ITO WARD - 13(1), New Delhi V. Jagdamba Foods Ltd, Karnal

ITA 661/DEL/2020

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5699 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2024
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-07-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 03-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PARUL SINGH
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI Before Sh. Saktijit Dey, Vice President Dr. B. R. R. Kumar, Accountant Member ITA No. 661/Del/2020 : Asstt. Year : 2013-14 Income Tax Officer, Ward-13(1), New Delhi-110002 Vs. Jagdamba Foods Ltd., Taraori, Karnal, Haryana-110034 (APPELLANT) (RESPONDENT) PAN No. AAACJ1863F Assessee by : Sh. Ved Jain, Adv. & Ms. Supriya Mehta, AR Revenue by : Ms. Parul Singh, Sr. DR Date of Hearing: 09.07.2024 Date of Pronouncement: 23.07.2024 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the Revenue against the order of ld. CIT(A)-36, New Delhi dated 16.12.2019. 2. Following grounds have been raised by the Revenue: “1. On f ac t s & ci rc u mst an c es of th e c as e and in l a w th e Ld. CI T( A) h a s er red i n d el et in g th e ad d i t ion mad e b y a ss es si ng offi c er on ac cou n t of c es sat i on / remi s si on o f l iab il it i es u /s 41( 1) ( a) of R s .1 , 05, 69 ,417/ - by i g n orin g t h e f i nd in g s of as s ess in g of fi c er t h at th ere wa s remi s si on / c es sat i on in t h e l ong te rm an d sh ort t erm b orrowin gs , t rad e p a yabl es a s w ell as ot h er cu rr en t l ia b il it i es a gg regat in g to R s . 1 ,0 5,6 9, 417/- wh ere a s sam e wa s n ot refl ect ed in t h e b an k a c c oun t s of th e as s ess ee. 2. On f a ct s & ci rc um st an ces of th e c as e an d in la w th e Ld . CI T( A) h a s er red i n d el et in g th e ad d i t ion mad e b y a ss es si ng offi c er on a c c ou nt of red u ct i on i n t rad e rec ei vab l e t o t h e tu n e of Rs .1 ,0 5, 57, 313 /- by ig n orin g t h e fin d in gs of a ss es si ng offi c er th at th ere wa s r edu ct i on in t rad e recei vabl e a n d th ere wa s n o c redi t/ rec ei p t in th e ban k acc ou nt . ITA No. 661/Del/2020 Jagdamba Foods Ltd. 2 3. On f a ct s & ci rc um st an ces of th e c as e an d in la w th e Ld . CI T( A) h a s er red i n d el et in g th e ad d i t ion mad e b y a ss es si ng offi c er on a c cou n t of u n ex plai n ed cr edit ors, l on g t erm l i ab il it i es & oth er cu rren t lia bi lit i es am ou n ti ng t o R s. 3, 84 ,82,4 11/ - as as s ess ee fail ed to fil e d et a i l s/ con fi rm ati on d u ri ng a s ses sm en t pr oc eed in g s .” 3. The Assessing Officer made addition on account of reduction of long term liabilities, short term borrowing, trade payables and other current liabilities of Rs.1,05,69,471/-. The Assessing Officer held that there was remission in the trading liabilities and hence the same is taxable u/s 41(1). The ld. CIT(A) deleted the addition after examining the facts and concluded that there was no cessation of liabilities during the year as assumed by the ld. CIT(A) but it was discharged the liabilities against the trade receivables. The ld. DR relied on the order of the Tribunal in the case Bharat Dana Bera Vs. ITO (56 Taxmann 388). The ld. AR relied on the order of the ld. CIT(A) and the following judgments:  PCIT Vs. Sri B.T. Nagraj Reddy, 2019 (5) TMI 1204 dated 01.04.2019 (Kar. HC)  ACIT Vs. Foot Mart Retail India Pvt. Ltd., 2022 (5) TMI 1551 dated 31.05.2022 (ITAT Del.)  ACIT Vs. M/s Milroc Good Earth Property and Developers LLP, 2022 (4) TMI 493 dated 06.04.2022 (ITAT Panaji)  Aarvee Denims and Exports Vs. DCIT, 2022 (4) TMI 96 dated 30.03.2022 (ITAT Ahd.)  Arvind Ltd. Vs. DCIT, 2021 (11) TMI 766 dated 30.09.2021 (ITAT Ahd.) ITA No. 661/Del/2020 Jagdamba Foods Ltd. 3 4. The relevant part of the ld. CIT(A) on this issue is as under: “A s rega rds t h e addi ti on of R s .1, 0 5,5 7, 313/ - in res pect of t rad e rec eiv ab l e, I n ot e t h at th e sai d ad d it i o n wa s m ad e b y th e A ss es si n g Of fi c er mer el y on th e g rou nd th at th ere is a red u ct i on i n t h e t ra d e rec eiv ab l e t o th i s ext en t du ri ng t h e y ea r and t h ere i s n o t ran s act i on in t h e ban k ac c oun t . A s di scu s sed herei nab ov e wh il e ad j u d i cati n g g roun d no. 4 rega rdi ng add it i on m ad e on a cc ou n t of red u ct ion i n l iab i l it i es , th e As s es si n g Of fi c er h as fa i l ed t o ap p recia te t ha t th e red ucti on in t ra d e rec eiv ab l e i s on a ccou n t of redu ct i on in t rad e p a ya b l e and ot h er l ia b il it i es . Th u s, th ere wa s c orresp ond in g red uc t i on in t rad e r ec ei va bl e c on s equ ent t o adj u s tm en t of su ch rec eiv ab l e agai n st t he a m ou n t p ay ab l e. E v en oth erwi s e redu cti on in t ra d e rec eiv abl e can n ot b e ass um ed t o b e t h e i nc om e of th e as s ess ee s o a s t o ca l l f or t h e add i t ion on th i s ac c ou nt . Th e t rad e rec eiv ab l e rep resen ts th e s al es m ad e i n ea rl i er y ea r whi ch ob vi ou sl y st ood in clu d ed in t h e i n c om e of ea rl i er y ears . A n y redu ct i on in su ch t ra d e rec eiv ab l e ev en as per A sses sin g O f fi c er's all eg at i on wi t h ou t b ein g an y pay m en t rec ei v ed wil l b e el i g ib l e a s a d ed u ct i on on a cc ou nt of am ou nt writ t en of f a s b ad d eb t . Th u s, b y n o s t ret ch of i m ag i nat i on su ch red uc t i on in tr ad e rec eiv ab l e can b e con sid ered a s in c om e of t he as s essee. Ac c ord in gl y , t hi s ad dit i on i s di rect ed to b e d el et ed . Th e al t ern at iv e c ont en ti on of t h e A R i s a ls o j u st i fi ed t h at in c a se it i s b ei n g as su m ed b y th e A ss es si ng Of fi c er th at th ere h as b een a c es sat i on o f l iab i l it y t o th e ext en t of red u ct ion in li a bi li t i es /c red i t ors du rin g th e y ea r an d th e s am e i s in c om e un d er s ect i on 4 1(1) th en t h ere i s a c or resp on d i ng red uct i on i n tra d e r ecei va bl e wh ich wi ll b e a l l ow ab l e d edu ct i on a s ba d d eb t . A n d b oth th es e a m oun t s wil l b ec om e p art of t he p rofit an d l os s a ccou n t. Th e redu cti on in li abi l it y w ill b e th e in c om e un d er s ect i on 41(1) and th e redu cti on i n t rad e rec eiv ab l e wil l b e an all owa bl e d edu cti on u n der s ect i on 36( 2) of th e I T A ct . Th u s, ei th er w ay th es e a m ou n t cann ot b e c on sid ered as an i n com e of th e a s s ess ee. H en c e, t he g roun d n o. 4 a n d 6 a re h ereb y all ow ed . ” ITA No. 661/Del/2020 Jagdamba Foods Ltd. 4 5. We have examined the fact that there was an outstanding balance of Rs.4,95,12,689/- during the year out of which the liabilities of Rs.1,05,69,416/- was adjusted of by the debtors. The details of debtors and creditors have been duly examined by the ld. CIT(A) and hence, we decline to interfere with the well reasoned order of the ld. CIT(A) on this issue. 6. The AO has also made addition of Rs.3,84,82,400/- on account of unexplained creditor, long term liabilities and other liabilities on the grounds that the assessee failed to prove the genuineness of brought forward trade creditors. The ld. CIT(A) deleted the addition on the grounds that there was no cessation of liabilities and hence, the same cannot be added u/s 41(1) of the I.T. Act. The provisions of Section 41(1) are as under: “Profits chargeable to tax. 41. [ ( 1) Wh ere an al lowan c e or deduction ha s b een mad e i n th e as s ess m en t f or an y y ea r i n resp ect of l o ss , ex p en di t u re or trading liability in cu rr ed b y th e a s ses s ee ( h erein aft er ref erred t o a s th e f i rst - men t i on ed p ers on) and su b s eq uen tl y d u rin g an y p rev i ous y ea r, — ( a) t h e fi rst- m en t i on ed p ers on h a s obt ai n ed , wh et h er in ca sh or i n any ot h er man n er wh at so ev er, an y am ou nt i n res p ec t of su ch l os s or exp en di tu re or s om e b en efi t in resp ect o f su c h t rad in g li a b ili t y b y wa y of rem is si on or c ess at i on t h ereof, t h e am ou nt ob tai n ed b y su c h pers on o r th e value of benefit accruing t o h im shal l be deem ed t o b e p rof i t s and g ain s of bu sin ess or p rof essi on an d a cco rdin g ly cha rg ea b l e t o in c om e-t a x a s th e in c om e o f t hat pr evi ou s y ea r , wh et h er th e bu sin es s or p rof es si on in resp ect of wh i ch th e al l o wan c e or d edu cti on h a s b een mad e is i n ex ist enc e in th at y ea r o r n ot ; or ( b) t h e su c ces s or in bu si n ess ha s ob t ai n ed , wh et h er i n ca sh o r i n an y oth er man n er wh a ts oev er, any a m ou n t in resp ect of wh ich l os s or exp en d i tu re wa s in cu rr ed b y t h e fi rs t- m en t i on ed p ers on or s om e ben efit in resp ect of ITA No. 661/Del/2020 Jagdamba Foods Ltd. 5 th e t rad i ng l i ab il it y refer red t o i n cl aus e (a) by w ay of rem i s si on or c ess at i on th ereo f , t h e am oun t obt ai n ed b y th e su cc es s or in b us in es s or th e value of benefit a cc ru in g t o th e su cces s or i n bu sin es s sh a l l be d eem ed t o be p rofi t s and g ai n s o f t h e b u si n ess or p rof es si on , a n d a cco rd i ng l y cha rg eabl e t o i nc om e-t ax a s t h e i n com e of t h a t p revi ou s y ear . [ Expl an at i on 1 . —F or th e pu rp os es of th i s sub - s ecti on , th e exp ressi on " l os s or ex p end it u re or s om e b en efi t in resp ect of any su ch t ra di n g l ia b ili t y b y way of rem i s si on or c es sat i on t h er eof" sh al l i n cl ud e t he rem i s si on or c ess at i on o f an y li a bi li t y b y a u n i l at e ra l ac t by th e f i rst m ent i on ed p erson u nd er clau s e (a) o r th e suc c es sor in bu sin es s un d er cl au se (b ) o f th at su b- s ect i on by w ay of w riti n g of f su ch l iab ili t y i n h is a c cou n t s. ] ” 7. In the instant case, the assessee could not file any confirmation before the AO with regard to the sundry creditor whether they are still outstanding or not. There were no details about the intention of the assessee to pay the outstanding liabilities nor any reminders from the creditors seeking payment of the amounts due. The details of the litigation or any Court case have not been brought before us. The ratio of the ld. CIT(A) that the liabilities brought forward from earlier years, hence, the provisions of Section 68 are not applicable is not emanating from the record. To that extent, the ld. CIT(A) erred in adjudicating on the Section which is not a subject matter of Assessment Order. Hence, we are of the considered view that the matter should go back to the Assessing Officer for due verification as to the existence of the parties, writing of these liabilities as bad debts in their books or not and to afford an opportunity to the assessee to file the confirmations and the relevant details before the Assessing Officer. The appeal of the Revenue on this ground is allowed for statistical purpose. ITA No. 661/Del/2020 Jagdamba Foods Ltd. 6 8. In the result, the appeal of the Revenue allowed for statistical purpose. Order Pronounced in the Open Court on 23/07/2024. Sd/- Sd/- (Saktijit Dey) (Dr. B. R. R. Kumar) Vice President Accountant Member Dated: 23/07/2024 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR