SRI SURESH KUMAR T JAIN vs. THE INCOME TAX OFFICER

The assessee had preferred ITA No.160/2010 challenging the order of the Income Tax Appellate Tribunal, Bengaluru [ITAT] in ITA No.667/Bang/2009 dated 08.01.2010. The said appeal was admitted to consider the following substantial questions of law:

Learned counsel for the assessee had contended that the provisions of Section 4[1][a] and 68 of the Income Tax Act, 1961 [‘Act’ for short] could not have been invoked by the Revenue in the facts and circumstances of the case, placing reliance on the judgment of the Co-ordinate Bench of this Court in the case of Commissioner of Income Tax V/s. Alvares and Thomas [(2017) 394 ITR 0647 (Karn)] more particularly paragraphs 8 and 9, wherein, it has been held as under: “8. Examining of the facts of the present case reveals that, it is not the case of the Department that, any benefit in respect of such trading liability was taken by the assessee but, the Revenue contends that since the burden was not discharged of existence of the liability, it be treated as cessation of the liability and therefore, Section 41(1) could be invoked. Further, stand of

In our view, even if we accept the contention of the Revenue that the party could not be traced and therefore debt could not be verified then also, by no stretch of imagination can it be held that it would satisfy the requirement of cessation of liability. In legal parlance, merely because the creditor could not be traced on the date when the verification was made, same is not a ground to conclude that there was cessation of the liability. Cessation of the liability has to be cessation in law, of the debt to be paid by the assessee to the creditor. The debt is recoverable even if the creditor has expired, by the legal heirs of the deceased creditor. Under the circumstances, in the present case, it can hardly be said that the liability had ceased. If the liability had not ceased or the benefit was 19 not taken by the assessee in respect of such trade liability, in our view, the

Learned counsel for the Revenue had argued that the creditors have confirmed the balance and provided the details as called for. Hence, the said judgment was not applicable.

Having considered the submissions made by the learned counsel for the parties as aforesaid, this Court has dismissed the appeal observing that the judgment of the Co-ordinate Bench of this Court in Alvares and Thomas supra, would not come to the aid of the appellant as the facts and circumstances differs.

The assessee has preferred this review petition contending that 12 sundry creditors to whom the notices were sent were returned unserved for insufficient address, no such person etc., since the debts of those 12 sundry creditors could not be verified because of non-service of the notices, it does not satisfy

Learned counsel appearing for the petitioner reiterating the grounds urged in the review petition submitted that this Court has categorically observed that out of 26 sundry creditors, in 4 cases, the credit balance confirmed as Nil, in 10 cases as the assessee has not furnished the addresses of the creditors and in 12 cases the notices are returned as un-served for insufficient address, no such person etc. As regards these 12 cases, certainly the judgment of the Co-ordinate Bench of this Court in Alvares and Thomas supra is applicable.

Learned counsel for the Revenue fairly submits that the matter requires to be re-examined by

We have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record.

As noticed above, the appeal filed by the assessee came to be dismissed rejecting the contention of the learned counsel for the assessee that the matter is covered by the decision of the Co-ordinate Bench of this Court in Alvares and Thomas supra. In the light of the legal principles laid down by the Co-ordinate Bench of this Court in Alvares and Thomas supra, in paragraphs 8 and 9 extracted herein above, even accepting the contention of the Revenue that the party could not be traced and therefore debt could not be verified, then also it cannot be held that it would specify the requirement of

The 12 cases in which the notices were returned as un-served, necessarily requires to be examined in the light of the legal principles enunciated in Alvares and Thomas supra, which indeed is not objected by the Revenue. Hence, we deem it appropriate to re-call the order dated 20.11.2018 passed in ITA No.160/2010 and modify the same in paragraphs 6, 7 and 12 insofar as the 12 cases are concerned where notices are returned as un-served for insufficient address, no such person etc.

Hence, we pass the following: ORDER i] The order dated 20.11.2018 passed in ITA No.160/2010 is modified as under: