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2016 (9) TMI 383 - ITAT DELHI

2016 (9) TMI 383 - ITAT DELHI - TMI - Addition U/S 41(1) - Held that:- From the assessment order, it does not appear that the credit amounting to Rs.,2,81,138/- and the alleged capital receipt amounting to ₹ 3.70 crores has ceased to exist. The contention of the assessee regarding the amounts not being considered in the books of accounts, needs verification for application of Section 41(1) of the Act. We, therefore, in the interest of justice, set aside the issue to the Assessing Officer f .....

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ssessment Year 2006-07 on the following grounds of appeal: 1. The Ld. CIT(A) erred in law and on facts in confirming the addition of ₹ 2,81,138/- made U/S 41(1) for sundry creditors outstanding, even when the liability to pay the same is neither disputed nor written off in books by the appellant. Thus, said addition must be deleted. 2. The Ld. CIT(A) erred in law and on facts in confirming the addition of' ₹ 3.70 crores by holding the waiver of loan as revenue receipt instead of .....

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(1) and the case of the assessee was selected for scrutiny. Notices u/s 143(2) were issued and the assessee, accordingly filed its submissions in respect of the questionnaire issued. 2.1 Assessee is a company engaged in the business of manufacturing, trading and job work of mens suits, jackets and trousers. During the course of assessment proceedings the Assessing Officer observed that an amount of ₹ 3.70 crores was claimed as capitals receipt out of the loan outstanding in the name of Shr .....

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ed as revenue receipt. In response, vide letter dated 14.10.2008, it was submitted that a sum of ₹ 3.70 crores is a capital receipt as Mr. Panchal Singh Sachthep had provided funds which had been kept as fixed deposits with the bank against which the company was using overdraft facilities. 2.2 The assessee submitted before Ld. A.O. that these were adjusted against the outstanding loan by Indian Overseas Bank and no amount was available to repay Mr. Panchal Singh Sachthep and as part of the .....

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and found unacceptable, The aforesaid receipts of ₹ 3.70 crores is liable to be taxed in the hands of assessee company being revenue receipts. As stated by the assessee itself that these funds had been with the assessee company for a long time and no amount was available with the assessee company to repay Mr. Panchal Singh Sachthep, therefore he decided to surrender and forego the sums due to him. It clearly establishes that this is a cessation of liability for the assessee company. This f .....

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ance as per para 5 above. 2,81,138 Disallowance as per para 6 above 3,70,00,000 4,06,99,999 Total Business Income (-)18,10,77,553 Income from Capital Gains as declared 45,29,17,204 Taxable Income 27,18,39,651 Less: brought forward losses 27,18,39,651 Taxable Income NIL Assessed at Rs. NIL under the normal provisions of the Act. However, income of the assessee is assessed u/s 115JB at ₹ 32,52,184/-. Issue necessary forms. Give credit for prepaid taxes. Charge interest u/s 234B and 234D as a .....

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year under consideration. Ld. CIT(A) rejected the sub missions made by the assessee and upheld the addition made by the Assessing Officer. 5. Aggrieved by the order of Ld. CIT(A), the assessee is in appeal before us now. 6. Ld. A.R. submitted that these amounts have never been taken into books of account. He submitted that Mr. Panchal Singh Sachthep stood as guarantor for the overdraft before Indian Overseas Bank. As the assessee could not repay the loan, the bank recovered the guarantee and adj .....

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the Court and the assessee company was referred to BIFR to settle the outstanding sundry creditors. Ld. A.R. thus submitted that thee liabilities had not seized in the books of account of the assessee. Therefore, it cannot be considered as cessation of liability u/s 14(1) of the Act. 7. On the contrary, Ld. D.R. submitted the written submissions which are reproduced here as under: With respect to the Addition of ₹ 3.70 Crores by holding that the waiver of loan as Income, reliance is also .....

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CIT [1993] 200 ITR 483 (SC) 1 Kedar Narain Singh v. CIT[1938] 6 ITR 157 (All.) (ii) Items not falling under specified categories can still be income - Even if a receipt does not fall within the ambit of any of the sub-clauses in section 2(24), it may still be income if it partakes of the nature of the income. The idea behind providing inclusive definition in section 2(24) is not to limit its meaning but to widen its net. The word "income" is of widest amplitude, and it must be given i .....

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Income may even be in kind - Income may be received in kind as well as in cash and the receipt of an equivalent of cash may be a receipt of income. The essence of the matter is that there must be an actually realized or realizable profit or loss. - Raja Raghunandan Prasad Sing v. CIT [1933] 1 ITR 113 (PC) 1 CIT v. Central India Industries Ltd. [1971] 82 ITR 555 (SC) 1 Seth Kishori Lal Babulal v. CIT[1963] 49 ITR 502 (All). F (v)It is well-settled that the way in which entries are made by the ass .....

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oubt that they are also a species of taxable income. CIT vs P. Mariappa Gounder (1984) 147 ITR 676 (Mad). (viii)Assessee must prove the source of receipt - It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the ITO .....

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tary or whether it was compulsory on the part of the persons who paid it'. The liability to income-tax is not negatived merely by reason of the fact that there was no legal obligation on the part of the person who contributed the money to pay it - P. Krishna Menon v. CIT [1959] 35 ITR 48 (sq. (x) In Dooars Tea Ltd. v. Commr. of Agri., IT (1963) 44 ITR 6, the Supreme Court has pointed out that it is necessary to bear in mind that the word 'income' as used in the Indian IT Act, 1922, i .....

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Morvi v. CIT, (1963) 49 ITR 594, it was held that a voluntary payment, which is made entirely without consideration and is not traceable to any source which a practical man may regard as a real source of his income but depends entirely on the whim of the donor, cannot fall in the category of 'income.' Thus voluntary and gratuitous payments which are connected with the office, profession, vocation or occupation may constitute income, although if the payments were not made, enforcement th .....

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h can be regarded as having an origin, which a practical man can regard as a real source of income, will fall in the category of income, which is taxable under the Act." (xii) The motive of payer is not relevant while deciding whether a receipt is revenue or capital in nature. [Po H. Divecha V. CIT, (1963) 48 ITR 222 (SC)] (xiii) In the judgment of the Board in the case of Raja Bahadur Kamakshya Narain Singh of Ramgarh V. CIT [1943] 11 ITR 513 (PC), delivered by Lord Russell of Killowen, th .....

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