Case Law Details
Assessee vide letter dated 28th Jan 2013 has submitted a statement showing the details of sundry credits from the year 2000 to 2012. It has been further claimed that the amount which was outstanding at Rs. 69,32,307 in the year 2000 has been reduced to Rs.19,32,372 at the end of the A.Y. 2012-13. Through this letter the assessee wants to bring into the knowledge of this Tribunal that the liability has not ceased, rather he has been repaying the amount to his creditors. The outstanding amount is now a sum of Rs.19,32,372 only against the amount of 48,89,025 relating to A.Y. 2007-08, which has been added by the Assessing Officer to his total income.
In view of the newly developed facts, it would be in the interest of justice to remand the issue back to the Assessing Officer for verifying the genuineness of repayment of loans as claimed by the assessee. We may observe that in the list submitted by the assessee, he has shown to have made certain payments during the A.Ys. 2009-10 and 2010-11. However, neither this fact was brought into the knowledge of the Assessing Officer before completion of the assessment on 27.11.2009 nor this plea or this fact of repayment was brought into the notice of the learned CIT(A) during the pendency of the appeal or till date of order on 14.10.2010. No such plea was taken by the assessee in the grounds of appeal before the Tribunal. It is only after the completion of the arguments that the assessee has come with a new fact that he has been regularly repaying the loan amount to the creditors as detailed in the list. This type of explanation given by the assessee at this stage seems to be suspicious. However, the interest of justice demands that this explanation, though suspicious, is required to be verified. If the assessee has really repaid the amount to the creditors then it will be injustice to him, if the amount is added to his income. Under such circumstances, we remand this case back to the file of the Assessing Officer for fresh assessment in accordance with law and with direction to scrutinize, verify and make necessary investigations regarding the genuineness of the assessee’s claim of repayment to the sundry creditors
INCOME TAX APPELLATE TRIBUNAL, MUMBAI
BEFORE SHRI P M JAGTAP, ACCOUNTANT MEMBER
& SHRI SANJAY GARG, JUDICIAL MEMBER
ITA No.: 8408/Mum/2010 Assessment Year: 2007-08
Mr. Yusuf R Tanwar Vs.ITO
Date of pronouncement: 28.02.2013
ORDER
Per Sanjay Garg, JM: The present appeal has been preferred by the assessee against the order of the CIT(A) dated 14.10.2010, vide which he confirmed the additions of Rs.48,89,025 to the income of the assessee made by the Assessing Officer vide assessment order dated 27.11.2009 u/s. 143(3) of the Income Tax Act relevant to A.Y. 2007-08 holding the cessation of liability of sundry creditors, invoking provisions of section 41(1) of the Income Tax Act.
2. The brief facts of the case are that the assessee, an individual, was engaged in the business of civil contract, filed his return of income declaring the income at Rs.2,10,060. The Assessing Officer during the assessment proceedings found that the assessee had shown an amount of Rs.48,89,025.96 as current liabilities towards sundry creditors. The Assessing Officer asked the assessee to give details of the said sundry creditors along with their name address and also confirmation of the same. The assessee failed to supply the requisite information and, hence, the Assessing Officer treated the said liabilities as income of the assessee and added this amount to the total income of the assessee. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the learned CIT(A). The learned CIT(A) also did not find any infirmity in the order of the Assessing Officer and, hence, confirmed the additions made by him. The assessee is thus in appeal before this Tribunal.
3. We have heard the learned representative of the parties and have also gone through the material on record. The Assessing Officer when called for the details such as the name, addresses and confirmations of the sundry creditors from the assessee, the assessee vide his letter dated 08.05.2009 claimed that all the credits pertain to the assessment year prior to A.Y. 2002-03 and that it would not be proper and prudent on the part of the assessee to give confirmation letters from the sundry creditors as by doing so, the period of limitation would start. The assessee also failed to provide the addresses and other details of the creditors. However, at the same time, the assessee claimed before the Assessing Officer that though the limitation period for claiming the amount by the creditor had expired, he had not extinguished the debt so as to prevent the creditors from enforcing the debts against the assessee. He further stressed that only the right to recovery had ceased but not the liability. Hence, he has rightly shown the amount of Rs.48,89,025 as current liability on account of sundry creditors. The Assessing Officer after considering the submissions of the assessee in para 5.4 i of the assessment order has observed as under:
“i.After repetitive opportunities during the course of assessment proceedings, the representative for the assessee vide order sheet noting dated 3.11.2009 submitted that the assessee is not able to provide addresses of sundry creditors. The assessee is claiming that these liabilities pertain to period prior to A Y 2002-03 and are due to expenses claimed by her at that time. The statute does not permit to assessee to claim certain business liabilities in its balance sheet ad, at the same, does not disclose details of these business liabilities in the name of limitation act or any other reason. The primary details were privileged knowledge ofthe assessee and therefore, the assessee had to prove that these trade liabilities were genuine and in existence and not settled in some other manner or by some other arrangement. In the decision of Kesoram Industries &Cotton Mills Ltd(1992) (196 ITR 845 (Cal) the hon ‘ble High court held that whether the liability of the assessee has been fully discharged is within 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 cessation of the liability of the assessee.”
4. The authorized representative citing various authorities has submitted before us that the assessee has not written back the accounts of the sundry creditors into profit and loss account. The liability has regularly been shown in the balance sheet. The assessee’s liability to the creditors thus subsists and has not ceased, whatever is ceased is the right of the creditors under law to recover the same being barred by limitation in view of the provisions of the Limitation Act 1963. He has pressed that the amount is not thus assessable u/s. 41(1) of the Income Tax Act. He has strongly relied upon the authority of the Hon’ble Delhi High Court styled as “CIT vs. Shri Vardhaman Overseas Ltd.” (2012) 343 ITR 408 (Del). Apart from the said authority he has relied upon the following decisions:
“CIT vs. T V Sundaram Iyengar & Sons Ltd.” 222 ITR 344 (SC)
“DCIT vs. Hotel Excelsior Ltd.” 141 TT3 248 (Del)
“ACIT Circle -1 vs. Samrat Rice Mills (P) Ltd.” 54 SOT 1 (Del)
“ITO vs. Bhavesh Prints (P.) Ltd.” 46 SOT 268 (Ahd)
“Kaps Advertising vs. ITO” 48 SOT 63 (Del)
“CCIT vs. Kesari Tea Co. Ltd.” 254 ITR 434 (SC)
“CIT vs. Sugauli Sugar Works (P.) Ltd.” 236 ITR 518 (SC)
5. On the other hand, the learned DR has relied upon a recent authority of the Hon’ble Delhi High Court styled as “CIT vs. Chip soft Technology (P.) Ltd.” 210 Taxman 173 (Del), wherein it has been held as under:
“9. Two aspects are to be noticed in this context. The first is that the view that liability does not cease as long as it is reflected in the books, and that mere lapse of time given to the creditor or the workman, to recover the amounts due, does not efface the liability, though it bars the remedy. This view, with respect is an abstract and theoretical one, and does not ground itself in reality. Interpretation of laws, particularly fiscal and commercial legislation is increasingly based on pragmatic realities, which means that even though the law, permits the debtor to take all defences, and successfully avoid liability, for abstract juristic purposes, he would be shown as a debtor. In other words, would be illogical to say that a debtor or an employer, holding on to unpaid dues, should be given the benefit of his showing the amount as a liability, even though he would be entitled in law to say that a claim for its recovery is time barred, and continue to enjoy the amount. The second reason why the assessee’s contention is unacceptable is because with effect from 1-4-1997 by virtue of Finance Act, 1996 (No.2), an Explanation was added to Section 41 which spells out that “loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof” shall include the remission or cessation of any liability by an unilateral act by the first mentioned person under clause”. The expression “include” is significant; Parliament did not use the expression “means”. Necessarily, even omission to pay, over a period of time, and the resultant benefit derived by the employer~assessee would therefore qualify as a cessation of liability, albeit by operation of law.”
6. We may observe that one of the Hon’ble Judges of the High Court of Delhi was part of the Division Bench as in both the authorities i.e. ” Shri Vardhaman Overseas Ltd.” (supra), and “Chipsoft Technology (P.) Ltd.” (supra). Under such circumstances, it cannot be said that both the authorities are contradictory to each other, rather the law laid down by the authority in the case of “Chipsoft Technology (P.) Ltd.” (supra), supplements but not supplants the law laid down by the Hon’ble Delhi High Court in the case of “Shri Vardhaman Overseas Ltd.” (supra). In the case of “Chipsoft Technology (P.) Ltd.”, the Hon’ble High Court has categorically held that it would be illogical to say that a debtor or an employer, holding on to unpaid dues, should be given the benefit of his showing the amount as a liability, even though he would be entitled in law to say that a claim for its recovery is time barred, and continue to enjoy the amount. The facts of the present case are also squarely covered by the law laid down by the Hon’ble Delhi High Court in the case of “Chip soft Technology (P.) Ltd.”, (supra). In the case in hand also the assessee on one had is continuously for the last so many years showing the amount in question as his liability towards sundry creditors and at the same time when the Assessing Officer asked for the details of the creditors he refused to provide the same saying that it would amount to acknowledgement of the debt and the creditors may sue him for recovery of the amount. He even failed to provide the addresses of the creditors, prove the genuineness or the creditworthiness of the creditors. Under law, the assessee cannot be allowed to approbate and reprobate at the same time. On one hand he wants to avoid the liability to pay the tax saying that the amount is legally payable by him as a liability but on the other hand he does not want to pay the said amount to the creditors but enjoy the same without being added to his income. The assessee is blowing hot and cold in the same breath, which in our view is not permissible under law. So far as the authorities relied upon by the assessee are concerned, with due respect it is submitted that in those authorities, it was not established that the assessee had no intention to pay back the debts but in the case in hand, the assessee has refused to divulge the details of creditors because of his intention not to pay back the loan amount as was claimed by him in his reply to the Assessing Officer. Hence, the authorities relied upon by the assessee, as detailed above, are quite distinguishable on their own facts.
7. The case was heard on merits on 22nd Jan 2013 and the judgment was reserved. Now, the assessee vide letter dated 28th Jan 2013 has submitted a statement showing the details of sundry credits from the year 2000 to 2012. It has been further claimed that the amount which was outstanding at Rs. 69,32,307 in the year 2000 has been reduced to Rs.19,32,372 at the end of the A.Y. 2012-13. Through this letter the assessee wants to bring into the knowledge of this Tribunal that the liability has not ceased, rather he has been repaying the amount to his creditors. The outstanding amount is now a sum of Rs. 19,32,372 only against the amount of 48,89,025 relating to A.Y. 2007-08, which has been added by the Assessing Officer to his total income.
8. In view of the newly developed facts, it would be in the interest of justice to remand the issue back to the Assessing Officer for verifying the genuineness of repayment of loans as claimed by the assessee. We may observe that in the list submitted by the assessee, he has shown to have made certain payments during the A.Ys. 2009-10 and 2010-11. However, neither this fact was brought into the knowledge of the Assessing Officer before completion of the assessment on 27.11.2009 nor this plea or this fact of repayment was brought into the notice of the learned CIT(A) during the pendency of the appeal or till date of order on 14.10.2010. No such plea was taken by the assessee in the grounds of appeal before the Tribunal. It is only after the completion of the arguments that the assessee has come with a new fact that he has been regularly repaying the loan amount to the creditors as detailed in the list. This type of explanation given by the assessee at this stage seems to be suspicious. However, the interest of justice demands that this explanation, though suspicious, is required to be verified. If the assessee has really repaid the amount to the creditors then it will be injustice to him, if the amount is added to his income. Under such circumstances, we remand this case back to the file of the Assessing Officer for fresh assessment in accordance with law and with direction to scrutinize, verify and make necessary investigations regarding the genuineness of the assessee’s claim of repayment to the sundry creditors
9. In the result, the appeal is partly allowed.
Order pronounced in the open court on this 28th day of February 2013.
