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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
AadoSa / O R D E R महावीर स ुंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM: This appeal filed by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)25, Mumbai [in short CIT(A)], in appeal No. CIT(A)-25/IT/126/2014-15, dated 04.06.2016. The Assessment was framed by the Income Tax Officer, Ward-22(2)(1) Mumbai (in short ITO/ AO) for the A.Y. 2006-07 vide order dated 28.03.2014, under section ITAs No.1274/Mum/2010 2327/Mum/2018 143(3) read with section 147 of the Income-tax Act, 1961 (hereinafter ‘the Act’).
At the outset, it is noticed that this appeal is recalled matter and the Tribunal in MA No. 499/mum/2019 dated 02.04.2019 has recalled the first ground vide Para 4 as under: - “4. We have heard rival submissions and perused the relevant material on record. We find that whereas the 2nd & 3rd ground of appeal filed by the Revenue were decided by the Tribunal, it failed to decide the 1st ground of appeal which read as under:
On the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of ₹ 64,83,483/- shown by the assessee as payable to a partnership firm M/s India Steel International without appreciating the fact that the assessee failed to prove the origination of liability.
The omission on the part of the Tribunal to decide a substantive ground of appeal is a mistake apparent from record. Therefore, we recall the impugned order to the limited extent that the 1st ground of appeal be decided. Accordingly, the Registry is directed to fix the case for haring by a regular Bench.”
Hence, this appeal was re-fixed for hearing.
Now, the only issue to be adjudicated is as regards to the addition made by AO deleted by CIT(A) in regard to the liability payable to the ITAs No.1274/Mum/2010 2327/Mum/2018 partnership firm M/s India Steel Industries. For this Revenue has raised the following ground No. 1: -
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 64,83,483/- shown by the assessee as payable to a partnership firm M/s India Steel International without appreciating the fact that the assessee failed to prove the origination of liability.”
Briefly stated facts are that the assessee is a partner in the firm M/s India Steel International. The AO during the course of assessment proceedings noted that there is a liability of ₹ 64,83,483/- as appearing in the assessee’s balance sheet as on 31.03.2004 and 31.03.2005 in the name of M/s India Steel International. According to AO, the assessee in her statement on 28.03.2014 stated that she might have overdrawn her capital account to meet his expenses. He also noted that the capital account is appearing separately in both the balance sheet and balance is of ₹ 2,50,000/- in both the balance sheets is appearing. The AO required the assessee to file the balance sheets of earlier years but assessee did not furnish. Hence, the AO added the liability appearing in the assessee’s balance sheet as on 31.03.2004 and 31.03.2005 to the returned income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) after considering the submissions of the assessee deleted the addition by observing in para 3.7 as under: - “3.7 As regards to addition of ₹ 64,89,483/- on account of unexplained liability, the AO has not been able to substantiate as to how the liability was unexplained. The liability was reflected in the earlier balance sheets as at 31.03..2004 and 31.03.2005. Thus, the liability was discharged during the year.
ITAs No.1274/Mum/2010 2327/Mum/2018 The AO has merely stated that the liability is unexplained and time barred. However, the appellant has settled the same during the year. Thus, no addition on squared up liability can be made. Accordingly, the addition of ₹ 64,89,483/- is hereby deleted.”
Aggrieved, now Revenue is in appeal before Tribunal.
We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the assessee is partner in partnership firm namely M/s India Steel International from number of years. The assessee had overdrawn the capital from said partnership firm prior to A. Y. 2002-2003 of Rs.64,89,483/- and same was reflected as a liability and fixed capital of Rs. 2,50,000/- is reflected as assets in her balance sheet. The assessee has enclosed the balance sheet for F. Y. ending 31.03.2004 and 31.03.2005 in his paper book before us. We noted that the assessee had filed the last three year Balance sheet before AO vide letter dated 09/ 22/ 2013 in response to notice under section 142(1) of the Act 1961 dated 05/11/2013. The assessment for A. Y. 2004-2005 was completed U/s 143(3) of the Act. The assessee filed copy of assessment order for AY 2004-05. From the above facts, we noted that the assessee owes a sum Rs. 64,89,483/- to the firm. M/s India Steel International and Mrs. Ruchi Gupta to receive from said firm a sum of Rs. 77,63,790/-. All the transactions that is repayment of loan by assessee to the firm and refund of loan by firm to Mrs.Ruchi Gupta was done through bank account maintained with Indian Bank, Wadala Branch. The Bank A/c No 424784153 belonging to assessee from where she paid a sum of Rs. 80 Iacs on 24.01.2006 to the firm having bank A/c No. 424811871 against her liability of Rs. 64,89,483/-. The excess amount of Rs. 12,40,000/- was refunded by partnership firm. The firm on receipt of ITAs No.1274/Mum/2010 2327/Mum/2018 said amount refunded an amount of Rs. 77,63,790/- due to Mrs. Ruchi Gupta in her bank A/c No. 424737770. From the said account Mrs.Ruchi Gupta gifted a sum of Rs.66,15,000/- out of total gift of Rs. 1 Cr. and remaining balance from her ICICI Bank.. The confirmation of Mrs Ruchi Gupta, Bank statement of A/c No. 424784153, 424811871, 424737770 are part of Assessment records.
From the above facts, we noted that now there is no liability appearing in Balance sheet of assessee as on 31/03/2006 and hence, can same be treated as un-explained liability of the year under consideration. The assessee is partner in the above firm and as she had over drawn the capital of ₹ 64,89,483/- in earlier years, the same is reflected as liability and fixed capital of ₹ 2,50,000/- as capital in partnership firms in the Balance Sheet of 31.03.2005 and 31.03.2004 The said amount is paid by the assessee during the year and hence question of any liability existing as on 31.03.2006 does not arise. From above it is clear that the assessee explained the liability in the books of account maintained by the assessee and such liability pertains to earlier years but wiped off during the year. The AO had also stated this fact in para 4 of the Assessments Order that - your balance sheet record show the following amount as payable by you to M/s India Steel international as under: - “Liability in the name B/s As on 31.03.2004 B/s As on 31.03.2005 India Steel International 64,89,483/- 64,89,483/-