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TMI Blog2017 (4) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... collected these advances from a well targeted section of lower income strata of the society wayback in the financial year 1986-87 wherein it had promoted sale of TV sets through a multi level marketing scheme. Learned counsel at the outset takes us to assessee's business model of introducing the abovestated scheme narrated in its statement of facts before the lower appellate authority as under: "The company has started to promote the sales of its black & white T.V. for the middle class people who can afford to buy it and the price of the said T.V. set was fixed at Rs. 2,125/-. In order to push up the sales of the same, persons are appointed and any person who is able to enroll four members, who willing to purchase coupons worth Rs. 500/- are entitled to apply for the T.V. set. Thereafter, the coupons worth Rs. 500/- are sent to each of the four persons and if they accept the V.P.P. by giving Rs. 500/- each the person who has enrolled four members would be given the T.V. set. Thus, by this way, the assessee company, after receiving Rs. 2,000/- gives a T.V. set to a person who had enrolled four members. The members enrolled also become entitled to get T.V. set if they in turn enrol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1986-87 to promote sales of its Black & White TVs. The basic premise of the scheme was that the company appointed people to enroll members to the scheme. The person had to enroll four members who would agree to purchase coupons worth Rs. 500/-each. Subsequently, these coupons were sent to the four persons and if they accepted the same by payment of Rs. 500/-, the person who had enrolled these four persons would be entitled to a free TV set and the company would receive Rs. 2,000/- (Rs.500/- x 4 persons). The persons who had paid Rs. 500/- each would further become eligible for a free TV set if they themselves enrolled four members and so on. The amount of Rs. 7,87,09,819/- lying as outstanding liability in the balancesheet of the appellant reflects this amount received from customers since 1986-87, The submissions and evidences given by the appellant from time to time during the appellate proceedings have been perused and the; following observations are made: (i) The advertisement which launched the said scheme to the public states the following - " your enlistment payment is not refundable to you by cash or bank draft". It is also stated in this advertisement that "to become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatsapp, etc. but once again, none of these claims made by the appellant are verifiable, and can not and have not been substantiated by the appellant. (v) The appellant has not been able to show even one instance where liability on account of these advances from customers lying with the appellant over the past so many years has been discharged. On the contrary, it is seen that the appellant company has used this amount as its own money over the years by giving advances out of the same to friends and relatives and has earned interest on such advances made by it. The appellant has also used this money to enter into transactions in properties and shares. This money has also been parked in the form of fixed deposits with banks and in other funds. It is seen from the submission made by the appellant that almost the entire money received by the appellant from the customers has been used by the appellant and has been "parked"( appellant's own words) as follows: Fixed deposit with Bank of India - Rs. 2,90,98,193/-; Fixed deposit with State Bank of India - Rs. 1,00,82,655/-; Fixed deposit with Sindh Mrc. Co. Op.Bank - Rs.l,00,000/-; IIFCL Tax Free Bonds - Rs. 1,00,54,814/-; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the Supreme Court in in the case of CIT v. Sugauli Sugar Works (P) Ltd as under - "In our opinion, the judgment of the Supreme Court in CIT v. Sugauli Sugar Works (P) Ltd. (supra) is a complete answer to the contention of the learned standing counsel. In the case before the Supreme Court for a period of almost 20 years the liability remained unpaid and this fact formed the basis of the contention of the revenue before the Supreme Court to the effect that having regard to the long lapse of time and in the absence of any steps taken by the creditors to recover the amount, it must be held that there was a cessation of the debts bringing the case within the scope of Section 41(1). In the case before us, the identical contention has been taken on behalf \of the revenue, though the period for which the amount remained unpaid to the creditors is much less. It was held by the Supreme Court that a unilateral action cannot bring about a cessation or remission of the liability because a remission can be granted only by the creditor and a cessation of the liability can only occur either by reason of operation of law or the debtor unequivocally declaring his intention not to honour his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgements by the Hon'ble Apex Court, High Courts and Tribunals on section 41(1] and section 28(iv), I am of the view that there are situations where the facts and circumstances of an appellant's case cannot be compared to those which prevailed in the cases before the Hon'ble Courts and hence case-laws cannot be applied generally to every appellant. As has been discussed above, the situation in this case is peculiar since the customers have paid only Rs. 500/- each to the appellant in pursuance of a scheme which has long lapsed. This amount of Rs. 500/-collected from the customers all over the country has resulted in a corpus of over Rs. 7 crores with the appellant which it has been using as its own money over the years to make various investments (discussed earlier in the order). The appellant has itself admitted that these customers are from very remote areas and a perusal of the sample vouchers and invoices presented by the appellant also shows that only vague addresses have been noted down. Thus, it is highly unlikely that after a period of 10-15 years, these customers would claim an amount of Rs. 500/- from the appellant. The appellant however very conveniently is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee's additional evidence are not germane to the sole substantive issue before us pending for adjudication. This assessee's additional evidence petition is declined. 6. We now come to merits of the issue. There can hardly be any dispute that the assessee's so-called marketing scheme is very much in the nature of a ponzy one wherein it collected moneys by exploiting aspirations of the lower income strata of the society by issuing the investors in question some marketing coupons valid for a year. Shri Shah fails in proving assessee's bonafides since we find it very much and unjustifiable explanation that there was no coupon holder coming forward to encash the same in lieu of the specified electronic items between assessment years 2008-09 to 2013-14 including the impugned assessment year 2012-13. These facts constrain us to speak about the assessee's marketing scheme alike "the pied piper of Hamlin" type fleecing poor investors. We further wish to highlight the fact that there is no privity of contract/agreement between the assessee and the above investors since the coupon in question is valid for a clear-cut expressly stated time period of one year wherein the coupon holder i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 250, section 254.........on or before twelve months from the end of the month in such order is received or passed by the Principal Commissioner or the Commissioner, as the case may be". Explanation 2 to Section 153 further provides that "where, by an order referred to in clause (i) of sub section (6), any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year, for the purpose of section 150 and this section, be deemed to be one made in consequence to or giving effect to any finding or direction contained in the said order". As to the nature of findings or directions which can be given in an appellate order, Hon'ble Supreme Court, in the case of Rajinder Nath Vs CIT [(1979) 120 ITR 14 (SC)], has, inter alia, observed as follows: 7. The expressions "finding" and "direction" are limited in meaning. A finding given in an appeal, revision or reference arising out of an assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the particular assessee and in relation to the particular assessment year. To be a necessary finding, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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