SATYANARAYAN NANGALIA, MUMBAI V. ITOA CIR 12(1)(4), MUMBAI

ITA 7245/MUM/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3822 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 09-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 22-10-2010
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & AMIT SHUKLA (JM) I.T.A. NO. 7245 /MUM/ 2010 (ASSESSMENT YEAR 2007 - 08 ) SATYANARAYAN NANGALIA C/O. SHANKARLAL JAIN & ASSOCIATES 12, ENGINEER BUILDING 265, PRINCESS S TREET MUMBAI - 400 002. VS. ITO, CIRCLE 12(1)(4) MUMBAI ( APPELLANT ) ( RESPONDENT ) PAN NO. AAAPN5524G ASSESSEE BY SHRI S.L. JAIN DEPARTMENT BY SHRI A.K. NAYAK DATE OF HEARING 11. 4 . 201 6 DATE OF PRONOUNCEMENT 6 . 5 . 201 6 O R D E R PER B.R . BASKARAN, A M : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 1.9.2010 PASSED BY LEARNED CIT(A) - 23, MUMBAI FOR A.Y. 2007 - 08 PARTIALLY CONFIRMING THE ADDITION MADE U/S. 41(1) OF THE ACT. 2. WE HAVE HEARD THE PARTIES AND PERUSED T HE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEAL ING IN SHARES AND SECURITIES. HE DISCLOSED SUNDRY CREDITORS BALANCE OF RS. 1.64 CRORES IN HIS BALANCE - SHEET , EVEN THOUGH THERE WAS NO PURCHASE WAS MADE DURING THE YEAR. THE ASSESSING OFFICER NOTIC ED THAT THE BALANCES ARE OUTSTANDING FOR A LONG TIME AND HENCE ISSUED NOTICES TO SOME OF THE CREDITORS U/S. 133(6) OF THE I.T. ACT DIRECTING THEM TO CONFIRM THE BALANCES. HOWEVER, THE ASSESSING OFFICER DID NOT RECEIVE ANY REPLY FROM MOST OF THE PARTIES . AFTER EXAMINING THE SUNDRY CREDITORS ACCOUNTS, THE ASSESSING OFFICER TOOK THE VIEW THAT THE SUNDRY CREDITORS BALANCES AGGREGATING TO RS. 1.30 CRORES IS NO LONGER PAYABLE AND ACCORDINGLY ASSESSED THE SAME AS INCOME OF THE ASSESSEE U/S. 41(1) OF THE ACT AS CESSATION OF LIABILITY. LEARNED SHRI SATYANARAYAN NANGALIA 2 CIT(A) NOTICED THAT THE ASSESSEE HAS MADE PAYMENT TO SOME OF THE CREDITORS IN THE SUBSEQUENT YEAR (S) AND ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE AMOUNT RELATING TO THOSE CREDITORS. ACCORDINGLY, HE CONFIRMED THE ADDITION RELATING TO THE BALANCE CREDITORS. 3. LEARNED AR SUBMITTED THAT LEARNED CIT(A) HAS CONFIRMED THE ADDITION TO THE EXTENT OF RS. 1.15 CRORES . HE FURTHER SUBMITTED THAT THE ABOVE SAID AMOUNT INCLUDE SUM OF RS. 0.3 0 CRORES RELATING TO LOAN LIA BILITY. LEARNED AR FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 41(1) SHALL APPLY ONLY IN RESPECT OF TRADING LIABILITY AND NOT TO A LOAN LIABILITY. HE FURTHER SUBMITTED THAT THE CREDITORS BALANCE INCLUDES A SUM OF RS. 0.68 CRORES OUTSTANDING IN THE NAM E OF M/S. PANCHAL INDUSTRIES PVT. LTD. HE SUBMITTED THAT THE ASSESSEE WAS A PARTNER IN A FIRM M/S. PURANMAL BANSIDHAR , WHICH HAD SOLD SHARES BELONGING TO PANCHAL INDUSTRIES PVT. LTD. SUBSEQUENTLY, PARTNERSHIP FIRM WAS CLOSED AND BUSINESS WAS TAKEN OVER BY THE ASSESSEE ALONG WITH ITS ASSETS AND LIABILITIES . ACCORDINGLY HE SUBMITTED THAT THE CREDIT BALANCE OF RS. 0.68 CRORES OUTSTANDING IN THE NAME OF PANCHAL INDUSTRIES PVT. LTD. CANNOT BE ASSESSED IN THE HANDS OF THE ASSESSEE AS THE SAME HAS BEEN RECEIVED BY THE ERSTWHILE PARTNERSHIP FIRM. HE SUBMITTED THAT MONEY RECEIVED ON BEHALF OF ITS CUSTOMERS CANNOT BE CONSIDERED AS TRADING LIABILITY AND HENCE PROVISIONS OF SEC. 41(1) OF THE ACT ARE NOT APPLICABLE. IN THIS REGARD THE ASSESSEE PLACED RELIANCE ON THE DECISION RENDERED BY THE HYDERABAD BENCH OF THE ITAT IN THE CASE OF KAPIL CHIT FUND PVT. LTD. VS. ITO (146 ITD 529). LEARNED AR FURTHER SUBMITTED THAT THE BALANCE OUTSTANDING IN THE NAME OF RASHI EQUISEARCH REPRESENTS VALUE OF SHARES SOLD BY THE ASSESSEE O N BEHALF OF THE ABOVE SAID CLIENT. SINCE THE SAID CLIENT HAS ACCOUNTED FOR THE SALE TRAN SACTIONS IN THE SUBSEQUENT YEAR, THE BALANCE DUE FROM THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS SHOWN AS NIL BY IT. ACCORDINGLY, LEARNED AR SUBMITTED THAT THE BALANCE RELATING TO THE ABOVE SAID TRANSACTIONS SHOULD BE EXCLUDED FROM THE ADDITION MADE U/S. 41(1) OF THE ACT. SHRI SATYANARAYAN NANGALIA 3 4. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE DETAILS FURNISHED BY THE ASSESSEE REQUIRE VERIFICATION AT THE END O F THE ASSESSING OFFICER. 5. HAVING HEARD THE SUBMISSIONS MADE BY LEARNED AR, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY , WE MODIFY THE ORDER OF LEARNED CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO REEXAMINE THE ADDITION THAT HAS BEEN CONFIRMED BY LEARNED CIT(A) IN THE LIGHT OF THE SUBMISSIONS MADE BY THE ASSESSEE. WE ALSO DIRECT THE ASSESSEE TO FURNISH NECESSARY INFORMATION AND EXPLANATION TO THE SATISFACTION OF THE ASSESSING OFFICER. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BEEN PRONOU NCED IN THE OPEN COURT ON 6 .5 .2016 . SD/ - SD/ - (AMIT SHUKLA ) (B.R.BAS KARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 6 / 5 /20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS