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Income Tax Appellate Tribunal, F Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Sandeep Gosain
This appeal by the assessee is directed against the order of the CIT(A)-1, Mumbai dated 26.12.2013 for A.Y. 2009-10.
The facts of the case, briefly, are as under: - 2.1 The assessee-company, engaged in the business of investments, filed its return of income for A.Y. 2009-10 on 30.09.2009 declaring income of `1,23,02,840/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 26.12.2011 wherein the income of the assessee was determined at `8,31,76,140/- under the normal provisions of the Act in view of the following additions/disallowances: - (i) Cessation of liability of Sundry Creditors u/s 41(1) `7,01,46,481/- (ii) Disallowance u/s 14A r.w. Rule 8D ` 7,26,816/- 2 ITA 1224/Mum/2014 Firestorm Electronics Corp. P. Ltd. 2.2 Aggrieved by the order of assessment dated 26.12.2011 for A.Y. 2009-10, the assessee preferred an appeal before the CIT(A)-I, Mumbai. The learned CIT(A) dismissed the assessee’s appeal vide impugned order dated 26.12.2013. 3. Aggrieved by the order of the CIT(A)-1, Mumbai dated 26.12.2013, the assessee has preferred this appeal raising the following grounds: - “
1. The Learned Commissioner of Income Tax (Appeals) - 1, Mumbai ["The CIT(A)"] erred in confirming the action of the Assessing Officer ("the AO") in making an addition of sum of Rs 7,01,46,481/- on the alleged ground that the said credit liability in question was a part of trading operations of the appellant and had ceased to exist and as such would be liable to be taxed u/s 28(i) and 28(iv) of the Income Tax Act,1961 ("the Act"). 1.1 The CIT(A) also erred in confirming the action of the A.O. in making the said addition u/s 41(1) of the Act. 1.2 The CIT(A) further erred in not appreciating the fact that the said loan liability was not a trading liability and that it was not an integral part of any commercial transactions resulting into business income. 1.3 The CIT(A) also erred in not appreciating the fact that there was neither waiver of loan liability nor the said loan liability had ceased to exist inasmuch as the Appellant had continued to acknowledge the said loan liability in the books of the Appellant. 1.4 The CIT(A) further erred in not appreciating the fact that the said loan liability had ceased to exist only in the A.Y. 2011-12 inasmuch as the name of the Lender Company was "Stuck Off" in the A.Y. 2011-12. 1.5 The CIT(A) erred in not appreciating the fact that the said addition would result in double taxation of income inasmuch as the said amount had already been offered to tax in the Assessment Year 2011-12. 1.6 The Appellant prays that it be held that the said liability would not be chargeable to tax. 1.7 The Appellant further prays that the said addition be deleted.
2. The CIT(A) erred in confirming action of A.O. in levying interest u/s. 234B and 234C of the Act. A 2.1 The Appellant prays that levying of interest be deleted.
3. The Appellant craves leave to add to, alter and / or amend all or any of the foregoing grounds of appeal.”
3 ITA 1224/Mum/2014 Firestorm Electronics Corp. P. Ltd.
Ground Nos. 1 (1.1 to 1.7) 4.1.1 In these grounds (supra) the assessee contends that the impugned order of the learned CIT(A) is erroneous in confirming the action of the Assessing Officer (AO) in making an addition of `7,01,46,481/- in respect of the outstanding sundry creditors balance in the name of M/s. Koel Manufacturing the Investment Pvt. Ltd. (in short Koel), which is outstanding since March, 2004 under section 41(1) of the Act. It is submitted that the learned CIT(A) erred by holding the same to be a part of the assessee’s trading operations and had ceased to exist and therefore would be liable to be taxed under section 28(1) and 28(iv) of the Act. It is further contended that the learned CIT(A) erred in not appreciating the fact that there was neither waiver of loan liability nor did the said liability cease to exist since the same continued to exist and was outstanding in the Balance Sheet as on 31.03.2009 and therefore it was not material for consideration in the period under consideration, i.e. A.Y. 2009-10. It is further submitted that the learned CIT(A) failed to acknowledge and appreciate the fact that the said loan liability had ceased to exist and was written back in the assessee’s books and offered for tax only in the A.Y. 2011-12 since the name of the lender company was ‘struck off’ in the period relevant to A.Y. 2011-12, thereby resulting in double taxation as the same was again brought to tax in the period under consideration, i.e. A.Y. 2009-10. The assessee prays that in view of the above facts, the addition of the sundry creditor outstanding balance of `7,01,46,481/- in the name of M/s. Koel would not be chargeable to tax in the period relevant to A.Y. 20090-10 and therefore ought to be deleted. 4.1.2 The learned A.R. for the assessee was heard in support of the grounds raised. It was submitted by the learned A.R. for the assessee that the addition under section 41(1) of the Act of the amount of `7,01,46,481/- being the outstanding sundry creditor balance as on 31.03.2009 of M/s. Koel, on grounds of cessation of liability was a conclusion reached by the authorities below, i.e. AO/CIT(A) on a wrong assumption and appreciation of facts of the matter in respect of when the ROC, Ministry of Corporate 4 ITA 1224/Mum/2014 Firestorm Electronics Corp. P. Ltd. Affairs, GOI was in the process of ‘striking off’ the name of M/s Koel. The learned A.R. for the assessee pointed out that since the case on hand was taken up for scrutiny by issue of notice under section 143(2) of the Act dated 24.09.2010, the AO must have accessed the website of the Ministry of Corporate Affairs, only thereafter in order to notice that the sundry creditors M/s. Koel was in the process of being ‘struck off’. This process of striking off, it is submitted, was in the period relevant to A.Y. 2011-12, i.e. the assessment year in which the outstanding balance in the case of ‘Koel’ was written back and offered to tax by the assessee. In this regard, the learned A.R. for the assessee took us through the paper book (pages 1 to 113), papers of which were certified as having been filed before the authorities below. The learned A.R. for the assessee specifically drew the attention of the Bench to the assessee’s Audited Financials for the year ended March 31st 2009 and March 31st 2011 at pages 4 to 52 of the paper book in order to show that the said sundry creditor balance pertaining to ‘Koel’ was outstanding in the assessee’s Balance Sheet as one 31.03.2009 and was written back in the assessee’s Profit & Loss Account for the year ended 31.03.2011; does not appear in the Balance Sheet as on 31.03.2011 and consequently offered to tax in the assessee’s hands in period corresponding to A.Y. 2011-12. Admission of additional evidence in respect of ground No. 1(1.1 to 1.7) 4.2.1 In this regard, the assessee vide letter dated 02.04.2016 has filed an application for admission of additional evidence relating to the addition of `7,01,46,481/- made on account of cessation in trading liability of ‘Koel’ under section 41(1) of the Act attached therewith as paper book-2 (pages 1 to 6) comprising copies of the following documents: - i. Notice dated 04.02.2010 from Ministry of Corporate Affairs, Government of India. ii. Notice dated 31.04.2010 from Ministry of Corporate Affairs, Government of India. iii. Notice dated 21.06.2010 from Ministry of Corporate Affairs, Government of India.
5 ITA 1224/Mum/2014 Firestorm Electronics Corp. P. Ltd. iv. Notice dated 21.09.2010 from Ministry of Corporate Affairs, Government of India. v. Extract of official gazette dated 26.02.2012. It was pleaded by the learned A.R. for the assessee that in addition to the details filed in paper book-1 (pages 1 to 113), the aforesaid documents are vital and essential for the purpose of establishing that whether the name of ‘Koel’ was in the process of being struck off in the year under consideration, i.e. A.Y. 2009-10 and when ‘Koel’ was actually ‘struck off’. It is submitted that the aforesaid documents (supra) were not available with the assessee at the time of assessment proceedings before the AO or in the appellate proceedings before the learned CIT(A). It is prayed that the aforesaid documents be admitted as additional evidence under Rule 29 of the Appellate Tribunal Rules, 1963. 4.2.2 The learned D.R. opposed admission of the additional evidence filed by the assessee, but submitted that if the additional evidence is to be admitted for consideration, then in all fairness the issue in dispute alongwith the additional evidence should be remanded to the file of the AO for de novo examination of this issue afresh. 4.2.3 We have heard both parties in respect of the assessee’s application for admission of additional evidence filed by the assessee in respect of the issues raised in grounds No. 1 (1.1 to 1.7) of this appeal. On an appreciation of the material on record on this issue of dispute and the additional evidence sought to be brought on record by the assessee, we are of the considered view that in the light of the factual matrix of the issue and conflicting claims, as discussed in paras 4.1.1 to 4.2.2 of this order (supra), the aforesaid documents are essential and would go to the root of the matter to establish whether or not the process of ‘Koel’ being ‘struck off’ was in process in the year under consideration, i.e. A.Y. 2009-10 as contended by the authorities below or in A.Y. 2011-12 as submitted by the assessee. In this view of the matter, in the interest of justice and equity, we admit the additional evidence filed by the assessee for consideration and adjudication of the issue in dispute. We, therefore, deem it appropriate to set aside the finding of the authorities below that there was a cessation of 6 ITA 1224/Mum/2014 Firestorm Electronics Corp. P. Ltd. liability under section 41(1) of the Act in respect of the sundry creditors balance of `7,01,46,481/- of ‘Koel’ in the year under consideration or the finding that the same was assessable under section 28(i) and 28(iv) of the Act and restore this issue back to the file of the AO to examine the issue afresh factually and legally in the light of the submissions put forth by the assessee in paper book-1 (pages 1 to 113) and the additional evidences in paper book-2 (pages 1 to 6) and adjudicate thereon in accordance with law after affording the assessee adequate opportunity of being heard in the matter and to file further submissions/ details required in the matter. It is ordered accordingly. Consequently, ground Nos. 1(1.1 to 1.7) of the assessee’s appeal are treated as allowed for statistical purposes.
Ground No. 2 (2.1) - Charging of Interest under section 234B and 234C of the Act. 5.1 In this ground the assessee denies itself liable to be charged interest under section 234B and 234C of the Act. The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon'ble Apex Court in the case of Anjum H. Ghaswala & Others (252 ITR 1) (SC) and we therefore uphold the AO’s action in charging the said interest. The AO is, however, directed to recompute the interest chargeable under section 234B and 234C of the Act, if any, while giving effect to this order.
Ground No. 3, being general in nature calls for no adjudication and is therefore dismissed as infructuous.
Additional Grounds of Appeal
7.1 By letter dated 14.04.2016, the assessee has raised the following additional grounds of appeal in respect of the charge of interest under section 234A of the Act: -
1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals)-1, Mumbai [“the CIT(A)”] erred in not giving any specific finding on the additional grounds filed (vide letter dated February 14, 2013) during the course of appellate proceedings relating to levy of interest of Rs.41,27,940/- u/s. 234A of the Income-tax Act, 1961 (“the Act”).
7 ITA 1224/Mum/2014 Firestorm Electronics Corp. P. Ltd. 1.1. The Learned CIT(A) erred in not appreciating the fact that the Return of Income was filed on September 30, 2009 which was before the due date of filing of return of income u/s. 139(1) of the Act and as such interest u/s. 234A of the Act would not be leviable. 1.2. The Learned CIT(A) further erred in not directing the Assistant Commissioner of Income-tax-1(1), Mumbai (“the AO” to dispose off the Application of Rectification filed u/s. 154 of the Act against the levy of interest u/s. 234A of the Act. 1.3. The Appellant prays that the interest levied u/s. 234A of the Act be deleted. 2.1 The Appellant craves leave to, add to or alter or amend any of the above Grounds of Appeal.” 7.2 It is submitted that this ground challenging the charging of interest under section 234A of the Act was inadvertently omitted to be filed alongwith the other grounds of appeal and the omission thereof was not intentional. It is submitted that since the assessee had filed the return of income for A.Y. 2009-10 in time under section 139(1) of the Act, i.e. on 30.09.2009, interest under section 234A of the Act was not chargeable. However, even though this ground was raised before the learned CIT(A) by letter dated 14.02.2013, (i.e. before the impugned order was passed on 26.12.2013) the learned CIT(A) overlooked the matter and did not adjudicate thereon. It is also submitted that a rectification application under section 154 of the Act filed in this regard before the AO has also not been disposed off. It is prayed that the additional grounds be admitted and the authorities below be directed to examine the assessee’s claim in respect of non-chargeability of interest under section 234A of the Act in the case on hand and adjudicate thereon. 7.3 The learned D.R. submitted that if the additional grounds be admitted in respect of the chargeability of interest under section 234A of the Act for A.Y. 2009-10 in the case on hand, the same be remitted to the file of the AO for consideration and adjudication. 7.4 We have heard both parties and perused and carefully considered the material on record. After due consideration of the grounds raised in respect of the chargeability or otherwise of interest under section 234A of the Act for