TaxTMI 
TaxTMI 
2022 (11) TMI 1215
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....ffered by the appellant revenue for not preferring the appeal within the period of limitation is not satisfactory. It would have been well open to us to dismiss the appeal as time barred. However being conscious of the fact that the appeal has been filed under Section 260A of the Income Tax, Act, 1961 (Act), wherein the Court has to consider as to whether any substantial question of law arises for consideration, we are of the view that in the facts and circumstances of the case, it may not augur well to reject the appeal on a technical ground especially when the statute stipulates that the requirement is to consider whether any substantial question of law arises for consideration in this appeal. 2. Hence for such reasons, we exercise discretion and accordingly condoned the delay in filing the appeal. GA No. 01 of 2020 is allowed. 3. This appeal filed by the revenue under Section 260A of the Act is directed against the order passed by the Income Tax Appellate Tribunal "B" Bench Kolkata (Tribunal), dated 20.07.2018 in ITA No. 1907/Kol/2016 for the assessment year 2001-2002. 4. The revenue has raised the following substantial questions of law for consideration: a) Whether on the ....
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....006. The details of the business activities done by each unit were also called for. The assessing officer while completing the assessment by order dated 31.12.2007 pointed out that the assessee has failed to submit any of the details of the branches as well as the head office and has submitted only a list of unsecured loan creditors with amount thereof. Further the assessing officer records that there is no confirmation of account of the said loan creditors as on 15.11.2007. Further in the balance sheet as the assessee had shown current liability amounting to Rs. 12,97,47,322/-, the assessee was directed to provide names and addresses of all persons to whom this interest is payable. Other connected details were also called for. The assessing officer records that the assessee submitted a list of loan creditors and also mentioned about the interest which is due and payable to them. There after show cause notice dated 27.12.2007 was issued calling upon the assessee to explain as to why the interest payable on loan for the assessment year 2001-2002 should not be treated as cessation of liability and be included in the taxable income. The assessee submitted their response by letter date....
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....ons whose names were furnished was continuing for a very long time; there has been no change in relation thereto atleast since 1988-1989 corresponding to the assessment year 1989-1990; most of the creditors were family members, relations and associates of the partners of the assessing firm; the names and addresses of all the creditors is available in the old tax records of the assessee firm; on account of various disputes which had been continuing amongst the partners for more than three decades, the liability on account of loans borrowed from their family members, close relations and their associates and/or interest payable there on, had not been discharged by the assessee; the fact that disputes continue amongst the partners is on record of the Income Tax Department and the assessee was not able even to file its complete tax return year after year, since its various partners including their family members who are controlling different business activities of the assessee did not provide details to its head office; none of the creditors named in the list furnished by the assessee have ever granted remission and/or either of the amounts due and payable to them; out of the aggregate ....
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....the assessee has not furnished details of the outstanding creditors. That apart, the assessee also furnished details of payments made to creditors subsequent to 31.03.2001 which was produced to show that the liabilities continue to exist at the end of 31.03.2001. It is not disputed that the assessing officer though was furnished the full list of creditors chose to issue notice only to 6 of them. Directors of the four creditor companies appeared before the assessing officer, however, those directors were appointed subsequent to 31.03.2001 and did not readily have the necessary information. This led to the assessing officer to conclude that the directors of the four companies were unaware of the transactions. The assessing officer ought to have taken note of the response filed by the assessee by way of further explanation which appears to have been brushed aside. More importantly, none of the persons who had appeared before the assessing officer had denied the transactions with the assessee nor stated that there are no dues or outstanding payable by assessee to them. In the given facts and circumstances, was the assessing officer justified in holding that there was cessation of liabi....
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.... 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. 10. As noted above, revenue contended that the decision in Bombay Dyeing was dealing with the statutory liability and that could not have been taken into consideration to examine the theory of extinguishing of the debt. We are not persuaded by the said submission as the five judge bench of the Hon'ble Supreme Court which delivered the verdict had analysed the entire aspect as regards, cessation of liability and held that the limitation does not extinguish the debt or precludes its enforcement unless the debtor chooses to avail himself of the defence and specifically pleads its. Therefore, the decision in Bombay Dyeing was rightly referred to in Sugauli Sugar Works for the aforesaid legal proposition. Reliance was placed on the decision in West Asia Exports and Imports Private Limited Versus Assistant Commissioner of Income Tax, Company Circle III(3) (2019) 412 ITR 208 (Mad) In the said case, the facts were wholly different from the case on hand as there was change of business of the assessee therein to entirely different nature and the ....
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....aid decision, it was held that the decision in T.V. Sundaram Iyengar and Sons is of no relevance. This decision will wholly support the case of the assessee. Reliance was placed on the decision in Gujtron Electronics Private Limited Versus Income Tax Officer (2017) 397 ITR 462 (Guj) and that special leave petition filed against the said decision was dismissed by the Hon'ble Supreme Court by order dated 30.10.2017. In said decision also on facts the court found that in all the accounts the assessee has treated such amount as its own and the scheme which the assessee has floated had been terminated many years back and the limitation for claiming the amount back had also ceased and there was absolutely no movement or the correspondence between the assessee and its members with regard to the claim or with response to the deposited amount. The said decision is also factually distinguishing. Reliance was also placed by the revenue on the decision in the case of Jay Engineering Works Limited Versus Commissioner of Income Tax (2009) 311 ITR 299 (del). In our considered view, the decision in the case of Commissioner of Income Tax 3 Versus Indian Rayon and Industries Limited (2011) 336 ITR 4....
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....n in Sundaram Iyengar case is distinguishable. In that case, monies were received by the assessee in the course of carrying on its business. Although the receipt of these monies was treated as a deposit and was of a capital nature when it was received, the money had by efflux of time become the assessee's own money. What remained after making adjustments had not been claimed by the customers. The claims of the customers had become barred by limitation. In these circumstances, the assessee having treated the money as its own money and having transferred it to the profit and loss account, the Supreme Court held that the amount representing unclaimed credit balances would be treted as the assessee's income and was liable to be taxed. The decision in Sundaram Iyengar's case consequently rested on these specific facts. On the other hand the subsequent decision in Sugauli Sugar Works specifically deals with the issue in hand and would cover the case against the Revenue. Hence, no substantial question of law would arise. 13. The decision in Commissioner of Income Tax - III Versus Shri Vardhman Overseas Limited (2011) 16 Taxmann.com 350 (Del) has considered all the decisions which we have....
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....002. In the case before the Supreme Court in CIT v. T.V.Sundaram Iyengar (supra), the assessee took a positive step of transferring the unclaimed balances in the deposit accounts to its profit and loss account, an act, which was considered to be of considerable significance in demonstrating the intention of the assessee to appropriate the money belonging to the depositors as its own monies. That case was dealing with items of receipt received in the course of the business of the assessee, though of capital nature at the time when they were received. The present case is one of a trading liability being earlier allowed as a deduction and which is sought to be recalled under Section 41(1) of the Act. At the cost of repetition it may be added that in CIT Vs. Kesaria Tea Company Ltd. (supra) the revenue sought to raise the argument based on the judgment of the Supreme Court in CIT Vs. T.V.Sundaram Iyengar (supra), but it was rejected by the Supreme Court holding that the decision was of no relevance to the question involved in the case before them, which was about the applicability of Section 41(1), and because the factual matrix and the provision of law considered therein were entirely....
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....owing observations of the Supreme Court, approving an earlier Full Bench decision of the Gujarat High Court in that case, are relevant and quoted below: As pointed out already, the crucial words in the section require that the assessee has to obtain in cash or in any other manner some benefit. That part of the section has been omitted to be considered by the Division Bench of the Bombay High Court. The said words have been considered by a Full Bench of Gujarat High Court in detail in CIT v. Bharat Iron & Steel Industries MANU/KA/0138/1992 : [1993] Tax LR 188. The following passages in the judgment brings out of the reasoning of the Full Bench succinctly (At Pp. 195 and 196 of Tax LR): In our opinion, for considering the taxability of amount coming within the mischief of section 41(1) of the Act, the system of accounting followed by the assessee is of no relevance or consequence. We have to go by the language used in section 41(1) to find out whether or not the amount was obtained by the assessee or whether or not some benefit in respect of trading liability by way of remission or cessation thereof was obtained by the assessee and it is in the previous year in which the amount o....
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....assessee; (2) Subsequently, a benefit is obtained in respect of such trading liability by way of remission or cessation thereof during the year in which such event occurred; (3) in that situation the value of benefit accruing to the assessee is deemed to be the profit and gains of business which otherwise would not be his income; and (4) such value of benefit is made chargeable to Income-tax as the income of the previous year wherein such benefit was obtained. The High Court, agreeing with the Tribunal, rightly held that the resort to section 41(1) could arise only if the liability of the assessee can be said to have ceased finally without the possibility of reviving it. On the facts found by the Tribunal, the Tribunal as well as the High Court were well justified in coming to the conclusion that the purchase tax liability of the assessee had not ceased finally during the year in question. Despite the finality attained by the judgment in Neroth Oil Mills' case, the other issues having bearing on the exigibility of purchase tax still remained and the dispute between the assessee and the sales-tax department was still going on. There is no material on record to rebut these factua....
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....esaria Tea Co. Ltd. (supra) and the Supreme Court in paragraph 6 of the judgment dealt with the decision by making the following observations: The decision of this Court in CIT v. T.V. Sundaram Iyengar & Sons Ltd. (MANU/SC/1251/1996 : 222 ITR 344) has been cited by the learned counsel for the appellant. We find no relevance of this decision to the determination of the question involved in the present case. The factual matrix and the provision of law considered therein is entirely different. We also propose to adopt the same observations in the above decision. Moreover, as pointed out in the case of Sugauli Sugar Works (P.) Ltd. (supra), vide the last five lines of the paragraph 6 of the judgment, the question whether the liability is actually barred by limitation is not a matter which can be decided by considering the assessee's case alone but has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable. There may be circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even....