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TMI Blog2019 (8) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... anding in the name of M/s. Shree Mahalaxmi Trading Investment Co. we are of the view that the liability standing in the name of M/s. Shree Mahalaxmi Trading Investment Co. Limited could not be treated as ceased to have existed during the year under consideration, especially when nothing was brought on record by the AO to conclusively prove the cessation of liability during the year under consideration. The decision of the Hon ble Supreme Court in the case of CIT vs.- Sugauli Sugar Works Pvt. Limited [ 1999 (2) TMI 5 - SUPREME COURT] relied upon by the ld. Counsel for the assessee supports this view, wherein it was held that the cessation of the liability may occur either by reason of the operation of law i.e. on the liability becoming unenforceable at law by the creditor and the debtor declaring unequivocally his intention not to honour his liability when payment is demanded by the creditor. Since this situation is not occurred in the present case, we hold that the addition of ₹ 86,58,069/- made by the AO and confirmed by the ld. CIT(Appeals) by treating the liability standing in the name of M/s. Shree Mahalaxmi Trading Investment Co. Limited by invoking the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on account of the amounts payable to M/s. Bimal Kumar Jhanwar (HUF) and Bimal Kumar Jhanwar respectively - HELD THAT:- We restore this matter to the file of the AO for deciding the same afresh after verifying the claim of the assessee that the amounts in question have been duly paid through banking channel to the concerned parties in the subsequent years. If the amount is found to have been paid by the said parties as claimed by the ld. Counsel for the assessee, the AO shall delete the addition made to the total income of the assessee on this issue. Ground No. 4 of the assessee s appeal is accordingly treated as allowed. MAT computation - treatment of provision made for Gratuity payable u/s 115JB as unascertained liability - HELD THAT:- this matter also requires verification by the AO keeping in view the contrary findings recorded by the authorities below to the effect that there was no evidence produced by the assessee to prove that the amount in question was a provision made for ascertained liability. We, therefore, set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter to the file of the AO for deciding the same afresh after giving pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KOL/2017. The issue raised in Ground No. 1 of this appeal relates to the additions of ₹ 86,58,069/- and ₹ 1,35,51,000/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of the amounts payable by the assessee to M/s. Shree Mahalaxmi Trading Investment Co. Limited and M/s. Basanti Finance Investment Co. Limited respectively by treating the same as liabilities, which have ceased to exist as per the provisions of section 41(1) of the Income Tax Act, 1961. 2. The assessee in the present case is a Company, which is engaged in the business of Manufacturing of Jute Goods and Trading of Jute Jute Products. The return of income for the year under consideration was filed by it on 26.09.2012 declaring total income at NIL . During the course of assessment proceedings, notices under section 133(6) were issued by the Assessing Officer to verify the genuineness of the liabilities claimed by the assessee in respect of various parties. The notices sent by the assessee to M/s. Basanti Finance Investment Co. Limited with credit balance of ₹ 1,35,51,000/- and to M/s. Shree Mahalaxmi Trading Investment Co. Limited with credit bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued letter on 07.03.2016 and a letter claiming to be from M/s Basanti Finance Investment Co. Ltd. has been submitted on 15.03.2016, which shows the same address which was not found to be correct during assessment proceedings for assmt. Year 2011-12. Further if assessee was able to contact the other party in March, 2016, then assessee could have provided the correct address and contact details of the party in appeal proceedings. However, this has not been done. Under the circumstances amount of ₹ 1,35,31,000/- is taken as trading liability and it would be dealt in the same manner as trading liabilities from other parties. Assessee has submitted copy of a letter from Shree Mahalaxmi Trading Investment Co. Pvt. Limited dated 19.03.2018. Along with the letter, ledger account of the transactions in the books of accounts of Shree Mahalaxmi Trading Investment Co. Pvt. Ltd. have also been submitted. Here again old address of the party is indicated on the letter head which was not found to be correct by the postal authorities. Appellant has not provided the correct address or the contact details of this party as well. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said party during the course of assessment proceedings for A.Y. 2010-11 to support the assessee s claim that the said trading liability was very much inexistence and there was nothing brought on record by the Assessing Officer to show that the said liability had ceased to exist during the year under consideration. He contended that there was a family dispute which kept the said liability outstanding and the onus that lay on the Assessing Officer to show that the said liability had ceased to exist during the year under consideration was not discharged by him. In support of this contention, he relied on the decision of the Coordinate Bench of this Tribunal in the case of Sri Nasir Ahmed vs.- ITO (ITA No. 2518/KOL/2013 dated 03.06.2016), wherein it was held that income cannot be brought to tax under section 41(1) of the Act until and unless the trading liability is ceased to exist in the books of account of the assessee. He also relied on the decision of the Hon ble Supreme Court in the case of CIT vs.- Sugauli Sugar Works Pvt. Limited [236 ITR 518], wherein it was explained that cessation of the liability may occur either by reason of the operation of law, that is, on the liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also perused the relevant material available on record. As regards the liability standing in the name of M/s. Basanti Finance Investment Co. Limited, the ld. Counsel for the assessee has submitted that the same represented an advance received by the assessee and since the same was not claimed by the assessee as deduction while computed the income for the year under consideration or any of the earlier years, we find merit in the contention of the ld. Counsel for the assessee that the same cannot be treated as income by invoking the provisions of section 41(1) of the Act. However, keeping in view that this claim is made by the assessee specifically for the first time before the Tribunal, we consider it just and proper to give an opportunity to the Assessing Officer to verify the same. We accordingly direct the Assessing Officer to verify this claim of the assessee from the relevant record and decide the issue afresh in accordance with law. 9. As regards the liability standing in the name of M/s. Shree Mahalaxmi Trading Investment Co. Limited, it is observed from the copy of the relevant ledger account placed at page nos. 66 to 68 of the paper book that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e address of the said party as given by the assessee. The same, however, was returned back with the Postal remarks not known . When this position was brought by the Assessing Officer to the notice of the assessee, a new address of the said party was provided by the assessee. In order to make the verification at the said new address, Inspector of the Department was deputed by the Assessing Officer. As reported by the said Inspector to the Assessing Officer, he failed to locate any such party even at the new address given by the assessee after a long effort. The Assessing Officer, therefore, treated the liability standing in the name of Bhikam Chand Jhawar(HUF) as ceased to have existed and addition of ₹ 18,36,091/- was made by him to the total income of the assessee under section 41(1) of the Act. On appeal, the ld. CIT(Appeals) confirmed the said addition made by the Assessing Officer by invoking the provision of section 41(1). 12. The ld. Counsel for the assessee invited our attention to the copy of the ledger account of Bhikam Chand Jhawar(HUF) as maintained in the books of account of the assessee to show that the said party was regular supplier of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years and the same is still shown as outstanding in the books of account of the assessee. Keeping in view all these facts and circumstances of the case, we are of the view that the liability in question was rightly treated by the Assessing Officer as ceased to have existed and the ld. CIT(Appeals) is fully justified in confirming the addition made by the Assessing Officer on this issue under section 41(1) of the Act. We accordingly uphold the impugned order of the ld. CIT(Appeals) and dismiss Ground No. 2 of the assessee s appeal. 15. The issue raised in Ground No. 3 relates to the addition of ₹ 17,99,020/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of trading liability payable to M/s. Daga Trading Company by treating the same as income of the assessee under section 41(1) of the Act. 16. A liability of ₹ 17,99,020/- was shown by the assessee in the name of M/s. Daga Trading Company as on 31.03.2011. In order to verify the same, a notice under section 133(6) was issued by the Assessing Officer. In reply to the said notice, it was submitted by M/s. Daga Trading Company that it was a Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was duly established by the assessee and in the absence of anything brought on record by the Assessing Officer to prove otherwise, the addition made by him under section 41(1) and confirmed by the ld. CIT(Appeals) is not sustainable. We accordingly delete the said addition and allow Ground No. 3 of the assessee s appeal. 18. The issue raised in Ground No. 4 relates to the additions of ₹ 46,87,982/- and ₹ 36,11,432/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of the amounts payable to M/s. Bimal Kumar Jhanwar (HUF) and Bimal Kumar Jhanwar respectively. 19. The assessee had shown trading liabilities of ₹ 46,87,982/- and ₹ 33,65,484/- in the name of M/s. Bimal Kumar Jhanwar (HUF) and Bimal Kumar Jhanwar respectively as on 31.03.2011. In response to the notices issued under section 133(6) of the Act, the said parties confirmed the transactions made with the assessee-company. They also stated in their reply that they were dealing with the assessee-company as commission agent and the copies of ledger accounts of the assessee as maintained in their books were also furnished. As revealed from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to have been paid by the said parties as claimed by the ld. Counsel for the assessee, the Assessing Officer shall delete the addition made to the total income of the assessee on this issue. Ground No. 4 of the assessee s appeal is accordingly treated as allowed. 21. As regards the issue raised in Ground No. 5 of the assessee s appeal relating to the addition of ₹ 1,82,03,626/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of provision made for Gratuity payable while computing the book profit of the assessee under section 115JB of the Act by treating the same as unascertained liability, the ld. Counsel for the assessee has submitted that the said amount actually did not represent any provision made for any liability by the assessee but it was paid on account of Gratuity to the employees, who had actually retired during the year under consideration. He has contended that the amount in question thus represented the provision made for the ascertained liability on account of Gratuity payable to the employees, who retired from service in the year under consideration and the same, therefore, cannot be added while computing the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned order of the ld. CIT(Appeals) giving relief to the assessee on this ground. Ground No. 1 of the Revenue s appeal is accordingly dismissed. 24. The issue raised in Ground No. 2 of the Revenue s appeal relates to the deletion by the ld. CIT(Appeals) of the disallowance of ₹ 21,59,862/- made by the Assessing Officer on account of assessee s claim for additional depreciation on new plant and machinery. 25. The additional depreciation of ₹ 21,59,862/- claimed by the assessee was disallowed by the Assessing Officer on the ground that the same was claimed in respect of certain parts of plant and machinery, which could not function on its own as plant and machinery. The ld. CIT(Appeals), however, found that a similar issue was decided by the Chandigarh Bench of this Tribunal in favour of the assessee in the case of Adarsh Steel Rolling Mills vs.- DCIT (ITA No. 523/CHD/2013) and following the same, he directed the Assessing Officer to allow additional depreciation on the parts of the plant and machinery, which were already installed. At the time of hearing before us, no case law taking contrary view in favour of the Revenue on this issue has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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