TMI Blog2016 (11) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... per the requirement of section 68 of the Act. Before us, Revenue has not placed any material on record to controvert the findings of the ld.CIT(A). - Decided in favour of assessee - I.T.A. No. 1212/Ahd/2012, I.T.A. No. 970/Ahd/2012 - - - Dated:- 24-8-2016 - Shri Rajpal Yadav, Judicial Member And Shri Anil Chaturvedi, Accountant Member Appellant by : Shri James Kurian, Sr.DR Respondent by : Shri C.J. Maniar, AR ORDER Per Shri Anil Chaturvedi, Accountant Member Both these appeals by the Revenue in the case of same assessee are directed against the separate orders of the Commissioner of Income Tax(Appeals)-XI, Ahmedabad dated 22/03/2012 29/02/2012 for the Assessment Years (AYs) 2003-04 and 2008-09 respectively. 2. We first take up Revenue s appeal for AY 2003-04 in ITA No.1212/Ahd/2012. 2.1. The relevant facts as culled out from the materials on record are as under:- 2.2. Assessee is a company stated to be engaged in the business of trading of castor oil and other allied products. Assessee filed its return of income for AY 2003-04 on 09/10/2003 declaring total income of ₹ 22,68,270/-. Thereafter, assessment was framed u/s.144 of the Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemchandani through foreign remittance of New York branch of State Bank of India. AO noted that the assessee s contention of the receipt of gifts by the aforesaid four persons were not supported by any evidence which could prove the identity and creditworthiness of the donor; namely Soniya Khemchandani nor assessee had furnished any confirmatory letter from the donor or disclosed the source of the amount of the donor. He therefore held the assessee has failed to discharge the onus of proving the identity, creditworthiness of the donor and genuineness of the gifts. AO further noted that during the year assessee had exported Indian Caster Oil of first special grade to Supreme General Trading Co. LLC, Dubai (UAE) @ 1,100 USD per metric ton and the same commodity to Concordia Trading B.V. @ 630 USD per metric ton. He therefore concluded that there was under billing with respect to goods exported to Concordia Trading B.V. which according to AO proves that assessee has brought its own money through hawala entry. He therefore considered the aggregate amount of ₹ 1,78,56,000/- received from Shri L.T. Khusahalani Director (Rs.43,48,000/-), Smt. Meenaxidevi L.Khusahalani Director s wif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction and creditworthiness of the creditors. This way, the appellant has discharged the onus cast upon him by the provisions of sec.68 of the I.T.Act. In view of above, I am of the considered opinion that addition of ₹ 1,78,56,000/- made by the A.O. u/s.68 is untenable. 3.4 It is further seen that the appellant had received a sum of ₹ 1,00,00,000/- as share application money from the directors. It is clearly held by the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd. 216 CTR 195 that in case of share application money, to discharge the onus of section 68, the appellant has to establish the identity of the persons, who had applied for shares. In this case the identity of the directors is never under doubt. The A.O. has not doubted the identity of the directors at all. In view of these facts, addition of ₹ 1,00,00,000/- cannot be made u/s.68 of the I.T.Act. 3.5 I have also perused various case laws relied upon by the appellant. These case laws support the above mentioned conclusions. 3.6 The only objection A.O. had raised is that the gift deed was not produced during the assessment proceedings. In my considered view, for want of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord to controvert the findings of the ld.CIT(A). In view of these facts, we see no reason to interfere with the order of ld.CIT(A) and thus this ground of Revenue is dismissed. 5. In the result, the appeal of the Revenue in ITA No.1212/Ahd/2012 for AY 2003-04 is dismissed. 6. Now we take up Revenue s appeal in ITA No.970/Ahd/2012 for AY 2008-09. 6.2. Assessee filed its return of income for AY 2008-09 on 23/09/2008 declaring total loss of ₹ 17,43,988/-. The case was selected for scrutiny and thereafter assessment was framed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide order dated 23/11/2010 and the total income was determined at ₹ 2,12,05,120/-. Aggrieved by the order of the Assessing Officer (AO), assessee carried the matter before the ld.CIT(A), who vide order dated 29/02/2012 (in Appeal No.CIT(A)-XI/230/DCIT.Cir-5/10-11) granted substantial relief to the assessee. Aggrieved by the order of ld.CIT(A), Revenue is now in appeal before us and has raised following ground:- i) The Ld.Commissioner of Income tax (A) has erred in law and on facts in deleting the addition of ₹ 1,89,11,800/- made u/s.41(1) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts necessary by way of condition precedent for raising the legal fiction have to be established first and they can be established only on the basis of evidence on record. In the case in hand, the appellant has specifically raised the question that the impugned amount was never allowed as deduction in the earlier year. In this regard, the Hon'ble Delhi High Court in CIT vs Foolchand Jivanram (1981) reported at 131 ITR 37 and Steel and General Mills Co. Ltd. vs CIT (1974) reported at 96 ITR 438 (Del), has held that the burden lies upon the Department to prove that an allowance or deduction had been given for relevant amount to the assessee in the earlier assessment years, this burden will be discharged only if revenue produces positive evidence and does not rely upon probabilities and extraneous circumstances. It is further held by Hon'ble Jabalpur Tribunal in the case of CIT vs Bhagwandas Shobhadas Jain (1997) reported at 60 ITD 180 that for applying provisions of Sec.41(1), onus is upon the revenue to establish that liability has ceased during the relevant previous year. 3.4 The taxability of advance of ₹ 1,89,11,800/- u/s.41 (1) needs to be ascertained keep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.CIT(A) has given a finding that in the Balance Sheet the amount has been shown as an advance, there is no evidence on record to indicate that assessee has derived any benefit in respect of this liability. Ld.CIT(A) has further given a finding that since the requirement of provisions for making additions u/s. 41(1) were not fulfilled, provision of section 41(1) could not be invoked by AO. Before us, the Revenue has not controverted the findings of the ld.CIT(A) nor has placed on record any contrary binding decision in its support. On the other hand, we find that the Hon ble Gujarat High Court in the case of CIT vs. Bhogilal Ramjibhai Atara reported at (2014) 222 Taxman 0313 (Gujarat) has decided the issue in favour of assessee and has held as under:- Section 41(1) would apply in a case where there has been remission or cessation of liability during the year under consideration subject to the conditions contained in the statute being fulfilled. Additionally, such cessation or remission has to be during the previous year relevant to the assessment year under consideration. In the present case, both elements are missing. There was nothing on record to suggest there was remission ..... 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