2022 (9) TMI 235 - AT - Income Tax

Loss from share market and commodity market - loss is contingent in nature as the assessee has not admitted its liability - HELD THAT - The assessee has claimed the loss on the reason that the assessee has incurred said loss on account of unauthorized trading carried out in recognized exchanges. CIT(A) deleted the addition on the ground that the said loss is not a contingent loss and more so the assessee claim has already rejected by the Tribunal and the Appellate Tribunal as per the admission of the assessee. As found that the assessee herein has suffered an arbitration award dated 06/05/2015, which has been challenged by the assessee before the City Civil Court, Bangalore, has been transferred to the Commercial Court Bengaluru and renumbered - The dispute between the assessee and Religare Securities Ltd. are still pending for adjudication before the Court of Law. Therefore, in the interest of justice we inclined to remit the issue to the file of A.O. to decide the same on the basis of the final outcome of the pending dispute before the Commercial Court at Bengaluru. Accordingly, the Ground No. 1 of the Revenue is allowed for statistical purpose. Addition made u/s. 41(1) on account of cessation of liability from three creditors - HELD THAT - On the ground that creditors were lying static for more than three years and that resulted in cessation of liability. It is admitted fact that the said amount has been by the assessee as the creditor in the books of accounts and also reflected in the balance sheet. The balance sheet has been signed by the statutory auditor and also by the assessee which is nothing but acknowledgment of the debt. Being so invocation of Section 41(1) is erroneous by the A.O. Thus, we do not find any infirmity in the order of Ld. CIT(A) in deleting the addition made by the A.O. u/s. 41(1) - Ground No. 2 of the assessee is allowed. Addition on account of receipt of payment of rendering service - said amount as appearing in the service tax return filed by the assessee, but not reflected in the P L Account - assessee has not produced the books of account and reconciled the said figure with the P L Account figure of sales - HELD THAT - It is specific case of the Revenue is that the assesses has failed to produced books of accounts before the authorities. There is nothing comes out of the order of the Ld. CIT(A) regarding production of books of account even before the CIT(A). In our opinion, it is an appropriate to remit the issue to the file of A.O. with a direction to produce all the materials whatever produced before the CIT(A) including the books of accounts of the assessee in respect of issue in hand. Accordingly, the issue in question is remitted to the file of the A.O. for Denovo consideration. Accordingly, we allow Ground No. 3 for statistical purpose.

Issues:
1. Deletion of loss from share market and commodity market
2. Deletion of addition made on account of cessation of liability from three creditors
3. Deletion of addition made on account of receipt of payments for rendering services
4. Perversity of the order of the Ld. CIT(A)

Analysis:

Issue 1: Deletion of loss from share market and commodity market
The Revenue appealed against the deletion of a loss amounting to Rs. 4,84,06,022 from share market and commodity market by the Ld. CIT(A). The Revenue argued that the loss was not contingent as the assessee had not admitted its liability. However, the Ld. CIT(A) found in favor of the assessee, stating that the loss was not contingent and had already been rejected by previous tribunals. The Tribunal remitted the issue back to the A.O. pending the outcome of the dispute between the assessee and Religare Securities Ltd. before the Commercial Court at Bengaluru.

Issue 2: Deletion of addition made on account of cessation of liability from three creditors
The Revenue contested the deletion of an addition of Rs. 1,17,18,396 made under Section 41(1) due to the cessation of liability from three creditors. The A.O. had invoked Section 41(1) based on the creditors' static status for over three years. However, the Tribunal found no error in the Ld. CIT(A)'s decision to delete the addition, as the liabilities were acknowledged in the books of accounts and balance sheet, signed by the statutory auditor and the assessee.

Issue 3: Deletion of addition made on account of receipt of payments for rendering services
The Revenue challenged the deletion of an addition of Rs. 3,30,47,364 made for receipt of payments for rendering services. The Ld. CIT(A) had deleted the addition after considering the reconciliation filed by the appellant. However, as the assessee had not produced books of accounts, the Tribunal remitted the issue back to the A.O. for a fresh consideration with a direction to produce all relevant materials, including the books of accounts.

Issue 4: Perversity of the order of the Ld. CIT(A)
The Revenue contended that the order of the Ld. CIT(A) was perverse. However, the Tribunal did not find any merit in this contention and partly allowed the appeal for statistical purposes.

In conclusion, the Tribunal addressed each issue raised by the Revenue, remitting some back to the A.O. for further consideration while upholding the decisions of the Ld. CIT(A) in others. The judgment provided detailed reasoning for each issue, ensuring a fair and thorough analysis of the case.

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