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TMI Blog2014 (6) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... ers had not shown this amount in the balance sheet as debtors – but, the assessee’s intention is to pay the amount to the lenders - the order of the CIT(A) is set aside – Decided in favour of Assessee. Addition made – Outstanding amount of money borrowed – Held that:- Both the parties M/s. Ambica Mills and M/s. Shatmurti Investment and Trading Pvt. Ltd. had gone into liquidation – assessee being secured creditor, filed a case for recovery of amount through liquidator for amount of Rs.2,57,04,019/- (principal + interest) - The details of the case filed by both the parties, were considered by the CIT(A) in his findings - M/s. Shatmurti Investment and Trading Pvt. Ltd. also filed Civil Suit against M/s. Ambica Mills Ltd. for recovery of Rs.1,14,12,473 - The Skylark Finance Ltd. had confirmed the outstanding balance as on 31.03.1998 from its books of account – thus, the CIT(A) was justified in deleting the addition - Decided against Revenue. - ITA No. 2698/Ahd/2010, ITA No. 2600/Ahd/2010 - - - Dated:- 16-5-2014 - Shri G. C. Gupta And Shri T. R. Meena,JJ. For the Petitioner : Shri O. P. Meena, Sr. D.R. For the Respondent : Shri Mukesh M. Patel, A.R. ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the financial year ending on 31.03.1996 and the balance outstanding was Rs.1.5 crore. No interest was paid on the amount received during the financial year ending on 31.03.1997. The assessee has received further sum of Rs.9,25,000/- from the said party and the outstanding balance as on 31.03.1997 was Rs.1,59,25,000/-. No interest was charged by the said Skylark nor the assessee had paid any interest on such huge balance of Rs.1,59,25,000/- which had been carry forwarded from year to year and is appearing in the balance sheet of the assessee company for the year ended on31.03.2007 as liability under the head sundry creditors . Even after 11 years, the said Skylark Finance Ltd. had not charged any interest and neither paid by the assessee. The lender had not taken any action for recovery of the said amount. In 11 years, there is no transaction between them. The A.O. opined that the liability in respect of the said sum had come to an end. Thus, there is a cessation of liability to pay the above said creditor. The A.O. wrote a letter to M/s. Skylark Finance Ltd. on 20.11.2009 to furnish the copy of ledger account of the assessee company from the books for the year ended 31.03.2005, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at even though the deposits were of capital nature at the point of time of receipt by the assessee, could their character change by efflux of time. In other trading transaction, even though it is not taxable in the year of receipt as being of revenue character, the amount changes its character when the amount becomes the assessee s own money because of limitation or by any other statutory or contractual right. When such a thing happens, commonsense demands that the amount should be treated as income of the assessee. By considering the Hon ble Supreme Court decision, the A.O. added this in assessee s income u/s. 28(iv) of the IT Act and same is also taxable u/s.41(1). ii) Mrubee Exports Imports Pvt. Ltd. Rs.15,00,000/- The assessee had shown closing balance of Rs.20,00,000/- in the name of assessee as on 31.03.1996. During the financial year ended 31.03.1997, there is repayment of Rs.5,00,000/- and an amount of Rs.15,00,000/- is shown as payable to the said party as on 31.03.1997. From 01.04.1997 onwards the sum of balance of Rs.15 lacs was carry forwarded from year to year and was appearing in the balance sheet of the assessee company. No interest had been charged by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r.w.s. 41(1) of the I.T. Act. The ld. A.O. again relied upon the Hon ble Supreme Court decision in case of CIT vs. T.V.Sundaram Iyengar And Sons (supra). Thus, total addition of Rs.1,78,87,324/- made in the income of the assessee. 4. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A) who had partly allowed the appeal by observing as under: 2.3 I have considered the facts of the case and the submissions of the appellant. I am inclined to accept the contentions of the appellant based on facts and duly supported by evidences and legal proposition. The A.O. cannot assume the power of the businessman and unilaterally decide about how to conduct business, which liability still exist etc, The A.O has power to investigate all the transactions of an assessee keeping in view various business expediency of such business from businessman's angle. The appellant's claim that majority of the outstanding amount of Rs. l,78,87,324/-(except that of Ajanta Chem Plast Pvt. Ltd.) is in respect of money borrowed to advance a loan to M/s. Ambica Mills and M/s. Shatmurti Inv. Trading Pvt. Ltd. is supported by outstanding balance shown against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate proceedings by the appellant that without prejudice if AO's contention is accepted, this will not give any benefit in real manner to appellant to enjoy such benefit or advantage. If considered from the angle of real income theory, the A.O. then treat the corresponding loans and advances to M/s. Ambica Mills and M/s. Shatmurti Inv. Trading Pvt. Ltd. as bad debt since the same are also not recoverable since period as that outstanding creditor. This will give NIL addition. The A,O. cannot unilateraly take only one side of same transaction while not considering other legal side. Further, if the A.O, is invoking limitation act for such outstanding creditors then why not such additions were made in any of the earlier year. These transactions are releated to F.Y. 96-97 and why A.O. as chosen only this year though facts and circumstances were existing in earlier years also which were accepted by Deptt. as such. It is, therefore, the A.O. abruptly made such addition without apprecaiting the facts and legal proposition and does not amount to prooper asst. of income of the appellant as per settled principle of jurisprudence. The A.O. can invoke such section if appellant recover so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court held that when the assessee had itself treated this amount as its own money, there was no reason as to why the same should not be made chargeable to tax. The case law cited by the A.O. is distinguishable on both facts of the case as well as law. Reasons behind not showing this amount by the lender Ananta Chem. PLast. P. Ltd. in balance sheet were not known to the appellant. There may be a number of reasons but as such liability is standing in the appellant s balance sheet as a creditor. He further relied upon following decisions: i. CIT vs. Nitin Garg 208 Taxman 16 (Guj.) (2012) ii. ITO vs. Bhavesh Prints 46 SOT 268 (Ahd.) (2011) iii. CIT vs. Chetan Chemicals (P.) Ltd. 267 ITR 770 (2004) iv. CIT vs. Miraa Pfrocessors (P.) Ltd. 208 Taxman 93 (Guj.) (2012) v. PIC (Gujarat) Ltd. vs. DCIT 48 SOT 132 (Ahd.) 2011. Wherein, identical issue has been decided i.e. the appellant had continue to show admitted amount as liability in the balance sheet cannot be added u/s. 41(1) of the IT Act on the ground remission or cessation of trading liability. He further relied upon recent decision of Hon ble Gujarat High Court in Tax Appeal No. 588 of 2013, decided on 04.02.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e advances and loan but which was advanced to M/s. Ambica Mills and M/s. Shatmurti Investment and Trading Pvt. Ltd., which was supported by the balance sheet of the appellant for the year under consideration as outstanding. The balance of M/s. Ambica Mills was Rs.1,41,75,626/- and of M/s. Shatmurti Investment and Trading Pvt. Ltd. was Rs. 30,10,478/-. The appellant was dealing in the business of trading of Textile Ltd. to M/s. Ambica Mills and advances were in the normal course of business, which were used by the assessee in furtherance of business. Both the parties M/s. Ambica Mills and M/s. Shatmurti Investment and Trading Pvt. Ltd. had gone into liquidation. The appellant being secured creditor, filed a case for recovery of amount through liquidator for amount of Rs.2,57,04,019/- (principal + interest). The details of the case filed by both the parties, were considered by the ld. CIT(A) in his findings. M/s. Shatmurti Investment and Trading Pvt. Ltd. also filed Civil Suit against M/s. Ambica Mills Ltd. for recovery of Rs.1,14,12,473/-. The Skylark Finance Ltd. had confirmed the outstanding balance as on 31.03.1998 from its books of account. The case laws cited by the Revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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