ITO 25(2)(3), MUMBAI V. SUBHASH TEMKAR, HUF, MUMBAI

ITA 6851/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8318 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-10-2012
• Assessment Year: misc
• Appeal Filed On: 01-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Assessee Lawyers: RAHUL K KHANDHERIA
• Keywords: Additional evidence
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI RAJENDRA (ACCOUNTANT MEMBER) ITA NO.6851/MUM/2010 ASSESSMENT YEAR: 2007-08 I.T.O. 25(2)(3), C-11, PRATYSKHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-51. SUBHASH TEMKAR, HUF, A-504, RAHEJA GREEN, RAHEJA ESTATE, KULLUPWADI, BORIVALI(E), MUMBAI-66 PA NO.AAKHS 2927 N (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI V.KRISHNAMOORTHY RESPONDENT BY: SHRI RAHUL K KHANDHERIA DATE OF HEARING: 18.10.2012 DATE OF PRONOUNCEMENT: 7 .11.2012 ORDER PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2007-08 AGAINST ORDER DATED 21.7.2010 OF LD CIT(A) -35, MUMBAI ON FOLLOW ING GROUNDS (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S.41(1) OF TH E I.T.ACT,1961 BY THE ASSESSING OFFICER ON ACCOUNT OF CESSATION OF LIABIL ITY. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN ADMITTING ADDITIONAL EVIDENCE GIVEN BY THE ASSESSEE REGARDING PAYMENTS MADE BY THE ASSESSEE TO CONCERNED SUNDRY CREDITORS WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER UNDER RULE 46A OF THE I.T.RULES,1962. 2. THE RELEVANT FACTS GIVING RISE TO THIS APPEAL AR E THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSPORTATION UNDER THE NAME AND STYLE OF TEMKAR TRANSPORT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED THAT ASSESSEE HAS SHOWN SUNDRY CREDITORS OF RS.30,81,991. THE AO ASK ED THE ASSESSEE TO FURNISH PARTY- WISE DETAILS OF THE SUNDRY CREDITORS. IN REPLY, AS SESSEE SUBMITTED THE PARTY WISE DETAILS OF SUNDRY CREDITORS ALONGWITH ADDRESSES OF THE PART IES AND AMOUNT OUTSTANDING. IN ITA NO.6851/MUM/2010 ASSESSMENT YEAR: 2007-08 2 ORDER TO VERIFY THE CLAIM OF ASSESSEE, NOTICES UNDE R SECTION 133(6) OF THE ACT WERE ISSUED BY THE AO TO SEVERAL PARTIES, OUT OF WHICH, NOTICE ISSUED TO M/S. BALAJI TRANSPORT AND M/S. B.K. TRANSPORT WERE RETURNED BACK UNSERVED . BEFORE THE AO, ASSESSEE SUBMITTED CONFIRMATION OF BOTH THE PARTIES WHICH DI D NOT CONTAIN THE ADDRESSES. AO NOTICED THAT SAID AMOUNTS WERE OUTSTANDING FROM 31. 3.2004 AND THERE WAS NO SUBSEQUENT TRANSACTION. IT WAS IN THIS BACKDROP TH AT THE ASSESSING OFFICER TAXED THE ABOVE LIABILITY OF RS.17,17,219 UNDER SECTION 41(1) OF THE ACT. AGGRIEVED, ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. LD CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF A SSESSEE DELETED THE ADDITION OF RS.17,17,219 U/S.41(1) OF THE ACT, OBSERVING AS UND ER: I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESEN TATIVE AND THE STAND TAKEN BY THE A.O. ADMITTEDLY, THE APPELLANT FILED CONFIRMATI ONS FROM DOTH THE CREDITORS AND THE A.O. FOUND THAT THE LIABILITIES WERE OUTSTA NDING SINCE 31-3-04. HE WAS UNDER THE IMPRESSION THAT AS 3 YEARS LAPSED, THE AB ILITY WAS BARRED BY IMITATION AND TAXED THE SAME U/S 41(1) OF THE I.T.ACT. UT AS CONTENDED BY THE REPRESENTATIVE, THE APPELLANT CLEARED THE IBOVE LIA BILITY IN THE NEXT FINANCIAL YEAR BY MEANS OF ACCOUNT PAYEE CHEQUES WHICH WERE CLEARE D IN THE NAME OF THE CREDITORS AS SEEN FROM THE BANK BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME FOR A.Y. 2009-10 SHOWS THAT A SUM OF RS 9,79 ,042.17 WAS OUTSTANDING AS SUNDRY CREDITORS AND AS PER SCHEDULE -10 THE SAME W AS PAYABLE TO SUJEET TRANSPORT. THUS, THE EVIDENCE AVAILABLE WITH THE A .O. CLEARLY SHOWS THAT THE ABOVE LIABILITIES WERE PAID BY THE APPELLANT IN THE NEXT YEAR AS THE SAME WERE NOT OUTSTANDING AS ON 31-3- 09. IN THE CIRCUMSTANCES, T HERE WAS NO JUSTIFICATION IN TAXING THE CREDITORS U/S 41(1) OF THE I.T.ACT. IN T HE CASE OF DY.CIT VS. ALLIED LEATHER FINISHERS (P) LTD.(32 SOT 549), A SIMILAR I SSUE AROSE IN WHICH THE A.O. ADDED ALL THE LIABILITIES IN THE BALANCE SHEET MERE LY BECAUSE LETTERS SENT TO THEM WERE RETURNED BACK OR THEY WERE OLD. THE A.O. BEFOR E APPLYING SECTION 41(1) DID NOT EXAMINE WHETHER THEY ARE TRADING LIABILITIES AN D WHETHER THERE WAS ANY REMISSION OR CESSATION. THE HONBLE ITAT HELD THAT THE WORD CESSATION MEANS THE TERMINATION BY OPERATION OF LAW OR BY AN ORDER OF A COURT, OF LEGAL OBLIGATION OF THE ASSESSEE TO PAY TO THE CREDITOR. A CONTRACTU AL AGREEMENT BETWEEN THE PARTIES, APPROVED BY A COURT TO WAIVE THE DEBT OR T O TERMINATE THE LEGAL OBLIGATION OF THE ASSESSEE WILL ALSO CAUSE THE CESS ATION OF LIABILITY. EVEN IN A CASE WHERE A LIABILITY CEASES TO EXIST DUE TO LIMITATION I.E. THE CLAIM OF THE CREDITOR IS BARRED BY LIMITATION UNDER THE LIMITATION ACT, 1963 BUT IF THE LIABILITY SUBSISTS OR HAS NOT BEEN WRITTEN OFF BY THE ASSESSEE OR THE ASS ESSEE DOES NOT ABSOLVE HIMSELF FROM THE LIABILITY, THOUGH NOT LEGALLY ENFO RCEABLE, YET IT CANNOT HE TAXED U/S.41(I). WHEN THE ABOVE DECISION IS APPLIED TO TH E FACTS OF THE CASE, I FIND THAT THE A.O. HAS TO PROVE THE FACTUM OF CESSATION OR RE MISSION AND UNLESS THE A.O. PROVED THAT THERE WAS REMISSION OR CESSATION DURING THIS YEAR THE SAME CANNOT BE TAXED U,S.41(L) MERELY BECAUSE THE APPELLANT WA S NOT ABLE TO FURNISH THE ITA NO.6851/MUM/2010 ASSESSMENT YEAR: 2007-08 3 CONFIRMATION. IN VIEW OF THE ABOVE, THE ADDITION OF RS.17,17,219/- U/S 41(1) IS DELETED. 4. HENCE, THIS APPEAL BY THE DEPARTMENT. 5. AT THE TIME OF HEARING, LD D.R. RELIED ON ORDER OF ASSESSING OFFICER AND WHEREAS LD A.R. SUPPORTED THE ORDER OF LD CIT(A). 6. WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTAT IVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. WE OBSERVE THAT THE AO HAS APPL IED SECTION 41(1) WITHOUT EXAMINING WHETHER THE TRANSACTION WITH BOTH THE PARTIES ARE T RADING LIABILITIES AND WHETHER THERE WAS ANY REMISSION OR CESSATION. WE ALSO OBSERVE TH AT ASSESSEE FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-2010 WHEREIN, ABOVE LIABILITIES WERE NOT APPEARING IN THE BALANCE SHEET. FROM THE ABOVE, IT SHOWS THAT T HE ABOVE LIABILITIES WERE PAID BY THE ASSESSEE IN THE NEXT YEAR AS THE SAME WERE NOT OUTS TANDING AS ON 31.3.2009. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF LD CIT(A) TO INTERFERE. WE, ACCORDINGLY, REJECTS GROUNDS OF APPEAL TAKEN BY DEPARTMENT BY UPHOLDING THE ORDER OF LD CIT(A). 7. IN THE RESULT, APPEAL FILED BY DEPARTMENT IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON 7 TH NOVEMBER, 2012 SD/- (RAJENDRA) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 7 TH NOVEMBER, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),35, MUMBAI 4. COMMISSIONER OF INCOME TAX, 25 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI