Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES, ‘A’ MUMBAI
Before: Shri Joginder Singh, & Shri Jason P. Boaz
आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 21/01/2010 of the Ld. First Appellate Authority, Mumbai. The only ground raised
/agitated in this appeal pertains to confirming penalty of Rs.6,19,972/-, levied by the Assessing Officer despite the fact that the additions made u/s 41(1) of the Act are on account of the credit balance of unsecured loans, remained unpaid are beyond the control of the assessee and which were paid subsequently.
2. During hearing of this appeal, the ld. counsel for the assessee, Shri Madan Parikar, claimed that the impugned issue is covered by the decision dated 09/09/2015 of the Tribunal in the case of assessee itself (ITA No.2485/Mum/2012) Assessment year 2005-06. This factual matrix was not controverted by the ld. DR, Shri A. Ramachandran. 2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the aforesaid order dated 09/09/2015 of the Tribunal for ready reference and analysis:- “Challenging the order,dated 21.1.2010,of the CIT(A)-20,Mumbai, the assessee has raised following grounds of appeal: “1. The Learned Commissioner of Income Tax (Appeals) has erred in law and facts on records in not adjudicating various (four) grounds of appeal as stated in the appeal memo (Form No. 35) even though relevant facts were narrated alongwith Form No. 35 as well as in the assessment order. He has dismissed the appeal by confirming the assessment merely on account of non attendance by A.O. as well as Appellant, which the appellant submits was due to circumstances beyond the control. The Appellant submits that since all the relevant facts were already there in Kuber Housing Investment & Finance Pvt. Ltd. his records, the ld. C.I.T. (Appeals) ought to have adjudicated and disposed off by taking judicious decision in the interest of justice.
In view of the above, the appellant's main ground of appeal, relating to A.O.'s treatment of unsecured loan Rs.16,95,071/- as income u/s 41(1), got confirmed by the said appellate order, which is totally unjustified, specially when this issue is almost settled in favour of the assessee by several decisions including jurisdictional High Court and Tribunals. The appellant prays that the appeals prayed for be admitted and allowed and the grounds may kindly be adjudicated or the same may be sent back to the C.LT. (Appeals) in the interest of justice. The appellant craves leave to add, to alter or to amend any of the grounds of appeal at or before the time of hearing.” Assessee-company, engaged in the business of factoring and finance, filed its return of income on 30.8.06 declaring income of Rs.5.08 lacs. Assessing Officer (AO) completed the assessment on 26.7.07,u/s.143(3)of the Act, determining income of assessee at Rs.21,51,350/-. 2.Effective Ground of appeal is about treatment of unsecured loan of Rs.16,95,071/- as income u/s. 41(1) of the Act. During the assessment proceedings, the AO found that the assessee had outstanding loan from M/s. Ojas Housing Finance Pvt. Ltd.(OHFPL)amounting to Rs.16.95 lacs. He directed the assessee to explain as to when the said amount was returned back to OHFPL Vide its letter,dt.12.12.07,the assessee stated that due to freezing of account of OHFPL by government authorities and resignation of directors from the Board said loan was not paid. Considering these facts,the AO held that the assessee had not made any payment to OHFPL, that the liability had ceased to exist.He made an addition of Rs.16.95 lacs to the income of the assessee. Aggrieved by the order of the AO, the assessee filed an appeal before the First Appellate Authority(FAA).Before him, nobody appeared though he had fixed the case on several occasions. Therefore, he upheld the order of the AO without deciding the issue on merits. 3.During the course of hearing before us, the Authorised Representative(AR)contended that OHFPL had granted loan to the assessee in accordance with an agreement entered into, that out of Rs.20.00 lacs loan Rs.16.95 lacs was outstanding on 31.3.2005,that the assessee could not repay the loan as the accounts of OHFPL were freezed, that amount was always payable to the party concerned, that the AO had disregarded the above facts, that the assessee had filed a confirmation letter of OHFPL, that it had furnished the extract from the website of the Registrar of the company, that the amount was payable at the end of the assessee company, that it could not be treated as cessation of trading liability within the meaning of s.41(1) of the Act. He further Kuber Housing Investment & Finance Pvt. Ltd.
informed that assessee had paid the amount to OHFPL on 31.3.2011 amounting to Rs.18.79 lacs, that it had paid interest to OHFPL from 01.04.2005 to 31.03.2011,that the payment was made through banking channels. Departmental Representative (DR) left the issue to the discretion of the bench. 4.We have heard the rival submissions and perused the material before us. We find that the AO had treated the loan amount to OHFPL as cessation of liability, that the FAA had not decided the issue on merits, that the assessee had paid the amount to OHFPL on 31.3.2011,that it had also paid interest for the entire period, that the payment of the principle amount and the interest was through banking channels. Considering these facts, we are of the opinion that the AO was not justified in invoking provisions of s.41(1) of the Act. Therefore, we are deciding effective Ground of appeal in favour of the assessee. As a result, appeal filed by the assessee stands allowed.” In the aforesaid order, we find that the Tribunal has considered the issue of cessation of trading liability within the meaning of section 41(1) of the Act and finally held that the Assessing Officer was no justified in invoking the said provision and thus the appeal was decided in favour of the assessee. 2.2. In the present appeal also, the assessee paid Rs.16,95,071/- by way of demand draft during the year 2010- 11, therefore, the liability cannot be said to be “cessed to exist”, moreover, the assessee company did not claim the impugned amount as the expenditure, thus, the temporary cessing cannot be added in the income u/s 41(1) of the Act. Since, the addition of Rs.16,95,071/- was not towards cessation of trading liabilities but towards unclaimed unsecured loans. Even otherwise, since the addition has been deleted by the Tribunal, the penalty cannot survive. Our view find support from the decision in K.C. Builders vs ACIT (2004)
Kuber Housing Investment & Finance Pvt. Ltd. 265 ITR 562 (SC) and the ratio laid down in CIT vs S.P. Viz, 176 ITR 76 (Patna). Even otherwise, when the quantum addition is deleted, there remains no basis at all for levying the penalty for concealment or furnishing inaccurate particulars. The penalty cannot stand on its legs when addition on the basis of which the penalty was imposed remains no more in existence, thus, the appeal of the assessee is allowed and the ld. Assessing Officer is directed to delete the penalty. Finally, the appeal of the assessee is allowed. This order was pronounced in the open court in the presence of the ld. representative from both sides at the conclusion of the hearing on 07/07/2016.