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TMI Blog2010 (12) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... ntered into with the associate concern assessee appears to have not obtained any benefit from the time the agreement was entered into - It cannot be said that assessee was not aware of the activities of the sister concern and assessee cannot plead that it is naive to the fact that there are no chances of making fair profit - Therefore, it is for the assessee to highlight as to what prompted it to enter into such transaction and how it had benefited the assessee in any of these earlier years as well as in the years under consideration - The expression "cessation" or "remission" of liability was subject matter of consideration by various Courts and various principles were laid down which can act as guiding factors in order to consider as to what can be classified as remission or cessation of trading liability - order of the learned CIT(A) deserves to be set aside & restore the issue to the file of the Assessing Officer for fresh consideration - Thus, the appeal filed by the Revenue is treated as allowed for statistical purposes. - IT Appeal No. 4830 (Mum.) of 2009, - - - Dated:- 21-12-2010 - D. Manmohan, Rajendra Singh, JJ. Dhivendra Khare for the Appellant Niraj D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions. In the assessment year 1996-97 details of these transactions were given to the Assessing Officer and the Assessing Officer finally found that the part of the funds obtained by the assessee out of such arrangement has been utilised for non-business purposes and accordingly a part of the discounting charges being Rs. 25 lakhs was disallowed in that assessment year. 4. The Assessing Officer further noticed that M/s. GFIL classified these liabilities as 'non-performing assets (NPS)'. Under these circumstances, the assessee was called upon to furnish complete details of the transactions including the assessee's purpose in entering into such transactions with its associate concern and also the total income and expenditure of the assessee out of these transactions as well as bifurcation of principle and discounting charges, out of its liabilities which is outstanding as on 31-3-2003. Though the assessee sought to furnish certain details it could not bifurcate the expenditure referable to revenue account and capital account. On a conspectus of the matter, the Assessing Officer arrived at a conclusion that the liability shown as outstanding cannot be treated as payable as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted before the learned CIT(A) that assessee had partially discharged the amount due in assessment years 2004-05 and 2005-06. Since liability was acknowledged by assessee and partly discharged in subsequent years, it cannot be considered under section 41(1) of the Act. 6. Having regard to the circumstances of the case, the learned CIT(A) set aside the addition by observing in para 8 as under:- "8. The aforesaid issues are considered hereinafter. The appellant vide their letter dated 16-1-2006 had explained that there was no remission or cessation of liability as the liability was subsisting and due by the appellant. It was also explained that the appellant had partially discharged the amount due in assessment year 2004-05 (Rs. 2,38,40,000) and 2005-06 (Rs. 40,50,386). The appellant had also submitted the account confirmation of GFIL as on 31-3-2003. From the confirmation letter it is seen that the appellant had paid Rs. 23,36,473 during the previous year relevant to the impugned year in appeal. Thus it is established that the appellant was discharging its liability to GFIL during the previous year as also in the subsequent years. In the aforestated facts it is held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was invoked by the Assessing Officer, the assessee might have shown to have made part-payments to the sister concern which again casts a shadow of doubt as to whether the transaction was real, particularly in view of the fact that it was a transaction with a sister concern and the entire circumstances do not indicate as to why such huge liability had to be taken upon itself without any apparent benefit therefrom. 8. Learned DR further submitted that assessee had never explained before the Assessing Officer with regard to the capital liability and revenue liability and it could not explain as to why such discounting arrangement has to be agreed upon. Despite detailed observations of the Assessing Officer, the learned CIT(A) has wrongly concluded that the Assessing Officer has given more emphasis to the fact that GFIL had 'written off' the amount, overlooking the fact that the Assessing Officer had clearly mentioned that M/s. GFIL classified these liabilities as "non-performing assets". Learned CIT(A) has also taken into consideration certain facts which were not placed before the Assessing Officer. For example, it was not stated before the Assessing Officer that in the subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. At the out set, it may be noticed that in order to appreciate the issue before us, the salient features of section 41(1) has to be taken into consideration. The marginal heading of section 41 reads "profits chargeable to tax" and section 41(1) says that "if an allowance or deduction has been made in the assessment for any year in respect of losses/expenditure or trading liability incurred by the assessee and subsequently, during the previous year, if the assessee obtained any benefit in respect of such trading liability by way of remission or cessation thereof, the same has to be deemed to be the "profits and gains of business or profession" and accordingly chargeable to Income-tax Act. 11. It is not in dispute that in the initial year the assessee has treated it as a loss/expenditure/trading liability and it was accepted as such except to the extent of Rs. 25 lakhs. However, in the year under consideration the Assessing Officer analysed the facts in detail to highlight that the benefit obtained as a trading liability in the earlier years was not in fact a trading liability and it was a colourable transaction entered into between the assessee and its sister concern and, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) to call for further details to examine the issue in the correct perspective, to understand as to whether it was a case of trading liability and even if it is a trading liability in the earlier years whether it can still be considered as a trading liability in the year under consideration and if it is not to be considered as a trading liability, whether the same can be considered as a remission or cessation of such liability atleast in the year under consideration. 13. It is well settled that the powers of the CIT(A) are co-terminus with that of the Assessing Officer and even if a mistake has been committed by the Assessing Officer an assessment should not be set aside or quashed on that limited ground and it is the duty of the first appellate authority to correct such mistakes. In the case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451 the Apex Court observed that "appellate authority has the jurisdiction as well as the duty to correct all the errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred, to dispose of the appeal or any part of the matter afresh". ..... X X X X Extracts X X X X X X X X Extracts X X X X
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