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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI R.C. SHARMA, AM & SHRI SANDEEP GOSAIN, JM
आदेश / O R D E R Per Sandeep Gosain, J. M.: The Present Appeal has been filed by the revenue against the order of Commissioner of Income Tax (Appeals) - 36, dated 29.08.2013 for A.Y. 2010-11 thereby CIT(A) has partly allowed the appeal filed by the assesee against the order of AO dated 14.12.2012 on the grounds of appeal mentioned herein below.
(A.Y. 2010-11) DCIT Vs. M/s Lawrence Dyes& Petrochemicals Pvt. Ltd.
“On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.44,78,815/- u/s 41(1) being amount due to Shri Thomos D’mello stating that the issue is covered by settlement commission order for A.Y. 1997-98 to 2004-05, when the assessment year involved here is A.Y. 2010-11.”
2. “On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in not clearly bringing out the facts, as to how the Settlement Commission’s order covered the said issue also.”
3. “On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in stating that the issue is coverd by Settlement Commission order for A.Y. 1997-98 to A.Y. 2004-05, when the amount involved in the said order and A.Y. 2010-11 are different.”
4. The Appellant craves leave to add, to amend and/or to alter, any of the grounds of appeal, if need be.
5. The appellant, therefore, prays that on the gounds stated above, the order of the CIT(A)-36, Mumbai may be set aside and that of the Assessing Officer restored.”
The brief facts of the case are that the assessee company shown to have been engaged in the business of trading in dyes and chemicals. The assessee E-filed
(A.Y. 2010-11) DCIT Vs. M/s Lawrence Dyes& Petrochemicals Pvt. Ltd. return of income from A.Y. 2010-11 on 23.09.2010 thereby showing loss at Rs.12,55,392/-. The return was processed u/s 143(1) of the I.T. Act. Subsequently the case of the assessee was selected for scrutiny and notice u/s 143(2) of the I.T.
Act was issued and served on the assessee. After seeking reply from the assessee, AO passed order of assessment thereby making additions on account of cessation of liability u/s 41(1) of Rs.44,78,815/-.
3. Aggrieved by the order of the AO, revenue filed an appeal before the CIT(A) and the CIT(A) considering the case of the assessee and deleted the addition vide order dated 14.12.2012.
3.1 Aggrieved by the order of the CIT(A) the assessee filed the present appeal before us on the grounds mentioned herein above.
4. At the very outset, ld. DR representing the revenue submitted that on perusal of balance sheet for year ending 31.3.10, the assessee has shown certain current liabilities and out of those it has been shown that Rs.44,78,815/- pertains to M/s.
Bharat Chemicals & Paint Industries which comprising a sum of Rs.29,45,538/- received in the name of the firm and Rs.15,33,277/- towards personal account aggregating to Rs.44,78,815/-. Although the confirmation was submitted by the (A.Y. 2010-11) DCIT Vs. M/s Lawrence Dyes& Petrochemicals Pvt. Ltd. assessee but the same was not bearing the seal and stamp of the firm. In addition copy of accounts in the books of Bharat Chemicals & Paint Industries had been furnished and it was stated that the liability stands long back since 1997 and the assessee was unable to provide any details. It was further submitted by the ld. DR that M/s. Bharat Chemicals & Paint Industries is the proprietary concern of Shri Thomas M’Demelo one of the director of the assessee company. The said company is closed and no business activities are carried out from the said concern. It was the specific stand taken by the ld. DR that on verification of the records of Shri.
Thomas M’ Dmello , it was noticed that he is not showing any amount in his debit side of his balance sheet pertaining to the company i.e. M/s. Lawrence Dyes & Petrochemicals Pvt. Ltd. Therefore, after considering the facts the AO has rightly held that the unpaid liability of Rs.44,78,815/- is nothing but just an entry in the books of the assessee showing on date 31.3.2010 hence the said amount was rightly considered as cessation of liability and accordingly taxed u/s 41(1) of the I.T. Act. Ld. DR further submitted that the CIT(A) has merely deleted the additions on the ground that the matter is covered by settlement order for A.Y. 1997-98 to 2004-05 whereas the present assessment year involves here is A.Y. 2010-11. In such circumstances, the ld. CIT(A) erred in not clearly bringing out the facts as to how the said settlement commission orders covered the said issue.
(A.Y. 2010-11) DCIT Vs. M/s Lawrence Dyes& Petrochemicals Pvt. Ltd. 5. On the other hand the ld. AR representing the assessee relied upon the orders passed by the CIT(A) and submitted that the AO had wrongly made addition u/s 41(1) as the same was not trading liability and was unsecured loan from a director and it was further submitted that unsecured loan received was not a new loan but was very old and the same was confirmed by loaner. The ld. AR also relied upon the documents submitted during the course of CIT(A) hearing wherein chart of loans received from the directors was referred and the said chart contains the details from the Financial Year 1997-98 to Financial Year 1999-2010. It was also submitted that the Balance sheet of the company contains the name of assssee in all these years. The assessment of the assessee as well as the company has been completed u/s 143(3) for all the above years. And in this respect extracts from the balance sheet of the company of the few years were also placed before the CIT(A).
It was submitted by the ld. AR that the assessee had borrowed huge amount form Canara Bank and one of the condition of the loan sanctioned is that the company will not repay the loans of director and associates till the bank loan continue and in this respect copy of sanction letter was also placed on record before CIT(A). It was also submitted that the Hon’ble Settlement Commission has passed a composite order in the case of assssee and other associates. The order passed pertains to A.Y. 1997-98 to 2004-05 wherein the total income determined by the Hon’ble
(A.Y. 2010-11) DCIT Vs. M/s Lawrence Dyes& Petrochemicals Pvt. Ltd. Settlement Commission was Rs.2,28,27,843/- the Hon’ble Settlement Commission passed covering all issues.
We have heard the counsels of both the parties and also perused the material on record and orders passed by revenue authorities. We have noticed that the AO while making additions has taken a stand that the amount shown by the assessee towards M/s. Bharat Chemicals & Paint Industries has not been shown in the debit side of the balance sheet of Shri Thomas M’Demelo. Therefore it was decided by the AO that since the creditors in this books is not showing any such amount to be receivable from the assesse’s company therefore it was held that the matter was covered by sec-41(1) of Income tax Act, 1961 and hence the amount was taxed under Income Tax Act, 1961 whereas on the contrary the ld. CIT(A) while deleting the addition has decided issue, the operative portion of the CIT(A) are mentioned below:
“6.1 The appellant has submitted in the written submissions as under:
“1. The learned Assessing Officer has made an addition of Rs.44,78,815/- u/s 41(1). The same is not a trading liability and is unsecured loan from a director.
2. It is also important to note that the unsecured loan received is not a new loan but is very old loan and the same has been (A.Y. 2010-11) DCIT Vs. M/s Lawrence Dyes& Petrochemicals Pvt. Ltd. confirmed by loaner. We are once again enclosing a chart of the loans received by the appellant form the director. The chart
contains the details form F.Y. 1997-98 to F.Y. 2009-2010. The balance sheet of the company contains the name of the appellant in all these years. The assessment of the appellant as ell as the company has been completed u/s 143(3) for all the above years. Extracts from the balance sheet of the company of the few years are enclosed herewith.
It is also substantial to mention that the appellant has borrowed
huge amount form Canara Bank and one of the condition of the loan sanctioned is that the company will not repay the loans of director and associates till the bank loan continue. A copy of the sanction letter is once again enclosed.
It is important to mention that the Hon’ble Settlement
Commission has passed a composite order in the case of the appellant and other associates. The order pertains to the A.Y.
1997-98 to 2004-05. Hence, all the issues for the above years have been settled by the Hon’ble Settlement Commission and re- consideration of the same by the learned Assessing officer is not permissible as the same is beyond his jurisdiction. Total income
(A.Y. 2010-11) DCIT Vs. M/s Lawrence Dyes& Petrochemicals Pvt. Ltd. determined by the Hon’ble Settlement Commission is Rs.2,28,37,843/-. A copy of the order of the Hon’ble Settlement
Commission has already been filed.”
6.1 We have considered and analyzed the orders passed by the CIT(A), while dealing with the said grounds the CIT(A) has taken a specific stand that since the Hon’le Settlement Commission has passed composite order covering all the issues and, therefore, the addition made by the AO u/s 41(1) of I.T. Act, would be deleted. On the perusal of the orders passed by the CIT(A), we are of the considered opinion that CIT(A) while appreciating the order passed by the Hon’ble Settlement Commission has also considered the chart of loans received from the director and the said chart contains the details from F.Y. 1997-1998 to 2009-2010.
The CIT(A) also appreciated the balance sheet containing the name of the assessee in all those years apart from that CIT(A) has also considered the other documents submitted by the assessee. The CIT(A) has correctly reached to the conclusion that since the Hon’ble Settlement Commission had passed composite order of the assessee and its associate concerns on all the issues which have been settled by the Hon’ble Commission and therefore re-consideration of the same by the AO is not permissible. Since the Hon’ble Settlement Commission had already determined the total income of Rs.2,28,37,843/- therefore, keeping in view those facts the addition was rightly deleted. We are further of the view that merely because outstanding
(A.Y. 2010-11) DCIT Vs. M/s Lawrence Dyes& Petrochemicals Pvt. Ltd. amount is appearing in the accounts for several years, the same cannot be taxed by provision of section 41(1). We found support from the following judicial orders in the case of “CITvs. Sugauli Sugar Works (P.) Ltd.” [1999] 236 ITR 518 (SC). We are also of the considered view that merely because account has become non- operational for a period of three years it does not mean that outstanding loan of assessee has cease to exist more so, when the assessee had not written off such loan in its P&L A/c. In this respect we find support from DCIT vs. Votak Excelsiour..
6.2 Considering the totality of the facts and circumstances, we hold that the orders passed by the CIT(A) are judicious and do not need any interference, therefore we uphold the orders passed by the CIT(A) and consequently dismiss the appeal filed by the revenue.
In the result, the revenue’s appeal is dismissed. Order pronounced in the open court on 4th February, 2016