ITO 9(2)-3, MUMBAI v. MAA SHREWALI EXPORTS P. LTD, MUMBAI

ITA 3651/MUM/2009 | 2005-2006
Pronouncement Date: 31-01-2011 | Result: Allowed

Appeal Details

RSA Number 365119914 RSA 2009
Assessee PAN AAACM7112N
Bench Mumbai
Appeal Number ITA 3651/MUM/2009
Duration Of Justice 1 year(s) 7 month(s) 26 day(s)
Appellant ITO 9(2)-3, MUMBAI
Respondent MAA SHREWALI EXPORTS P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted F
Tribunal Order Date 31-01-2011
Date Of Final Hearing 18-09-2013
Next Hearing Date 18-09-2013
Assessment Year 2005-2006
Appeal Filed On 04-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI BEFORE SHRI S V MEHROTRA ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 3651/MUM/2009 (ASSESSMENT YEAR 2005-06) INCOME TAX OFFICER 9(2)-3 AAYAKAR BHAVAN ROOM NO.225 2 ND FL M K ROAD MUMBAI-400020 . APPELLANT VS MAA SHEREWALI EXPORTS P LTD. 603 MARI GOLD CHS LTD. NEW LINK ROAD ANDHERI (W) MUMBAI-400053 PAN: AAACM7112N RESPONDENT APPELLANT BY : SHRI K R DAS RESPONDENT BY : NONE O R D E R PER VIJAY PAL RAO JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 16.3.2009 OF THE CIT(A) FOR THE ASSESSMENT Y EAR 2005- 06. 2. ONLY GROUND RAISED BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD . CIT(A) ERRED IN DIRECTING THE SUM OF RS.3 34 75 277/- WHICH WAS TREATED AS INCOME ON ACCOUNT OF REMISSION/CESSATION OF LIABILITY U/S 41(1)(/28(IV) OF THE INCOME TAX ACT 1961 ITA NO. 3657/MUM/2009 (ASSESSMENT YEAR 2005-06) 2 3. DURING THE COURTS OF ASSESSMENT PROCEEDINGS TH E AO NOTED FROM THE BALANCE SHEET THAT THE ASSESSEE HAS SHOWN CURRENT LIABILITY TOWARDS VARIOUS PARTIES. THE DET AILS OF WHICH AS GIVEN BY THE AO IN THE ASSESSMENT ORDER AT PAGE 2 ARE AS UNDER : A. ADVANCES RECEIVED AGAINST FILMS FROM CUSTOMERS A ND DISTRIBUTORS AS ON 31.3.2005 SANCO INTERNATIONAL LTD UK 18 780 821 ZEE TELEVISION UK (ASIA TV) 24 45 312 D P KEDIYA AND BROS 2 00 000 ADITYA CORPORATIONS 1 02 672 ABC EXPORTS 11 68 144 BVA EXPORTS 25 00 000 ABC CORPORATION 25 000 EASSEL VISION 27 05 000 ANAND EXPORTS - ANKIT MOVIES - TOTAL 2 79 27 949 B.SUNDRY CREDITORS FOR EXPENSES J K CHOUDHARY AND CO 97 500 TARA SING AND SONS 54 332 V G P VIDEO VISION OF INDIA LTD 3 250 FOR GOODS SUPPLIED GRAMCO MUSIC PUBLISHING PVT LTD 4 800 000 NEHA MAD FILSMS COMBINES 3 375 000 G G PHOTO LTD 2 656 ADLABS LTD 5 517 KUMAR D GOKULANI 40 000 NEO GRAPHICS 49 405 ITA NO. 3657/MUM/2009 (ASSESSMENT YEAR 2005-06) 3 3.1 AO FOUND THAT THESE LIABILITIES HAVE BEEN CARRI ED FORWARD BY THE ASSESSEE FOR 10 TO 12 YEARS. ACCORDINGLY T HE AO ASKED THE ASSESSEE TO FURNISH THE VARIOUS DETAILS A BOUT THE PERSONS FROM WHOM THE ASSESSEE RECEIVED THE ADVANC ES AGAINST THE FILMS GOODS SUPPLIED AND EXPENSES. TH E ASSESSEE NEITHER FILED ANY REPLY NOR ANY CONFIRMATI ON OF THE PARTIES. IN ORDER TO VERIFY THE GENUINENESS AND AUTHENTICITY OF THE LIABILITIES APPEARED IN THE BALANCE SHEET OF THE ASSESSEE THE AO ISSUED NOTICES U/S 133(6) OF THE ACT. THE NOTICES ISSUED BY THE AO WERE RETURNED BACK BY THE POSTAL AUTHORITY IN SOME OF THE CASES WITH THE REMARK LEFT AND IN SOME OF THE CASES THE NOTICES WERE SERVED ON THE PARTIE S BUT NO REPLY WAS RECEIVED BY THE AO EXCEPT IN THE CASE OF TARA SINGH AND SONS IN RESPECT OF THE SUM OF RS.54 332/ - SHOWN AS SUNDRY CREDITORS FOR EXPENSES. IN THE REPLY RE CEIVED FROM THE TARA SINGH AND SONS IT WAS STATED THAT THE AM OUNT OF RS.46 125/- WAS RECEIVABLE BY THEM WHICH WRITTEN OF F BY THEM DURING THE FINANCIAL YEAR 2002-03. THEREFORE AS O N DATE THERE IS NO AMOUNT RECEIVABLE BY THEM AGAINST THE A SSESSEE. THE AO AFFORDED MORE OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE PARTIES ALONG WITH THEIR CONFIRMATION. AFTER AVAILING NUMBER OF OPPORTUNITIES THE ASSESSEE FIL ED LETTER DATED 12.11.2007. AFTER CONSIDERING THE REPLY THE AO MADE AN ADDITION IN RESPECT OF 14 PARTIES AMOUNTING TO ITA NO. 3657/MUM/2009 (ASSESSMENT YEAR 2005-06) 4 RS.3 37 54 559/- BY TREATING THE SAME AS INCOME OF THE ASSESSEE U/S 28(IV) OR 41(1) OF THE ACT. 3.2. ON APPEAL THE CIT(A) DELETED THE ADDITION MA DE BY THE AO TO THE EXTENT OF RS.3 34 75 277/- IN RESPECT OF 7 PARTIES AND CONFIRMED THE REMAINING ADDITION OF RS.2 79 58 2. 3.3. WE HAVE HEARD THE LEARNED DR AND CONSIDERED T HE RELEVANT RECORD. SINCE NOBODY APPEARED ON BEHALF O F THE ASSESSEE THEREFORE WE HAD NO PRIVILEGE TO HEAR THE ASSESSEE. THE LEARNED DR HAS REFERRED THE REASONING AND FINDI NGS OF THE AO AND SUBMITTED THAT WHEN THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS TO ESTABLISH THAT THE LIABILITI ES ARE STILL EXISTS THE AO IS JUSTIFIED IN MAKING THE ADDITION U/S 41(1) OF THE ACT. 3.4. AFTER CONSIDERING THE SUBMISSIONS AND RELEVA NT RECORD AT THE OUTSET WE NOTE THAT IN THE REPLY DATED 12.1 1.2007 THE ASSESSEE HAS NOT DISPUTED THAT THESE LIABILITIES A RE MORE THAN 10 TO 12 YEARS OLD AND IN SOME OF THE CASES THE P ARTIES HAVE ALREADY WRITTEN OFF THE AMOUNT IN THEIR BOOKS OF AC COUNT AS NON-RECOVERABLE FROM THE ASSESSEE. THE AO HAS RECO RDED THE REPLY OF THE ASSESSEE AT PAGES 5 AND 6 OF THE ASSES SMENT ORDER AS UNDER : ITA NO. 3657/MUM/2009 (ASSESSMENT YEAR 2005-06) 5 THIS HAS REFERENCE TO YOUR LETTER NO. ITO WARD 9(2 )- 3/SHOW-CAUSE/2007-8 DATED 10.10.2007. IN THIS CONNECTION WE WOULD LIKE TO BRING TO YOUR KIND NOTI CE THAT ALL THE ASSETS AND LIABILITIES APPEARING IN T HE BALANCE SHEET OF THE COMPANY AS ON 31.3.2005 ARE VERY OLD. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF FILM EXPORTS AND DISTRIBUTION. IN THE COURSE OF ITS BUSINESS THE COMPANY HAD BOUGHT VARIOUS FILMS UNDER PRODUCTION AND HAD GIVEN ADVANCES TO PRODUCERS. SIMILARLY THE COMPANY HAD SOLD VARIOUS FILMS TO OVERSEAS BUYERS AND RECEIVED ADVANCES FROM THESE OVERSEAS BUYERS. THE DEBTORS FOR SALE OF FIMLS AN CREDITORS FOR PURCHASE OF FILMS/EXPENSES ARE ALSO SHOWN IN THE BALANCE SHEET. THESE ASSETS AND LIABILITIES ARE CARRIED OVER AS I T IS SINCE FY 1997-98. WE ENCLOSE HEREWITH A CHART MARKET AS EXHIBIT A SHOWING LIABILITGIES TOWARDS (I) ADVANCES RECEIVED FROM DISTRIBUTORS AND CUSTOMERS AND (II) SUNDRY CREDITORS FOR LAST 10 YEARS I.E. F Y 1995-96 TO FY 2004-05. SIMILARLY WE ENCLOSED HEREWITH A CHART MARKED EX.B SHOWING DETAILS OF (I) ADVANCES GIVEN TO PRODUCERS AGAINST FILMS UNDER PRODUCTION AND (II) SUNDRY DEBTORS FOR LAST 9 YEAR S I.E. FROM FY 1996-97 TO FY 2004-05. YOU WILL OBSERVE THAT SAME LIABILITIES AND ASETS ARE CARRIED OVER YE AR AFTER YEAR. THE COMPANY IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE COMPANY IS REGULARLY ASSESSED TO INCOME TAX AND THE ASSETS AND LIABILITIES OF THE COMPANY HAVE BEEN ACCWEPTED BY THE DEPARTMENT FOR ALL THE PREVIOUS YEAR. THE ADVANCES GIVEN TO PRODUCERS FOR FILMS UNDER PRODUCTION ARE SHOWN AS ASSETS UNDER THE HEAD ADVANCES GIVEN TO PRODUCERS AND DISTRIBUTORS IN THE BALANCE SHEET. SIMILARLY ADVANCES RECEIVED FROM CUSTOMERS TOWARDS FILMS ARE SHOWN AS LIABILITIES IN THE BALANCE SHEET UNDER THE HEAD ADVANCES RECEIVED FROM CUSTOMERS. WHEN A FILM IS COMPLETED AND DELIVERED ADVANCES PAID FOR FILM ARE TRANSFERRED TO PURCHASE OF FILM AND ADVANCES RECEIVED ARE TRANSFERRED TO SALE OF FILMS ACCOUNT AS PER PROVISIONS OF RULE 9B. FURTHER IT IS OBSERVED THAT THE COMPANY HAS RECEIV ED ADVANCE OF RS.11 68 144/- FROM M/S ABC EXPORTS. THESE ENTRIES ARE WRONGLY SHOWN SEPARATELY. AFTER MERGING THESE ACCOUNTS THE COMPANY HAS PAID ITA NO. 3657/MUM/2009 (ASSESSMENT YEAR 2005-06) 6 RS.3 68 144 TO M/S ABC EXPORTS IN THE CURRENT YEAR AND THIS ACCOUNT HAS BEEN SQUIRED UP. SIMILARLY THE COMPANY HAS SHOWN ADVANCES OF RS.25 00 000/- PAID TO GRAMCO MUSIC PUBLISHING PV T LTD. THE COMPANY HAS ALSO SHOWN SUNDRY CREDITORS OF RS.48 00 000/- IN THE NAME OF GRAMCO MUSIC PUBLISHING PVT LTD. THE PAYMENT OF RS.25 00 000/- SHOULD HAVE BEEN DEBITED AGAINST SUNDRY CREDITORS O F RS.48 00 000/- ONLY RS. 23 00 000/- SHOULD HAVE BEEN SHOWN AS PAYABLE TO THIS PARTY. THIS IS A ACCOUNTING MISTAKE WHICH OUGHT HAVE BEEN RECTIFIED . THE ASSESSEE RECEIVED RS.1 87 81 821/- FROM M/S SANCO INTERNATIONAL LTD UK. THE ASSESSEE HAS TO RECEIVED TS.2 27 31 750/- FROM M/S MAA SHERAWALI FILMS LTD UK TOWARDS SALE OF FILMS. THIS AMOUNT O F RS.1 87 81 821/- IS REQUIRED TO BE CREDITED TO MAS S SHERAWALI FILMS PVT LTD UK WHICH WAS BECOME BAD DEBTS AND THE SAME HAS TO BE WRITTEN OFF THE ADVANCES PAID BY THE COMPANY TO THE PRODUCERS FOR FILMS OF RS.1 08 74 000/- ARE NOT RECOVERABLE SINCE THE FILMS ARE INCOMPLETE AND HAS BECOME OBSOLETE AND THERE ARE NO CHANCES OF COMPLETION OF FUTURE ALSO AND HENCE THE COMPANY HAS TO WRITE OFF THEE AMOUNTS AS NON RECOVERABLE. FROM THE ABOVE IT IS CLEAR THAT ASSETS SHOWN IN BALANCE SHEET AS ON 31.3.2005 ARE NON-REALIZABLE AN D SAME SHOULD BE WRITTEN OFF AGAINST THE LIABILITIES OF THE COMPANY WHICH IN YOUR OPINION CEASED TO BE LIABILIT IES OF THE COMPANY. WE THEREFORE REQUEST YOU TO KINDLY CONSIDER THE ASSETS AND LIABILITIES OF THE COMPANY IN TANDEM AND ADJUST ALL NON-REALIZABLE ASSETS OF THE COMPANY AGAINST THE LIABILITIES OF THE COMPANY WHICH YOUR GOODSELVES CONSIDER TO HAVE BEEN CEASED U/S 41(1) OF THE IT ACT 1961. THE ASSESSEE HAS GIVEN YOU ADDRESSES OF THE PARTIES AS PER THE RECORD WHICH ARE 10 -12 YEAS O LD. MANY OF THE PARTIES HAVE DISCONTINUED THEIR BUSINES S AND MANY OF THEM HAVE CHANGED THEIR PLACE OF BUSINESS. IT WILL TAKE SOME TIME TO LOCATE THESE PARTIES. THE PRESENT DIRECTORS OF THE COMPANY WERE NOT ON THE BOARD OF THE DIRECTORS OF THIS COMPANY WHEN THESE TRANSACTIONS TOOK PLACE. HENCE WE REQUEST YOU TO KINDLY PROVE AT LEAST A MONTHS TIME TO ITA NO. 3657/MUM/2009 (ASSESSMENT YEAR 2005-06) 7 ENABLE US TO PROVE YOU WITH NEW ADDRESSES OF THE PARTY. SOME OF THE PARTIES HAVE WRITTEN OFF THE AMOUNTS IN THEIR BOOKS AS NON-RECOVERABLE/PAYABLE TO THIS ASSESSEE. HENCE THEY DO NOT SHOW ANY DEBIT OR CRED IT IN THE NAME OF THIS ASSESSEE. THE COMPANY HAS NO BUSINESS ACTIVITIES SINCE LAST 7-8 YEARS AND HAS BECOME A DEFUNCT COMPANY IN VIEW OF THE ABOVE FACTS WE REQUEST YOUR HONOUR TO ADJUST ALL NON-REALIZABLE ASSETS OF THE COMPANY AS DISCUSSED HEREIN ABOVE AGAINST LIABILITIES WHICH HAVE CEASED TO BE LIABILITIES AS PER PROVISIONS OF SECT ION 41(1) OF THE IT ACT 1961 3.5 FROM THE ABOVE REPLY IT IS CLEAR THAT THE ASSE SSEE HAS NOT DISPUTED ABOUT THE NON-EXISTENCE OF THE LIABI LITIES. HOWEVER THE ASSESSEE CLAIMED THAT SAME MAY BE ADJU STED AGAINST THE NON-REALIZABLE ASSETS OF THE ASSESSEE. WHILE TREATING THESE LIABILITIES AS CEASED TO EXISTS AND GAIN TO THE ASSESSEE THE AO RELIED UPON THE DECISION OF THE HON. SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX. V. T.V. SUNDARAM IYENGAR & SONS LTD REPORTED IN 222 ITR 344. THE CIT(A) HAS DELETED THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS BEEN SHOWING THE TRADING LIABILITIES AS PAYABLE IN THE BOOKS OF ACCOUNTS THEREFORE MERELY BECAUSE THE LIABILITIES REMAINED UNPAID BEYOND THE EXPIRY PERIO D OF LIMITATION IT CANNOT BE TREATED AS REMISSION OF L IABILITY U/S 41(1) OR SECTION 28(IV). THE CIT(A)S FINDINGS IS BASED ON THE REASON THAT THE ASSESSEE FURNISHED THE DOCUMENTA RY EVIDENCE TO PROVE THAT THE DEPOSITS ARE GENUINE. ITA NO. 3657/MUM/2009 (ASSESSMENT YEAR 2005-06) 8 THEREFORE THE CIT(A) HELD THAT ONCE IT IS ESTABL ISHED THAT THE DEPOSITS ARE GENUINE THERE IS NO REMISSION OR CESSA TION THEREOF. 3.6 IT IS TO BE NOTED THAT THE AO HAS MADE THE A DDITION ON ACCOUNT OF NON-EXISTENCE OF THE LIABILITY DUE TO OU TSTANDING FOR LAST MORE 10 TO 12 YEARS AND THE PARTIES HAVE NOT RESPONDED TO THE NOTICE ISSUED BY THE REVENUE. THEREFORE TH E AO CONCLUDED THAT THE LIABILITIES NO MORE IN EXISTENCE AND THAT THE PARTIES HAVE NOT CLAIMED THE AMOUNT FROM THE ASSES SEE. THE AO HAS NOT MADE ADDITION ONLY ON THE BASIS THAT THE LIABILITIES ARE BOGUS. THEREFORE IN OUR VIEW WHE N THE ASSESSEE HAS ALSO NOT DISPUTED THAT THE LIABILITIES ARE NO MORE PAYABLE THOUGH THE ASSESSEE HAS NOT WRITTEN BACK IN THE BOOKS OF ACCOUNT THE CIT(A) HAS NOT TAKEN THE CORRECT V IEW OF THE FACTS WHILE DECIDING THE ISSUE. ONCE THE AO HAS B ROUGHT ON RECORD THAT THESE LIABILITIES ARE PRIMA FACIE NOT S UBSISTING THEN THE BURDEN IS ON THE ASSESSEE TO PROVE THAT THE LIA BILITIES SHOWN BY THE ASSESSEE WHICH ARE CARRIED FORWARD F OR MORE THAN 10 TO 12 YEARS STILL SUBSISTS. FROM THE COND UCT OF THE PARTIES AND SURROUNDING CIRCUMSTANCES CLEARLY DEMON STRATE THAT THE AMOUNT SHOWN BY THE ASSESSEE UNDER THE HEA D CURRENT LIABILITIES WERE NOT CLAIMABLE AGAINST THE ASSESSEE AND THEREFORE WOULD BE CLEAR CASE OF REMISSION/CESSATIO N OF THE ITA NO. 3657/MUM/2009 (ASSESSMENT YEAR 2005-06) 9 LIABILITIES OF THE ASSESSEE. IT IS ADMITTED FACT AS EVIDENT FROM THE REPLY OF THE ASSESSEE AS REPRODUCED IN THE FORG OING PARAGRAPHS THAT THE ASSESSEE HAS NOT DISPUTED THE CESSATION OF THE LIABILITIES. EVEN OTHERWISE IF THE ASSESS EE HAS CONSIDERED THAT SOME OF THE LIABILITIES MAY BE PAYA BLE IN FUTURE THEN IT IS UP TO THE ASSESSEE TO ESTABLISH THE SAM E. THESE BALANCES ARE VERY OLD AND THERE ARE REMOTE CHANCES OF ANY CLAIM TO BE MADE BY THE PARTIES AGAINST THE ASSE SSEE. THEREFORE IF THE ASSESSEE IS ABLE TO PROVE THAT AN Y PART OF LIABILITIES SHOWN IN THE BOOKS OF ACCOUNT AS OUTSTA NDING HAS BEEN PAID AND THE SAME WILL NOT BE TREATED AS CESSA TIONS OF LIABILITIES. SINCE NOTHING HAS BEEN BROUGHT ON REC ORD BY THE ASSESSEE EITHER BEFORE THE AO OR BEFORE THE CIT( A) TO SHOW THAT THE ASSESSEE HAS THE INTENTION TO PAY THESE LI ABILITIES. ACCORDINGLY WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THAT OF AO. 4. IN THE RESULT APPEAL OF THE REVENUE STANDS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JAN 2011 SD SD (S V MEHROTRA ) (VIJAY PAL RAO) ACCOUNTANT MEMBER JU DICIAL MEMBER MUMBAI DATED 31ST JAN 2011 SRL:27111 ITA NO. 3657/MUM/2009 (ASSESSMENT YEAR 2005-06) 10 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI