TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 597
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....ago against the booking of plots. (ii) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals)-2, Amritsar, erred in holding that the provisions of indexation as well as the provisions of section 41(1) are not applicable in this case without considering the fact that the said advance remained unclaimed for almost 20 years in spite of the legal notices given by the assessee-firm to those persons. (iii) On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) 2, Amritsar, erred by relying upon the decision of the hon'ble Income-tax Appellate Tribunal, Amritsar, in the case of International Engg. Corpn. (Regd.) v. ITO Ward 3(l), Amritsar, in I. T. A. No. 433(ASR)/2012 for the assessment year 2007-08, dated February 15, 2013, which is distinguishable on facts as in that case the Assessing Officer made addition on account of cessation of liabilities of sundry creditors outstanding for more than one year by invoking the provisions of section 41(1) of the Act as the assessee had failed to furnish the confirmed copies of accounts, permanent account number and other details of the sundry creditors....
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....on of plots and, therefore, the assessee was confronted on the issue and the learned counsel for the assessee submitted that the assessee was getting commission at 1 per cent. to 2 per cent. Therefore, the Assessing Officer assumed that the assessee must be getting commission on a few plots at 1 per cent. and on a few plots at 2 per cent. Therefore, the addition of Rs. 4,55,768 was made to the business income of the assessee assuming the rate of commission at 1½ per cent. 5. Aggrieved with the order, the assessee filed an appeal before the learned Commissioner of Income-tax (Appeals) and filed various submissions. The learned Commissioner of Income-tax (Appeals) taking into consideration the submissions of the assessee, deleted both the additions by holding as under : "During the assessment proceedings the Assessing Officer observed that there were long standing advances against the booking of plots. Some of the advances had been standing on the liabilities side of the balance-sheet since 1987. Most of the advances were received in the financial years 1990-91 to 1993-94, i.e., almost 20 years ago. The Assessing Officer observed that no plots have been registered against t....
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....l these advances were approximately more than 20 years old and not one of the advances under consideration was taken during the year under consideration. The Assessing Officer has also not given any finding that the said copies of accounts are false or fraudulent. Further, the appellant rightly pointed out that the provisions of section 41(1) are not at all applicable in this case. It was pointed out that under the same and similar circumstances the addition made by the Assessing Officer was deleted by the hon'ble Income-tax Appel late Tribunal, Amritsar Bench in the case of the International Engg. Corpn. (Regd.) v. ITO (I. T. A. No. 433(ASR)/2012, dated February 15, 2013) relating to the assessment year 2007-08. That the Department went in appeal against the said decision before the hon'ble Punjab and Haryana High Court and the appeal of the Department was dismissed. The said liability pertains to the preceding years as is accepted by the Assessing Officer himself in the assessment order when at the bottom of page 4 of the assessment order that '. . . these advances are lying with the assessee-firm from the last approximately 20 years and the firm has been using th....
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.... per cent. which totalled to Rs.,526 of the gross sale amount of Rs. 9,11,52,614. It is observed that the Assessing Officer has made the said addition of Rs. 4,55,768 without pointing out even a single instance where the commission was charged by the appellant at more than one per cent. of the sale consideration of the plots sold and had made the said addition on basis of mere presumption/estimation. Therefore, the said addition of Rs. 4,55,768 cannot be sustained and is deleted. (v) The ground of appeal No. 5 are against the charging of interest under sections 234B and 234C of the Act. The charging of interest under these sections is mandatory but consequential in nature and, therefore, the Assessing Officer is directed to recompute the interest under these sections (if any) after giving effect to this order. 7. In the result, the appeal is allowed." 6. Aggrieved, the Revenue is in appeal before us. 7. The learned Departmental representative, at the outset, invited our attention to the paper book 3-4 filed by the assessee and on further specific attention was invited to the paper book 4 wherein it was mentioned that the assessee had forfeited the earnest money of plot allo....
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.... balance-sheet itself. Therefore, the learned Commissioner of Income-tax (Appeals) has rightly deleted the addition. 10. To support its case, the learned counsel for the assessee relied upon the decision of the Income-tax Appellate Tribunal, Amritsar Bench, in the case of International Engg. Corpn. (Regd.) v. ITO (I. T. A. No. 433(ASR)/2012 for the assessment year 2007-08 dated February 15, 2013. He further invited our attention to the paper book 2 for the proposition that the plots were registered in the name of various persons in the succeeding years and also some plots were cancelled and the necessary refunds were made. In this connection, our attention was invited to Sl. No. 4 and submitted that on April 16, 2014, plot was registered in favour of this person. Similarly, our attention was invited to Sl. Nos. 6, 11, 17 and 18 and submitted that in all these cases the plots were registered on subsequent dates, which itself prove that the liability had not ceased to exist and it was wrong on the part of the learned Departmental representative to argue that these advances had been forfeited. Therefore, he submitted that the case law relied on by the learned Departmental representat....
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....sake of convenience, the relevant part of the findings of the Income-tax Appellate Tribunal, Amritsar is reproduced below : "10. We have heard the rival contentions and perused the facts of the case. There is no dispute to the fact that the assessee has not submitted confirmation of copies of accounts, books of account and therefore, the arguments made by the learned Departmental representative and the findings of both the authorities below to that extent are not disputed. But at the same time, there is also no dispute that the assessee has submitted copies of accounts in the case of sundry creditors amounting to Rs. 14,74,763, where the balances shown are outstanding as per the last year, i.e., which has been brought forward from the preceding year except provisions of interest in the respective years and in the impugned year which has not been disallowed by the Assessing Officer. The liability pertains to the preceding year, as is evident from pages 6 to 21 where copies of accounts of all sundry creditors are placed on record and were available before both the authorities below. The said balances are outstanding in the following years as well is a matter of record and there is ....
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....on of Rs. 26,30,038, all the balances are outstanding for the last many years as appearing from the paper book 22 to 33 and 97 to 99 and also all the persons, i.e., Smt. Ujjal Kaur, Smt. Manjit Kaur and Smt. Rayam Kaur are assessed to tax as per copy of acknowledgment of Income-tax return at the paper book 75, 76 and 77 along with permanent account number is placed on record. The Assessing Officer, after applying his mind, has made the addition of family loans of Rs. 26,30,038 which has been confirmed by the learned Commissioner of Income-tax (Appeals). The arrangements made by the learned Departmental representative has no substance in the matter in this regard. The assessee having proved the identity, capacity and creditworthiness of the said persons and, therefore, cannot be a subject matter of addition. Thus, both the additions of Rs. 14,74,763 and Rs. 26,30,038 have wrongly been confirmed by the learned Commissioner of Income-tax (Appeals) and the same are directed to be deleted. 12. As regards the disallowance of car expenditure and car depreciation, the Assessing Officer has not made any discussion in the body of the order and has simply disallowed expenses without applica....
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.... buyers that their security deposits will be forfeited but did not actually forfeit the same, as it continued to declare such advances in the balance-sheet. 15. We further find that the hon'ble Delhi High Court in the case of CIT v. Jain Exports Pvt. Ltd. (I. T. A. No. 235 of 2013, dated May 24, 2013), under similar facts and circumstances has held that the liability on account of creditors, which were being declared by the assessee for the last more than 25 years in favour of the assessee, by holding that the liability had not ceased to exist. The relevant findings of the hon'ble Delhi High Court from paragraph 10 onwards are reproduced hereunder : "10. We are unable to appreciate the stand taken on behalf of the Revenue, which has, apparently, not been consistent. The Assessing Officer, inter alia, added a sum of Rs. 1,57,15,137, being the aggregate of the amounts shown as payable to various sundry creditors, as income under section 41(1) of the Act. Whilst the Assessing Officer held that the liabilities due to the sundry creditors had ceased, the genuineness of the initial transaction on account of which the amounts were payable to various creditors was not made an is....
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....deleted the addition of Rs. 1,53,48,850 confirmed by the Commissioner of Income-tax (Appeals). 13. The genuineness of the transaction entered into by the assessee in 1984-85 with M/s. Elephanta Oil and Vanaspati Ltd. is not being assailed before us and the only controversy sought to be raised before us is whether there has been cessation of liability owed by the assessee to M/s. Elephanta Oil and Vanaspati Ltd. In our view, that question does not arise in the present case since the decision of the Commissioner of Income-tax (Appeals) that there is no cession of liability in cases where the debt has been acknowledged by the assessee- company has already been accepted by the Revenue. However, as the question whether there is any cessation of liability in the relevant previous year warranting an addition in terms of section 41(1) of the Act has been urged on behalf of the Revenue, we consider it appropriate to examine the same. 14. Section 41(1) of the Act is relevant and is quoted below : '41. Profits chargeable to tax.-(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assess....
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....a trading liability. The relevant extract from the decision of the Supreme Court in the case of CIT v. Sugauli Sugar Works (P.) Ltd. [1999] 236 ITR 518 (SC) is quoted below (page 520) : 'It will be seen that the following words in the section are important : "the assessee had obtained, whether in cash or in any other manner whatsoever any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him". Thus, the section contemplates the obtaining by the assessee of an amount either in cash or in any other manner whatsoever or a benefit by way of remission or cessation and it should be of a particular amount obtained by him. Thus, the obtaining by the assessee of a benefit by virtue of remission or cessation is sine qua non for the application of this section.' 17. The only issue that needs to be considered is whether the liability towards M/s. Elephanta Oil and Vanaspati Ltd. has ceased on account of efflux of time. 18. The Supreme Court in the case of Bombay Dyeing and Manufacturing Co. Ltd. v. State of Bombay, AIR 1958 SC 328, has clearly held that even in cases ....
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.... employer to his employees in an industry, the provisions of the Industrial Disputes Act also are attracted and for the recovery of the dues from the employer, under section 33C(2) of the Industrial Disputes Act, no bar of limitation comes in the way of the employees.' After quoting the above passage, the Supreme Court held as under (page 523 of 236 ITR) : 'This judgment has been quoted by the High Court in the present case and followed. We have no hesitation to say that the reasoning is correct and we agree with the same.' 20. In order to attract the provisions of section 41(1) of the Act, it is necessary that there should have been a cessation or remission of liability. As held by the Bombay High Court, in the case of J. K. Chemicals Ltd. v. CIT [1966] 62 ITR 34 (Bom), cessation of liability may occur either by the reason of the liability becoming unenforce able in law by the creditor coupled with debtor declaring his intention not to honour his liability, or by a contract between parties or by discharge of the debt. In the present case, the assessee is acknowledging the debt payable to M/s. Elephanta Oil and Vanaspati Ltd. and there is no material to indicate t....
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....artment having accepted the balances outstanding over several years, it was not open for the Commissioner of Income-tax (Appeals) to confirm the addition of the amount of Rs. 1,53,48,850 on the ground that the assessee could not produce sufficient evidence to prove the genuineness of the transactions which were undertaken in the year 1984-85." 16. We further find that the assessee during the subsequent years had adjusted the advances against sale of plots as is apparent from the paper book 2, where against Sl. Nos. 4, 6, 11, 17 and 18 the plots were sold and the amount of deposit was adjusted. The fact of part of advances having been adjusted in subsequent years itself proves that the liability had not ceased and, therefore, also, the addition under section 41(1) of the Act was not justified and the learned Commissioner of Income-tax (Appeals) has rightly deleted the same. 17. Therefore, in view of the above facts and in the circumstances and in view of judicial precedents, we do not find any infirmity in the order of the learned Commissioner of Income-tax (Appeals) and the same is upheld. Therefore, ground Nos. 1 to 3 of the Revenue are dismissed. 18. Coming to ground No. 4, re....