2018 (8) TMI 2025 - AT - Income Tax

Unexplained cash credits addition u/s. 68 - as argued CIT(A) did not call for the necessary remand report from the assessing authority - HELD THAT - Assessee had received the amount in question from its director namely Sri Biswanath Beriwal for meeting its day-to-day expenses whose details already stood filed before the Assessing Officer during the course of assessment. Be that as it may, the fact remains that identity of assessee s director is nowhere in dispute. We therefore hold that genuineness and creditworthiness identity of the assessee s director hereinabove is nowhere in issue. Nor is there any material indicating admission of additional evidence under Rule 46A of Income Tax Rules. We therefore affirm the CIT(A) s lower appellate findings under challenge regarding the instant issue. Disallowance u/s 43B - CIT-A deleted the addition - HELD THAT - We notice herein as well that there is no rebuttal on Revenue s part qua the CIT(A) s clinching finding that the amount in question nowhere formed part of assessee s deduction claim(s) pertaining to impugned assessment year 2013-14. We affirm the CIT(A) s findings under challenge on this count alone. Disallowance of expenditure made in the course of assessment - CIT-A deleted the addition - HELD THAT - We notice herein as well that Revenue s has no case on merits since the assessee; who had not derived any business income in the relevant previous year, incurred the impugned expenditure alike telephone, electricity charges and other expenses for running its business whose details already formed part of record before the Assessing Officer. We thus reject Revenue s instant third substantive ground as well. Addition of cessation of liability u/s 41(1) - AO stand appears to have taken note of the only fact that these liabilities continued to exist for the last many years - CIT A deleted the addition - HELD THAT - We find no merits in the instant argument. We quote this tribunal s co-ordinate bench s decision in ACIT vs. M/s Soorajull Nagarmull 2018 (7) TMI 2063 - ITAT KOLKATA where in held that the mere fact of a liability having continued to be shown for very many years would not attract section 41(1) since it is for the Assessing Officer has who has to show that concerned assessee has drawn any benefit by way of cessation or remission thereof. We further make it clear that CIT(A) s above extracted detailed discussion has examined all the facts as well as the relevant legal position at length which has nowhere been rebutted from the Revenue side. We therefore conclude that the CIT(A) has rightly reversed the assessment findings holding the amount in question to be a case of cessation of liability u/s 41(1) of the Act. - Decided against revenue.

Summary

Issues Involved:
1. Unexplained cash credits addition u/s 68 of the Income Tax Act.
2. Disallowance u/s 43B.
3. Disallowance of expenditure.
4. Addition u/s 41(1) for cessation of liability.

Detailed Analysis:

1. Unexplained Cash Credits Addition u/s 68:
The Revenue challenged the deletion of an addition of ?4,51,649/- made by the Assessing Officer (AO) under section 68 for unexplained cash credits. The Revenue argued that the Commissioner of Income Tax (Appeals) [CIT(A)] did not call for a remand report from the AO. However, the Tribunal found no merit in this argument, noting that the CIT(A) had already established that the amount was received from the assessee's director for day-to-day expenses, and the identity, genuineness, and creditworthiness of the director were not in dispute. There was no admission of additional evidence under Rule 46A. Therefore, the Tribunal affirmed the CIT(A)’s findings and dismissed the Revenue's ground.

2. Disallowance u/s 43B:
The Revenue contested the CIT(A)'s deletion of a disallowance of ?12,64,109/- made under section 43B. The Tribunal noted that the Revenue did not rebut the CIT(A)’s finding that the amount in question did not form part of the assessee’s deduction claims for the assessment year 2013-14. Consequently, the Tribunal upheld the CIT(A)’s decision and dismissed this ground of the Revenue's appeal.

3. Disallowance of Expenditure:
The Revenue challenged the deletion of a disallowance of ?1,33,880/- related to various business expenses such as telephone and electricity charges. The Tribunal observed that the assessee had not derived any business income during the relevant year but had incurred these expenses for running its business. The details of these expenses were already on record before the AO. Therefore, the Tribunal found no merit in the Revenue's argument and upheld the CIT(A)’s decision to delete the disallowance.

4. Addition u/s 41(1) for Cessation of Liability:
The Revenue disputed the deletion of additions totaling ?1,68,65,622/- made under section 41(1) for cessation of liability. The AO had added these amounts on the grounds that the liabilities were outstanding for many years, and there was no evidence that they still existed. The CIT(A) deleted these additions, noting that the liabilities were old and had been carried forward in the assessee's books. The Tribunal agreed with the CIT(A), stating that a liability cannot be treated as ceased merely because it has been outstanding for many years. The Tribunal cited various judicial precedents, including the Supreme Court's decision in CIT v. Sugauli Sugar Works (P) Ltd., which held that the mere fact of a liability being shown for many years does not attract section 41(1) unless the AO can prove that the assessee has obtained a benefit by way of remission or cessation of the liability. The Tribunal also noted that the CIT(A) had not admitted any additional evidence without calling for a remand report. Therefore, the Tribunal dismissed the Revenue's appeal on this ground as well.

Conclusion:
The Tribunal dismissed the Revenue’s appeal in its entirety, affirming the CIT(A)’s decisions on all four substantive grounds. The order was pronounced in the open court on 29/08/2018.