The ITO, Ward-4(2),, Baroda v. Rainbow Housing Developement & Finance Corpn.Ltd.,, Baroda

ITA 4052/AHD/2007 | 2001-2002
Pronouncement Date: 31-05-2010 | Result: Dismissed

Appeal Details

RSA Number 405220514 RSA 2007
Assessee PAN AABCR4038D
Bench Ahmedabad
Appeal Number ITA 4052/AHD/2007
Duration Of Justice 2 year(s) 6 month(s) 24 day(s)
Appellant The ITO, Ward-4(2),, Baroda
Respondent Rainbow Housing Developement & Finance Corpn.Ltd.,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 31-05-2010
Date Of Final Hearing 05-05-2010
Next Hearing Date 05-05-2010
Assessment Year 2001-2002
Appeal Filed On 06-11-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : A HMEDABAD (BEFORE HON'BLE SHRI G.D. AGRAWAL V.P. (AZ) & HON BLE SHRI T.K. SHARMA J.M.) I.T.A. NO. 4052/AHD./2007 ASSESSMENT YEAR : 2001-2002 INCOME TAX OFFICER WARD-4(2) BARODA -VS.- RAINB OW HOUSING DEVELOPMENT & FINANCE CORPORATION LIMITED BARODA (PAN : AABCR 4038 D) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHELLEY JINDAL CIT D.R. RESPONDENT BY : SHRI S.N. SOPARKAR O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 23.07.2007 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-III BORADA FOR THE ASSESSMENT YEAR 2001-02. 2. THE ONLY GROUND RAISED IN THIS APPEAL IS AS UNDE R :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A.) HAS ERRED IN DELETING THE ADDITION OF RS.1 08 24 496/- BEING EXTINGUISHMENT OF LIABILITY U/S. 41(1) THOUG H THE ASSESSEE FAILED TO FURNISH NEITHER CONFIRMATION FROM THE CREDITOR NOR COULD FURNISH PAPERS INDICATIVE OF THE PENDENCY OF CIVIL SUIT EITHER DU RING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS IG NORING THE FACT THAT THE ASSESSEE HAS DECLARED THE INVENTORY ON THE LAST DAY OF DIFFERENT ASSESSMENT YEARS AT DIFFERENT AMOUNT WHICH PROVES T HAT THE ASSESSEE HAS SOLD THE LAND. 3. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN THIS GROUND OF APPEAL ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER NOTICED THAT THE ASSESSEE HAD SHOWN OUTSTANDING LIABILITY OF THE IMPUGNED AMOUNT OF RS. 1.08 CRORES IN ITS BALANCE-SHEET. ON BEING ASKED TO EXPLAIN THE NATURE OF LIABILITY THE ASSES SEE FAILED TO ATTEND THE ASSESSMENT PROCEEDINGS EXCEPT ONCE. THE ASSESSING OFFICER THEREFORE COMP LETED THE ASSESSMENT UNDER SECTION 144 AND MADE THE ADDITION OF RS.1.08 CRORES OBSERVING AS UN DER :- 2 ITA NO. 4052/AHD/2007 A LIABILITY OF RS.1 08 24 496/- ON ACCOUNT OF ADVA NCE GIVEN FOR PURCHASE OF LAND IS TREATED AS REMISSION OF LIABILI TY U/S. 41(1) OF THE I.T. ACT AS THE ASSESSEE HAS FAILED TO FURNISH LATE ST ADDRESS OF SHRI V.K. MANJUNATH AND ALSO FAILED TO FURNISH ANY OTHER PAPERS/ DOCUMENTS PERTAINING TO THIS LIABILITY OR CONFIRMAT ION LETTER. LIABILITY OF RS.1 08 24 496/- IS ADDED TO THE TOTAL INCOME. 4. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) ON BEHALF OF ASSESSEE IT WAS EXPLAINED THAT IN THE YEAR 1990 T HE ASSESSEE PURCHASED A PLOT OF LAND AT BANGALORE FOR THE PURPOSE OF DEVELOPMENT AS A HOUSI NG PROJECT. THE COST OF THE LAND WAS RS.2 15 41 450/-. THE ASSESSEE MADE PAYMENT OF RS.1 07 16 954/- AND THE REMAINING AMOUNT OF RS.1 08 24 496/- WAS TREATED AS OUTSTANDING LIABILI TY BEING AMOUNT PAYABLE TOWARDS COST OF LAND. THE COST OF THE LAND WAS SHOWN AS PART OF ASSESSEE S INVENTORY AND REFLECTED ON THE ASSET SIDE OF THE BALANCE-SHEET. THE OUTSTANDING AMOUNT OF RS.1.0 8 CRORES WAS REFLECTED IN THE LIABILITY SIDE OF THE BALANCE-SHEET. THE SELLER OF THE LAND WAS ONE S HRI V.K. MANJUNATHAN. SUBSEQUENTLY IT WAS DISCOVERED BY THE ASSESSEE THAT SHRI V.K. MANJUNATH AN DID NOT HAVE CLEAR TITLE TO THE LAND WHICH WAS SOLD TO THE ASSESSEE. THE ASSESSEE ACCORDINGLY WITHHELD THE REMAINING AMOUNT OF RS.1.08 CRORES. THE POSSESSION OF THE LAND WAS NOT RECEIVED BY THE ASSESSEE TILL DATE. IN ORDER TO RECOVER THE LAND THE ASSESSEE FILED CIVIL SUIT NO. 71/S/19 98 IN THE COURT OF CHIEF METROPOLITAN MAGISTRATE OF BANGALORE. SINCE THE CIVIL SUIT WAS E XPECTED TO TAKE LONG TIME BEFORE THE ORDER COULD BE RECEIVED THE ASSESSEE-COMPANY DECIDED TO GO IN FOR ARBITRATION. ACCORDINGLY TWO ARBITRATORS VIZ. SHRI V. SHANKAR AND SHRI JONATHAN REPRESENTING THE SELLER AND THE ASSESSEE RESPECTIVELY WERE APPOINTED. TO SUM UP BEFORE THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS) IT WAS SUBMITTED THAT THE MATTER IS U NDER LITIGATION AND SUBJUDICE. SINCE THE DECISION OF THE COURT AS WELL AS THE DECISION OF TH E ARBITRATORS ARE STILL AWAITED THE ASSESSEE HAS CONTINUED TO TREAT THE LAND IN QUESTION AS ITS ASSE T AND CONTINUED TO TREAT THE AMOUNT PAYABLE AS OUTSTANDING LIABILITY. IN CASE THE COURT HOLDS THA T THE OWNERSHIP OF THE LAND LEGALLY VESTS WITH THE ASSESSEE AFTER OBTAINING THE POSSESSION THEREOF T HE OUTSTANDING OF RS.1.08 CRORES WOULD BE PAID TO SHRI MANJUNATHAN. IN THE EVENT OF THE COURT TAKI NG THE VIEW THAT THE LAND COULD NOT BE TRANSFERRED TO THE ASSESSEE FOR LACK OF CLEAR TITLE THE ASSESSEE WOULD EXTINGUISH THE LIABILITY OUTSTANDING AND WRITE BACK THE SAME IN ITS BOOKS AN D OFFER THE SAME FOR TAXATION U/S. 41(1). HOWEVER TILL THE DECISION BY THE COURT NO CHANGE IN THE STATUS QUO WAS CONTEMPLATED. IT WAS POINTED OUT THAT THERE WAS A SEARCH AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE COMPANY AND 3 ITA NO. 4052/AHD/2007 ITS DIRECTORS ON 15.12.1995. EVEN DURING THE COURSE OF SEARCH ASSESSMENT FRAMED U/S. 158BC THE ISSUE REGARDING EXTINGUISHMENT OF LIABILITY U/S. 41 (1) WAS NOT RAISED. 5. AFTER CONSIDERING THE AFORESAID SUBMISSIONS IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADD ITION OF RS.1.08 CRORES FOR THE DETAILED REASONS GIVEN IN PARA 4.2 TO 4.4 WHICH READS AS UN DER :- 4.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A.R. AND FACTS OF THE CASE. SINCE THE ORIGINAL ASSESSMENT WAS COMPLET ED U/S. 144 AND THE ASSESSEE DID NOT HAVE ADEQUATE OPPORTUNITY TO E XPLAIN ITS CASE BEFORE THE A.O. THE COMMENTS OF THE A.O. WERE CALL ED FOR ON THE SUBMISSIONS MADE BY THE APPELLANT. THE A.O. HAS SUB MITTED HIS REPORT ON 9.1.2007. IN THE REPORT IT HAS BEEN MENTIONED TH AT THE LAND HAS BEEN REFLECTED AS PART OF THE INVENTORY AND LIABILI TY OF RS.1.08 CRORES HAS BEEN SHOWN AS PAYABLE TO SHRI V.K. MANJUNATYHAN . THE ADDITION WAS MADE SINCE CONFIRMATION LETTER FROM THE SELLER I.E. SHRI MANJUNATHAN WAS NOT FURNISHED. SINCE NO CONFIRMATIO N HAS BEEN FILED EVEN TILL DATE IT WAS STATED THAT THE REQUEST OF TH E ASSESSEE MAY NOT BE CONSIDERED POSITIVELY. IN REJOINDER IT WAS CONTEND ED BY THE APPELLANT THAT SHRI MANJUNATHAN IS NOT COOPERATING IN THE MAT TER AND SINCE LEGAL PROCEEDINGS ARE PENDING IN THE COURT HE HAS REFUSED TO FURNISH ANY CONFIRMATION IN THIS REGARD. HOWEVER ON EXAMIN ATION OF ORIGINAL DOCUMENTS SEIZED BY THE DEPARTMENT DURING THE COURS E OF SEARCH ON 15.12.95 THE BALANCE SHEET PREPARED WAS ACCEPTED EV EN IN THE BLOCK ASSESSMENT U/S. 158BC WHEREIN THE LAND IN QUESTION WAS SHOWN AS PART OF THE INVENTORY AND OUTSTANDING LIABILITY WAS REFLECTED IN THE BALANCE-SHEET. 4.3. IN THE INSTANT CASE THE TRANSACTION IS NOT FU LLY COMPLETED AND IS UNDER THE PROCESS OF SETTLEMENT/ COMPROMISE EITH ER THROUGH THE COURT OR THROUGH ARBITRATION. THE MATTER HAS YET TO BE FINALLY RESOLVED. THE ASSESSEE HAS ACKNOWLEDGED THE DEBT AN D ACTUALLY PAID PART OF IT. THE DEBT HAS BEEN ACKNOWLEDGED BY ENTRY IN ITS BALANCE- SHEET AS PART OF ITS OUTSTANDING LIABILITY. 4.3. SECTION 18 OF THE LIMITATION ACT 1963 PROVIDE S THAT : WHERE A DEBT IS ACKNOWLEDGED IN WRITING BEFORE THE EXPIRY OF THE LIMITATION PERIOD THIS WOULD AMOUNT TO SUFFICIENT ACKNOWLEDGEMENT AND FRESH LIMITATION SHALL BE COMPUTED FROM THE TIME WHEN SUCH ACKNOWLEDGMENT IS MADE. 4 ITA NO. 4052/AHD/2007 4.4. IN THE INSTANT CASE ALSO THE STATEMENT IN THE BALANCE SHEET HAS ACKNOWLEDGED THE DEBT BY THE COMPANY. THIS WOULD BE SUFFICIENT ACKNOWLEDGMENT EVEN WITHIN SECTION 18 OF THE LIMITA TION ACT. IN ANY CASE THERE HAS BEEN NO EXTINGUISHMENT OF THE DEBT OR LIABILITY TO PAY EITHER BY ANY UNILATERAL ACT OR THROUGH BILATERAL N EGOTIATION. SINCE THE ASSESSEE HAD PURCHASED THE LAND FOR BUSINESS PU RPOSES THERE COULD BE NO INFIRMITY IN THE ACTION OF THE ASSESSEE COMPANY IN GENUINELY ACKNOWLEDGING THE DEBT. THIS IS WHAT A PR UDENT BUSINESSMAN WOULD DO. ACCORDINGLY IN MY OPINION T HE A.O. WAS NOT JUSTIFIED IN ADDING BACK THE AMOUNT OF RS.1.08 CROR ES AS EXTINGUISHMENT OF LIABILITY U/S. 41(1). THE ADDITIO N OF THIS AMOUNT IS THEREFORE DELETED. 6. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER O F INCOME TAX(APPEALS) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING BEFORE US ON BEHALF OF R EVENUE SHRI SHELLEY JINDAL CIT D.R. APPEARED AND CONTENDED THAT BEFORE THE ASSESSING OF FICER THE ASSESSEE HAS FURNISHED NO EXPLANATION WHATSOEVER AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ENTIRE ADDITION OF RS.1 08 24 496/- MADE UNDER SECT ION 41(1) WITHOUT APPRECIATING THE FACT THAT THE LAND WAS STOCK-IN-TRADE. THE ASSESSING OFFICER WANTED TO MAKE CROSS VERIFICATION FROM THE SELLER OF LAND BUT BEFORE THE ASSESSING OFFICER TH E ASSESSEE HAS NOT FURNISHED THE ADDRESS OF SELLER. THEREFORE THE LEARNED COMMISSIONER OF INCO ME TAX(APPEALS) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 8. ON THE OTHER HAND SHRI S.N. SOPARKAR ADVOCATE APPEARING ON BEHALF OF ASSESSEE SUPPORTED THE ORDER OF LEARNED COMMISSIONER OF INCO ME TAX(APPEALS). HE POINTED OUT THAT LIABILITY WAS OUTSTANDING RIGHT FROM THE EARLIER AS SESSMENT YEAR. NO EVENT WHATSOEVER HAS TAKEN PLACE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSME NT YEAR UNDER APPEAL. HE ALSO POINTED OUT THAT THE MATTER IS SQUARELY COVERED BY THE DECISION DATE D 01.04.2010 OF ITAT A BENCH AHMEDABAD IN ITA NO. 1465/AHD/2007 FOR THE ASSESSME NT YEAR 2003-04 IN THE CASE OF DEEPAK PETROCHEM LTD. VS.- ACIT WHEREIN IT WAS HELD THAT MERELY BECAUSE THE REMEDY OF THE CREDITORS TO RECOVER THE AMOUNT IS BARED THE ASSESSEES LIAB ILITY DID NOT CEASE AND THAT THEREFORE THE AMOUNT WAS NOT TAXABLE UNDER SECTION 41(1) OF THE I NCOME TAX ACT 1961. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE AMOUNT IN QUESTION WAS UNDER BONA FIDE DISPUTE WHICH IS EVIDENT FROM THE VARIOUS DOCUMENTS FILED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 5 ITA NO. 4052/AHD/2007 THEREFORE THE ORDER OF LEARNED COMMISSIONER OF INC OME TAX(APPEALS) DELETING THE ADDITION OF RS.1 08 24 496/- BE UPHELD. 9. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. FROM THE RECORD WE FIND THAT IN PARA 4.2 OF THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS MENTIONED T HAT THE ASSESSING OFFICER CALLED THE REMAND REPORT AND AFTER CONSIDERING THE REMAND REPO RT AND COMMENTS OF THE ASSESSEE HE DELETED THE ADDITION. IN THIS CASE THE CONDITIONS LAID DOW N UNDER SECTION 41(1) ARE NOT SATISFIED. THE AMOUNT OF RS.1.08 CRORES HAS BEEN SHOWN BY THE ASSE SSEE IN ITS BALANCE-SHEET AS LIABILITY SINCE THE YEAR 1980. NO EVENT WHATSOEVER HAS TAKEN PLACE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THE ITAT AHMEDABAD B ENCH IN THE CASE OF RAJESH MUKUNDLAL SHAH VS.- ITO IN ITA NOS. 424 AND 609/AHD/2006 DEL ETED THE ENTIRE ADDITION UNDER SECTION 41(1) ON IDENTICAL ISSUE VIDE ORDER DATED 08.01.201 0. THE FINDING OF THE TRIBUNAL IS CONTAINED IN PARA 9 TO 9.5 WHICH IS REPRODUCED HEREUNDER :- 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. THE PROVISIONS OF S EC. 41(1)(A) STIPULATE THAT WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN TH E ASSESSMENT FOR ANY YEAR M RESPECT OF LOSS EXPENDITURE OR TRADING LIAB ILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSE SSES OBTAINS 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 TRAD ING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF THE AMOUNT OBTAINED OF 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 I N RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENC E IN THAT YEAR OR NOT. THE ID. CIT(A) WITHOUT EVEN ADVERTING TO THE DECISIONS CITED ON BEHALF OF THE ASSESSES SUSTAINED THE ADDITION MADE BY THE AO U/S 41(1) OF THE ACT. UNDISPUTEDLY THE ASSESSES DID NOT RECEIVE ANY BENE FIT NOR THE AMOUNT HAS BEEN TRANSFERRED TO PROFIT AND LOSS ACCOUNT AND THUS TH E AMOUNT DID NOT BECOME THE ASSESSEE'S OWN MONEY. IN THESE CIRCUMSTANCES AS CO NCLUDED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN BHARAT IRON AND STEEL INDUSTRIES (SUPRA) THE PROVISIONS OF SEC. 41(1)(A) ARE NOT ATTRACTED. 9.1. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SILVER COTTON MILLS CO. LTD. 254 ITR 728(GUJ) HELD THAT SIMPLY B ECAUSE THE PERIOD OF LIMITATION HAD COME TO AN END FOR THE PURPOSE OF FI LING A SUIT FOR RECOVERY OF THE SAID AMOUNT OR FOR TAKING APPROPRIATE ACTION AGAINS T THE ASSESSES IT CANNOT BE SAID THAT THERE WAS A CESSATION OF LIABILITY. THE L IABILITY STILL REMAINS THOUGH IT MAY NOT BE ENFORCEABLE AT LAW ON ACCOUNT OF THE PRO VISIONS OF THE LAW OF LIMITATION. RELYING UPON THE DECISION IN THE CASE O F SUGAULI SUGAR WORKS (P.) LTD. [1999] 236 ITR 5J8(SC) HON'BLE JURISDICTIONAL HIGH COURT FURTHER HELD 6 ITA NO. 4052/AHD/2007 THAT UNLESS THERE IS A CESSATION OF LIABILITY OR TH ERE IS U REMISSION OF LIABILITY BY THE CREDITOR THE LIABILITY SUBSISTS AND THEREFORE EVEN IF THE ENTRIES ARE MADE TO WRITE BACK THE EXPENDITURE THE AMOUNT SO WRITTEN BACK CANNOT BE ADDED IN THE INCOME OF THE ASSESSES AS PER THE PROVISIONS OF SEC TION 41(1) OF THE ACT. 9.2. HON'BLE BOMBAY HIGH COURT IN ANOTHER CASE OF CIT VS. CHASE BRIGHT STEEL LTD. 177 ITR 128(BOMBAY) WHILE RELYING UPON T HEIR JUDGMENT IN J. K. CHEMICALS LTD. VS. CIT [1966] 62 ITR 34 HELD THAT THE LIABILITY OF AN ASSESSEE DOES NOT CEASE MERELY BECAUSE THE LIABILITY HAS BEC OME BARRED BY LIMITATION. THE LIABILITY CEASES WHEN IT HAS BECOME BARRED BY L IMITATION AND THE ASSESSES HAS UNEQUIVOCALLY EXPRESSED ITS INTENTION NOT TO HO NOUR THE LIABILITY EVEN WHEN DEMANDED. 9.3 HON'BLE SUPREME COURT IN THE CASE OF BOMBAY DYEING & MANUFACTURING CO. LID. VS. STATE OF BOMBAY AIR 1958 SC 328 IN P ARA 23 OF THEIR DECISION OBSERVED AS FOLLOWS : 23. IT HAS BEEN ALREADY MENTIONED THAT WHEN A DEBT BECOMES TIME BARRED IT DOES NOT BECOME EXTINGUISHED BUT ONLY UN ENFORCEABLE IN A COURT OF LAW.' 9.4. HON'BLE SUPREME COURT IN THE CASE OF SUGAULI SUGAR WORKS (P.) LTD. [1999] 236 ITR 518 HELD THAT UNLESS THERE IS A CESS ATION OF LIABILITY INCOME CANNOT BE ADDED AS PER THE PROVISIONS OF SECTION. 4 1(1) OF THE ACT. SIMILARLY HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. C HETAN CHEMICALS PUT. LTD. 267 ITR 770 (GUJ) HELD THAT: 'ON A READING OF THE PROVISIONS IT IS APPARENT THA T BEFORE THE SECTION CAN BE INVOKED IT IS NECESSARY THAT AN ALLOWANCE O R A DEDUCTION HAS BEEN GRANTED DURING THE COURSE OF ASSESSMENT FOR AN Y YEAR IN RESPECT OF LOSS EXPENDITURE OR TRADING WHICH IS INCURRED B Y THE ASSESSES AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE OBTAINS WHETHER IN CASH OR IN ANY OTHER MANNER ANY AMOUNT IN RESPE CT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION OF SUCH LIABILITY. IN THAT CASE EITHER THE AMOUNT OBTAINED BY THE ASSESS EE OR THE VALUE OF THE BENEFIT OCCURRING TO THE ASSESSEE CAN BE DEEMED TO THE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND CAN BE BROU GHT TO TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH AMOUNT OR BENEFIT IS OBTAINED. IN THE FACTS OF THE CASE ON HAND WITHOUT ENTERING INTO THE ASPECT AS TO WHETHER THE LIABILITY TO REPAY THE LOA NS WOULD BE A TRADING LIABILITY OR NOT IT IS AN ADMITTED POSITIO N THAT THERE HAD BEEN NO ALLOWANCE OR DEDUCTION IN ANY OF THE PRECEDING Y EARS AND HENCE THERE IS NO QUESTION OF APPLYING THE PROVISION AS S UCH. SECTION 28 OF THE ACT DEALS WITH PROFITS AND GAINS OF BUSINESS OR PROFESSION AND CLAUSE (IV) THEREOF SAYS THAT THE VA LUE OF ANY BENEFIT OR PERQUISITE WHETHER CONVERTIBLE INTO MONEY OR NO T ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION SHALL HE C HARGEABLE AS INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINES S OR PROFESSION.' IN THE FACTS OF THE PRESENT CASE IT CANNOT BE SAID THAT THE ASSESSEE- COMPANY WAS CARRYING ON BUSINESS OF OBTAINING LOANS AND THAT THE 7 ITA NO. 4052/AHD/2007 REMISSION OF SUCH LOANS BY THE CREDITORS OF THE COM PANY WAS A BENEFIT ARISING FROM SUCH BUSINESS.' 9.5. IN THE LIGHT OF VIEW TAKEN BY THE HON'BLE SUPR EME COURT AND JURISDICTIONAL HIGH COURT IN THE AFORESAID DECISIONS IT IS APPARE NT THAT UNLESS THERE IS A CESSATION OF LIABILITY OR THERE IS A REMISSION OF L IABILITY BY THE CREDITOR THE LIABILITY SUBSISTS AND THEREFORE EVEN IF THE ENTRIES ARE MA DE TO WRITE BACK THE EXPENDITURE THE AMOUNT SO WRITTEN BACK CANNOT BE ADDED IN THE I NCOME OF THE ASSESSED AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT. IN THE INSTANT CASE THERE IS NOTHING TO SUGGEST THAT THE ASSESSES HAS OBTAINED ANY BENEFIT EITHER BY WAY OF REMISSION OR CESSATION OF ANY LIABILITY WHILE THE AFORESAID LIAB ILITIES ARE CONTINUALLY ADMITTED BY THE ASSESSES IN THEIR BALANCE SHEET. IN THESE CIRCU MSTANCES WE HAVE NO ALTERNATIVE BUT TO VACATE THE FINDINGS OF THE ID. CIT(A) AND DE LETE THE ADDITION SUSTAINED BY THE ID CIT(A). THEREFORE GROUND NOS. GROUND NOS. 3 TO 5 IN THE APPEAL OF THE ASSESSEE ARE ALLOWED WHILE GROUND NOS. 1 & 2 IN THE APPEAL OF THE REVENUE ARE DISMISSED'. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V S.- TAMILNADU WAREHOUSING CORPORATION 292 ITR 310 (MAD.) HELD AS UNDER :- THE ASSESSEE FILED ITS RETURN FOR THE ASSESSMENT Y EAR 1989-90 AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T 1961. THE ASSESSES HAD SURRENDERED THE CROUP GRATUITY SCHEME WITH LIC AND RECEIVED A SUM OF RS.8 22 925 DURING THE YEAR RELEVANT TO THE ASSESSM ENT YEAR 1989-90. AS THERE WAS NO PROPER ENQUIRY MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED ON JANUARY 21 1992 THE COMMISSIONER PASSED ORDER UND ER SECTION 263 OF THE ACT AND SET ASIDE THE ASSESSMENT WITH A DIRECTION TO T HE ASSESSING OFFICER TO ASSESS THE SAID AMOUNT UNDER SECTION 41(1) OF THE ACT FOR ASSESSMENT YEAR 1989-90. THE TRIBUNAL SET ASIDE THE ORDER OF THE COMMISSIONER. O N APPEAL TO THE HIGH COURT: HELD THAT THE ASSESSEE HAD CONTINUED TO SHOW THE A DMITTED AMOUNT OF RS.8 22 925 AS LIABILITY IN THE BALANCE-SHEET. THE UNDISPUTED FACT WAS THAT IT WAS A LIABILITY REFLECTED IN THE BALANCE-SH EET. ONCE IT WAS SHOWN AS LIABILITY BY THE ASSESSEE THE COMMISSIONER WAS WRONG IN HOLDING THAT IT WAS ASSESSABLE UNDER SECTION 41(1) OF THE A CT. UNLESS AND UNTIL THERE IS A CESSATION OF LIABILITY SECTION 41 IS NO T APPLICABLE.' 10. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE THE REASONING GIVEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER WE ARE CONVINCED THAT THE AMOUNT OF RS.1.08 CRORES HAS BEEN SHOWN BY THE ASSESSEE-CO MPANY AS LIABILITY IN THE BALANCE-SHEET AND NO EVIDENCE OF CESSATION OF LIABILITY HAS BEEN BROU GHT ON RECORD. NO EVENT WHATSOEVER HAS TAKEN PLACE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSME NT YEAR UNDER APPEAL. THEREFORE IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) RIGHTLY TOOK THE VIEW THAT THE AMOUNT IN QUESTION IS NOT ASSESSABLE UNDER SECT ION 41(1) OF THE INCOME TAX ACT 1961. WE 8 ITA NO. 4052/AHD/2007 THEREFORE INCLINE TO UPHOLD THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 11. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 31.05.201 0 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 31 / 05 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGIS TRAR ITAT AHMEDABAD LAHA/SR.P.S. 31.05.2010 ORDER PRONOUNCED BY US TODAY SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA) A.M. J.M.