NUIPACIFIC TRAVELS AND TOURS PVT. LTD.,MUMBAI vs. ITO 3(3)-3, MUMBAI, MUMBAI

The grounds of appeal are that assessee is aggrieved by the following addition

Brief facts of the case are that the assessee in this case is an air ticket agent engaged in the business of commission on tickets booking. The Assessing Officer noted that the assessee has shown unsecured loans of Rs. 25,56,066/- and from shareholders and others at Rs. 92,08,369/- during the year under consideration as against Rs. 23,12,856/- and Rs. 83,67,398/- in the immediately previous year. Hence, he noted that there is additions of Rs. 2,43,210/- and Rs. 8,40,971/- in both heads. The Assessing Officer wanted the assessee to submit confirmation. The Assessing Officer noted since the 2 M/s. Unipacific Travels and Tours Private Limited assessee has not filed confirmation from Ms. Urmila Mohan for an amount of Rs. 4,00,000/- he was of the opinion that the same is not liable to be paid under section 41(1) of the Act. Alternative the said amount was also brought to tax under section 28(iv) of the Act.

The Assessing Officer also noted sundry creditors at Rs. 81,92,059/-. The assessee was asked to furnish age-wise details thereof. The Assessing Officer noted that the assessee gave details of Rs. 76,54,419/-. Since the total of sundry creditors was Rs. 81,92,059/- the Assessing Officer held that the difference of Rs. 5,37,640/- is no more a liability payable and hence, added the same under section 41(1) of the Act. He further noted that the Gross receipts of the assessee company during the year from booking of air tickets is amounting to Rs. 2,63,53,365/-. The assessee is required to get its account audited u/s 44AB of the I.T.Act and furnishing Audit report of the auditor in form 3CD on or before the specified due date. In the assessee's case specified due date was 30.09.2012. However the assessee has not filed audit report u/s 44AB, which is mandatory for gross receipts from business above Rs. 40,00,000/- . In view of this, penalty proceedings 271B is being initiated separately.

Against the above order assessee appealed before the learned CIT(A). Learned CIT(A) in a very laconic order which showed absolute non-application of mind, confirmed the Assessing Officer’s order by holding as under :-

Against the above order assessee is in appeal before the ITAT.

I have heard learned Departmental Representative and perused the records. I note that the order of learned CIT(A) is an absolutely travesty of appellate order which shows non-application of mind. On this count alone order of learned CIT(A) is liable to be set aside.

Furthermore, I note that the Assessing Officer has added due to non confirmation of loan of the party of Rs. 4 lakhs under section 41(1) and alternatively under section 28(iv) of the Act. As regards addition under section 28(iv) of the Act is concerned, the addition involved is not at all sustainable on the touchstone of Hon'ble Supreme Court decision in the case of CIT v/s Mahindra & Mahindra Ltd., [2018] 302 CTR 201 wherein such addition has been held to be unsustainable in as much as it was expounded by Hon'ble Supreme Court that this section is not applicable for non-cash transaction. In the present case, it is a non cash transaction for the year.

As regards the issue of section 41(1) of the Act is concerned there is due prescription of the Act under section 41(1) as to what can be the subject matter of section 41(1) of the Act. Section 41(1) is applicable when liability being a trade liability which has been taken into account as expenditure in the profit and loss account but the liability for that expenditure is no more payable. Without any discussion in this regard the Assessing Officer’s order is not sustainable. There is no mention that the amount involved was for the trade liability. Further, mere non confirmation cannot lead to a conclusive proof that there is cessation of liability. Similar is the situation of the addition of sundry creditors. There is no mention by the Assessing Officer as to whether credit was in the nature of trading liability. The liability involved is very much appearing in the balance sheet. There is nothing on record to suggest that there is cessation of liability.

In the result, this appeal by the assessee stands allowed.