CIT, FARIDABAD vs. SITA DEVI JUNEJA M/S SUPREM IRON AND ALLOY STEEL

ITA/619/2009HC Punjab & HaryanaPHHC01084746200902 December 2009Author: MR. JUSTICE M.S. SULLAR,MR. JUSTICE SATISH KUMAR MITTAL6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that there was no merit in the revenue's appeal. It was a conceded position that the liabilities were shown in the assessee's balance sheet, acknowledging debts payable to sundry creditors. The mere fact that a liability was outstanding for six years did not presume its cessation. Crucially, there was no bilateral act between the assessee and creditors indicating cessation of these liabilities. Therefore, the CIT(A) and ITAT rightly concluded that the AO wrongly invoked Explanation-I to Section 41(1) based on presumptions and conjectures. The AO also failed to demonstrate that any deduction was allowed in earlier years for these trading liabilities or that the assessee obtained any benefit by way of remission or cessation. The Court noted that the assessee had filed copies of accounts of sundry creditors signed by them, supporting the ITAT's finding that confirmations were produced. Consequently, no substantial questions of law arose from the ITAT's order.

What were the facts?

The Revenue (Commissioner of Income Tax, Faridabad) appealed against an order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 2004-05. The ITAT had upheld the deletion of an addition of Rs. 1,47,71,696/- made by the Assessing Officer (AO) on account of the cessation of liability. The AO had treated these outstanding sundry credit balances as deemed income under Section 41(1) of the Income Tax Act, 1961, as the liabilities were outstanding for over six years, creditors were untraceable, and the assessee failed to provide creditor particulars. The Commissioner of Income Tax (Appeals) had partly allowed the assessee's appeal, deleting the addition, finding that Section 41(1) was wrongly invoked as there was no unilateral cessation or remission of liabilities and the revenue had not discharged its burden of proof.

What were the issues?

1. Whether, on the facts and circumstances, the ITAT was justified in law in confirming the deletion of the addition of Rs. 1,47,71,696/- on account of cessation of liability, despite the liabilities being outstanding for over six years, creditors being untraceable, and the assessee failing to produce creditor particulars and present addresses? 2. Whether, on the facts and circumstances and in law, the ITAT was right in holding that confirmations from creditors were produced and not doubted, despite the AO's observation that the assessee admitted losing contact with creditors and failing to provide their addresses and PANs? 3. Whether the ITAT was right in holding that no trading liability existed to attract Section 41(1), disregarding the AO's invocation of the provision due to cessation of liability by trade creditors? Assessee's Contentions: The assessee argued that the CIT(A) and ITAT correctly deleted the addition, as there was no unilateral cessation or remission of liabilities. The burden was on the revenue to prove cessation, which it failed to do. The ITAT relied on "CIT v. Tamil Nadu Warehousing Corpn.", "Ambika Mills Ltd. v. CIT", and "Sugauli Sugar Works v. CIT" to hold that cessation requires a bilateral act and that the liabilities were acknowledged in the balance sheet. The ITAT also relied on "Chief Commissioner of Income Tax v. Kesaria Tea Co. Ltd.". Revenue's Contentions: The revenue contended that the ITAT was not justified in confirming the deletion because the liabilities were outstanding for over six years, creditors were untraceable, and the assessee failed to produce necessary documentation and particulars, thus fulfilling the conditions for invoking Section 41(1).

Which sections of the Income-tax Act were involved?

Section 41(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No. 619 of 2009 DATE OF DECISION : 02.12.2009 Commissioner of Income Tax, Faridabad .... APPELLANT Versus Smt. Sita Devi Juneja ..... RESPONDENT

CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTAL HON'BLE MR. JUSTICE MEHINDER SINGH SULLAR

Present: Ms. Urvashi Dhugga, Advocate, for the appellant-revenue.

* * * SATISH KUMAR MITTAL , J. The revenue has filed this appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as `the Act'), against the order dated 26.3.2009, passed by the Income Tax Appellate Tribunal, Delhi Bench `G' Delhi (hereinafter referred to as `the ITAT') in ITA No. 18 (Del) 2008, pertaining to the assessment year 2004-05, while raising the following substantial questions of law : (i) Whether on the facts and circumstances of the case, the learned ITAT was justified in law in confirming the order of CIT (A) deleting the addition of Rs. 1,47,71,696/- made on account of cessation of liability despite the fact that the liabilities were outstanding for a period of more than six years and on inquiry conducted by the Assessing Officer creditors were untraceable and also the assesse

The order continues below.

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