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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri P.M. Jagtap & Shri S.S. Viswanethra Ravi
ORDER Shri S.S.Viswanethra Ravi, JM:
This appeal by the Assessee is directed against the order of the Commissioner of Income Tax (Appeals), XII, Kolkata dt. 25-07-2014 for the A.Y 2008-09.
The only issue is to be decided as to whether the CIT-A justified in confirming the impugned addition (Rs.40,36,895/-) made on account of cessation of liability u/s. 41(1) of the Act in the facts and circumstances of the case.
The AO found that the assessee has shown liability of Rs.1,02,87,127/- from 1999-2000 to 2006-07 under the head ‘advance from customers’ and offered for taxation a sum of Rs.40,36,895/- being the amount received in cash and cheque. However, the AO treated the said amount as income on account of cessation of liability u/s. 41(1) of the Act and added the same to the total income of the assessee.
Before the CIT-A the assessee contended that the said liability was never allowed as deduction in earlier years. The assessee has also not claimed any benefit by way of remission or cessation of the 1 said liability and challenged the said addition made by the AO u/s. 41(1) of the Act and prayed to delete the same. But, however, the CIT-A did not accept the submissions made by the AO and confirmed the addition made by the AO. Relevant portion of CIT-A order is reproduced herein below:-
5.2.3 Decision:
As discussed in the foregoing paragraphs, the Assessing Officer found that cash/cheque was received by the appellant company as advance from the customers since 1999-2000. According to the details furnished by the appellant, total cash advance received during the period from 1999-2000 to 2007-2008 was of Rs.1,02,87,127/- which was shown by the appellant as its liability. On being asked to explain why so much of cash advance has been retained by them without making necessary adjustments in the subsequent years, the Assessing Officer noted that no satisfactory explanation could be offered by the appellant for retaining such huge amount of cash as advance from the customers since 1999-2000, but, ultimately the appellant had offered for taxation a sum of Rs.40,36,895/- being the cash/cheque received as advance during the period from 1999-2000 to 2006-07. In Kesoram Industries & Cotton Mills Ltd. Vs. CIT [1992] 196 ITR 845 (Cal.), it has been held that whether the liability of the assessee has been fully discharged is within the special knowledge of the assessee. He has to prove that in fact the liability subsists. Where the conduct and surrounding circumstances demonstrate that the amount has been remitted or foregone or the sum has ceased to be claimable against the assessee, it would be a clear case of remission or cession of the liability of the assessee. In the instant case, the appellant company has not made any effort to substantiate that the liabilities subsisted during the financial year relevant for the present assessment year either during assessment proceedings, or at this stage. Now, it is well settled that agreed assessment cannot be complained against. In Kanshi Ram Wadhwa v. CIT [ 1982] 138 ITR 830 (Punj & Har.), it has been held that an assessee who has derived the benefit of an agreed order cannot be allowed to turn around and urge that such an order was incorrect or unwarranted. On the facts and in the circumstances of the case, I am of the considered view that the Assessing Officer was justified in making the impugned addition of the amount of Rs.40,36,895/-, which has been offered by the appellant for taxation during the course of assessment proceedings. I do not find any evidence or material brought on record in rebuttal of such finding. The said addition is, therefore, confirmed. This ground of appeal is, therefore, rejected.”
The ld. AR reiterated the same submissions as made before the CIT-A.
On the other hand, the ld.DR submits that the liability should not go for the periods 1999-2000 to 2006-07 and the CIT-A was justified in confirming the same by relying on many case laws available in his order.
Heard rival submissions and perused the record. We find force in the arguments as advanced by the assessee before the CIT-A as well as before us regarding no benefit derived by way of claiming deduction of liability shown from 1999-2006. The Respondent Revenue did not bring on record by any material to show that the assessee availed benefit of deduction. Therefore, the addition made 2 u/s. 41(1) of the Act is not maintainable. In view of above, we are of the view that the assessee derived no benefit of deduction under the head ‘liability of remission’. Therefore, the CIT-A was not justified in confirming the same. Accordingly, we delete the impugned addition as made by the AO on this issue. Therefore, the grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.