ACIT 25(2), MUMBAI V. METAL INDIA, MUMBAI

ITA 9208/MUM/2010

• Counselvise Citation: 920819914 RSA 2010
• Duration Of Justice: 4 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 02-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 31-12-2010
• Court: TRIBUNAL
• Department Lawyers: YOGESH KAMAT SR
• Section: 143(3)

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./I.T.A. NO.9208/M/2010 ( AY: 2007 - 2008 ) ACIT 25(2), C - 11, 1 ST FLOOR, PRATYAKSHKAR BHAVAN, BANDRA (E), MUMBAI - 51. / VS. M/S. METAL INDIA, 3, MUKUND VILLA, 1 ST CARTER ROAD, BORIVALI (E), MUMBAI - 66. ./ PAN : AAAFM7505N ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI YOGESH KAMAT, SR. AR / RESPONDENT BY : SHRI SATISH MODY / DATE OF HEARING : 02.6 .2015 / DATE OF PRONOUNCEMENT :30 .6.2015 / O R D E R PER G.S. PANNU, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) - 35, MUMBAI DATED 27.10.2010 FOR THE ASSESSMENT YEAR 2007 - 2008 IN THE MATTER OF ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT), DATED 17.11.2009. 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) IS ERRED IN DELETING THE ADDITION OF RS. 66,79,282/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CESSATION OF LIABILITY U/S 41(1) OF THE ACT CLAIMED TO HAVE BEEN PAYABLE TO M/S. CO - NICK ALLOYS LTD., AND M/S. SWASTIK METAL CORPORATION WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NO WHEREABOUTS OF THESE PARTIES WITH IT AND FURTHER T HE ASSESSEE HAS NOT MADE ANY TRANSACTIONS WITH THESE PARTIES FOR MORE THAN 5 YEARS. (II) THE APPELLANT PRAYS THAT THE ORDER OF THE LD CIT (A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. THE RESPONDENT ASSESSEE IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF SUPPLY OF STAINLESS STEEL PIPES AND TUBES ETC., AND DEALING IN NON - FERROUS METALS. FOR THE ASSESSMENT YEAR 2007 - 2008, IT FILED A RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 23,47,420/ - , WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT. IN THE 2 ASSESSMENT FINALIZED U/S 143(3) OF THE ACT, THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME AT RS. 1,29,02,910/ - , WHICH INTER - ALIA INCLUDED AN ADDITION OF R S. 1,03,19,741/ - ON ACCOU NT OF C ESSATION OF LIABILITY U/S 41(1) OF THE ACT. THE AFORESAID AMOUNT REFLECTED OUTSTANDING BALANCES IN THE NAME OF CERTAIN CREDITORS, WHICH WERE FOUND TO BE OUTSTANDING FOR A NUMBER OF YEARS. THE ASSESSING OFFICER HELD THAT THE OUTSTANDING LIABILITY IN RESPECT OF SUCH CREDITORS HAD CEASED TO EXIST, AND ACCORDINGLY TAXED THE AMOUNT AS INCOME WITHIN THE MEANING OF SECTION 41(1) OF THE ACT. THE CIT (A) HAS ALLOWED THE RELIEF TO THE ASSESSEE, AND IN SO FAR AS THE PRESENT APPEAL OF THE REVENUE IS CONCERNED, THE SAME IS RELATING TO THE DIRECTION OF THE CIT (A) IN DELETING THE ADDITION WITH RESPECT TO THE TWO CREDITORS NAMELY; CO - NICK ALLOYS LTD - RS. 58,18,060/ - ; AND M/S. SWASTIK METAL CORPORATION - RS. 10,61,222/ - . 4. BEFORE THE CIT (A), ASSESSEE CONTENDED T HAT THERE WAS NO MATERIAL TO ESTABLISH ANY C ESSATION OF LIABILITY HAVING TAKEN PLACE DURING THE YEAR UNDER CONSIDERATION WITHIN THE MEANING OF SECTION 41(1) OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT AS PER THE BOOKS OF ACCOUNT , THE AMOUNTS WERE PAYA BLE TO THE AFORESAID CREDITORS AND THAT NO EVENT HAD TAKEN PLACE DURING THE YEAR UNDER CONSID ERATION SO AS TO ESTABLISH ANY C ESSATION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION WITHIN THE MEANING OF SECTION 41(1) OF THE ACT. THE CIT (A) CONSIDERED T HE SUBMISSIONS AND MATERIAL PUT FORTH BY THE ASSESSEE AND ALSO CALLED FOR A REMAND REPORT FROM THE ASSESSING O FFICER. IN THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER, IT WAS ASSERTED THAT IN SO FAR AS M/S. CO - NICK ALLOYS LTD. IS CONCERNED, THE SUM MONS ISSUED TO THE SAID PARTY CAME BACK UN - SERVED. THEREFORE, THE ASSESSING OFFICER REITERATED THAT THE BALANCE STANDING IN THE NAME OF THE SAID CONCERN WAS NOT PAYABLE AND JUSTIFIED THE INVOKING OF SECTION 41(1) OF THE ACT. THE CIT (A), HOWEVER, CONCLUD E D THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT QUA THE AFORESAID AMOUNTS AS ACCORDING TO HIM, THERE WAS NEITHER A REMISSION AND NOR ANY CESSATION OF LIABILITY WITHIN THE MEANING OF SECTION 41(1) OF TH E ACT DURING THE YEAR UNDER CONSIDERATION. AGAINST THE DELETION OF THE SAID ADDITION, REVENUE IS IN APPEAL BEFORE US. 5. THE LD DR APPEARING FOR THE REVENUE HAS ASSAILED THE ORDER OF THE CIT (A) BY REITERATING THAT THE ASSESSEE WAS NOT ABLE TO FURNISH THE WHEREABOUTS OF THE IMPUGNED PARTIES AND THAT THE ASSESSEE HAD NOT UNDERTAKEN ANY TRANSACTIONS WITH 3 SUCH PARTIES FOR MORE THAN FIVE YEARS, AND THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT ON THE GROU ND THAT THE LIABILITIES HAD CEASED TO EXIST. 6. ON THE OTHER HAND, LD REPRESENTATIVE FOR THE RESPONDENT ASSESSEE WHILE DEFENDING THE ORDER OF THE CIT (A) SUBMITTED THAT THERE WAS NO JUSTIFICATION FOR INVOKING THE SECTION 41(1) OF THE ACT IN THE YEAR UNDER CONSIDERATION. ACCORDING TO THE LD REPRESENTATIVE, IN SO FAR AS THE BALANCE OUTSTAN DING AGAINST THE NAME OF M/S. S WASTIK METAL CORPORATION RS. 10,61,222/ - IS CONCERNED, THE ASSESSEE HAS WRITTEN BACK THE SAME IN ITS ACCOUNTS FOR THE FINANCIAL YEAR 1.4.20 10 TO 13.3.2011 AND THU S, OFFERED FOR TAXATION IN THE ASSESSMENT Y EAR 2011 - 2012 AND THE CIT (A) CORRECTLY DELETE D THE ADDITION FOR THE INSTANT ASSESSMENT Y EAR OF 2007 - 2008. EVEN, WITH REGARD TO THE OTHER SUNDRY CREDITOR, NAMELY; M/S. CO - NICK ALLOYS LTD , T HE LD REPRESENTATIVE POINTED OUT THAT OUT OF THE TOTAL BALANCE OF RS. 58,18,060/ - , AN AMOUNT OF RS. 7,18,060/ - WAS WRITTEN BACK BY THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT IN THE FINANCIAL YEAR 1.4.2010 TO 13.3.2011, CORRESPONDING TO ASSESSMENT Y EAR 2011 - 2012 AND THE BALANCE OF RS. 49 LAKHS HAS BEEN ACTUALLY PAID DURING THE CURRENT FINANCIAL YEAR OF 2014 - 2015. THEREFORE, IT WAS CONTENDED THAT THERE WAS NO JUSTIFICATION FOR THE ASSESSING OFFICER TO HAVE MAD E THE IMPUGNED ADDITION IN THE ASSESSMENT Y EAR 200 7 - 2008 AND THE CIT (A) WAS QUITE JUSTIFIED IN DELETING THE ADDITION. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. THE FACTUAL FINDING ARRIVED AT BY THE CIT (A) IS TO THE EFFECT THAT THERE WAS NEITHER REMISSION OR CESSATION OF LIABILITY WITHIN THE MEANING OF SECTION 41(1) OF THE ACT DURING THE YEAR QUA THE AFORESAID AMOUNTS. THOUGH THE AFORESAID FINDING HAS NOT BEEN ASSAILED BY THE REVENUE ON THE BASIS OF ANY CREDIBLE MATERIAL BEFORE US; NEVERTHELESS, THE FACTUAL MATRIX BROUGHT OUT BY TH E ASSESSEE IN THE COURSE OF THE HEARING , NAMELY , THAT THE OUTSTANDING BALANCE IN THE CASE OF M/S. SWASTIK METAL CORPORATION AND PART IN THE CASE OF M/S. CO - NICK ALLOYS LTD., HAS BEEN WRITTEN BACK A ND OFFERED FOR TAXATION IN THE ASSESSMENT Y EAR 2011 - 2012 IS NOT EMERGING FROM THE ORDER OF THE CIT (A). EVEN THE FACTUM OF REPAYMENT OF PART OF THE LIABILITY IN THE C ASE OF M/S. CO - NICK ALLOYS LTD. IS NOT EMERGING FROM THE ORDER OF THE CIT (A), OSTENSIBLY BECAUSE THE STATED DATE OF PAYMENT IS SUBSEQUENT TO THE O RDER OF THE CIT (A). THE LD 4 REPRESENTATIVE FOR THE RESPONDENT ASSESSEE HAD SUBMITTED AT THE TIME OF HEARING THAT THE ASSESSEE HAS NO OBJECTION IF THE MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE AFORESAID FACTUAL ASSERT IONS . OSTENSIBLY, THE AFORESAID FACTUAL ASSERTIONS , IF FOUND CORRECT, WOULD SUPPORT THE PLEA OF THE ASSESSEE THAT THERE IS NO CESSATION OR REMISSION OF LIABILITY WITHIN THE MEANING OF SECTION 41(1) OF THE ACT QUA THE TWO IMPUGNED CREDITORS. THE SAID FACT UAL ASSERTIONS WERE NOT BEFORE THE CIT (A), AND THEREFORE, WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR APPROPRIATE VERIFICATION . THE ASSESSING OFFICER SHALL VERIFY THE AFORESAID CONTENTIONS RAISED BY THE A SSESSEE AND IF HE SATISFIED BY THE SAME, THEN NO ADDITION WOULD SURVIVE WITH RESPECT TO M/S. CO - NICK ALLOYS LTD - RS. 58,18,060/ - ; AND M/S. SWASTIK METAL CORPORATION - RS. 10,61,222/ - . NEEDLESS TO MENTION, IN CASE THE ASSESSING OFFICER IS NOT SATISFIED WI TH THE ASSERTIONS OF THE ASSESSEE, THEN HE SHALL BE FREE TO PROCEED AS PER LAW. THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONA BLE OPPORTUNITY TO PUT FORTH THE MATERIAL AND SUBMISSIONS THAT THE ASSESSEE MAY CH OOSE TO PRODUCE IN SUPPORT OF I T S STAN D. ONLY THEREAFTER, THE ASSESSING OFFICER SHALL PASS AN ORDER ON THE ABOVE LIMITED ASPECT, AS PER LAW. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUN CED IN THE OPEN COURT ON 30 TH JUNE, 2015. SD/ - SD/ - ( SANJAY GARG ) ( G.S. PANNU ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 30 .6 .2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, 5 ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI