In this case Ld.CIT(A) has in fact restored the matter to the file of the Assessing Officer for re-consideration and verification from the bank about the amount of actual cessation which amounts to setting aside the matter to the file of the Assessing Officer, and such action is beyond the powers confirmed upon the Ld.CIT(A) while dealing with appeal. So, action of the CIT(A) to this extent being not justified is set aside.
INCOME TAX APPELLATE TRIBUNAL, DELHI
ITA No.5507/Del./2011 – (Assessment Year: 2006-07)
Late Shri Shyam Sunder Chopra,
L/H 1. Smt. Shashi Chopra (Wife)
2. Mrs. Shweta Sood (Daughter)
PER U.B.S. BEDI, J.M.
This appeal of the Revenue is directed against the order passed by the CIT (A)- XXV, New Delhi, dated 20.09.2011 relevant to assessment year 2006-07, whereby department besides challenging deletion of addition of Rs.13,23,433/- made by the Assessing Officer, has also challenged the action of the CIT(A) in directing the Assessing Officer to verify the bank amount of actual cessation that amounts to setting aside the assessment.
2. The Assessing Officer passed order u/s 143(3) on 30.12.2008 determining total income at Rs.20,28,880/- as against returned income of Rs.85,450/-.
3. Assessee took up the matter in appeal and challenged the action of Assessing Officer and it was submitted before first appellate authority that the assessee is a proprietor of M/s Ceco Electronics and is engaged in the business of transformer manufacturing but the business has been closed for the last ten years. The assessee had shown the sundry creditors of Rs.65,96,929/- which included the liability of Rs.44,32,266/- of Oriental Bank of Commerce (OBC) Chandni Chowk, Delhi. Since the business of the assessee was closed and the assessee was not able to pay the liability of the bank, there was a compromise between the bank and the assessee through the Delhi State Legal Services Authority (Lok Adalat) for settling the accounts of the bank. As per the compromise formula the assessee was required to pay the amount of Rs.31,08,833/- as against the liability of Rs.44,32,266/- and as such there was cessation of liability of Rs.13,23,433/- (Rs.44,32,266)(-) Rs.31,08,833/-). Since there was a cessation of liability to extent of Rs.13,23,433/- the Assessing Officer has made the addition for this amount u/s 41(1).
4. The assessee is in appeal against the order of the Assessing Officer and it is submitted that the Assessing Officer is not justified to make the addition as the compromise formula with the bank did not work and as the assessee could not fulfill the conditions of the award of the Lok Adalat i.e. the assessee could not pay the settled amount of Rs.31,08,833/-. The assessee had also submitted a letter dated 29.07.2005 of the OBC before the Assessing Officer in which it was informed that the compromise formula and all the concessions to the assessee has been cancelled as the assessee did not make the payment of the installments as per the award of he Lok Adalat. The Assessingb Officer did not accept the explanation of the assessee and has made the addition of Rs.13,23,433/- on the ground of cessation of liability u/s 41(1). CIT(A) while considering the submissions of the assessee has concluded to hold as per para.3.3 of his order, with respect to first issue, as under:
“3.3 I have considered the order of the Assessing Officer and the submissions of the assessee and I find considerable merit in the submission of the assessee that the Assessing Officer is not justified to make the addition when actually there is no cessation of liability of Rs.13,23,433/- as the assessee has failed to get the concession of Rs.13,23,433/- which was allowable only on the condition of payment of the balance/settled amount of Rs.31,08,833/- as against the total liability of Rs.44,32,266/-. Since the bank has not granted any concession to the assessee as per the bank’s letter dated 29.7.2005 (copy enclosed and marked as Annexure –A), it will be not be fair and proper to sustain this addition as the assessee apparently did not gain any cessation of any liability. After considering all the facts and circumstances of the case, I am of the view that this addition cannot be sustained without further verification by the Assessing Officer from the bank and accordingly, the addition made by the Assessing Officer is deleted subject to the verification by the Assessing Officer form the bank regarding the actual cessation of liability.
5. Aggrieved by this order of CIT(A), department has come up in appeal and raised two grounds, firstly that CIT(A) has erred in deleting the addition of Rs.13,23,433/- made by the Assessing Officer subject to the verification by Assessing Officer from the bank that the amount of actual cessation which amounts to setting aside the assessment order, therefore, order of CIT(A) who is not competent to set aside the order needs to be reversed, which may be reversed.
6. Assessee in this case has expired on 6.5.2012 and Smt. Shashi Chopra, wife of the assessee appeared and filed death certificate issued by Municipal Corporation of Delhi certifying the death of the assessee on 6.5.2012 and submitted that widow and daughter of the assessee are only the legal heirs of the assessee. So, after obtaining no objection from the Revenue, wife and daughter of the assessee are substituted as legal heirs and fresh notices in the names of the legal heirs were issued. In response thereto, widow of the assessee appeared on her behalf and on behalf of her daughter in this appeal and submitted that CIT(A) has passed a fresh well reasoned order. So, there was no justification for the department to file any further appeal. Therefore, appeal of the Revenue should be dismissed.
7. Having heard both the sides and considering the material on record we find that in this case Ld.CIT(A) has in fact restored the matter to the file of the Assessing Officer for re-consideration and verification from the bank about the amount of actual cessation which amounts to setting aside the matter to the file of the Assessing Officer, and such action is beyond the powers confirmed upon the Ld.CIT(A) while dealing with appeal. So, action of the CIT(A) to this extent being not justified is set aside. But, since the amount of actual cessation has to be ascertained from the bank in order to verify the claim of the assessee, therefore, we find it just and appropriate to set aside the order of the authorities below in this regard and restore the matter back on the file of the Assessing Officer with the direction to re-decide the issue afresh after making enquiry from the concerned bank and by giving the opportunity to the assessee. We hold and direct accordingly.
8. As a result, the appeal filed by the department gets accepted for statistical purposes.
Order pronounced in open court soon after the conclusion of the hearing on 02.08.2012.