The ITO,Vapi Ward-3,, Vapi v. M/s. Advance Cooling Systems, Vapi

ITA 465/AHD/2011 | 2007-2008
Pronouncement Date: 22-07-2011 | Result: Dismissed

Appeal Details

RSA Number 46520514 RSA 2011
Assessee PAN AAFFA9774C
Bench Ahmedabad
Appeal Number ITA 465/AHD/2011
Duration Of Justice 5 month(s) 4 day(s)
Appellant The ITO,Vapi Ward-3,, Vapi
Respondent M/s. Advance Cooling Systems, Vapi
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 22-07-2011
Date Of Final Hearing 01-07-2011
Next Hearing Date 01-07-2011
Assessment Year 2007-2008
Appeal Filed On 17-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT JUDICIAL MEMBER) ITA NO.465/AHD/2011 [ASSTT. YEAR : 2007-2008] ITO VAPI WARD-1 VAPI. VS. M/S.ADVANCE COOLING SYSTEMS C-1 11 LIC SECTOR GIDC VAPI. PAN : AAFFA 9774 C (APPELLANT) (RESPONDENT) REVENUE BY : SHRI G. S. SURYAVANSHI ASSESSEE BY : SHRI RAJESH M. UPADHYAY O R D E R PER G.D. AGARWAL VICE-PRESIDENT : THIS IS REVENUES APPEAL AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) VALSAD DATED 18.11.2010 ARISING OUT OF T HE ORDER OF THE AO UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. 2. THE ONLY GROUND RAISED IN THE APPEAL OF THE REVE NUE IS AGAINST DELETION OF THE ADDITION OF RS.12 43 544/- MADE ON ACCOUNT OF SUNDRY CREDITORS UNDER SECTION 41(1) OF THE I.T. ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS.1 40 020/- WHIC H WAS ASSESSED UNDER SECTION 143(3) DETERMINING TOTAL INCOME AT RS.13 83 564/- BY MAKING AN ADDITION ON ACCOUNT OF CREDITORS OUTSTANDING FOR MO RE THAN THREE YEARS. IN THE FIRST APPEAL THE CIT(A) RELYING UPON CERTAIN J UDICIAL AUTHORITIES DELETED THE ADDITION ON THE GROUND THAT THERE IS NO CESSATION OF THE LIABILITY. ITA NO.465/AHD/2011 -2- 4. AT THE TIME OF HEARING BEFORE US THE LEARNED DR SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION B ECAUSE DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FAIL ED TO FURNISH DETAILS OF THE PAYMENTS TO CREDITORS MADE AFTER 31.03.2007 AND THAT THE ASSESSEE NEITHER FURNISHED THE CONFIRMATION LETTERS FROM THE CREDITORS NOR FURNISHED COGENT REASON OF NON-PAYMENT TO CREDITORS TILL DATE AND THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS TO PROVE THAT THE CREDITORS EXISTED ON 31.03.2007. 5. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED THAT ALL THE DETAILS OF THE CREDITORS OUTSTANDING WITH THEIR NAMES ADDRESS AND AMOUNT DU E AS REQUIRED BY THE AO HAVE BEEN FURNISHED. IN THE INSTANT CASE THERE IS NO REMISSION OR CESSATION BY THE ASSESSEE QUA THE CREDITORS. THEREFORE THE CIT(A) RIGHTLY APPRECIATED THE LAW AND CAME TO THE CONCLUSION THAT UNLESS AND UNTIL THERE IS A CESSATION OF THE IMPUGNED LIABILITY SECTION 4 1(1) WOULD NOT BE APPLICABLE. THEREFORE THE ORDER THE OF THE CIT(A) MAY BE UPHELD AND THE APPEAL OF THE REVENUE BE DISMISSED. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. THE CIT(A) ACCEPTED THE ASSESSEES CLAI M WITH THE FOLLOWING FINDINGS: I HAVE CONSIDERED THE FACTS OF THE CASE CAREFULLY . ALSO CAREFULLY CONSIDERED THE FINDING OF THE AO IN ASSESSMENT ORDE R AND THE SUBMISSIONS MADE BY THE LD. AR. THE AO MADE THE ADD ITION BECAUSE THE CREDIT BALANCES ARE SHOWN IN THE ACCOUN TS FOR MORE THAN 3 YEARS AND THEREFORE LIABLE TO BE TREATED AS DEEMED INCOME U/S 41(1) OF I.T. ACT. NO OTHER FINDINGS WERE GIVEN BY THE AO. ON THE OTHER HAND THE ID. AR MADE THE ELABORATE SUBMIS SIONS WITH CERTAIN CASE LAWS IN SUPPORT OF HIS ARGUMENTS. WHAT IS THE MANDATE ITA NO.465/AHD/2011 -3- OF PROVISIONS U/S.41(1) OF THE ACT? SEC.41(1) IS A MACHINERY SECTION AND NOT A CHARGING PROVISION AND HENCE NOT REQUIRED TO CONSTRUED STRICTLY BUT IN SUCH A MANNER AS TO MAKE THE LEVY O F TAX EFFECTIVE AND TO MAKE THE MACHINERY OF ASSESSMENT WORKABLE AS HEL D HONBLE GUJARAT HC IN THE CASE OF MOTILAL AMBIDAS VS. CIT T O8 ITR 136 (GUJ.). SEC. 41(1) CAN BE INVOKED ONLY IF THE CONCE RNED LIABILITY OF THE ASSESSEE HAS CEASED FINALLY AND THERE IS NO POS SIBILITY OF ITS REVIVAL IN FUTURE. THE CESSATION OF LIABILITY ARISE S ONLY WHEN SUCH LIABILITY CEASES TO EXIST IN THE EYE OF LAW FOR ALL INTENTS AND PURPOSES. IN THE CASE OF TAMILNADU WARE HOUSING COR PORATION VS. CIT 292 ITR 310 (MAD.) THE HONBLE HC HELD THAT 'AN AMOUNT REPRESENTING AS LIABILITY WAS BEING SHOWN FOR YEARS AFTER YEAR. UNLESS AND UNTIL THERE IS CESSATION OF THE SAID LIA BILITY SEC.41(1) WAS NOT APPLICABLE. SINCE THERE WAS NO EVIDENCE OF CESSATION OF LIABILITY AMOUNT WAS HELD NOT ASSESSABLE AS INCOME U/S. 41(1)) OF THE ACT.' FURTHER IN THE CASE OF SUGAULI SUGAR WORK S VS. CIT 236 ITR 518 (SC) THE HON'BLE SC HELD THAT 'THE QUESTIO N WHETHER THE LIABILITY IS ACTUALLY BARRED BY LIMITATION IS NOT A MATTER WHICH CAN BE DECIDED BY CONSIDERING ASSESSEE'S CASE ALONE BUT IT IS A MATTER WHICH HAS TO BE DECIDED ONLY IF THE CREDITORS IS BE FORE THE CONCERNED AUTHORITY. IN THE ABSENCE OF THE CREDITOR S IT IS NOT POSSIBLE FOR THE AUTHORITY TO COME TO THE CONCLUSIO N THAT THE DEBTS IS BARRED AND HAS BECOME UNENFORCEABLE. THERE MAD BE CIRCUMSTANCES WHICH MAY ENABLE THE CREDITORS TO CO ME WITH A PROCEEDING FOR ENFORCEMENT OF THE DEBTS EVEN AFTER EXPIRY OF THE NORMAL PERIOD OF LIMITATION AS PROVIDED BY THE LIMI TATION ACT.' IN THE INSTANT CASE THE AO HAS NOT BROUGHT ON RECORD A NY FURTHER EVIDENCE FOR COMING TO THE CONCLUSION THAT THE LIAB ILITY IS RIPE FOR CESSATION. IN THIS CIRCUMSTANCES AND CONSIDERING TH E JUDICIAL PRONOUNCEMENTS FAVORING THE APPELLANT I DIRECT THE AO TO DELETE THE ADDITIONS BECAUSE SUCH ADDITION CAN NOT SUSTAIN IN THE EYE OF LAW. THIS GROUND OF APPEAL IS ALLOWED. AFTER CONSIDERING THE FACTS OF THE CASE AND ARGUMEN TS OF BOTH THE SIDES WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T(A). THE AO PRESUMED THE CESSATION OF LIABILITY MERELY ON THE G ROUND THAT THE CREDIT BALANCES ARE MORE THAN THREE YEARS OLD. THAT MEREL Y BECAUSE CREDIT BALANCES ARE OF MORE THAN THREE YEARS OLD THAT BY I TSELF IS NOT SUFFICIENT TO ITA NO.465/AHD/2011 -4- HOLD THAT THE LIABILITY HAS CEASED. NO EVIDENCE AT ALL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO ESTABLISH THAT THERE WAS C ESSATION OF LIABILITY DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSME NT YEAR UNDER CONSIDERATION. IN THE CASE SUGAULI SUGAR WORKS VS. CIT 236 ITR 518 THE HONBLE APEX COURT HAS HELD THAT THE EXPIRY OF PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMITATION ACT WOULD NOT EXTIN GUISH THE DEBT BUT WOULD ONLY PREVENT THE CREDITOR FROM ENFORCING THE DEBT. IN VIEW OF THE ABOVE WE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HONBLE APEX COURT UPHOLD THE ORDER OF THE CIT(A) AND DISMISS T HE APPEAL OF THE REVENUE. 7. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND JULY 2011 SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 22-07-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD