ITO 25(1)(4), MUMBAI v. BHAVANA M VYAS, MUMBAI

ITA 6566/MUM/2010 | 2007-2008
Pronouncement Date: 30-03-2012 | Result: Allowed

Appeal Details

RSA Number 656619914 RSA 2010
Assessee PAN AACPV1902C
Bench Mumbai
Appeal Number ITA 6566/MUM/2010
Duration Of Justice 1 year(s) 6 month(s) 22 day(s)
Appellant ITO 25(1)(4), MUMBAI
Respondent BHAVANA M VYAS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 30-03-2012
Assessment Year 2007-2008
Appeal Filed On 08-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHIRI G. E. VEERABHADRAPPA HON'BLE PRESIDEN T AND SHRI AMIT SHUKLA JUDICIAL MEMBER ITA NO. : 6566/MUM/2010 ASSESSMENT YEAR : 2007-08 OFFICE OF THE INCOME TAX OFFICER - 25(1)(4) CIT(APPEALS)-10/308 3 RD FLOOR PRATYAKSH KAR BHAVAN BANDRA-KURLA COMPLEX BANDRA (E) MUMBAI-51 VS. BHAVANA M. VYAS 1 GROUND FLOOR PARAS APARTMENT BORIVALI (W) MUMBAI-92 PAN NO: AACPV 1902 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.C. MAURY A RESPONDENT BY : SHRI HITEN DEDHIA DATE OF HEARING : 0 7 .03.2012 DATE OF PRONOUNCEMENT : 30 . 03.2012 ORDER PER AMIT SHUKLA (J.M.) : THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAIN ST ORDER DATED 25.06.2010 PASSED BY THE CIT(APPEALS) 35 MUMBAI FOR THE QUANTUM OF ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07 ONLY ON THE FOLLOWING GROUND OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S.41(1) OF THE I.T. ACT 1961 ON THE BASIS OF ADD ITIONAL EVIDENCE FILED DURING THE APPELLATE PROCEEDINGS IN CONTRAVENTION OF RULE 46A OF THE I.T. RULES 1962 W ITHOUT ITA NO : 6566/MUM/2011 BHAVANA M. VYAS 2 APPRECIATING THE FACT THAT DETAILS WITH REGARD TO N ATURE AND EXISTENCE OF SUNDRY CREDITORS WERE FILED AT ASSESSM ENT STAGE. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(APPEA LS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSIN G OFFICER BE RESTORED. 2. BRIEFLY STATED THE FACTS OF THE CASE AS CULLED O UT FROM THE ORDER OF THE CIT(APPEALS) IS THAT THE RESPONDENT/ASSESSEE IS ENGAGED IN THE BUSINESS OF LAND DEALING CONSTRUCTION AND DEVELOPE R. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER AF TER PERUSING A BALANCE SHEET NOTED THAT THE FOLLOWING LIABILITIES WERE SHO WN OUTSTANDING :- A. SUNDRY CREDITORS FOR PLOT `. 15 57 674 B. SUNDRY CREDITORS FOR OTHERS `. 4 76 800 C. CREDITORS FOR ROW `. 4 00 000 TOTAL `. `.`. `. 24 34 474 2.1 THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO GIVE THE DETAILS OF SUNDRY CREDITORS IN THE FOLLOWING MANNER :- I) NAME AND ADDRESS OF THE PARTY. II) FINANCIAL YEAR IN WHICH THE AMOUNT HAS BEEN BO OKED. III) WHETHER THE AMOUNT HAS BEEN PAID BACK SUBSEQU ENTLY IF SO THE DATE AND AMOUNT THERETO. 2.2 IN RESPONSE THE ASSESSEE VIDE LETTER DATED 03. 12.2009 HAS SUBMITTED AS UNDER :- CREDITORS FOR PLOT : THE ASSESSEE ACQUIRED VARIOUS PLOTS OF LAND FROM LAND LORDS LONG BACK FOR WHICH THE AGREEM ENTS FOR SALE WERE EXECUTED PRIOR TO 1990. HOWEVER TILL DA TE OF CONVEYANCE ARE NOT EXECUTED FOR ANY PLOT IN STOCK. ALL PLOTS IN STOCK IN TRADE ARE UNDER RESERVATION AND ENCROACHED UPON BY SLUMS. ITA NO : 6566/MUM/2011 BHAVANA M. VYAS 3 ADVANCE FROM RAMA SHANKAR PAL : FURTHER WOULD LIKE TO STATE THAT THE SAMOUNT OF `. 400000/- IS RECEIVED FROM RAMSHANKAR PAL AS AN ADVANCE FOR SALE OF PLOTS SURV EY NO 134/7 137/8 CTS NO. 842 AND 843 PENDING THE EXECU TION OF AGREEMENT. AS IT IS INCOMPLETE TRANSACTION AND NEG OTIATION NO ACTUAL SALE HAS BEEN AFFECTED. I HAVE RECEIVED THE SAID `. 400000/- BY CROSS AND ORDER CHEQUE AND THE SAME IS REFLECTED IN MY BOOKS OF ACCOUNT AS ADVANCE AGAINST PLOTS AND PLOTS ARE STILL SHOWN AS STOCK IN HAND. CREDITORS FOR OTHERS : ALL OTHER CREDITORS ARE OLD CREDITORS AND CARRIED FORWARD FROM YEAR TO YEAR AND THE SAME ARE LIABILITIES EXISTING AND WILL BE PAID ON SETTLEMENT. THE OLD C REDIT DOES NOT AMOUNT TO REMISSION OR CESSATION OF LIABILITIES. I T IS HUMBLY REQUESTED THAT NO ADDITION ON ACCOUNT OF THESE CREDITS/LIABILITIES MAY PLEASE BE MADE. RAJESH CONSTRUCTION : THE AMOUNT OF `. 300000/- IS RECEIVED FROM RAJESH CONSTRUCTION TOWARDS THE RECONSTRUCTION OF LAYOUT INTERNAL ROAD TO THE SAID BUILDER AS PER THE BMC LE TTER DATED 02.06.1997. THE SAID ROAD IS TO BE HANDED OVER TO BMC IN GOOD CONDITION WHICH WILL ENTAIL EXPENDITURE. THE ROAD IS YET NOT HANDED OVER TO BMC AS NO CONVEYANCE IS EXECUTED TO ANY OF THE SOCIETY. THE ROAD IS IN DILAPIDATED CONDITI ON. THE AMOUNT WILL BE UTILIZED FOR RESTORATION OF THE ROAD AT THE TIME OF HANDING OVER TO BMC. 2.3 THE ASSESSING OFFICER REJECTED THE ASSESSEES S UBMISSION ON THE GROUND THAT : I) THE ASSESSEE HAS NOT GIVEN THE ADDRESSES OF ANY OF THE CREDITOR THEREFORE THE SAME CANNOT BE VERIFIED. II) IN RESPECT OF THE CREDITORS FOR THE PLOT (EXCEP T FOR SHRI RAM SHANKAR PAL) THE ASSESSEE HAS NOT GIVEN ANY EV IDENCES OR SUBMISSION WHETHER THE AMOUNT IS STILL PAYABLE AND THAT AFTER ALMOST TWO DECADES THE ASSESSEE HAD NOT SETT LED THE LIABILITIES. THUS HE APPLIED THE PROVISIONS OF SECTION 41(1) TH AT THERE IS A CESSATION OF LIABILITY AS THE ASSESSEE WAS UNABLE TO GIVE TH E COMPLETE DETAILS OF THE ITA NO : 6566/MUM/2011 BHAVANA M. VYAS 4 SAID LIABILITY APPEARING IN THE BALANCE SHEET. HE THEREFORE ADDED THE ENTIRE AMOUNT SHOWN UNDER THE HEAD SUNDRY CREDITOR S AMOUNTING TO `. 24 37 474/-. 3. BEFORE THE CIT(APPEALS) THE APPELLANT MADE EXTE NSIVE SUBMISSIONS AS HAVE BEEN REPRODUCED AND DEALT WITH FROM PAGES 2 TO 5 OF THE APPELLATE ORDER. THE SUM AND SUBSTANCE OF THE ASSESSEES CON TENTION WAS THAT THE ADVANCES FOR THE SALES WERE RECEIVED FROM THE PARTI ES AS PER THE AGREEMENTS AND COPIES OF SUCH AGREEMENTS WERE FURNI SHED BEFORE THE CIT(APPEALS). IT WAS ALSO CONTENTED THAT SOME OF T HE PLOT OF LAND IN RESPECT OF WHICH ADVANCES HAS BEEN RECEIVED REPRES ENTS STOCK-IN-TRADE AND NO ADDITION U/S.41(1) CAN BE MADE AS THE SAME WOULD REDUCE THE PURCHASE PRICE OF THE PLOTS AND VALUATION OF CLOSIN G SOCK ALSO. IT WAS FURTHER SUBMITTED THAT THE PAYMENTS WERE OUTSTANDIN G FOR A LONG TIME BECAUSE THE ASSESSEE FAILED TO COMPLY WITH THE VARI OUS CONDITIONS PROVIDED IN THE AGREEMENT AND SUBMITTED PHOTOGRAPHS OF THE LAND OCCUPIED BY THE SLUM DWELLERS. FOR THE OTHER ITEMS LIKE CREDIT OF `. 4 00 000/- IN THE NAME OF RAM SHANKAR PAL IT WAS S UBMITTED THAT DURING THE COURSE OF BLOCK PROCEEDINGS INITIATED U/ S.158BD IN THE CASE OF THE APPELLANT THE SAME WERE DELETED BY THE HON'BL E ITAT. REGARDING THE SUM OF `. 4 00 000/- FOR THE CREDITORS FOR ROW IT WAS EXPLAI NED THAT IT HAS ALREADY BEEN OFFERED AS INCOME FOR THE ASSESSMENT YEAR 2008-09 AS THE SAME WERE RETURNED BACK AND WAS SHOWN IN THE PROFIT AND LOSS ACCOUNT. AFTER EXAMINING ALL THE DETAILS AND EVIDENCES AS WA S FILED BY THE ASSESSEE THE CIT(APPEALS) PARTLY DELETED THE ADDITION AFTER OBSERVING AND HOLDING AS UNDER :- 3.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE REPR ESENTATIVE AND THE STAND TAKEN BY THE A.O.. A PERUSAL OF THE A SSESSMENT ORDER SHOWS THAT MERELY BECAUSE THE APPELLANT WAS N OT ABLE TO GIVE THE ADDRESSES OF THE PARTIES THE A.O. ASSUMED THAT ALL THE LIABILITIES REPRESENTS TRADING LIABILITIES AND FURT HER HELD THAT THERE WAS CESSATION OF LIABILITY DURING THIS YEAR. AS CONTENTED ITA NO : 6566/MUM/2011 BHAVANA M. VYAS 5 BY THE REPRESENTATIVE THE A.O. HAS TO FIRST EXAMIN E WHETHER IT REPRESENTS TRADING LIABILITIES. THE APPELLANT CONT ENDED BEFORE THE A.O. THAT IT REPRESENTS SUNDRY CREDITORS FOR PL OTS AS PER AGREEMENT FOR SALE WHICH WERE EXECUTED PRIOR TO 199 0 BUT THE CONVEYANCE DEED COULD NOT BE EXECUTED AS THE LAND W AS ENCROACHED UPON BY THE SLUMS. WHEN THERE IS WRITTEN AGREEMENT IT CANNOT BE SAID THAT THE LIABILITIES C EASED TO EXIST DURING THIS YEAR. FURTHER THE VERY FACT THAT IT RE PRESENTS ADVANCE RECEIVED AS PER SALE AGREEMENT SHOWS THAT T HEY DO NOT REPRESENT TRADING LIABILITIES FOR WHICH DEDUCTI ON WAS ALLOWED IN THE EARLIER YEARS. HOWEVER THE A.O. ASS UMED THAT IT REPRESENTS TRADING LIABILITIES MERELY BECAUSE THE S AME WERE SHOWN AS SUNDRY CREDITORS. FROM THE CONTENTION OF T HE APPELLANT IT IS CLEAR THAT THE THEY WERE NOT ALLOW ED AS TRADING LIABILITIES IN THE EARLIER YEARS BUT REPRESENTS ADV ANCE RECEIVED AND THEREFORE SECTION 41(1) IS NOT APPLICABLE IN RESPECT OF THE FOLLOWING SUNDRY CREDITORS: 1. MR.RAMASHANKER S. PAL `. 4 00 000 2. DOMNIC ROMERI `. 1 50 000 3. M/S.GUNJAN SALES AGENCIES `. 35 000 4. M/S.PARESH ENTERPRISE `. 40 000 5. M/S.PARAS & BUILDERS `. 86 800 6. MR.RAGHUNATH MALI `. 35 000 TOTAL `. 7 46 800 EVEN OTHERWISE IT CANNOT BE SAID THAT THERE WAS REMISSION OR CESSATION OF LIABILITY DURING THIS YEA R. THE HON'BLE LUCKNOW TRIBUNAL IN THE CASE OF DY.CIT VS. ALLIED L EATHER FINISHERS (P) LTD. HELD THAT THE WORD CESSATION M EANS THE TERMINATION BY OPERATION OF LAW OR BY AN ORDER OF A COURT OF LEGAL OBLIGATION OF THE ASSESSEE TO PAY TO THE CRED ITOR. A CONTRACTUAL AGREEMENT BETWEEN THE PARTIES APPROVED BY A COURT TO WAIVE THE DEBT OR TO TERMINATE THE LEGAL O BLIGATION OF THE ASSESSEE WILL ALSO CAUSE THE CESSATION OF LIABI LITY. EVEN IN A CASE WHERE A LIABILITY CEASES TO EXIST DUE TO LIMIT ATION I.E. THE CLAIM OF THE CREDITOR IS BARRED BY LIMITATION UNDER THE LIMITATION ACT 1963 BUT IF THE LIABILITY SUBSISTS OR HAS NOT BEEN WRITTEN OFF BY THE ASSESSEE OR THE ASSESSEE DOES NOT ABSOLVE HI MSELF FROM THE LIABILITY THOUGH NOT LEGALLY ENFORCEABLE YET IT CANNOT BE TAXED U/S.41(1). FROM THE ABOVE IT COULD BE SEEN TH AT NOTHING HAPPENED DURING THIS YEAR FROM WHICH IT COULD BE AS SUMED THAT THERE WAS CESSATION OF LIABILITIES. HOWEVER T HE ADDITION OF `. 3 LACS REPRESENTING THE AMOUNT PAYABLE TO M/S. RAJE SH CONSTRUCTION IS CONFIRMED AS THE REPRESENTATIVE DID NOT HAVE ITA NO : 6566/MUM/2011 BHAVANA M. VYAS 6 OBJECTION FOR THE SAME ON THE GROUND THAT THE CORRE SPONDING EXPENDITURE IS ALREADY DEBITED TO PROFIT AND LOSS A CCOUNT AND CLAIMED BY THE APPELLANT. 3.3.1 REGARDING THE FOLLOWING CREDITORS IT IS SEEN THAT IT REPRESENTS CREDITS FOR PLOT WHICH ARE SHOWN AS STOC K-IN-TRADE BY THE APPELLANT. 1. MR. FRANCIS M. RODRIQUES `. 1 18 800 2. MRS. BABIBAI CHINTAMAN PATIL `. 1 14 300 3. MR. ANDREW M. RODRIQUES `. 4 30 452 TOTAL `. 6 63 552 THE APPELLANT HAS PURCHASED PLOTS WHICH ARE DEBITED TO THE PROFIT AND LOSS ACCOUNT WHICH ARE LYING AS STOCK-IN -TRADE FOR WHICH THE AMOUNT IS PAYABLE BY THE APPELLANT. THE A.O. HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW THAT THE LIA BILITIES ACTUALLY CEASED DURING THIS YEAR EXCEPT STATING THA T THE LIABILITIES ARE OUTSTANDING FOR A LONG TIME. ADMIT TEDLY THE APPELLANT HAS NOT SOLD PLOTS WHICH WERE LYING AS CL OSING STOCK AND THEREBY IT CANNOT BE SAID THA THE ABOVE AMOUNTS WERE ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME OF THE APPELLANT AND THEREFORE SECTION 41(1) IS NOT APPL ICABLE. FOR THIS REASON AND THE REASONS STATED ABOVE IT CANNOT BE ASSUMED THAT THERE WAS CESSATION OF LIABILITY DURIN G THIS YEAR AND FURTHER THE APPELLANT HAS NOT WRITTEN BACK TO T HE PROFIT AND LOSS ACCOUNT THE ABOVE LIABILITIES. ADDITION CAN B E MADE U/S.41(1) ONLY WHEN THERE IS CESSATION OF LIABILITY OR WHEN IT IS WRITTEN BACK TO THE PROFIT AND LOSS ACCOUNT. THE A .O. IS DIRECTED TO DELETE THE ABOVE ADDITION. 3.2.2 REGARDING RAJESH CONSTRUCTION IT IS SEEN THA T A SUM OF `. 4 LACS IS ALREADY OFFERED FOR TAXATION IN A.Y. 2008 -09 AS THE SAME IS WRITTEN BACK TO THE PROFIT AND LOSS ACCOUNT . ACCORDINGLY THIS ADDITION IS DELETED IN THIS YEAR. 3.3.3 REGARDING BALANCE FOLLOWING CREDITORS THE AP PELLANT DID NOT HAVE ANY OBJECTION FOR ADDING THE SAME. ACCORD INGLY THE ADDITION OF THE EXTENT OF `. 3 24 122/- IS CONFIRMED. 1. ANANDRAO PATIL / LAXMANRAO `. 47 000 2. MAMTORA ASSOCIATES `. 10 000 3. PRAKASH PATIL `. 2 52 122 4. DAMUBHAI ELIS VAITY `. 15 000 TOTAL `. 3 24 122 ITA NO : 6566/MUM/2011 BHAVANA M. VYAS 7 4. AS DISCUSSED ABOVE OUT OF THE TOTAL ADDITION OF `. 24 34 474/- THE ADDITION TO THE EXTENT OF `. 6 24 122/- IS CONFIRMED AND THE BALANCE ADDITION OF `. 18 10 352/- IS DELETED. 4. THE LEARNED SR. DR SUBMITTED THAT THE DETAILS AN D EVIDENCES WHICH HAVE BEEN GIVEN BEFORE THE CIT(APPEALS) WERE NEITHE R FILED BEFORE THE ASSESSING OFFICER NOR THE SAME WERE CONFRONTED TO THE ASSESSING OFFICER BY THE CIT(APPEALS) DURING THE COURSE OF APPELLATE PROCEEDINGS. THERE IS A CLEAR CUT VIOLATION OF RULE 46A OF THE INCOME TAX R ULE 1962 AND THEREFORE THE FINDING OF THE CIT(APPEALS) SHOULD B E SET ASIDE. 5. ON THE CONTRARY THE LEARNED AR ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE DOCUMENTS WERE NOT IN THE NATURE OF ADDITIONAL DOCUMENTS BUT WERE CLARIFICATORY EVIDENCES WHICH W ERE IN THE SUPPORT OF THE SUBMISSIONS AND CONTENTIONS GIVEN BEFORE THE AS SESSING OFFICER. HE THUS STRONGLY RELIED UPON THE FINDINGS GIVEN BY THE CIT(APPEALS). 6. AFTER HEARING BOTH THE PARTIES AND ALSO CAREFULL Y CONSIDERING THE ORDERS OF THE CIT(APPEALS) AS WELL AS THE ASSESSING OFFICER IT IS NOTICED THAT THE ASSESSEE HAS GIVEN EXPLANATION BEFORE THE ASSESSING OFFICER HOWEVER THE SAME WERE NOT SUBSTANTIATED BY ANY PROP ER EVIDENCES LIKE COPIES OF AGREEMENTS EVIDENCE WITH REGARD TO DELAY IN HANDING OVER / SELLING OF THE PLOTS TO VARIOUS PERSONS AND THE DET AILS OF EARLIER ASSESSMENT RECORDS AS HAVE BEEN REFERRED IN PARA 3. 2 AND 3.2.1 OF THE APPELLATE ORDER. IT WAS ONLY BASED ON THESE EVIDE NCES THAT CIT(APPEALS) HAVE COME TO THIS CONCLUSION. HOWEVER HE HAS NEIT HER VERIFIED THE EVIDENCES HIMSELF NOR HAS ASKED FOR ANY REMAND REP ORT FROM THE ASSESSING OFFICER. ONCE THE ASSESSING OFFICER HAS GIVEN A CATEGORICALLY OBSERVATION THAT THE ASSESSEE HAS FAILED TO SUBSTA NTIATE THE SUNDRY CREDITORS THE CIT(APPEALS) SHOULD HAVE FORWARDED T HE ENTIRE ITA NO : 6566/MUM/2011 BHAVANA M. VYAS 8 EXPLANATION/SUBMISSIONS ALONG WITH THE RELEVANT EVI DENCES AS WAS FILED BEFORE HIM AND SHOULD HAVE CALLED FOR THE REMAND RE PORT ASKING THE COMMENTS OF THE ASSESSING OFFICER. HAVING NOT DONE SO HE HAS VIOLATED THE PROVISIONS OF RULE 46A. 6.1 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES W E RESTORE THE MATTER BACK TO THE FILE OF THE CIT(APPEALS) WHO WILL CONF RONT THESE EVIDENCES AND ENTIRE EXPLANATION/SUBMISSION TO THE ASSESSING OFFI CER AND WILL CALL FOR THE REMAND REPORT FROM HIM AND THEN DECIDE THE ISSU E IN ACCORDANCE WITH THE LAW AFTER GIVING DUE AND EFFECTIVE OPPORTUNITY TO THE ASSESSEE AS WELL AS TO THE ASSESSING OFFICER. 7. IN THE RESULT THE APPEAL FILED BY THE DEPARTMEN T IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 30 TH DAY OF MARCH 2012. SD/- SD/- ( G. E. VEERABHADRAPPA ) ( AMIT SHUKLA ) PRESIDENT JUDICIAL MEMBER MUMBAI DT: 30.03.2012 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. 4. CIT (A) 5. THE DR B - BENCH ITAT MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ROSHANI