILE MAKING ADDITIONS HAS TAKEN A STAND THAT THE A MOUNT SHOWN BY THE ASSESSEE TOWARDS M/S. BHARAT CHEMICALS & PAINT INDUSTRIES HA S NOT BEEN SHOWN IN THE DEBIT SIDE OF THE BALANCE SHEET OF SHRI THOMAS MDEMELO. THEREFORE IT WAS DECIDED BY THE AO THAT SINCE THE CREDITORS IN THIS BOOKS IS NO T SHOWING ANY SUCH AMOUNT TO BE RECEIVABLE FROM THE ASSESSES COMPANY THEREFORE IT WAS HELD THAT THE MATTER WAS COVERED BY SEC-41(1) OF INCOME TAX ACT, 1961 AND HE NCE THE AMOUNT WAS TAXED UNDER INCOME TAX ACT, 1961 WHEREAS ON THE CONTRARY THE LD. CIT(A) WHILE DELETING THE ADDITION HAS DECIDED ISSUE, THE OPERATIVE PORTI ON OF THE CIT(A) ARE MENTIONED BELOW: 6.1 THE APPELLANT HAS SUBMITTED IN THE WRITTEN SU BMISSIONS AS UNDER: 1. THE LEARNED ASSESSING OFFICER HAS MADE AN ADDIT ION OF RS.44,78,815/- U/S 41(1). THE SAME IS NOT A TRADING LIABILITY AND IS UNSECURED LOAN FROM A DIRECTOR. 2. IT IS ALSO IMPORTANT TO NOTE THAT THE UNSECURED LOAN RECEIVED IS NOT A NEW LOAN BUT IS VERY OLD LOAN AND THE SAME HA S BEEN 7 ITA NO. 6520/MUM/2013 (A.Y. 2010-11) DCIT VS. M/S LAWRENCE DYES& PETROCHEMICALS PVT. LT D. CONFIRMED BY LOANER. WE ARE ONCE AGAIN ENCLOSING A CHART OF THE LOANS RECEIVED BY THE APPELLANT FORM THE DIRECT OR. THE CHART CONTAINS THE DETAILS FORM F.Y. 1997-98 TO F.Y. 2009 -2010. THE BALANCE SHEET OF THE COMPANY CONTAINS THE NAME OF T HE APPELLANT IN ALL THESE YEARS. THE ASSESSMENT OF THE APPELLANT AS ELL AS THE COMPANY HAS BEEN COMPLETED U/S 143(3) FO R ALL THE ABOVE YEARS. EXTRACTS FROM THE BALANCE SHEET OF TH E COMPANY OF THE FEW YEARS ARE ENCLOSED HEREWITH. 3. IT IS ALSO SUBSTANTIAL TO MENTION THAT THE APPEL LANT HAS BORROWED HUGE AMOUNT FORM CANARA BANK AND ONE OF THE CONDITI ON OF THE LOAN SANCTIONED IS THAT THE COMPANY WILL NOT REPAY THE LOANS OF DIRECTOR AND ASSOCIATES TILL THE BANK LOAN CONTINUE . A COPY OF THE SANCTION LETTER IS ONCE AGAIN ENCLOSED. 4. IT IS IMPORTANT TO MENTION THAT THE HONBLE SETT LEMENT COMMISSION HAS PASSED A COMPOSITE ORDER IN THE CASE OF THE APPELLANT AND OTHER ASSOCIATES. THE ORDER PERTAINS TO THE A.Y. 1997-98 TO 2004-05. HENCE, ALL THE ISSUES FOR THE A BOVE YEARS HAVE BEEN SETTLED BY THE HONBLE SETTLEMENT COMMISS ION AND RE- CONSIDERATION OF THE SAME BY THE LEARNED ASSESSING OFFICER IS NOT PERMISSIBLE AS THE SAME IS BEYOND HIS JURISDICTION. TOTAL INCOME 8 ITA NO. 6520/MUM/2013 (A.Y. 2010-11) DCIT VS. M/S LAWRENCE DYES& PETROCHEMICALS PVT. LT D. DETERMINED BY THE HONBLE SETTLEMENT COMMISSION IS RS.2,28,37,843/-. A COPY OF THE ORDER OF THE HONBL E SETTLEMENT COMMISSION HAS ALREADY BEEN FILED. 6.1 WE HAVE CONSIDERED AND ANALYZED THE ORDERS PASS ED BY THE CIT(A), WHILE DEALING WITH THE SAID GROUNDS THE CIT(A) HAS TAKEN A SPECIFIC STAND THAT SINCE THE HONLE SETTLEMENT COMMISSION HAS PASSED COMPOSITE O RDER COVERING ALL THE ISSUES AND, THEREFORE, THE ADDITION MADE BY THE AO U/S 41( 1) OF I.T. ACT, WOULD BE DELETED. ON THE PERUSAL OF THE ORDERS PASSED BY THE CIT(A), WE ARE OF THE CONSIDERED OPINION THAT CIT(A) WHILE APPRECIATING T HE ORDER PASSED BY THE HONBLE SETTLEMENT COMMISSION HAS ALSO CONSIDERED THE CHART OF LOANS RECEIVED FROM THE DIRECTOR AND THE SAID CHART CONTAINS THE DETAILS FR OM F.Y. 1997-1998 TO 2009-2010. THE CIT(A) ALSO APPRECIATED THE BALANCE SHEET CONTA INING THE NAME OF THE ASSESSEE IN ALL THOSE YEARS APART FROM THAT CIT(A) HAS ALSO CONSIDERED THE OTHER DOCUMENTS SUBMITTED BY THE ASSESSEE. THE CIT(A) HAS CORRECTLY REACHED TO THE CONCLUSION THAT SINCE THE HONBLE SETTLEMENT COMMISSION HAD PASSED COMPOSITE ORDER OF THE ASSESSEE AND ITS ASSOCIATE CONCERNS ON ALL THE ISSU ES WHICH HAVE BEEN SETTLED BY THE HONBLE COMMISSION AND THEREFORE RE-CONSIDERATION O F THE SAME BY THE AO IS NOT PERMISSIBLE. SINCE THE HONBLE SETTLEMENT COMMISSIO N HAD ALREADY DETERMINED THE TOTAL INCOME OF RS.2,28,37,843/- THEREFORE, KEEPING IN VIEW THOSE FACTS THE ADDITION WAS RIGHTLY DELETED. WE ARE FURTHER OF THE VIEW THA T MERELY BECAUSE OUTSTANDING 9 ITA NO. 6520/MUM/2013 (A.Y. 2010-11) DCIT VS. M/S LAWRENCE DYES& PETROCHEMICALS PVT. LT D. AMOUNT IS APPEARING IN THE ACCOUNTS FOR SEVERAL YE ARS, THE SAME CANNOT BE TAXED BY PROVISION OF SECTION 41(1). WE FOUND SUPPORT FROM T HE FOLLOWING JUDICIAL ORDERS IN THE CASE OF CITVS. SUGAULI SUGAR WORKS (P.) LTD. [1999] 236 ITR 518 (SC). WE ARE ALSO OF THE CONSIDERED VIEW THAT MERELY BECA USE ACCOUNT HAS BECOME NON- OPERATIONAL FOR A PERIOD OF THREE YEARS IT DOES NOT MEAN THAT OUTSTANDING LOAN OF ASSESSEE HAS CEASE TO EXIST MORE SO, WHEN THE ASSES SEE HAD NOT WRITTEN OFF SUCH LOAN IN ITS P&L A/C. IN THIS RESPECT WE FIND SUPPOR T FROM DCIT VS. VOTAK EXCELSIOUR.. 6.2 CONSIDERING THE TOTALITY OF THE FACTS AND CIRCU MSTANCES, WE HOLD THAT THE ORDERS PASSED BY THE CIT(A) ARE JUDICIOUS AND DO NO T NEED ANY INTERFERENCE, THEREFORE WE UPHOLD THE ORDERS PASSED BY THE CIT(A) AND CONSEQUENTLY DISMISS THE APPEAL FILED BY THE REVENUE. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH FEBRUARY, 2016 SD/- SD/- (R.C. SHARMA) (SANDEEP GOSAIN) $ / ACCOUNTANT MEMBER &' $ / JUDICIAL MEMBER ( ) MUMBAI; *$ DATED :04.02.2016 PS. ASHWINI 10 ITA NO. 6520/MUM/2013 (A.Y. 2010-11) DCIT VS. M/S LAWRENCE DYES& PETROCHEMICALS PVT. LT D. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT - CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI