9911796707
TMI Blog1989 (11) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... cts, namely, belt conveyors to M/s National Coal Development Corporation Ltd. and Coal Mining Authority Ltd., both ofRanchi. The assessee company had entered into an agreement with M/s Industrial Traders of Ranchi on3rd Sept., 1974, under which M/s Industrial Traders were to render services to the company and they were to be paid commission for the sales of that belt conveyors. This agreement was also duly ratified by a resolution in the annual general meeting of the Company on25th Nov., 1974. 3.1. Accordingly the assessee company effected sales of belt conveyors with regard to various tenders/orders to M/s National Coal Development Corporation Ltd. And M/s Coal Mining Authority Ltd. the assessee was maintaining accounts on mercantile basis and hence debited the commission liability in its books of accounts, which had been allowed in the respective assessment years as deductions. 3.2 During the assessment year under consideration the IAC(A) noticed that for previous year ending 31st March, 1982, relevant for assessment year under consideration, there was a credit balance of Rs. 4,68,468 in the accounts of M/s Industrial Traders of Ranchi which had not been discharged by the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting period relevant to the asst. year under appeal." The CIT(A) also relied on letter of the assessee dt. 15th March, 1985 and observed that after the knowledge of the enquiries made by the IAC(Asst.) with regard to the dissolution of theRanchifirm etc. The assessee had written back such liability in its accounts for accounting year 1986-87. He, therefore, held that there is no justification in treating the income under s. 41(1) of the IT Act, 1961 for assessment year under consideration. 4. The learned Departmental Representative while disputing the action of the CIT contended that Ranchi Firm had been dissolved in the financial year 1981-82 and, therefore, the liability of assessee to that firm had then extinguished. He further contended that in the letter dt.15th March, 1985the company had undertaken to write back these amounts through the profit loss appropriation account. In such letter the words in this year had been used which shows that the year in question would be year ending31st March, 1982. Besides he relied on the finding of the IAC(Asst). 5. The learned counsel for the assessee on the other hand submitted that provision of s. 41(1) could only be appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commissioner earlier received by them from the assessee as its income in some years. With regard to the commission of Rs. 4,68,468 the impugned amount, the said Ranchi party had not accounted for its income because it was not received by them and ultimately the Ranchi firm came to be dissolved in 1981-82 and the lady concerned running the said firm also left Ranchi after her wedding only in 1982. 6.1. On the basis of these facts it cannot be contended that dissolution of the firm resulted in the inability or in capacity of the erstwhile partners to realise their assets including the outstanding from the assessee. What was held in common prior to the dissolution is being held in severalty by the erstwhile partners. Therefore such a view that dissolution of the creditor firm results in cessation of liability or remission of liability cannot be sustained. Nor the marriage of the signatory to the agreement who leftRanchiin 1982 could result in cessation of liability or remission by the party. 6.2. From the facts stated before us it is apparent that there is no remission by theRanchiparty. Said remission has got to be done by a deliberate Act by the creditor. In the absence of evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the letter from MML dt.22nd Jan., 1985where in it was stated that commission of Rs. 68,133 and another sum of Rs. 18,750 had not been received by them, though they had raised the bill. With regard to the commission of Rs. 5,93,644 they have stated that there is some dispute with the assessee company. With regard to this commission also they have raised their claim. It was further stated that though earlier two amounts have been provided by them in their books of accounts as incomes, the MML had not been provided with the commission income of Rs. 5,93,644. On the basis of this letter the IAC(Asst.) came to the conclusion that provisions of s. 41(1) would be applicable. He also relied on the letter of the assessee dt.15th March, 1985wherein it was undertaken to write back the amount in case there is any cessation or remission of the said amount by that party. This amount was however written back by the assessee company in its accounts for the year ending31st March, 1986. 7.2. When the finding of the IAC(Asst.) came to be challenged by the assessee before the CIT(A), he had considered the various evidences and held that provisions of s. 41(1) are not attracted. He held that mere di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en as an evidence to warrant the application of s. 41(1). This ground is, therefore, rejected. 10.1. Other facts in background of this dispute are also identical as in respect of dispute pertaining to addition of Rs. 4,68,468. We adopt the very same reasons in confirming the action of the CIT(A) who accepted the assessee s contention in this regard. 11. The last ground in Revenue s appeal pertains to claim of Rs. 36,000 out of advertisement expenses, when this claim of the assessee came to be rejected by the IAC(Asst.) and matter travelled to the CIT(A) he found that this expenditure has been incurred by the assessee with regard to the design or work and sales literature for its goods, designing etc. This sum had been paid to M/s Reflection Advertising Marketing Co.,New Delhi. On the basis of this evidence the CIT(A) found that even necessary evidence by way of copies of literature, sales literatures etc. had been produced before him. He thus accepted assessee s claim. 12. After looking to the undisputed facts available on record and hearing both the parties, the learned Departmental Representative relying on the IAC(Asst.) and the learned counsel for the assessee relying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spired that partners of Morans are Mr. R. Salins and Mr. Janki Ram. The address of the firm which was at the residence of Mr. Salins as well as that of Mr. Janki Ram had also been furnished. Even the telephone numbers had been furnished. Both Mr. Janki Ram and Mr. Salins were contacted by Mr. Sinha who had gone for the spot enquiry. Mr. Janki Ram had given an impression that their bankers were Dena Bank, Malladpalli branch,Hyderabad, where the said draft had been credited. The report also says that Morans had also performed the services for the party for getting the contract from Singaneri Colleries and also getting the necessary advance. 13.2. The IAC(Asstt.) after noticing contents of the report given by Mr. Sinha found that the permanent account numbers of both the partners had not been furnished. He thus concluded that the identity of the firm had not been established and the claim appeared to be a pay off and did not appear to be a payment on account of commission. 13.3. The CIT(A) also found that there is no confirmation letter from Morans. He rejected the certificate of Bank of Baroda dt.13th Sep., 1985as fresh evidence. He further held that there was no evidence that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d secured two orders in 1981. It had received advance towards such supply from the customers. But the fact remained that neither permanent account number of Morans and its partners have been given nor any confirmatory letter from them is placed on record. The bank certificate though obtained subsequently cannot be considered as evidence in respect of existing evidence. According to us it is a new evidence. The certificate from Mr. Sinha is self-serving and Revenue never got a chance to check up its authenticity. Under the circumstances we are of the view that this matter must go back to the file of the IAC(Asst.) who is directed to re-adjudicate the issue de novo. The General Manager of the appellant Mr. Sinha though visitedHyderabadand submitted a report which has been taken on record, but as above said, its authenticity is to be checked. Undoubtedly it establishes that such a firm did exist, but whether it actually existed or not is yet to be found by the Revenue especially so when neither there is confirmatory letter nor any permanent account number of Moran or its partners. 17.1. The learned counsel for the assessee though submitted that addresses and telephone numbers are av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no confirmatory letter from this party had been obtained. He, therefore, disallowed the claim on the ground that evidence for services rendered byNagpurparty had not been furnished. 18.1. The CIT(A) noticed that the IAC(Asst.) had not questioned the fact that there was an agreement entered into between the appellant and theNagpurparty. The assessee appellant vide its letter dt. 28th Oct., 1985 appraised the Commissioner that the entire correspondence filed were before the IAC (Asst.) and also referred to a note with regard to its claim attached to this letter dt.18th Feb., 1985filed during course of assessment proceedings. Even copy of letters of the assessee andnagpurparty have also been filed. The CIT (A) was of the view that appellant had failed to file any confirmation letter with regard to the commission fromNagpurparty. It was also noticed that permanent account number ofNagpurparty had not been furnished. He therefore, found certain discrepancies with regard to the figure in various years. During account year 1979-80 a letter dt.23rd Jan., 1985written byNagpurparty to the appellant was, however, not admitted as being additional evidence which could have been filed durin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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