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TMI Blog2024 (11) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... n the contrary, found that the assessee never received any benefit or enjoyed the money that it has received as an advance and therefore, no benefit was derived out of the said transactions as admitted by the AO in the Assessment Order by observing that the assessee has reinvested the amount received as advance in the shares of the group companies of the said M/s. Marwar Hotels Private Limited which was later on sold at loss and such capital loss was never claimed as a set-off by the assessee. Thus, we are of the opinion that the provisions of Section 41 (1) read with Section 28 (iv) of the Act would not be applicable. Decided in favour of assessee. - HONOURABLE MR. JUSTICE BHARGAV D. KARIA AND HONOURABLE MR. JUSTICE D.N.RAY Appearance: For the Appellant(s) No. 1: Mr. Varun K. Patel (3802). For the Opponent(s) No. 1: Mr B S Soparkar (6851). ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. Heard learned Senior Standing Counsel Mr. Varun K. Patel for the appellant and learned advocate Mr. B.S. Soparkar for the respondent. 2. This Tax Appeal is filed under Section 260A of the Income Tax Act, 1961 (for short the Act ) by the appellant-Revenue proposing the following subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited still stands. Moreover there is nothing on records to say that the appellant has derived any benefit in respect of such trading liability by way of remission or cessation thereof. Thus on this ground also, no disallowance was called for. Therefore, on the facts ond submission of the appellant and also following the judgments of jurisdictional High Courts and other authorities as discussed above, the addition made made u/s. 41 (1) of the I.T. Act by the A.O is not warranted, and hence, the same is deleted. 2.13. Further, the provisions of section 28 (iv) of I.T. Act is also not applicable for the reason that the same comes into picture only when someone derives any benefit, whether convertible into money or not arising from the business. Since in appellant's case, the advances received from appellant were shown as payable in the balance sheet, and no benefit there-from has been derived by the appellant and hence, the provisions does not have any application over the same. The AO's reliance in the judgment of T. V. Sundaram Iyengar is not significant as there is difference from the facts of the case, for the reason that in the quoted case, the appellant during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year under consideration. There is no event taken place in the year under consideration. Therefore, the addition made by the AO is found not correct, and thus, same is deleted. 3.5. The appellant-Revenue being aggrieved preferred an Appeal before the Tribunal. The Tribunal by the impugned order confirmed the order passed by the CIT (Appeals) observing as under : 9. We have heard the rival contentions of both the parties and perused the material available on record. From the preceding discussion, we note that the assessee has received an advance of Rs. 11,23,64,705.00 against the project but the same has not seen light of the day and at the same time, the amount received by the assessee was not returned to the party. Thus, the issue arises whether the assessee has used colourable device in the transaction of the impugned projects against which the advance of Rs. 11,23,64,705 has been shown. Before we deal with the issue as discussed above, it is pertinent to note that as per the AO the advances received by the assessee from the party have been returned almost in entirety to the same group. To this effect, the relevant finding of the AO is extracted below: 3.8 Another interesting f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be alleged in such transaction is one of the conduits and not the party who allegedly derived benefit. Hence, no addition can be made in the hands of the assessee on the reasoning of colourable device as alleged by the AO. 9.2 Moving further, the next controversy arises whether the assessee is subject to the addition of such an advance in the manner provided under section 41 (1) of the Act. In this regard, we note that the AO himself in his has order has recorded that the assessee has made investment in the shares of M/s Marwar Group which is a capital transaction in the hands of the assessee. Accordingly, we are of the view that such a transaction cannot be made subject to the addition under section 41 (1) of the Act. Hence, the ground of appeal of the Revenue is hereby dismissed. 4. Thus, there are concurrent findings of fact arrived at by the CIT (Appeals) as well as the Tribunal to the effect that though the assessee has received the advance of Rs. 11,23,64,705/- against the project which had never been implemented and the amount was never returned by the assessee, the theory adopted by the Assessing Officer that it was a colourable devise was also not believed by the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest income to tax. 11. In view of the concurrent findings of the Revenue authorities and the Tribunal through which the above established facts emerged, we have no reason to interfere. The decision of the Supreme Court in case of Sundaram Iyengar (supra) would apply. In the said case, the Court had held and observed as under: In the present case, the money was received by the assessee in the course of carrying on his business. Although it was treated as deposit and was of capital nature at the point of time it was received, by efflux of time the money has become the assessee's own money. What remains after adjustment of the deposits has not been claimed by the customers. The claims of the customers have become barred by limitation. The assessee itself has treated the money as its own money and taken the amount to its profit and loss account. There is no explanation from the assessee why the surplus money was taken to its profit and loss account even if it was somebody else's money. In fact, as Atkinson J. pointed out that what the assessee did was the commonsense way of dealing with the amounts. 12. It is true that unlike in case of Sundaram Iyengar (supra), the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt purchased by the assessee to arrived at a finding of fact to make such payment exists in the assessee's books of account. So far as addition on account of FIRC is concerned, the Tribunal arrived at a finding that no expenditure has been incurred by the assessee as it is a case of export sales. With respect to addition of Rs. 7,052/- in the case of Pest Mortem, the Tribunal has found that from the ledger account, it was a carry forward balance from earlier years. Therefore, considering the decisions of this Court in the case of Bhogilal Ramjibhai Atara (supra) and Dattatray Poultry Breeding Farm (P) Ltd (supra), the Tribunal has held that the provisions of Section 41 (1) of the Act cannot be invoked where the existence of liability was doubted as such the addition could have been made in the year in which it was claimed or it could have been treated as unexplained cash credit in hands of the assessee under Section 68 of the Act as there is nothing on record to suggest that there is remission or cessation for the year under consideration. [14] In view of the above, we are of the opinion that the Tribunal has not committed any error in deleting the addition of Rs. 2,05,06,635/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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