2022 (9) TMI 1378 - HC - Income Tax

Recovery proceedings along with further interest on the principal amount - money was advanced to the defendant through the banking channels on the various dates - HELD THAT - In the case at hand, the balance-sheets for the Financial Year 2015 2016, 2016 2017 and 2017 2018 clearly record the amount due and payable to the plaintiff in the respective financial years. The audited reports appear to have been filed in compliance with the statutory requirement contained in Section 44AB - It would be contextually relevant to note that in the balance confirmation letter dated 1st April, 2019 (P1/6) the defendant has clearly acknowledged the outstanding balance as of 1st April, 2019. The entries therein are supported by the Ledger Account (Exhibit-P1/8) maintained by the plaintiff. Institution of the suit on 29th March, 2022 thus appears to be within the statutory period of limitation. To conclude, the documents on record namely the Tax Deduction Certificate (TDS), the audited balance-sheet, balance confirmation letter, if read cumulatively, lead to a legitimate inference that the plaintiff has succeeded in establishing that the plaintiff had advanced the amount to the defendant and the latter had agreed to pay interest at the rate of 12% p.a. thereon. After repayment of a part of principal sum i.e. Rs.50,00,000/-, and the payment of interest, as evidenced by the TDS Certificates, as of 1st April, 2019, a sum of Rs.2,47,69,000/- remained due and payable. As the plaintiff s claim and documents have gone unimpeached, there is no other go but to pass a decree. Order - Suit stands decreed.The defendant do pay a sum of Rs.3,31,05,384/- along with further interest on the amount of Rs.2,35,00,000/- at the rate of 12% p.a. from the date of the institution of the suit till realization.

Summary

Issues: Recovery of outstanding amount along with interest, acknowledgment of liability, bar of limitation

Recovery of Outstanding Amount along with Interest:
The plaintiff, a company dealing in transformers, instituted a commercial division summary suit against the defendant, a company engaged in Builders and Developers business, for the recovery of Rs.3,31,05,384/- along with interest on the principal amount of Rs.2,35,00,000/-. The plaintiff claimed to have advanced Rs.2,85,00,000/- to the defendant, who repaid a partial amount and acknowledged the outstanding balance in audited balance-sheets and income tax returns. Despite repeated requests and a legal notice, the defendant failed to repay the remaining amount, leading to the lawsuit. The court found the plaintiff's claim substantiated by bank statements and TDS certificates, concluding that a sum of Rs.2,47,69,000/- remained due and payable, resulting in a decree in favor of the plaintiff for the total amount claimed along with further interest.

Acknowledgment of Liability:
The plaintiff relied on various documents, including audited balance-sheets, balance confirmation letters, and ledger accounts, to establish the acknowledgment of the outstanding debt by the defendant. The court noted that the entries in the audited balance-sheets for multiple financial years indicated the amount due to the plaintiff, satisfying the requirements of Section 18 of the Limitation Act. Citing a Supreme Court judgment, the court emphasized that entries in books of account, including balance-sheets, amount to an acknowledgment of liability. The balance confirmation letter and ledger account supported the plaintiff's claim, leading the court to conclude that the plaintiff had successfully proven the acknowledgment of liability by the defendant.

Bar of Limitation:
Considering the aspect of the bar of limitation, the court analyzed the entries in audited balance-sheets, balance confirmation letters, and ledger accounts for different financial years. The court observed that the suit, filed within the statutory period of limitation, was supported by documents such as the Tax Deduction Certificate (TDS), audited balance-sheets, and balance confirmation letters. The court found that the plaintiff had initiated the suit within the limitation period based on the acknowledgment of the outstanding balance by the defendant in various financial documents. Consequently, the court dismissed the defendant's contention regarding the bar of limitation and ruled in favor of the plaintiff, passing a decree for the recovery of the outstanding amount along with interest and costs of the suit.