Subject: DR relied upon the order of the Assessing Officer. He submitted that the assessee company itself had admitted that the amounts were outstanding for more than five-six years
Referred Sections:
Section 41(1) of the Income Tax Act, 1961,
Referred Cases / Judgments
CIT vs. TV Sundaram 222 ITR 344 (SC),
CIT vs. Vardhman Overseas Ltd., 343 ITR 408,
CIT vs. TV Sundaram Iyengar & Sons Ltd., 222 ITR 344.
CIT vs. Vardhman Overseas Ltd., 343 ITR 408
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `F', NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA No. 6650/Del/2016
Assessment Year: 2013-14
DCIT, CIRCLE-19(2), Vs. M/S PASUPATI FABRICS LTD.,
NEW DELHI 112, F-14,
ROOM NO. 221, 2ND FLOOR, CONNAUGHT PLACE,
C.R. BUILDING, NEW DELHI
I.P. ESTATE, (PAN: AAACP1338B)
NEW DELHI
(Appellant) (Respondent)
Department by Sh. Sunder Pal, Sr. DR.
Assessee by Sh. Rajan Bhatia, Adv.
ORDER
PER H.S. SIDHU, JM
This appeal is filed by the Revenue against the Order dated
14.10.2016 passed by the Ld. CIT(A)-12, New Delhi relating to
assessment year 2013-14 on the following grounds:-
i. In the facts and circumstances of the case, the Ld.
CIT(A) erred in deleting the addition of
Rs. 2,78,25,006/- made under section 41(1) of the
Income Tax Act, 1961,.
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ii. The appellant craves to be allowed to add any fresh
ground(s) of appeal and / or delete or amend any of
the ground(s) of appeal.
2. The brief facts of the case are that assessee filed its e-return on
21.01.2014 declaring NIL income. The case of the assessee was selected
for scrutiny assessment under CASS and Statutory notices u/s. 143(2) of
the Income Tax Act, 1961 (in short "Act") dated 02.09.2014 was issued.
Subsequently, notices u/s. 142(1) of the Act was issued on 29.5.2015
and various information were called for in response to which the Ld. AR of
the assessee attended the proceedings and submitted the documents /
evidences in support of its claim as called for during the proceedings. The
Assessing Officer as against the NIL returned income has assessed the
income at a loss of Rs. 8,28,836/- u/s. 143(3) of the Act vide order
dated 05.01.2016 and made the addition of Rs. 2,78,25,006/-. Against
the assessment order, assessee appealed before the Ld. CIT(A), who vide
his impugned order dated 14.10.2016 has allowed the appeal of the
assessee. Aggrieved with the impugned order, Revenue is in appeal
before the Tribunal.
3. On the other hand, Ld. DR relied upon the order of the Assessing
Officer. He submitted that the assessee company itself had admitted
that the amounts were outstanding for more than five-six years and
therefore, the assessee company obtained a benefit in the course of its
business which was assessable under section 41(1) of the Income Tax
Act, 1961. He further submitted that the assessee company did not write
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back the liability to the profit and loss account for the year under
consideration. Thus, it was submitted that there was a remission or
cessation of trading liability which resulted in a benefit to the assessee
and by relying upon the decision of Hon'ble Supreme Court of India in the
case of CIT vs. TV Sundaram 222 ITR 344 (SC), the trade liability /
sundry pertaining to the 268 parties mentioned at assessment order at
page no. 2 to 11 which amounting to Rs. 2,78,25,006/- was rightly made
by the Assessing Officer and needs to be upheld.
4. Ld. counsel for the assessee relied upon the order of the Ld. CIT(A)
and stated that the issue in dispute is squarely covered by the decision of
the Hon'ble Delhi High Court in the case of CIT vs. Vardhman Overseas
Ltd., 343 ITR 408, which the Ld. CIT(A) has relied upon in his impugned
order and deleted the addition in dispute, which does not need any
interference.
5. We have heard both the parties and perused the records especially
the impugned order. We find that Ld. CIT(A) has elaborately discussed
the issue in dispute vide para no. 9.1 to 10 at page no. 7 to 9 of the
impugned order. For the sake of clarity, we are reproducing the relevant
finding of the Ld. CIT(A) as under:-
"9.1 Appellant company was incorporated in
1991. Due to heavy losses, Assessee was
declared a sick industrial unit on 2004 and
BIFR recommended the winding up of the
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Appellant Company to the Hon'ble High
Court. Hon'ble Delhi High Court had
appointed a Provisional Liquidator for
winding up of the company on 09.07.2010.
Appellant had preferred an appeal before
Appellate Authority for Industrial and
Financial Reconstruction (AAIFR), New Delhi
which has stayed the order of Hon'ble High
Court till further orders and the matter is
under consideration of AAIFR. It had filed its
ITR on 21.1.2014 for AY 2013-14 declaring
NIL income. During the course of
assessment proceedings, Assessing Officer
observed that assessee company had
shown trade payable at Rs. 9,36,79,214/-.
Appellant Company filed a chart containing
311 parties and the period related to FY
1999-2000 onwards. However, it could not
file confirmations with respect to the various
trade creditors. Assessing Officer
disallowed the amount of Rs. 2,78,25,006/-
on account of 268 creditors as appellant
company could not submit any detail or
confirmation regarding the same.
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Assessing Officer held that the assessee
company was no longer liable to pay the
amount to these parties and the debts have
become more than 5-6 years old and,
therefore, there was a remission or
cessation of trading liability which has
resulted in benefit to the assessee.
Assessing Officer has relied on the judgment
of Hon'ble Supreme Court in the case of CIT
vs. TV Sundaram Iyengar & Sons Ltd., 222
ITR 344. Assessee is in appeal against the
same.
9.2 Appellant has submitted that the amount of
Rs. 2,78,25,006/- is outstanding in the
balance sheet as on 31.3.2013 and the
debts is payable by the appellant company
as the debts has not been written off in the
books of the accounts.
9.3 I have carefully considered the observations
of the Assessing Officer and submissions of
the Appellant. Appellant is a sick industrial
unit and BIFR has recommended for winding
up of the company. At present, the matter
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is sub-judice before the Appellate Authority
for Industrial and Financial Reconstruction
(AAIFR) which has stayed the order of
Hon'ble Delhi High Court till further orders.
Therefore, in view of the facts and
circumstances of the case, it cannot be said
that liability has ceased to exist in
Appellant's case as neither the liability has
been written back by the Appellant in its
Profit and Loss Account nor the winding up
process has been completed. Hon'ble Delhi
High Court in the case of CIT vs. Vardhman
Overseas Ltd., 343 ITR 408 has held that
there is no cessation of liability when
Assessee has not unilaterally the written
back the amounts on account of sundry
creditors in its P&L account. The facts of the
judgment of Hon'ble Supreme Court in the
case of T.V. Sundaram Iyengar are different
as in that case, Assessee had written back
the amounts as income in its Profit & Loss
Account. Therefore, in view of the aforesaid
judgement of Hon'ble Delhi High Court and
the facts and circumstances of the case, the
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addition of Rs. 2,78,25,006/- made by
Assessing Officer is deleted.
10. In the result, the appeal is allowed."
5.1 After perusing the aforesaid finding of the Ld. CIT(A), we find that
Assessee is a sick industrial unit and BIFR has recommended for winding
up of the company. It is also noted that at present, the matter is sub-
judice before the Appellate Authority for Industrial and Financial
Reconstruction (AAIFR) which has stayed the order of Hon'ble Delhi High
Court till further orders. Therefore, it cannot be said that liability has
ceased to exist in Assessee's case as neither the liability has been written
back by the Assessee in its Profit and Loss Account nor the winding up
process has been completed. We further note that the Hon'ble Delhi High
Court in the case of CIT vs. Vardhman Overseas Ltd., 343 ITR 408 has
held that there is no cessation of liability when Assessee has not
unilaterally the written back the amounts on account of sundry creditors
in its P&L account. It is also noted that the facts of the judgment of
Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar are different
as in that case, because the Assessee had written back the amounts as
income in its Profit & Loss Account. Therefore, in view of the aforesaid
judgement of Hon'ble Delhi High Court and the facts and circumstances of
the case, the addition of Rs. 2,78,25,006/- made by Assessing Officer was
rightly deleted by the Ld. CIT(A), and therefore, there is no illegality or
infirmity in the finding of the Ld. CIT(A) on the issues in dispute, hence,
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we uphold the action of the Ld. CIT(A) on the issues in dispute and reject
the grounds raised by the Revenue.
6. In the result, the Appeal of the Revenue is dismissed.
Order pronounced on 04-06-2019.
Sd/- Sd/-
[B.R.R. KUMAR] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date: 04/06/2019
SRBhatnagar
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4.CIT (A) 5. DR, ITAT
By Order,
Assistant Registrar, ITAT, Delhi Benches
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