TaxTMI 
TaxTMI 
2017 (12) TMI 795
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....t, 1961 (hereinafter referred to as "the Act") was issued to the assessee on 10-09-2014. During the course of scrutiny assessment proceedings, the Assessing Officer observed that Balance Sheet of assessee company as on 31-03-2013 reflects share application money pending allotment to the tune of Rs. 2,34,86,419/-. The Assessing Officer further observed that the share application money was received by assessee for more than 9 years back in cash. The Assessing Officer invoked the provisions of section 41(1)(a) of the Act and treated the share application money as cessation of liability qua the assessee company. Aggrieved by assessment order dated 31-03-2016, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) vide impugned order rejected the contentions of assessee and confirmed the addition. Now, the assessee is in second appeal before the Tribunal. 3. The assessee has assailed the findings of Commissioner of Income Tax (Appeals) by raising following grounds of appeal : "The following brief grounds of appeal are taken without prejudice to each other- 1. On the facts and in the circumstances of the....
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.... of the case has erred in observing that entire share application money has been received in cash. The Assessing Officer and Commissioner of Income Tax (Appeals) have further erred in recording the fact that the assessee neither allotted the shares nor returned the money but has utilized the share application money for more than 9 years. The assessee received share application money during Financial Year 2009-10 and the shares have already been allotted as is evident from return of allotment at page B-38 of the paper book. The ld. AR submitted that the authorities below have erred in invoking the provisions of section 41(1)(a) and treating the share application money as cessation of liability. The ld. AR further submitted that the authorities below have erred in making addition u/s. 68 of the Act. The provisions of section 68 are attracted only when the amount is credited in the books of assessee in the previous year. In the case of assessee the amount of Rs. 2,34,86,419/- was brought forward as opening credit balance from the Audited Balance Sheet on the first day of Financial Year under consideration. It is not a case where the share application money was received during year ....
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.... was Rs. 2,34,86,149/-. The ld. AR contended that the findings of Assessing Officer are purely based on surmises and conjunctures. The Commissioner of Income Tax (Appeals) has upheld the same in mechanical manner without ascertaining true and correct facts of the case. The ld. AR prayed for setting aside the findings of Commissioner of Income Tax (Appeals) and allowing the appeal of assessee. 7. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also taken into consideration various documents on which the ld. AR of assessee has placed reliance to support his contentions. 8. The assessee in second appeal has assailed the findings of Commissioner of Income Tax (Appeals) in respect of solitary addition of Rs. 2,34,86,149/-. The addition has been made by invoking the provisions of section 41(1)(a) and treating share application money pending allotment as remission/cessation of trading liability. The authorities below in their orders have observed that the assessee has received share application money more than 9 years back. However, the authorities below have failed to indicate as to from where th....
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....cted in the accounts of the assessee over the past four to five years and the same was not fresh credit entry in the books in the previous year under consideration. 12. Now, before dwelling on invoking provisions of section 41(1)(a), it would be necessary to have glance at the relevant provisions of section 41(1) of the Act. The same are reproduced here-in-below : "41(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 assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (a) the first-mentioned person has 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 such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has b....
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....a particular later year to show that the liability has ceased or has been remitted, it can be brought to tax. In order to invoke the section, it must be first established that the assessee had obtained some benefit in respect of the trading liability which was earlier allowed as a deduction. It is not enough that the assessee derives some benefit in respect of such trading liability, but it is also essential that such benefit arises "by way of" remission or cessation of the liability. The words "remission" and "cessation" are legal terms and have to be interpreted accordingly. In CIT v. SUGAULI SUGAR WORKS P. LTD. [1999] 236 ITR 518it was held by the Supreme Court that a unilateral action cannot bring about a cessation or remission of the liability because a remission can be granted only by the creditor and a cessation of the liability can only occur either by reason of operation of law or the debtor unequivocally declaring his intention not to honour his liability when payment is demanded by the creditor, or by a contract between the parties, or by discharge of the debt." Dismissing the appeal of Department, the Hon"ble High Court held : "The assessee had not unilatera....