DCIT 1(1)(1), MUMBAI V. BIFORA WATCH COMANY LT, MUMBAI

ITA 782/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0630 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 15-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Assessee Lawyers: N H GAJRIA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.782/M/2016 ASSESSMENT YEAR: 2011-12 DY. COMMISSIONER OF INCOME-TAX 1(1)(1), 579, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. BIFORA WATCH COMPANY LTD., MISTRY BHAVAN, DINSHAW WATCH ROAD, CHURCHGATE, MUMBAI-400 020 PAN: AAACCB4498C (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI N.H. GAJRIA, A.R. REVENUE BY : SHRI T.A. KHAN, D.R. DATE OF HEARING : 05.12.2017 DATE OF PRONOUNCEMENT : 09.02.2018 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 30.11.2015 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF WATCHES, COMPONENT S, CASES AND JOB WORK. THE ASSESSEE COMPANY FORMED IN THE YEAR 1982 AND ORIGINALLY CARRYING ON BUSINESS OF MANUFACTURING OF ELECTRONIC WATCHES. ITA NO.782/M/2016 M/S. BIFORA WATCH COMPANY LTD. 2 COMPANY HAS SUFFERED HEAVY LOSSES IN MANUFACTURING UNIT. HENCE, THE SAID DIVISION WAS SHUT DOWN ABOUT 12 YEARS BACK . IN THE BALANCE SHEET OF THE COMPANY THE AMOUNT OF RS.2,80,00,000/- AS SHARE CAPITAL ADVANCE. THE ASSESSING OFFICER (HEREINAFTER REFERR ED TO AS THE AO) ADDED RS.2,80,00,000/- TO THE INCOME OF THE ASSESSE E AND HAS ALSO DISALLOWED RS.3,57,55,780/- BEING UNSECURED LOAN FR OM DIRECTORS UNDER SECTION 41(1) OF THE ACT ON ACCOUNT OF REMISS ION OF LIABILITY. THE ASSESSEES BOOKS OF ACCOUNT WHICH IS LIABILITY IS OUTSTANDING SINCE MORE THAN 20 YEARS AND COMPANY WAS UNABLE TO REPAID THE SAME. THEREFORE, THE AO HAS TREATED THIS UNDER SEC TION 41(1) OF THE ACT. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: 5.9 I HAVE GONE THROUGH THE ASSESSMENT ORDER DATED 25.03.2014 WHEREIN THE AO HAS ADDED A SUM OF RS.2,80,00,000/- OF SHARE CAPITAL ADVANCE RECEIVED FROM NRI PROMOTERS AND RS.3,57,55,780/- OF UNSECURED LOAN RECEIVED FROM DIRECTORS BY INVOKING SECTION 41(1) O F THE INCOME TAX-TAX ACT, 1961 STATING THE REASONS THAT THE ABOVE AMOUNT S CONTINUE TO APPEAR IN THE BALANCE SHEET WITHOUT ANY CHANGE FOR THE PAS T MANY YEARS. THE NATURE OF ADDITION I.E. LOAN FROM DIRECTORS OF RS. 3,57,55,780/- AND SHARE CAPITAL ADVANCE FROM NRI PROMOTERS OF RS. 2,8 0,00,000/- ARE FOUND TO BE PART OF BALANCE SHEET AND NOT BEEN CLAIMED AS A EXPENDITURE IN THE P&L A/C. UNDER THE YEAR QUESTIONED I.E. AY 2011-12 AS HELD BY THE AG. AS THE SECTION 4 1(1) DEALS WITH THE REMISSION OR CESSATIO N IN RESPECT OF LOSS OR EXPENDITURE OR SOME BENEFITS IN RESPECT OF SUCH TRA DING LIABILITY, WHICH ARE DEBITED IN P&L A/C. AND THE ADDITION MADE BY THE AO TOWARDS THE SHARE CAPITAL ADVANCE AND UNSECURED LOAN RECEIVED FROM TH E NRI PROMOTERS AND DIRECTORS RESPECTIVELY IS NOT FAIR AND JUSTIFIA BLE AND ACCORDINGLY I DIRECT THE AG TO DELETE THE ABOVE ADDITION OF RS. 6 ,37,55,780/-. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT ASSESSEE COMPANY HAD SUBMITTED ALL THE RELEVANT REC ORDS, AUDITED ITA NO.782/M/2016 M/S. BIFORA WATCH COMPANY LTD. 3 ACCOUNTS ENDED AS ON 31.03.11. THE ACKNOWLEDGMENT OF RECEIPT OF UNSECURED LOAN HAS BEEN FILED. THE RETURN OF INCOM E FOR LAST 3 YEARS ARE SHOWN ON PAGES 15 TO 20, COPY OF ACCOUNTS OF UN SECURED LOAN FROM THE PARTIES FROM 2007-2015 ARE SHOWN ON PAGES 21 TO 24, COPY OF THE LETTER FROM RESERVE BANK OF INDIA FOR PERMIT TING NON RESIDENT COMPANY TO INVEST IN THE COMPANY TO BE CONVERTED IN TO SHARES IN FUTURE. WE FIND THAT WE HAVE ALSO VERIFIED THE SAM E ACCOUNT AND WE ARE OF THE VIEW THAT LD. CIT(A) IS JUSTIFIED IN DEL ETING THE ADDITION AND OUR INTERFERENCE IS NOT REQUIRED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 09.02.2018. SD/- SD/- (G. MANJUNATHA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 09.02.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.