VIDUR VISHNU BHOGILAL, MUMBAI V. ASST CIT CIR 16(2), MUMBAI

ITA 7966/MUM/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9393 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Assessee
• Bench Allotted: F
• Next Hearing Date: 26-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 25-11-2011
• Court: TRIBUNAL
• Department Lawyers: PAWAN KU MAR BEERLA
• Section: 143(3); 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA, AM & SHRI VIVEK VARMA , JM ITA NO. 7966 / MUM/20 1 1 ( ASSESSMENT YEAR : 20 0 7 - 08 ) MR. VIDUR VISHNU BHOGILAL, B - 10, SEA FACE PARK, 50, BHULABHAI DESAI ROAD, BREACH CANDY, MUMBAI - 26 VS. ACIT, CIRCLE - 16(2), MUMBAI PAN/GIR NO. : A AKPB 9206 D ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI J.P.BAIRAGRA /REVENUE BY : SHRI PAWAN KUMAR BEERLA DATE OF HEARING : 1 3 / 01 /201 5 DATE OF PRONOU NCEMENT : 25 /0 2 /2015 O R D E R PER R.C.SHARMA ( A .M.) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 25 - 8 - 2011 , FOR THE ASSESSMENT YEAR 20 0 7 - 08 , IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE I.T. ACT . 2 . IN THIS APPEAL THE ASSESSEE IS AGGRIEVED BY THE ORDER OF CIT(A) CONFIRMING THE ADDITION OF RS. 11,91,796/ - . 3 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FROM THE RECORD, WE FOUND THAT THE ASSESSEE HAD, IN THE PAST, 'TAKEN A LOAN OF RS. 1 1,91,796/ - FROM M/S. PAREKH INVESTMENT IN HIS PROPRIETARY CONCERN M/ S. BHOGILAL & SONS. THE AO HAS NOTED IN PARA 4.2 OF HIS ORDER THAT THE LIABILITY ON ACCOUNT OF THE SAID LOAN IS OUTSTANDING SINCE ITA NO. 7966 /20 1 1 2 ASSESSMENT YEAR 2002 - 03. THE SAID LOAN WAS INTEREST - FREE. ON BEING ASKED BY THE AO TO EXPLAIN THE NATURE OF OUTSTANDING LIABILITY IN THE ABSENCE OF ANY BUSINESS ACTIVITY, THE ASSESSEE EXPLAINED THAT THE AFORESAID LOAN WAS TAKEN FOR THE PURCHASE OF SHARES OF INTERFACE FINANCE LTD. THE AO FURTHER NOT ED THAT THE ASSESSEE INFORMED THAT THE ASSESSEE S PROPRIETARY CONCERN M/S. BHOGILAL & SONS WAS NOT ENGAGED IN THE TRADING OF SHARES AND IT WAS TRADING IN ROCK SAL T. 4. IT WAS CONTENDED BY THE LD. AR THAT THE AO IN PARA 4.1 OF HIS ORDER HAS HELD THAT , AS TH E LOAN WAS OBTAINED FOR THE PURCHASE OF SHARES AND THE A SSESSEE WAS NOT DEALING IN SHARES, OBVIOUSLY THE LIABILITY IS ON CAPITAL ACCOUNT FOR INVESTMENT IN SHARES. THE A SSESSEE HAD NEVER CLAIMED THE SAID LIABILITY AS A TRADING LIABILITY. IT IS SUBMITTED THA T THE ISSUE WHETHER THE LIABILITY IS ON CAPITAL ACCOUNT OR IT IS A TRADING LIABILITY, HAS BY ITSELF NO BEARING FOR MAKING THE IMPUGNED ADDITION. 5. FROM THE RECORD, WE FOUND THAT IT IS NOT A TRADING LIABILITY AS HELD BY THE AO, THERE CAN BE NO ALLOWANCE OR DEDUCTION IN THE PAST ASSESSMENTS AND NO REMISSION OR CESSATION OF LIABILITY IN THE YEAR UNDER CONSIDERATION WITHIN THE MEANING OF SEC. 41(1) SO AS TO ATTRACT ITS OPERATION. MOREOVER, THE QUESTION OF REMISSION OF A LIABILITY ARISES WHEN THE CREDITOR GIVES UP THE CLAIMS, WHICH IS NOT THE CAS E. THE AO HAS HIMSELF NOTED IN PARA 3 AND 4.2 OF HIS ORDER THAT THE LOAN IS TAKEN IN THE EARLIER YEARS EVEN PRIOR TO DISCONTINUATION OF BUSINESS AND SAID LIABILITY IS OUTSTANDING SINCE ASST. YEAR 2002 - 03. IT IS NOT THE C ASE OF THE AO THAT THE IMPUGNED ADDITION IS BEING MADE U/S . 68 OF THE ACT. IF CONFIRMATION FROM THE CREDITOR IN RESPECT OF THE LOAN OBTAINED IS NOT OBTAINED BY A TAX PAYER, THE ADDITION U/S. 68 ITA NO. 7966 /20 1 1 3 COULD PERHAPS BE MADE IN THE YEAR IN WHICH THE LOAN IS FIRST O BTAINED BY HOLDING THAT IT IS UNEXPLAINED CASH CREDI T. 6 . RELIANCE WAS PLACED ON THE DECISION OF THE M UMBAI TRIBUNAL IN THE CASE OF DSA ENGINE RS (BOMBAY) V. ITA - 30 SOT 31 (MUM) , WHEREIN THE AO HAS MADE THE ADDITION OF OUTSTANDING SUNDRY CREDITORS U/ S. 41 (1) WITHOUT WRITING OFF THE OUTSTANDING SUNDRY CREDITORS IN THE BOOKS OF ACCOUNT AND WITHOUT ANY EVIDENCE, TREATING THE SAID LIABILITY AS CEASED TO EXIST. THE TRIBUNAL HELD THAT - (I) MERE FACT THAT LIABILITIES WERE OUTSTANDING FOR MORE THAN THREE Y EARS AND WERE TIME BARRED WAS NOT SUFFICIENT GROUND FOR ADDITION U/S. 41(1) OF THE I.T. ACT. (II) FOR TREATING THE LIABILITY AS INCOME U/S.41 (1), EVEN THOUGH THEY ARE OUTSTANDING IN THE BOOKS OF THE ASSESSEE, THE ONUS IS ON THE REVENUE TO PROVE THAT THE LIABILITIES HAVE CEASED TO EXIST AND, THERE WAS NO POSSIBILITY OF THEIR REALIZATION. (III) FURTHER, EXPLANATION TO SECTION INTRODUCED BY THE FINANCE ACT, 1996 W.E.F. 1 - 4 - 1997 IS APPLICABLE ONLY IF THE OUTSTANDING AMOUNT IS UNILATERALLY WRITTEN OFF IN T HE BOOKS OF ACCOUN T. FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE HON. BOMBAY HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA LTD VS. CIT (BOM) (2003) 261 ITR 501. IN SUPPORT OF THE PROPOSITION THAT EV EN IF THE SAID LOAN IS NOT PAYABLE, THE SAME IS N EITHER TAXABLE U/S. 28(IV) NOR U/S. 4 1. 7. IN VIEW OF THE ABOVE DISCUSSION, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA LTD. (SUPRA) , WE DO NOT FIND ANY MERIT IN THE ADDITION OF RS. 11,91 ,796/ - MADE BY THE AO 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ITA NO. 7966 /20 1 1 4 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH FEB. 201 5 . SD/ - SD/ - ( ) ( VIVEK VARMA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 25 / 0 2 /201 5 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6 . GUARD FILE. //TRUE COPY//