DCIT, New Delhi V. M/s. Pasupati Fabrics Ltd., New Delhi

ITA 6650/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1242 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 28-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Section: 143(3); 142(1); 143(2)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 6650/DEL/2016 ASSESSMENT YEAR: 2013-14 DCIT, CIRCLE-19(2), NEW DELHI ROOM NO. 221, 2 ND FLOOR, C.R. BUILDING, I.P. ESTATE, NEW DELHI VS. M/S PASUPATI FABRICS LTD., 112, F-14, CONNAUGHT PLACE, NEW DELHI (PAN: AAACP1338B) (APPELLANT) (RESPONDENT) ORDER PER H.S. SIDHU, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 14.10.2016 PASSED BY THE LD. CIT(A)-12, NEW DELHI R ELATING TO ASSESSMENT YEAR 2013-14 ON THE FOLLOWING GROUNDS:- I. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,78,25,006/- MADE UNDER SECTION 41(1) OF THE INCOME TAX ACT, 1961,. DEPARTMENT BY SH. SUNDER PAL, SR. DR. ASSESSEE BY SH. RAJAN BHATIA, ADV. 2 II. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUND(S) OF APPEAL AND / OR DELETE OR AMEND ANY OF THE GROUND(S) OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE F ILED ITS E-RETURN ON 21.01.2014 DECLARING NIL INCOME. THE CASE OF THE A SSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER CASS AND STATUTORY NO TICES U/S. 143(2) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) DATED 02. 09.2014 WAS ISSUED. SUBSEQUENTLY, NOTICES U/S. 142(1) OF THE ACT WAS IS SUED ON 29.5.2015 AND VARIOUS INFORMATION WERE CALLED FOR IN RESPONSE TO WHICH THE LD. AR OF THE ASSESSEE ATTENDED THE PROCEEDINGS AND SUBMITTED THE DOCUMENTS / EVIDENCES IN SUPPORT OF ITS CLAIM AS CALLED FOR DUR ING THE PROCEEDINGS. THE ASSESSING OFFICER AS AGAINST THE NIL RETURNED INCOM E HAS ASSESSED THE INCOME AT A LOSS OF RS. 8,28,836/- U/S. 143(3) OF T HE ACT VIDE ORDER DATED 05.01.2016 AND MADE THE ADDITION OF RS. 2,78, 25,006/-. AGAINST THE ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 14.10.2016 HAS ALLOWED T HE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE IMPUGNED ORDER, REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. 3. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSEE COMPANY IT SELF HAD ADMITTED THAT THE AMOUNTS WERE OUTSTANDING FOR MORE THAN FIV E-SIX YEARS AND THEREFORE, THE ASSESSEE COMPANY OBTAINED A BENEFIT IN THE COURSE OF ITS BUSINESS WHICH WAS ASSESSABLE UNDER SECTION 41(1) OF THE INCOME TAX ACT, 1961. HE FURTHER SUBMITTED THAT THE ASSESSEE COMPANY DID NOT WRITE 3 BACK THE LIABILITY TO THE PROFIT AND LOSS ACCOUNT F OR THE YEAR UNDER CONSIDERATION. THUS, IT WAS SUBMITTED THAT THERE WAS A REMISSION OR CESSATION OF TRADING LIABILITY WHICH RESULTED IN A BENEFIT TO THE ASSESSEE AND BY RELYING UPON THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. TV SUNDARAM 222 ITR 344 (SC), THE T RADE LIABILITY / SUNDRY PERTAINING TO THE 268 PARTIES MENTIONED AT A SSESSMENT ORDER AT PAGE NO. 2 TO 11 WHICH AMOUNTING TO RS. 2,78,25,006 /- WAS RIGHTLY MADE BY THE ASSESSING OFFICER AND NEEDS TO BE UPHELD. 4. LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE OR DER OF THE LD. CIT(A) AND STATED THAT THE ISSUE IN DISPUTE IS SQUARELY CO VERED BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. VARDHMAN OVERSEAS LTD., 343 ITR 408, WHICH THE LD. CIT(A) HAS RELIED UPON IN HIS IMPUGNED ORDER AND DELETED THE ADDITION IN DISPUTE, WHICH DO ES NOT NEED ANY INTERFERENCE. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS ESPECIALLY THE IMPUGNED ORDER. WE FIND THAT LD. CIT(A) HAS EL ABORATELY DISCUSSED THE ISSUE IN DISPUTE VIDE PARA NO. 9.1 TO 10 AT PAG E NO. 7 TO 9 OF THE IMPUGNED ORDER. FOR THE SAKE OF CLARITY, WE ARE REP RODUCING THE RELEVANT FINDING OF THE LD. CIT(A) AS UNDER:- 9.1 APPELLANT COMPANY WAS INCORPORATED IN 1991. DUE TO HEAVY LOSSES, ASSESSEE WAS DECLARED A SICK INDUSTRIAL UNIT ON 2004 AND BIFR RECOMMENDED THE WINDING UP OF THE 4 APPELLANT COMPANY TO THE HONBLE HIGH COURT. HONBLE DELHI HIGH COURT HAD APPOINTED A PROVISIONAL LIQUIDATOR FOR WINDING UP OF THE COMPANY ON 09.07.2010. APPELLANT HAD PREFERRED AN APPEAL BEFORE APPELLATE AUTHORITY FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (AAIFR), NEW DELHI WHICH HAS STAYED THE ORDER OF HONBLE HIGH COURT TILL FURTHER ORDERS AND THE MATTER IS UNDER CONSIDERATION OF AAIFR. IT HAD FILED ITS ITR ON 21.1.2014 FOR AY 2013-14 DECLARING NIL INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER OBSERVED THAT ASSESSEE COMPANY HAD SHOWN TRADE PAYABLE AT RS. 9,36,79,214/-. APPELLANT COMPANY FILED A CHART CONTAINING 311 PARTIES AND THE PERIOD RELATED TO FY 1999-2000 ONWARDS. HOWEVER, IT COULD NOT FILE CONFIRMATIONS WITH RESPECT TO THE VARIOUS TRADE CREDITORS. ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS. 2,78,25,006/- ON ACCOUNT OF 268 CREDITORS AS APPELLANT COMPANY COULD NOT SUBMIT ANY DETAIL OR CONFIRMATION REGARDING THE SAME. 5 ASSESSING OFFICER HELD THAT THE ASSESSEE COMPANY WAS NO LONGER LIABLE TO PAY THE AMOUNT TO THESE PARTIES AND THE DEBTS HAVE BECOME MORE THAN 5-6 YEARS OLD AND, THEREFORE, THERE WAS A REMISSION OR CESSATION OF TRADING LIABILITY WHICH HAS RESULTED IN BENEFIT TO THE ASSESSEE. ASSESSING OFFICER HAS RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. TV SUNDARAM IYENGAR & SONS LTD., 222 ITR 344. ASSESSEE IS IN APPEAL AGAINST THE SAME. 9.2 APPELLANT HAS SUBMITTED THAT THE AMOUNT OF RS. 2,78,25,006/- IS OUTSTANDING IN THE BALANCE SHEET AS ON 31.3.2013 AND THE DEBTS IS PAYABLE BY THE APPELLANT COMPANY AS THE DEBTS HAS NOT BEEN WRITTEN OFF IN THE BOOKS OF THE ACCOUNTS. 9.3 I HAVE CAREFULLY CONSIDERED THE OBSERVATIONS OF THE ASSESSING OFFICER AND SUBMISSIONS OF THE APPELLANT. APPELLANT IS A SICK INDUSTRIAL UNIT AND BIFR HAS RECOMMENDED FOR WINDING UP OF THE COMPANY. AT PRESENT, THE MATTER 6 IS SUB-JUDICE BEFORE THE APPELLATE AUTHORITY FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (AAIFR) WHICH HAS STAYED THE ORDER OF HONBLE DELHI HIGH COURT TILL FURTHER ORDERS. THEREFORE, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IT CANNOT BE SAID THAT LIABILITY HAS CEASED TO EXIST IN APPELLANTS CASE AS NEITHER THE LIABILITY HAS BEEN WRITTEN BACK BY THE APPELLANT IN ITS PROFIT AND LOSS ACCOUNT NOR THE WINDING UP PROCESS HAS BEEN COMPLETED. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. VARDHMAN OVERSEAS LTD., 343 ITR 408 HAS HELD THAT THERE IS NO CESSATION OF LIABILITY WHEN ASSESSEE HAS NOT UNILATERALLY THE WRITTEN BACK THE AMOUNTS ON ACCOUNT OF SUNDRY CREDITORS IN ITS P&L ACCOUNT. THE FACTS OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF T.V. SUNDARAM IYENGAR ARE DIFFERENT AS IN THAT CASE, ASSESSEE HAD WRITTEN BACK THE AMOUNTS AS INCOME IN ITS PROFIT & LOSS ACCOUNT. THEREFORE, IN VIEW OF THE AFORESAID JUDGEMENT OF HONBLE DELHI HIGH COURT AND THE FACTS AND CIRCUMSTANCES OF THE CASE, THE 7 ADDITION OF RS. 2,78,25,006/- MADE BY ASSESSING OFFICER IS DELETED. 10. IN THE RESULT, THE APPEAL IS ALLOWED. 5.1 AFTER PERUSING THE AFORESAID FINDING OF THE LD. CIT(A), WE FIND THAT ASSESSEE IS A SICK INDUSTRIAL UNIT AND BIFR HAS REC OMMENDED FOR WINDING UP OF THE COMPANY. IT IS ALSO NOTED THAT AT PRESENT , THE MATTER IS SUB- JUDICE BEFORE THE APPELLATE AUTHORITY FOR INDUSTRIA L AND FINANCIAL RECONSTRUCTION (AAIFR) WHICH HAS STAYED THE ORDER O F HONBLE DELHI HIGH COURT TILL FURTHER ORDERS. THEREFORE, IT CANNOT BE SAID THAT LIABILITY HAS CEASED TO EXIST IN ASSESSEES CASE AS NEITHER THE L IABILITY HAS BEEN WRITTEN BACK BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT NOR THE WINDING UP PROCESS HAS BEEN COMPLETED. WE FURTHER NOTE THAT T HE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. VARDHMAN OVERSEAS LTD. , 343 ITR 408 HAS HELD THAT THERE IS NO CESSATION OF LIABILITY WHEN A SSESSEE HAS NOT UNILATERALLY THE WRITTEN BACK THE AMOUNTS ON ACCOU NT OF SUNDRY CREDITORS IN ITS P&L ACCOUNT. IT IS ALSO NOTED THAT THE FACTS OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF T.V. SUNDARAM IYENGAR ARE DIFFERENT AS IN THAT CASE, BECAUSE THE ASSESSEE HAD WRITTEN B ACK THE AMOUNTS AS INCOME IN ITS PROFIT & LOSS ACCOUNT. THEREFORE, IN VIEW OF THE AFORESAID JUDGEMENT OF HONBLE DELHI HIGH COURT AND THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION OF RS. 2,78,25,006/- MADE BY ASSESSING OFFICER WAS RIGHTLY DELETED BY THE LD. CIT(A), AND THEREFORE, T HERE IS NO ILLEGALITY OR INFIRMITY IN THE FINDING OF THE LD. CIT(A) ON THE ISSUES IN DISPUTE, HENCE, 8 WE UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUE S IN DISPUTE AND REJECT THE GROUNDS RAISED BY THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PRONOUNCED ON 04-06-2019. SD/- SD/- [B.R.R. KUMAR] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 04/06/2019 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. D R, ITAT BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES