2012 (9) TMI 123 - AT - Income Tax

Addition on accrued income on actionable claim - that Official Liquidator of the High Court had allowed the claim in favour of the assessee - Held that - On perusal of the notice of admission of proof it reveals that the claim to the extent of Rs.8,06,69,709/- was allowed and it was not paid to the assessee and the aforementioned claim after a gap of almost one year i.e. on 10/1/2007 was transferred by the deed of assignment by the proprietary concern of the assessee to Grand , thus the said amount cannot also be said to have accrued to the assessee as what has been ordered by the Official Liquidator is the notice of admission of proof and not the admission of the payment to be made of the said amount. The payment of the said amount will depend upon several other circumstances and it is a matter of fact that till date the assessee had not received any amount and cannot be taxed in the hands of the assessee - in favour of assessee. Deemed income u/s 41(4) - Held that - The mention of section 41(4) in the computation of income filed by the assessee suggests that the assessee had earlier claimed the debt as bad debt. Therefore it just and proper to direct the AO to verify from the assessment records of the assessee that whether or not assessee has claimed the debt of Swadeshi as bad debt and if the assessee did not claim the debt as bad in earlier years then the claim of assessee will be accepted that he has already been offered as income by the assessee in his computation of income - in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Calculation of accrued income on actionable claim assigned to another entity.
2. Deletion of addition made by AO under section 41(1) of the Income Tax Act.
3. Verification of fresh evidence submitted during the appellate proceedings.

Issue-Wise Detailed Analysis:

1. Calculation of Accrued Income on Actionable Claim:
The primary issue raised by the assessee was the erroneous calculation of accrued income by the CIT(A) on an actionable claim. The claim was assigned to M/s Grand View Estate Private Limited, and the assessee argued that the rights to the debts were no longer with them as the debtor company was under liquidation. The assessee had already received Rs. 4,36,37,583/- against the claim and offered this amount for taxation. The CIT(A) sustained the addition of Rs. 3,70,32,126/- based on the Official Liquidator's order, which allowed the claim of Rs. 8,06,69,709/-. However, the Tribunal found that the amount had not been received or accrued to the assessee and that the assignment deed transferred all rights to the assignee. Consequently, the Tribunal directed the AO to verify if the debt was claimed as bad debt in earlier years and to adjust the income accordingly.

2. Deletion of Addition Made by AO Under Section 41(1):
The revenue's appeal contested the deletion of an addition of Rs. 3,44,91,214/- made by the AO under section 41(1) of the Income Tax Act. The AO added this amount as the assessee did not file confirmations from creditors, which were later submitted to the CIT(A). The Tribunal noted that the CIT(A) accepted these confirmations without confronting the AO, violating Rule 46A of the Income Tax Rules, 1962. Thus, the Tribunal restored the issue to the AO for re-examination, ensuring the assessee gets a reasonable opportunity to present their case.

3. Verification of Fresh Evidence Submitted During Appellate Proceedings:
The revenue also raised concerns about the CIT(A) not allowing the AO to verify fresh evidence submitted by the assessee during the appellate proceedings. The Tribunal acknowledged this procedural lapse and restored the issue to the AO for re-adjudication, ensuring compliance with Rule 46A and providing the AO an opportunity to examine the new evidence.

Conclusion:
The Tribunal allowed both the assessee's and the revenue's appeals for statistical purposes. It directed the AO to verify whether the debt was claimed as bad debt in earlier years and to re-adjudicate the issue of sundry creditors' confirmations. This comprehensive approach ensures that all procedural and substantive aspects are thoroughly examined, providing a fair resolution to the disputes.