TMI Blog2013 (11) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s. 41(1)cannot be faulted – Decided against the Assessee. - ITA No.2616/AHD/2012 - - - Dated:- 4-4-2013 - G C Gupta And Anil Chaturvedi, JJ. For the Appellant : Mr.S N Divatia For the Respondent : Mr Y P Verma, Sr. D R ORDER:- Per: Anil Chaturvedi: This appeal is filed by the assessee against the order of Ld. CIT (A)- VIII, Ahmedabad dated 18-9-2012 for the assessment year 2008-09. 2. The facts as culled out from the orders of the lower authorities are as under. 3. Assessee is a firm doing business of shroff and cheque discounting. It takes money on interest and advances the same on interest to others. It filed its return of income for A.Y. 2008-09 on 16-12-2008 showing total income of Rs.79,960/-.The case was selected for scrutiny and thereafter the assessment was framed u/s. 143(3) vide order dated 27-12-2010 and the total income was determined at Rs.9,02,690/-. Aggrieved by the order of the A.O. the assessee carried the matter before the Ld. CIT (A). CIT (A) vide order dated 18-9-2012 dismissed the appeal of the assessee. Aggrieved by the order of the CIT (A), the assessee is now in appeal before us and has raised following grounds. 1.1 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding as under:- 2.3. I have gone through the assessment order and the submission of the appellant carefully. The A.O. has made an addition of Rs.8,22,726/- as a cessation of liability u/s. 41(1) of the I.T. Act. The appellant has submitted that in clause No.1 of the A.O. has stated that at the time of dissolution of the firm on 31-3-2006 that the accounts have been squared up but it is not correct. The appellant has further submitted that the deposit received from the customers are time barred but in the case of appellant the creditors payment are not time barred because it was shown as a liability in the accounts and therefore, all the partners are agreed to it and it is automatically renewed for the further period. So the decision cited by the Ld. Assessing Officer in the case of CIT vs. T.V. Sundaram Iyenger Sons Ltd. reported in 222 ITR 344 is not applicable to this case. The arguments of the appellant have been considered but the facts and the legal position in these aspects are totally different from what the appellant is putting up. If an amount is received in course of trading transaction, even though it is not taxable in the year of receipt as being of revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue 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. 23. In the present case, the money was received by the assessee in 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 influx 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 profits 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. On the basis of above discussion and the facts of the case that the aforesaid liability of loan of Rs.8,22,726/- is barred by li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord to prove that the aforesaid firm had at any time demanded the repayment of loan and demanded the interest on it. Further nothing has been brought on record to demonstrate that the aforesaid loan has been repaid till date. Further the assessee has placed on record the copy of bank statement of Om Traders for the period 1-1-2012 to 31-8-2012 to prove its contention that the bank account has not been closed. However, the bank statement reveals no transactions during the period so as to demonstrate that the assets / liabilities have been settled during the period. Further nothing is on record to prove that what were the assets and liabilities of Om Traders as on the date of dissolution and whether the assets have been recovered and liabilities been repaid from the date of dissolution till date and what is its status as on date. Assessee has relied on the decision of CIT v/s. Nitin Garg (supra). We are of the view that the ratio of the aforesaid decision of Gujarat High Court are distinguishable and cannot be applied to the facts of the present case for the reason that in that case, it was not a case where the firm to whom the amount was payable was no more in existence and had ceas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d interalia that The principle laid down by Atkinson J applies in full force to the facts of this case. if a commonsense view of the matter is taken, the assessee, because of the trading operation, had become richer by the amount which it transferred to its profit and loss account, The moneys had arisen out of ordinary trading transactions. Although the amounts received originally were not of income nature, the amounts remained with the assessee for a long period unclaimed by the trade parties. By lapse of time, the claim of the deposit became time barred and the amount attained a totally different quality. It became a definite trade surplus, Atkinson J. pointed out that in Morely's case (supra) no trading asset was created. Mere change of method of book-keeping had taken place. But, where a new asset came into automatically by operation of law, commonsense demanded that the amount should be entered in the profit and loss account for the year and be treated as taxable income. In other words, the principle appears to be that if an amount is received in course of trading transaction, even though it is not taxable in the year of receipt as being of revenue character, the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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