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2019 (8) TMI 728 - AT - Income TaxAddition u/s 41 - AO alleged that liabilities which have ceased to exist in respect to M/s. Basanti Finance Investment Co. Limited and M/s. Shree Mahalaxmi Trading Investment Co - HELD THAT - As regards the liability standing in the name of M/s. Basanti Finance Investment Co. Limited, the assessee has submitted that the same represented an advance received by the assessee and since the same was not claimed by the assessee as deduction while computed the income for the year under consideration or any of the earlier years, we find merit in the contention of the assessee that the same cannot be treated as income by invoking the provisions of section 41(1) - keeping in view that this claim is made by the assessee specifically for the first time before the Tribunal, we consider it just and proper to give an opportunity to the AO to verify the same. We accordingly direct the AO to verify this claim of the assessee from the relevant record and decide the issue afresh in accordance with law. As regards the liability standing in the name of M/s. Shree Mahalaxmi Trading Investment Co. we are of the view that the liability standing in the name of M/s. Shree Mahalaxmi Trading Investment Co. Limited could not be treated as ceased to have existed during the year under consideration, especially when nothing was brought on record by the AO to conclusively prove the cessation of liability during the year under consideration. The decision of the Hon ble Supreme Court in the case of CIT vs.- Sugauli Sugar Works Pvt. Limited 1999 (2) TMI 5 - SUPREME COURT relied upon by the ld. Counsel for the assessee supports this view, wherein it was held that the cessation of the liability may occur either by reason of the operation of law i.e. on the liability becoming unenforceable at law by the creditor and the debtor declaring unequivocally his intention not to honour his liability when payment is demanded by the creditor. Since this situation is not occurred in the present case, we hold that the addition of ₹ 86,58,069/- made by the AO and confirmed by the ld. CIT(Appeals) by treating the liability standing in the name of M/s. Shree Mahalaxmi Trading Investment Co. Limited by invoking the provision of section 41(1) is not sustainable. We accordingly delete the same. Ground No. 1 of the assessee s appeal is accordingly treated as allowed. Amount payable by assessee to Bhikam Chand Jhawar(HUF) as ceased to have existed as per section 41(1) assessee was asked by the Bench to show any documentary evidence whereby the amount in question was ever demanded by Bhikam Chand Jhawar(HUF). He, however, has failed to show any such evidence. On the other hand, he has admitted that the amount in question is still not paid by the assessee to the said party even after a period of more than eight years and the same is still shown as outstanding in the books of account of the assessee - liability in question was rightly treated by the AO as ceased to have existed and the ld. CIT(Appeals) is fully justified in confirming the addition made by the AO on this issue under section 41(1). We accordingly uphold the impugned order of the ld. CIT(Appeals) and dismiss Ground No. 2 of the assessee s appeal. Trading liability payable to M/s. Daga Trading Company by treating the same as income u/s 41(1) - HELD THAT - As submitted by the ld. Counsel for the assessee, an amount of ₹ 17,99,020/- shown as payable by the assessee to the said party as on 31.03.2011 was paid through proper banking channel in the month of June, 2012 and the receipt of the same was duly acknowledged by the said party as per the confirmation of account placed at page no. 97 of the paper book. A separate confirmation letter was also issued by the said party to show that the amount of ₹ 17,99,020/- in question was receivable from the assessee-company towards invoices raised in the month of August, 2009 and the same was outstanding as on 31.03.2012. Keeping in view this documentary evidence placed on record and having regard to the fact that the liability in question was settled by the assessee subsequently through proper banking channel, which was duly acknowledged by M/s. Daga Trading Company, we are of the view that the existence of the liability in question was duly established by the assessee and in the absence of anything brought on record by the Assessing Officer to prove otherwise, the addition made by him under section 41(1) and confirmed by the ld. CIT(Appeals) is not sustainable. We accordingly delete the said addition and allow Ground No. 3 of the assessee s appeal. Addition on account of the amounts payable to M/s. Bimal Kumar Jhanwar (HUF) and Bimal Kumar Jhanwar respectively - HELD THAT - We restore this matter to the file of the AO for deciding the same afresh after verifying the claim of the assessee that the amounts in question have been duly paid through banking channel to the concerned parties in the subsequent years. If the amount is found to have been paid by the said parties as claimed by the ld. Counsel for the assessee, the AO shall delete the addition made to the total income of the assessee on this issue. Ground No. 4 of the assessee s appeal is accordingly treated as allowed. MAT computation - treatment of provision made for Gratuity payable u/s 115JB as unascertained liability - HELD THAT - this matter also requires verification by the AO keeping in view the contrary findings recorded by the authorities below to the effect that there was no evidence produced by the assessee to prove that the amount in question was a provision made for ascertained liability. We, therefore, set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter to the file of the AO for deciding the same afresh after giving proper and sufficient opportunity of being heard to the assessee. Delayed payment of employees contribution towards P.F. and ESIC - HELD THAT - This issue is squarely covered in favour of the assessee by the decision of the Hon ble Supreme Court in the case of CIT vs.- Alom s Extrusions Limited 2009 (11) TMI 27 - SUPREME COURT and CIT vs.- Vijay Shree Limited 2011 (9) TMI 30 - CALCUTTA HIGH COURT . Accordingly we respectfully follow the said judicial pronouncements and uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this ground. Ground No. 1 of the Revenue s appeal is accordingly dismissed. Additional depreciation on new plant and machinery - claim disallowed by AO on the ground that the same was claimed in respect of certain parts of plant and machinery, which could not function on its own as plant and machinery - HELD THAT - Similar issue was decided by the Chandigarh Bench of this Tribunal in favour of the assessee in the case of Adarsh Steel Rolling Mills vs.- DCIT 2014 (2) TMI 1363 - ITAT CHANDIGARH and following the same, he directed the Assessing Officer to allow additional depreciation on the parts of the plant and machinery, which were already installed. At the time of hearing before us, no case law taking contrary view in favour of the Revenue on this issue has been cited by the ld. D.R. We, therefore, respectfully follow the decision of the Coordinate Bench of this Tribunal in the case of Adarsh Steel Rolling Mills (supra) and uphold the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee for additional depreciation.
Issues Involved:
1. Additions on account of liabilities payable to M/s. Shree Mahalaxmi Trading & Investment Co. Limited and M/s. Basanti Finance & Investment Co. Limited under section 41(1) of the Income Tax Act, 1961. 2. Addition of liability payable to Bhikam Chand Jhawar (HUF) under section 41(1). 3. Addition of trading liability payable to M/s. Daga Trading Company under section 41(1). 4. Additions on account of amounts payable to M/s. Bimal Kumar Jhanwar (HUF) and Bimal Kumar Jhanwar under section 69C. 5. Addition of provision for Gratuity payable while computing book profit under section 115JB. 6. Deletion of addition on account of delayed payment of employees' contribution towards P.F. and ESIC. 7. Deletion of disallowance of additional depreciation on new plant and machinery. Detailed Analysis: 1. Additions on account of liabilities payable to M/s. Shree Mahalaxmi Trading & Investment Co. Limited and M/s. Basanti Finance & Investment Co. Limited under section 41(1): The Assessing Officer (AO) added ?2,22,09,069/- to the total income of the assessee, treating the liabilities as ceased to exist under section 41(1). The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the addition. The Tribunal directed the AO to verify the assessee's claim that the liability to M/s. Basanti Finance & Investment Co. Limited was an advance and not a deductible expense. Regarding M/s. Shree Mahalaxmi Trading & Investment Co. Limited, the Tribunal found documentary evidence supporting the existence of the liability and deleted the addition. 2. Addition of liability payable to Bhikam Chand Jhawar (HUF) under section 41(1): The AO added ?18,36,091/- under section 41(1) as the party was not traceable. The CIT(A) confirmed the addition. The Tribunal upheld the addition, noting the absence of any evidence from the assessee to prove the existence of the liability or the party. 3. Addition of trading liability payable to M/s. Daga Trading Company under section 41(1): The AO added ?17,99,020/- under section 41(1) based on the confirmation from M/s. Daga Trading Company showing no balance receivable. The CIT(A) confirmed the addition. The Tribunal deleted the addition, considering documentary evidence that the liability was settled through banking channels and acknowledged by the creditor. 4. Additions on account of amounts payable to M/s. Bimal Kumar Jhanwar (HUF) and Bimal Kumar Jhanwar under section 69C: The AO added ?46,87,982/- and ?36,11,430/- under section 69C, treating the purchases as unexplained. The CIT(A) confirmed the additions. The Tribunal remitted the matter to the AO for verification of the assessee's claim that the amounts were paid through banking channels in subsequent years. 5. Addition of provision for Gratuity payable while computing book profit under section 115JB: The AO added ?1,82,03,626/- to the book profit, treating it as an unascertained liability. The CIT(A) confirmed the addition. The Tribunal remitted the matter to the AO for verification of the assessee's claim that the amount represented gratuity paid to retiring employees. 6. Deletion of addition on account of delayed payment of employees' contribution towards P.F. and ESIC: The AO disallowed ?1,11,48,812/- for delayed payment of employees' contribution towards P.F. and ESIC. The CIT(A) deleted the addition, relying on judicial precedents. The Tribunal upheld the CIT(A)'s decision, following the Hon'ble Supreme Court and Jurisdictional High Court rulings. 7. Deletion of disallowance of additional depreciation on new plant and machinery: The AO disallowed ?21,59,862/- claimed as additional depreciation, stating that parts of plant and machinery could not function independently. The CIT(A) allowed the claim, following the Tribunal's decision in a similar case. The Tribunal upheld the CIT(A)'s decision, noting no contrary judicial precedents were cited by the Revenue. Conclusion: The Tribunal allowed the assessee's appeal partly, remitting certain issues for verification by the AO, and dismissed the Revenue's appeal.
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