ITO 10(2) - 4, MUMBAI v. M/s. PASTICOAT (VAPI) P. LTD., MUMBAI

ITA 6342/MUM/2005 | 2002-2003
Pronouncement Date: 30-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 634219914 RSA 2005
Assessee PAN AABCP6141M
Bench Mumbai
Appeal Number ITA 6342/MUM/2005
Duration Of Justice 4 year(s) 6 month(s) 4 day(s)
Appellant ITO 10(2) - 4, MUMBAI
Respondent M/s. PASTICOAT (VAPI) P. LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 30-04-2010
Date Of Final Hearing 21-04-2010
Next Hearing Date 21-04-2010
Assessment Year 2002-2003
Appeal Filed On 26-10-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH MUMBAI BEFORE SHRI R.S. PADVEKAR JM & BEFORE SHRI R.K. PA NDA AM I.T.A. NO. 6342/MUM/2005 (ASSESSMENT YEAR 2002-03) THE INCOME-TAX OFFICER-10(2)-4 ROOM NO. 431 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020 VS. M/S. PLASTICOAT (VAPI) PVT. LTD. 5/14 RAMBHA KHOKANI LANE GHATKOPAR (E) MUMBAI-77 PAN: AABCP 6141 M APPELLANT RESPONDENT APPELLANT BY: MR. KESHAVE SAXENA RESPONDENT BY: MR. M.P. MAKHIJA O R D E R DATE OF HEARING: 21.04.2010 DATE OF ORDER: 30.04.2010 PER R.K. PANDA AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 25 TH AUGUST 2005 OF THE CIT(A)-X MUMBAI RELATING TO A SSESSMENT YEAR 2002-03. 2. GROUNDS OF APPEAL NO. 1 BY THE REVENUE BEING GEN ERAL IN NATURE IS DISMISSED. 3. IN GROUNDS OF APPEAL NO. 2 THE REVENUE CHALLENGE D THE ORDER OF THE CIT(A) IN DECIDING THE APPEAL BY ACCEPTING UNPROVED ORAL AND WRITTEN SUBMISSIONS FROM THE ASSESSEE IN CONTRAVENTION OF R ULE 46A OF INCOME- TAX RULES 1962. THIS GROUND BY THE REVENUE IS TA KEN CARE OF WHILE DECIDING THE OTHER GROUNDS IN THE SUBSEQUENT PARAGR APHS OF THIS ORDER. HENCE IT DOES NOT REQUIRE ANY SEPARATE ADJUDICATION . 4. GROUNDS OF APPEAL NO. 3 BY THE REVENUE READS AS UND ER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN HOLDING THA T ASSESSING I.T.A. NO. 6342/MUM/05 M/S. PLASTICOAT (VAPI) PVT. LTD. ===================== 2 OFFICER WAS NOT JUSTIFIED IN TREATING THE RECEIPTS AS HOUSE PROPERTY INCOME AND WITHOUT GIVING AN OPPORTUNITY T O THE ASSESSING OFFICER OF BEING HEARD. 4.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE INCOME RECEIVED BY THE ASSESSEE AT RS.20 63 223 CONSISTS OF LABOUR CHA RGES OF RS.2 72 192 WAREHOUSING CHARGES OF RS.17 66 400 AND INTEREST IN COME OF RS.24 631. NOT BEING SATISFIED WITH THE VARIOUS EXPLANATIONS G IVEN BY THE ASSESSEE THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS FA ILED TO PROVE THAT ANY OF THE INCOME IS TAXABLE UNDER THE HEAD BUSINESS INCO ME. HE ACCORDINGLY TREATED THE WAREHOUSING CHARGES RECEIVED AT RS.17 6 6 400 AS INCOME FROM HOUSE PROPERTY AND ALLOWED DEDUCTION U/S. 24 AS PER LAW. 4.2 IN APPEAL THE LEARNED CIT(A) DIRECTED THE ASSESSIN G OFFICER TO TREAT THE WAREHOUSING CHARGES RECEIVED BY THE ASSESSEE CO MPANY AS INCOME FROM BUSINESS. AGGRIEVED WITH SUCH ORDER OF THE C IT(A) THE REVENUE IS IN APPEAL BEFORE US. 4.3 THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAD NOT PROVIDED ANY SERVICE TO TATA INFO MEDIA FOR WHICH THE WAREHOUSIN G CHARGES HAVE BEEN RECEIVED. RELYING ON A COUPLE OF DECISIONS HE SUB MITTED THAT SUCH INCOME SHOULD BE TREATED AS INCOME FROM HOUSE PROPERTY O NLY AND NOT AS BUSINESS INCOME. 4.4 THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT ON THE BASIS OF THE FINDING GIVEN BY THE ASSES SING OFFICER FOR THE IMPUGNED ASSESSMENT YEAR THE ASSESSMENTS OF A.YS. 1999-2000 2000-01 AND 2001-02 WERE REOPENED BY THE ASSESSING OFFICER U/S. 147 OF THE INCOME-TAX ACT 1961 (THE ACT). REFERRING TO THE C OPY OF THE ASSESSMENT ORDER PASSED U/S. 143(3)/147 OF THE ACT DATED 30 TH AUGUST 2006 FOR THE A.Y. 1999-2000 A COPY OF WHICH IS PLACED ON PAPER BOOK PAGES 72 TO 74 HE SUBMITTED THAT THE ASSESSING OFFICER AT PARA 6 O F THE SAID ORDER HAS HELD THAT THE GODOWN/WAREHOUSE LEASED OUT IS A COMM ERCIAL ASSET AND THE ACTIVITY IS BUSINESS ACTIVITY. THE ASSESSING OFFIC ER ACCORDINGLY HAS I.T.A. NO. 6342/MUM/05 M/S. PLASTICOAT (VAPI) PVT. LTD. ===================== 3 ACCEPTED THE CONTENTION OF THE ASSESSEE. SIMILAR I S THE CASE FOR A.YS. 2000- 01 AND 2001-02. SINCE THE ASSESSING OFFICER HIMSEL F HAS ACCEPTED THAT THE WAREHOUSE CHARGES AS BUSINESS RECEIPTS THEREFORE THE GROUND RAISED BY THE REVENUE HAS TO BE DISMISSED. 4.5 THE LEARNED DR IN HIS REJOINDER SUBMITTED THAT TH E ASSESSING OFFICERS ORDERS FOR THE SUBSEQUENT YEARS ARE WRONG . MERELY BECAUSE THE ASSESSING OFFICER HAD ACCEPTED THE WAREHOUSING CHAR GES AS BUSINESS RECEIPTS IN THE REOPENED ASSESSMENT IT DOES NOT ENT ITLE THE ASSESSEE TO TREAT THE HOUSE PROPERTY INCOME AS BUSINESS INCO ME. 4.6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. FROM THE COP Y OF THE ASSESSMENT ORDER FOR THE A.Y. 1999-2000 IT CAN BE SEEN THAT T HE ASSESSING OFFICER REOPENED THE ASSESSMENT FOR A.Y. 1999-2000 ON THE B ASIS OF HIS FINDING IN A.Y. 2002-03. THE ASSESSING OFFICER IN PARA 3 OF T HE SAID ORDER HAS MENTIONED AS UNDER: THE CASE WAS REOPENED TO TREAT THE WAREHOUSIN G CHARGES AS HOUSE PROPERTY INCOME AS DONE IN A.Y. 2002-03 AN D TO DISALLOW THE EXPENSES CLAIMED BY THE ASSESSEE. 4.7 WE FIND THE ASSESSING OFFICER AT PARA 6 OF THE SAID ORDER HAS HELD AS UNDER: 6. IN THIS CONNECTION THE ASSESSEE WAS REQUESTED T O SUBSTANTIATE AS ITS CLAIM HOW A GODOWN CAN BE A COM MERCIAL ASSETS AND THE RESULTANT LEASING OF THE GODOWN CAN BE BUSINESS ACTIVITY. IN THIS CONNECTION THE ASSESSEE S REPRESENTATIVE REPLIED THAT THE TECHNICAL SPECIFICA TION OF THE GODOWN WAS CONTROLLED BY THE LESSEE I.E. TATA DONN ELLY/TATA INFOMEDIA AND THE GODOWN WAS BUILT TO SUIT THE REQU IREMENT OF THE LESSEE. HENCE THE GODOWN/WAREHOUSE LEASED O UT IS A COMMERCIAL ASSET AND THE ACTIVITY IS A BUSINESS ACT IVITY. I AM OF THE OPINION THAT THE ASSESSEES CONTENTION IS TO BE ACCEPTED. FURTHER THE ASSESSEE HAS NOT CLAIMED ANY DEPRECIATI ON ALSO. 4.8 SIMILARLY WE FIND THE ASSESSING OFFICER IN THE ORD ER PASSED U/S. 143(3)/147 OF THE ACT FOR THE A.YS. 2000-01 AND 200 1-02 HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE GODOWN/WAREHOUS E LEASED OUT IS A I.T.A. NO. 6342/MUM/05 M/S. PLASTICOAT (VAPI) PVT. LTD. ===================== 4 COMMERCIAL ASSET AND THE ACTIVITY IS A BUSINESS ACT IVITY. SINCE THE ASSESSING OFFICER IN THE REOPENED ASSESSMENT HAS HI MSELF ACCEPTED THE WAREHOUSING CHARGES AS BUSINESS INCOME THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) TREATING SUCH WAREHOUSING CHARGES AS BUSINESS RECEIPTS AS AGAINST INCOME FROM HOUSE PRO PERTY HELD BY THE ASSESSING OFFICER. IN THIS VIEW OF THE MATTER WE UPHOLD THE ORDER OF THE CIT(A) AND THE GROUND RAISED BY THE REVENUE IS DISM ISSED. 5. GROUNDS OF APPEAL NO. 4 BY THE REVENUE READS AS UND ER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING TH E ADDITION OF RS.21 83 275/- MADE B AO ON ACCOUNT OF SALE OF P LANT AND MACHINERY WITHOUT GIVING OPPORTUNITY OF BEING HEARD TO ASSESSING OFFICER. 5.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE HAS NOT CLAIMED DEPRECIATION ON PLANT AND MACHINERY WORTH RS.21 83 376 ON THE GROUND THAT THE SAME WAS NOT PUT TO USE. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COULD NOT PRODUCE ANY BILL/VOUCHER TO SUBS TANTIATE THAT EITHER THE ASSESSEE HAS PURCHASED IT OR MANUFACTURED ITSEL F THROUGH ITS TECHNICALLY QUALIFIED DIRECTOR. ACCORDING TO THE A SSESSING OFFICER NON EXISTENCE OF PLANT AND MACHINERY MUST HAVE RESULTED IN SALE/TRANSFER WITHDRAWAL OF THE SAME FROM THE BUSINESS RESULTING IN APPROPRIATION OF THE SAME BY THE ASSESSEE. HE THEREFORE WAS OF TH E OPINION THAT SUCH SALE/WITHDRAWAL/TRANSFER WOULD BE TAKEN AS ADDITION TO TOTAL INCOME. NOT BEING SATISFIED WITH THE EXPLANATION GIVEN BY THE A SSESSEE THE ASSESSING OFFICER MADE ADDITION OF RS.21 83 275 AS INCOME ON ACCOUNT OF SALE/ TRANSFER/WITHDRAWAL OF PLANT AND MACHINERY. 5.2 IN APPEAL THE LEARNED CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: 8. I HAVE CONSIDERED THE AOS REMARKS THE SUBMISS ION OF THE APPELLANT AND FACTS ON RECORD. THE AO HAS MADE THE ADDITION SOLELY BECAUSE THE APPELLANT HAS NOT CLAIM ED DEPRECIATION. THIS IS ABSOLUTELY FAR FETCHED AND C ANNOT BE APPROVED OF. IF AO HAD ANY DOUBT ABOUT THE NON-EXI STENCE OF PLANT AND MACHINERY HE SHOULD HAVE VISITED THE PRE MISES AND SHOULD HAVE MADE ON THE SPOT INSPECTION. MERELY BE CAUSE I.T.A. NO. 6342/MUM/05 M/S. PLASTICOAT (VAPI) PVT. LTD. ===================== 5 SOMEBODY HAS NOT CLAIMED DEPRECIATION IT DOES NOT AUTOMATICALLY FOLLOW THAT IF NO DEPRECIATION HAS BE EN CLAIMED ON THE ASSET IT MUST HAVE BEEN SOLD EVEN THOUGH THE ASSET EXIST IN THE BALANCE SHEET. THE AO HAS NOT BROUGHT ANY E VIDENCE WHATSOEVER TO SUBSTANTIATE ITS ALLEGATION THAT PLAN T AND MACHINERY HAS BEEN SOLD. THIS PLANT AND MACHINERY WAS EXISTING IN THE BALANCE SHEET FROM EARLIER YEARS. THE AOS OBSERVATION IS CONTRADICTORY INSOFAR AS ON ONE HAND HE SAYS THAT THE APPELLANT HAS FAILED TO PROVE THE PURCHASE OF PARTS REQUIRED TO MANUFACTURE THE PLANT AND MACHINERY. I F IT IS THE STAND OF THE AO THAT MACHINERY DID NOT COME INTO EX ISTENCE THEN IT CAN BE SAID THAT THE MACHINERY IS SOLD. TH IS ACTION OF AO IS NOT BASED ON ANY EVIDENCE. ADDITION IS BASED ON CONJECTURES AND SURMISES AND CANNOT BE UPHELD. ACC ORDINGLY THIS ADDITION IS DELETED. 5.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT NO DEPRECIATION HAS BEEN CLAIMED ON SUCH PLANT AND MAC HINERY AND SUCH PLANT AND MACHINERY WAS SHOWN IN THE BALANCE SHEET SINCE LAST SO MANY YEARS. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THESE PLANT AND MACHINERY WERE SOLD IN THE SUBSEQUE NT YEAR THAT ONLY THE NET PROFIT ON ACCOUNT OF SUCH SALE OF PLANT AND MAC HINERY CAN BE CONSIDERED AS THE INCOME OF THE ASSESSEE AND NOT TH E ENTIRE INCOME AND THAT SINCE NOBODY HAS ASKED REGARDING THE SUBSEQUEN T SALE OF THE MACHINERY THE ASSESSEE NEVER PRODUCED THOSE DETAIL S BEFORE THE ASSESSING OFFICER. HOWEVER WE DO NOT FIND SUBSTAN CE IN THE ABOVE STATEMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE. WE FIND IN THE ASSESSMENT ORDER THE ASSESSING OFFICER VIDE LETTER DATED 14 TH OCTOBER 2004 HAD ASKED THE ASSESSEE TO PROVE THE ADDITION O F PLANT AND MACHINERY WORTH RS.21 83 275. THE ASSESSEE VIDE LETTER DATED 18.11.2004 HAD EXPLAINED THE SAME AS LYING IDLE. THEREFORE THE S UBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THOSE DETAILS WERE NO T PRODUCED SINCE NOBODY HAD ASKED FOR THEM IS NOT AT ALL CONVINCING. IT IS THE DUTY OF THE ASSESSEE TO PRODUCE THE FULL DETAILS BEFORE THE ASS ESSING OFFICER OR THE CIT(A) REGARDING ITS SUBSEQUENT SALE WHEN THE EXIST ENCE WAS DOUBTED BY THE ASSESSING OFFICER. SINCE THIS FACT WAS ALSO NE VER SUBMITTED BEFORE THE I.T.A. NO. 6342/MUM/05 M/S. PLASTICOAT (VAPI) PVT. LTD. ===================== 6 CIT(A) THEREFORE WE IN THE INTEREST OF JUSTICE D EEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICE R WITH A DIRECTION TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CASE. THE ASSESSING OFFICER SHALL GIVE DUE OPPORTUNITY OF BEING HEARD T O THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND BY THE REVENUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 6. GROUNDS OF APPEAL NO. 5 BY THE REVENUE READS AS UND ER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN ALLOWING RE LIEF OF RS.2 72 192/- IN ACCEPTING THE SAID RECEIPT AS BUSI NESS RECEIPT WITHOUT GIVING OPPORTUNITY OF BEING HEARD TO ASSESS ING OFFICER. 6.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE HAS CREDITED AN AMOUNT OF RS.2 72 192 ON ACCOUNT OF LABOUR CHARGES RECEIVED AS AGAINST RS.3 31 347 RECEIVED IN THE PRECEDING YEAR. ON BEI NG QUESTIONED BY THE ASSESSING OFFICER TO GIVE THE DETAILS OF SUCH LABOU R CHARGES RECEIVED THE ASSESSEE GAVE SOME NAMES WITHOUT ADDRESSES FROM WHO M SUCH CHARGES WERE RECEIVED. THEREFORE THE ASSESSING OFFICER HE LD THAT IT IS IMPOSSIBLE FOR HIM TO VERIFY THE GENUINENESS OF SUCH LABOUR CH ARGES RECEIVED. THE ASSESSEE ALSO FAILED TO PRODUCE THE PARTIES FOR CRO SS-VERIFICATION. THE ASSESSING OFFICER ACCORDINGLY TREATED THE LABOUR CH ARGES CREDITED AT RS.2 72 192 AS UNEXPLAINED CASH CREDIT. 6.2 IN APPEAL THE CIT(A) DELETED THE ADDITION BY HOLDI NG AS UNDER: 9. I HAVE CONSIDERED THE OBSERVATION OF THE AO AND THE SUBMISSION OF THE APPELLANT. THE AMOUNT OF RS.2 72 192 HAS BEEN SHOWN AS BUSINESS RECEIPTS BY THE APPELLANT. BY NO STRETCH OF IMAGINATION THIS AMOUNT CAN BE CONSIDERE D AS UNEXPLAINED CASH CREDIT. WHAT THE AO HAS DONE IS T O CONSIDER THESE RECEIPTS AS CASH CREDIT AND ALSO DISALLOWED E XPENDITURE CLAIMED AGAINST THESE RECEIPTS. IT HAS NOT BEEN CO NSIDERED BY THE AO THAT THE APPELLANT BY CLAIMING EXPENSES AGAI NST THESE RECEIPTS HAD ONLY NET CREDIT BALANCE OF RS.59 998/- . THEREFORE NO BENEFIT WOULD BE GAINED BY CREDITING BOGUS CASH CREDIT AND CLAIMING BOGUS EXPENDITURE AS PER T HE AO AMOUNTING TO RS.2.12 LAC. I.E. JUST FOR BOGUS CASH CREDIT OF RS.59 998/-. THE APPELLANT WOULD NOT INDULGE IN SU CH MANIPULATION. THE ADDITIONS ARE NOT BASED ON ANY S OUND I.T.A. NO. 6342/MUM/05 M/S. PLASTICOAT (VAPI) PVT. LTD. ===================== 7 LEGAL PRINCIPLE. BUSINESS RECEIPT CANNOT BE TERMED UNEXPLAINED CASH CREDIT. THE AOS ACTION IN TREATI NG THE WHOLE BUSINESS RECEIPT AS UNEXPLAINED CASH CREDIT C ANNOT BE UPHELD. RELIEF RS.2 72 192/-. 6.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENU E IS IN APPEAL BEFORE US. 6.4 AFTER HEARING BOTH THE SIDES WE FIND THE ASSESSING OFFICER TREATED THE AMOUNT OF RS.2 72 192 RECEIVED BY THE ASSESSEE ON ACCOUNT OF LABOUR CHARGES AS UNEXPLAINED CASH CREDIT ON THE GROUND TH AT THE ASSESSEE FAILED TO PROVIDE THE NAMES AND ADDRESSES OF THE PERSONS F ROM WHOM SUCH LABOUR CHARGES HAVE BEEN RECEIVED. WE FIND FROM TH E ORDERS FOR A.YS. 1999-2000 TO 2001-02 THAT THE ASSESSING OFFICER IN THE ORDER PASSED U/S. 143(3)/147 WHICH WERE SUBSEQUENT TO PASSING OF THE ASSESSMENT ORDER FOR THE IMPUGNED ASSESSMENT YEAR HAS NOT DOUBTED T HE LABOUR CHARGES RECEIVED BY THE ASSESSEE IN THOSE YEARS. FURTHER T HE EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF SUCH LABOUR CHARGES H AS NOT BEEN DISTURBED BY THE ASSESSING OFFICER. UNDER THESE CIRCUMSTANCE S WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE A DDITION MADE BY THE ASSESSING OFFICER TREATING THE LABOUR CHARGES AS UN EXPLAINED CASH CREDIT. THIS GROUND RAISED BY THE REVENUE IS ACCORDINGLY DI SMISSED. 7. GROUNDS OF APPEAL NOS. 6 AND 7 BY THE REVENUE READ AS UNDER: 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DEL ETING THE ADDITION OF RS.7 48 028/- MADE U/S. 41(1) OF THE I. T. ACT. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW THE LEARNED CIT(A) HAS ERRED IN DEL ETING THE ADDITION OF RS.2 52 850/- ON ACCOUNT OF UNPROVED EX PENSES WITHOUT GIVING OPPORTUNITY OF BEING HEARD TO ASSESS ING OFFICER AND WITHOUT APPRECIATING THAT THE SAME WAS NOT RAISED IN GROUNDS OF APPEAL. 7.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASS ESSEE HAS SHOWN SUNDRY CREDITORS AT RS.7 48 028. ON BEING QUESTION ED BY THE ASSESSING OFFICER TO PROVE THE LIABILITY AND TO PRODUCE THE S AID PARTIES THE ASSESSEE I.T.A. NO. 6342/MUM/05 M/S. PLASTICOAT (VAPI) PVT. LTD. ===================== 8 SHOWN ITS INABILITY TO PROVE SUCH CREDITORS. ACCOR DING TO THE ASSESSEE THESE ARE VERY OLD LIABILITIES FOR WHICH NO RECORDS ARE MAINTAINED. THE LIABILITY ON ACCOUNT OF M/S. METAL BOX INDIA LTD. F OR RS.4 95 178 WAS OFFERED AS TO BE TAKEN AS TERMINATION OF SUCH LIABI LITY. THE ASSESSING OFFICER THEREFORE WAS OF THE OPINION THAT THE OTH ER LIABILITIES ARE ALSO NOT REQUIRED TO BE PAID ON SIMILAR LINES. SINCE THE AS SESSEE FAILED TO PROVE THE LIABILITIES THE ASSESSING OFFICER INVOKED THE PROVI SIONS OF SECTION 41(1)(A) OF THE ACT AND MADE ADDITION OF RS.7 48 028 TO THE TOTAL INCOME OF THE ASSESSEE. 7.2 IN APPEAL THE CIT(A) DELETED THE ADDITION BY HOLDI NG AS UNDER: 12. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND FACTS ON RECORD. UNDER SECTION 41(1) IT IS UNDISP UTED THAT AN AMOUNT WHICH HAS BEEN ALLOWED AS DEDUCTION CAN ONLY BE BROUGHT TO TAX ON CESSATION OF THE LIABILITY. IN T HIS CASE THIS AMOUNT WAS NEVER ALLOWED AS DEDUCTION IN ANY YEAR. IT IS NOT THE CASE OF THE AO THAT THIS AMOUNT WAS EVER ALLOWE D AS DEDUCTION. THEREFORE THIS AMOUNT CANNOT BE BROUGH T TO TAX U/S. 41(1). IT HAS BEEN STATED BY THE AO THAT DIRE CTOR HAD SIGNED IN THE ORDER SHEET ENTRIES WHEREIN IT WAS NO TED THAT LIABILITY HAS CEASED TO EXIST. IN MY CONSIDERED OP INION THIS FACT ALONE CANNOT MAKE AN AMOUNT FROM NON-TAXABLE I NCOME. THIS AMOUNT WAS NEVER IN THE NATURE OF TAXABLE INCO ME. THE AO HAS NOT POINTED OUT EXISTING IN BALANCE SHEET BE CAME A TAXABLE INCOME. ADDITION OF BALANCE AMOUNT OF RS.2 52 850/- IS ALSO DELETED IN VIEW OF THE FACTS BROUGHT ON REC ORD BY THE APPELLANT. THE AO HAD NOT DISCUSSED AT ALL NOW THE SE LIABILITIES CEASED TO EXIST. ACCORDINGLY THE APPEL LANT GETS A RELIEF OF RS.7 48 028/-. 7.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENU E IS IN APPEAL BEFORE US. 7.4 THE LEARNED DR SUBMITTED THAT THE FINDING OF THE CI T(A) IS CONTRARY TO THE FACTS. THE ASSESSEE WAS NOT ABLE TO GIVE EI THER THE DETAILS OF SUCH LIABILITY OR TO PRODUCE THE PARTIES BEFORE HIM. TH EREFORE SUCH LIABILITY HAS CEASED TO EXIST AND THEREFORE IS LIABLE TO BE ADDE D TO THE TOTAL INCOME OF THE ASSESSEE U/S. 41(1)(A) OF THE ACT. I.T.A. NO. 6342/MUM/05 M/S. PLASTICOAT (VAPI) PVT. LTD. ===================== 9 7.5 THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAS NOT WRITTEN OFF THE AMOUNT OF RS.4 95 000 DUE TO METAL BOX CO. INDIA LTD. SIMILAR IS THE CASE WITH OTHER PARTIES WHERE ALL LIABILITIES ARE STILL APPEARING IN THE BALANCE SHEE T. REFERRING TO A NUMBER OF DECISIONS HE SUBMITTED THAT SINCE THE ASSESSEE HAS NEVER CLAIMED ANY EXPENDITURE ON THESE AMOUNTS AND SINCE THESE AMOUNT S WERE NEVER ALLOWED AS DEDUCTION AND SINCE THE ASSESSEE HAS NOT WRITTEN OFF THE AMOUNTS IN ITS BOOKS OF ACCOUNT THEREFORE THERE I S NO QUESTION OF INVOKING THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT. ALTERNATIVELY HE SUBMITTED THAT HE HAS NO OBJECTION IF THE MATTER IS SENT BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 7.6 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE FAILED TO GIVE FULL DETAILS OF THE LIA BILITY APPEARING IN ITS BALANCE SHEET AMOUNTING TO RS.7 48 028 WHICH COMPRI SES OF AN AMOUNT OF RS.4 95 178 PAYABLE TO METAL BOX INDIA LTD. AND THE BALANCE AMOUNT OF RS.2 52 850 TO OTHER CREDITORS FOR WHICH THE ASSESS ING OFFICER INVOKED THE PROVISIONS OF SECTION 41(1)(A) OF THE ACT. IT IS T HE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT ALL THOSE LIA BILITIES ARE STILL APPEARING AS OUTSTANDING IN THE BALANCE SHEET AND THESE ARE N OT WRITTEN OFF BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THEREFORE THE P ROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE. WE FIND FROM THE ASSESSM ENT ORDER THAT THE ASSESSEE HAS OFFERED TO TREAT THE TERMINATION OF LI ABILITY ON ACCOUNT OF METAL BOX INDIA LTD. FOR RS.4 95 178. FURTHER THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS NEVER CLAIMED ANY DEDUCTION ON ACCOUNT OF SUCH LIABILITIES REMAINS UN VERIFIED BY THE ASSESSING OFFICER AS WELL AS THE CIT(A). WE FIND T HE ASSESSEE MADE CERTAIN SUBMISSION BEFORE THE CIT(A) WHICH WAS NOT MADE BEF ORE THE ASSESSING OFFICER. FURTHER THE CIT(A)S ORDER IS ALSO CONTRA RY TO THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. CONSIDERING THE T OTALITY OF THE FACTS OF THE CASE AND CONSIDERING THE ALTERNATE SUBMISSION OF TH E LEARNED COUNSEL FOR I.T.A. NO. 6342/MUM/05 M/S. PLASTICOAT (VAPI) PVT. LTD. ===================== 10 THE ASSESSEE WE IN THE INTEREST OF JUSTICE DEEM I T PROPER TO RESTORE THESE TWO GROUNDS TO THE FILE OF THE ASSESSING OFFICER FO R FRESH ADJUDICATION IN ACCORDANCE WITH LAW. THE ASSESSING OFFICER SHALL G IVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CAS E. THE ABOVE TWO GROUNDS BY THE REVENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 30 TH APRIL 2010. SD/- (R.S. PADVEKAR) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI DATED 30 TH APRIL 2010 COPY TO: (1) THE APPELLANT (2) THE RESPONDENT (3) THE CIT(A) -X MUMBAI (4) THE CIT MC-X MUMBAI (5) THE DR H BENCH ITAT MUMBAI. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI TPRAO