ACIT 2(1), MUMBAI V. ELDE ELECTRICALS AGENCIES P.LTD, MUMBAI

ITA 6649/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1860 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 04-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH, MUMBAI . . , !'# , $ % BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLA IYA, AM ./I.T.A. NO. 6649/MUM/2011 ( & & & & / ASSESSMENT YEAR : 2008-09 THE ACIT 2(1), AAYAKAR BHAVAN, MUMBAI-400 020 / VS. M/S. ELDE ELECTRICALS AGENCIES PVT. LTD., 4A, ISMAIL BLDG., NO. 381, D.N. ROAD, FORT, MUMBAI-400 023 ' $ ./ () ./PAN/GIR NO. AAACE 0859N ( '* /APPELLANT ) .. ( +,'* / RESPONDENT ) '* - / APPELLANT BY: SHRI RAJARSHI DWIVEDY +,'* . - / RESPONDENT BY NONE . /0$ / DATE OF HEARING : 22.01.2013 12& . /0$ /DATE OF PRONOUNCEMENT :30.1.2013 3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-4, MUMBAI DT.14.7.2011 PERTAINING TO A.Y. 20 08-09. 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD . CIT(A) ERRED IN ALLOWING ASSESSEES APPEAL BY DELETING THE ADDITION OF RS. 64,27,366/- REPRESENTING THE CREDITORS OUTSTANDING FOR MORE THA N 3 YEARS AS REMITTED/CEASED LIABILITY U/S. 41(1) OF THE ACT. ITA NO. 6649/M/2011 2 3. NONE APPEARED ON BEHALF OF THE ASSESSEE THEREFOR E WE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND DISPOSE OF THIS MAT TER EX PARTE ON MERIT. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT WHILE SCRUTINIZING THE BALANCE SHEET, THE ASSES SING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOWN SUNDRY CREDITORS AT RS. 97,01,239/-. ON VERIFICATION OF THE DETAILS FURNISHED, IT WAS NOTIC ED BY THE AO THAT SOME OF THE CREDITORS WERE OUTSTANDING FOR MORE THAN 3 Y EARS. ACCORDINGLY, THE AO ASKED TO SHOW CAUSE AS TO WHY PROVISIONS OF SEC. 41(1) SHOULD NOT BE APPLIED IN ITS CASE FOR THE LIABILITIES WHICH ARE O UTSTANDING FOR MORE THAN THREE YEARS. IN RESPONSE TO WHICH, THE ASSESSEE FI LED A DETAILED REPLY DT. 6.12.2010 AND CONTENDED THAT THE AMOUNT OF LIABILIT IES HAVE NOT UNILATERALLY WRITTEN BACK IN THE BOOKS OF ACCOUNT T HEREFORE THE SAME DOES NOT AMOUNT TO REMISSION OR CESSATION OF TRADING LI ABILITIES U/S. 41(1) OF THE ACT. IT WAS FURTHER POINTED OUT BY THE AO THAT THE LIABILITIES WHICH ACCORDING TO THE ASSESSEE NO LONGER EXISTED/PAYABLE A SUM OF RS. 4,51,505/- IN RESPECT OF 15 SUCH CREDITORS HAVE ALR EADY BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT. 5. THE STATEMENTS OF THE ASSESSEE WERE REJECTED BY THE AO WHO WAS OF THE OPINION THAT THE ASSESSEE IS IN THE PROCESS OF SELLING OF ITS ASSETS AND STILL NOT PAYING ITS OLD CREDITORS ITSELF MEAN THAT THERE IS A CESSATION OF LIABILITY AND ACCORDINGLY ADDED A SUM OF RS. 64,27, 366/- TO THE INCOME OF THE ASSESSEE. 6. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) AND REITERATED ITS STAND THAT THE LIABILITIES HAVE NOT CEASED TO EXIST BUT ARE STILL VERY MUCH ALIVE IN THE BOOKS OF ACCOUNT. THE LD. C IT(A) WAS CONVINCED WITH THE SUBMISSION OF THE ASSESSEE AND AS THE LIAB ILITY HAS BEEN ACKNOWLEDGED BY WAY OF ADOPTING THE BALANCE SHEET B Y THE BOARD OF ITA NO. 6649/M/2011 3 DIRECTORS, THERE IS NO CASE FOR MAKING THE ADDITION U/S. 41(1) OF THE ACT AND ACCORDINGLY DELETED THE ADDITION MADE BY THE AO . 7. REVENUE IS IN APPEAL BEFORE US AGAINST THE FIND ING OF LD. CIT(A) 8. IT IS NOT IN DISPUTE THAT THE LIABILITIES ARE SH OWN IN THE BALANCE SHEET AND HAVE NOT BEEN WRITTEN BACK BY THE ASSESSEE. WE ARE THE PARTIES TO THE DECISION TAKEN BY THIS BENCH IN ITA NO. 4770/M/09 W HEREIN ON IDENTICAL FACTS, WE HAVE HELD THAT PROVISIONS OF SEC. 41(1) C ANNOT BE APPLIED EVEN IF THE LIABILITIES HAVE SURPASSED THE PERIOD OF LIMITA TION. IN THAT CASE WE HAVE RELIED UPON THE DECISIONS OF THE HONBLE SUPREME C OURT IN THE CASE OF CIT VS SUGAULI SUGAR WORKS (P) LTD. 236 ITR 518 HAS HELD THAT UNILATERAL ENTRY BY ASSESSEE IN THE ACCOUNT TRANSF ERRING THE AMOUNT TO THE CAPITAL RESERVE ACCOUNT WOULD NOT BRI NG THE MATTER WITHIN THE SCOPE OF SEC. 41 OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE HAS NOT EVEN WRIT TEN BACK THE CREDITORS. THEREFORE WHEN THE UNILATERAL ACT OF WR ITING BACK THE LIABILITY DOES NOT ATTRACT PROVISIONS OF SEC. 41(1) AS PER THE RATIO OF THE HONBLE SUPREME COURT (SUPRA) THEN WHEN THE ENT RIES EXISTS IN THE BOOKS OF ACCOUNT, WE DO NOT FIND ANY REASON FOR INVOKING PROVISIONS OF SEC. 41(1) OF THE ACT. 9. THE HONBLE SUPREME COURT IN THE CASE OF COMMISS IONER OF INCOME-TAX V. SUNDARAM IYENGAR (T.V.) AND SONS LTD. 222 ITR 344 HAS HELD THAT : ASSESSEE RECEIVING DEPOSITS (NOT BEING IN THE NATUR E OF SECURITY DEPOSIT HELD BY THE ASSESSEE FOR PERFORMAN CE OF CONTRACT BY HIS CONSTITUENTS) FROM HIS CUSTOMERS IN THE COUR SE OF HIS BUSINESS, WHICH DEPLETED BY ADJUSTMENT FROM TIME TO TIME, UNCLAIMED BALANCES TRANSFERRED BY THE ASSESSEE TO H IS PROFIT AND ITA NO. 6649/M/2011 4 LOSS ACCOUNT ARE HIS TRADING RECEIPT, EVEN THOUGH T HE DEPOSITS WERE INITIALLY TREATED AS CAPITAL RECEIPTS, THE CLAIM OF DEPOSITORS HAVING BECOME BARRED BY TIME. FACTS OF THE PRESENT CASE ARE CLEARLY DISTINGUISHAB LE AS IN THAT CASE THE ASSESSEE HAS TRANSFERRED UNCLAIMED BALANCE TO HIS P ROFIT AND LOSS ACCOUNT AS ITS TRADING RECEIPT WHEREAS IN THE INSTANT CASE, THE LIABILITY STILL EXISTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 10. THE HONBLE SUPREME COURT IN THE CASE OF CHIEF COMMISSIONER OF INCOME TAX VS KESARIA TEA CO. LTD. HAS ONCE AGAIN R EITERATED THAT UNILATERAL ACTION ON THE PART OF THE ASSESSEE BY WA Y OF WRITING OFF THE LIABILITY IN ITS ACCOUNTS DOES NOT NECESSARILY MEAN THAT THE LIABILITY HAS CEASED IN THE EYE OF LAW. AMOUNT WRITTEN BACK IS N OT CHARGEABLE TO TAX UNDER SECTION 41(1) OF THE ACT. AS MENTIONED EARLI ER IN THE PRESENT CASE, THE ASSESSEE HAS NOT WRITTEN BACK THE LIABILITY. 11. IN THE LIGHT OF THE ABOVE, WE DO NOT FIND ANY R EASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 4 /5 ( . 6 $4( . (/ 7' ORDER PRONOUNCED IN THE OPEN COURT ON 30.1.2013 3 . 2& $ 6 85 30.1.2013 2 . 9 SD/- SD/ (I.P. BANSAL) (N.K. BILLAIYA) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 8 DATED 30.1.2013 . . ./ RJ , SR. PS ITA NO. 6649/M/2011 5 3 . +/ : &/ / COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. <9 +/ , , / DR, ITAT, MUMBAI 6. 9= > / GUARD FILE. 3 / BY ORDER, , / +/ //TRUE COPY// ? / 7 ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI