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Income Tax Appellate Tribunal, KOLKATA BENCH “A” KOLKATA
Before: Shri Aby.T Varkey & Shri Waseem Ahmed
O R D E R
PER Waseem Ahmed, Accountant Member:
- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-2, Kolkata dated 04.02.2016. Assessment was framed by ITO Ward-5(1), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 26.03.2014 for assessment year 2010-11. Shri S.M. Surana, Ld. Advocate appeared on behalf of assessee and Shri Kalyan Nath, Ld. Departmental Representative appeared on behalf of Revenue.
The assessee has taken the following grounds of appeal:- “1. For that the order of the Ld. CIT(A) is arbitrary, illegal and bad in law.
2. For that the Ld. CIT(A) erred in confirming the addition of Rs.26,13,757/- when there was no cessation of liability, the assessee never written off the same and continue to confirm the said liability. A.Y. 2011-12 M/s Shimmer Textiles Pvt. Ltd. Vs. ITO Wd-5(1), Kol. Page 2
3. For that even otherwise the amount of Rs.26,13,757/- was a loan taken and the said amount was never allowed as deduction as loss, expenditure or trading liability.
4. For that on the facts and circumstances of the case the Ld. CIT(A) erred in confirming the addition of Rs.26,13,757/-.
5. For that on the facts and circumstances of the cases the order of the CIT(A) be modified and the assessee be given the relief prayed for.
6. For that the assessee craves leave to add, alter or amend any ground before or at the time of hearing.”
3. The effective issue raised by assessee in all the grounds of appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of ₹26,13,757/- on account of cessation of liability.
4. Briefly stated facts are that assessee is a private limited company and deriving its income from investment and house property. The assessee in its balance-sheet has shown a loan of ₹ 26,13,757/- only M/s Lahar Commodities Pvt. Ltd. (LCPL for short). On enquiry about the veracity of loan, the AO came to know that the name of M/s LCPL has been struck off from the record of ROC/MCA on 19.03.2014. Therefore, the AO was of the view the liability ceased to exist in the books of the assessee. Accordingly, the addition of Rs. 26,13,757.00 on account of cessation of liability was made by the AO to the total income of assessee.
5. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who confirmed the order of AO ex-parte after considering the materials available on record by observing as under:- “4.1 It appears that the assessee-company had shown a liability for loan of Rs.26,13,757/- with M/s Lahar Commodities Pvt. Ltd. in its books, though the same was not required to be paid as assessee stroked off that liability. Therefore, the AO was right in adding back that amount for cessation of liability. There is nothing on record to controvert the decision of the AO. Hence, the addition of Rs.26,13,757/- is confirmed.” Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us.
6. Ld. AR before us submitted that the loan liability was coming from the earlier year and the same has not been written off in the books of account in the year under consideration. Therefore, the same cannot be added to the A.Y. 2011-12 M/s Shimmer Textiles Pvt. Ltd. Vs. ITO Wd-5(1), Kol. Page 3 total income of the assessee. Ld. AR before us in support of assessee’s claim filed the copy of ledger of LCPL for the earlier year which is placed on record. On the other hand, Ld. DR submitted that a notice was issued by the AO u/s 133(6) of the Act which was returned as un-served. Similarly, it is also evident that the name of assessee-company has been struck off from the records of ROC/MCA, therefore it is proved that liability has been ceased to exist. He vehemently relied on the order of Authorities Below. In rejoinder, Ld. AR submitted that the name of LCPL was not struck off in the year under consideration. Thus, it cannot be concluded that the company is not in existence in the year under consideration.
7. We have heard the rival contentions & perused the material available on record. The issue in the instant relates to the addition made by the AO on account of cessation of liability for Rs.26,17,757.00 only. The assessee has shown loan liability of Rs.26,13,757.00 in the name of LCPL in its balance sheet as on 31st March 2011. This loan liability was coming from the earlier years as detailed under: “Shimmer Textiles Pvt. Ltd. 2, Clive Ghat Street, 8th Floor, Kolkata-001 GENERAL LEDGER : 01/04/2001 -31/03/2002 Balance C/D : Credit Balance Code USLL 01 Name :LAHARCOMMODITIES PVT Ltd. 01/04/2001 Opening balance 28/08/2001 BV 1 Oriental bank of commerce 20,0002 29/08/2001 BV 2 Oriental bank of commerce 30,3200 03/09/2001 BV 1 Oriental bank of commerce 30,0000 08/02/2001 BV 3 Oriental bank of commerce 40,0000 02/09/2001 BV 3 Oriental bank of commerce 30,0000 02/09/2001 BV 6 Oriental bank of commerce 30,0000 13/09/2001 BV 1 Oriental bank of commerce 35,0000 15/09/2002 BV 1 Oriental bank of commerce 10,0200 18/03/2002 JV 2 INTEREST 25,0000 30/01/2002 JV 5 T.D.S.ON INTEREST PAYABLE 41968.00 From the above copy of the ledger we note that the loan liability shown by the assessee comprises of principal amount as well as interest amount as depicted above. The undisputed fact is that the loan liability was very much reflecting in the balance sheet of the assessee as on 31.3.2011. There is also no ambiguity