TMI Blog2016 (5) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 (8) TMI 620 - ITAT COCHIN] - Decided in favour of assessee - ITA No. 3060/Ahd/2015 - - - Dated:- 1-4-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Assessee : Shri Mehul R. Shah, AR For The Revenue : Shri Alok Kumar, Sr. DR. ORDER PER MANISH BORAD, ACCOUNTANT MEMBER: This appeal of the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-1, Surat, dated 16.09.2015 passed against the order u/s 143(3) of the Act for Assessment Year 2012-13 by Income Tax Officer, Ward 1(1)(4), Surat. 2. The assessee has raised following grounds of appeal:- 1. On the facts and circumstances of the case as well as law on the subject, the learned Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, the opening balance of ₹ 40,69,952/- was converted into gift by book entry. The learned Assessing Officer, therefore, went ahead to make addition of ₹ 11,12,947/- for the interest paid to Smt. Kiranben Gandhi in earlier years by treating it as cessation of liability u/s 41(1) of the Act. The learned Authorized Representative also made addition of ₹ 1,00,430/- by disallowing 20% of expenses of ₹ 5,02,153/- on account of personal element involved in those expenses. Accordingly, assessment was framed by assessing the income atRs.12,21,117/- after making following two additions; i) Disallowance u/s 41(1) of the Act - Rs.11,12,947/- ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961. In response assessee filed the detailed reply vide letter dated 21.03.2015. However, assessing officer was not satisfied with the reply of the assessee and on the basis of his observation at para no. 4.2 to 4.4 he made the addition of interest paid in earlier years of ₹ 11,12,947/- to Kiranben Gandhi by treating it as cessation of liability u/s. 41(1) of the I. T. Act, 1961. The learned Authorized Representative further submitted that, in the course of appellate proceedings, it is not disputed that assessee owed a sum of ₹ 40,69,952/- to Kiranben Jayant Gandhi as at the beginning of the year. However, the balance outstanding could not be fully considered as a trading liability. The ld. Assessing Officer would not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have offered the same for taxation in her computation of income. Further no benefit would be claimed by the Kiranben Jayant Gandhi in form of claiming any bad debts or discount in the year of write-off as the said amount would be debited to her Capital account as gift given. In the present case, the amount received as gift is already considered for tax u/s 56 and then exempted as the gift is received from relatives. Now if the same amount is considered again under Section 41(1), it would amount to considering the same credit twice. Learned Authorized Representative referred and relied upon the following decisions:- i. Rajesh Kumar vs. ACIT, 24 taxmann.com 133 (Cochin) ii. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee s sister and the addition called for by the Assessing Officer was limited only to the amount of interest of ₹ 11,12,947/- booked by the assessee in the earlier years. We are able to understand that the interest which has been charged by the assessee in the earlier years would certainly have been offered to tax by the sister of the assessee Smt. Kiranben Jayant Gandhi in her income tax return as nothing contrary to this fact has been put on record. This means that the transactions of interest payment by assessee and interest received by the sister have found their due place in the return of income furnished by both the parties and the transactions have been entered prudently in the normal course of business. During the year und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration. There was also no dispute with regard to the fact that the maternal uncle of the assessee, V, the proprietor of Vee, had confirmed the gift of ₹ 75 lakhs given by him to the assessee. [Para 4] The Assessing Officer as well as the Commissioner (Appeals) had noticed that the gift had been given by the donor by way of book entry, i.e., by reducing the balance due from the assessee and, hence, taken the stand that such reduction of liability would amount to remission of trading liability . The revenue strongly supported the view expressed by the Commissioner (Appeals). [Para 6] However, according to the assessee, the balance outstanding in the account of Vee could not be fully considered as a trading liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X
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