TMI Blog2013 (11) TMI 1707X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. These liabilities came to be examined in the assessment year, 2005-06 and the respondent-assessee was directed to verify the credit entries appearing in the balance sheet of the proprietary concern, referred to hereinabove. 5. During the course of hearing, necessary letters/summons were sent to all the trade creditors as per list furnished by the respondent-assessee and the respondent-assessee was asked to prove genuineness of the trade credit entries appearing in the respective balance sheets. It is observed by the assessing officer that neither any reply was received from the trade creditors to whom letters were issued nor the respondent-assessee was able to prove the genuineness of the trade creditors appearing in the balance sheets of the proprietary concerns, referred to hereinabove. Since these liabilities according to the assessing officer pertained to the assessment year 2002-03 herein, therefore, a notice under section 147 r/w s. 148 of the Income Tax Act was issued to show cause as to why the assessment may not be reopened and why addition may not made by invoking provisions of s. 41(1) of the Income Tax Act. It was submitted by the respondent-assessee that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent-assessee himself credited the aforesaid liability appearing in the balance sheet of three proprietary concerns in the assessment year 2006-07 along with interest to the extent of ₹ 55,77,779. It was submitted by the respondent-assessee before the Commissioner (Appeals) that the liabilities were written off during the year ended 31-3-2006 relevant for the assessment year 2006-07, as the liabilities actually ceased in the financial year 2005-06, relevant to the assessment year 2006-07. It was also claimed that the entire tax on the aforesaid amount was also deposited by the respondent-assessee in the return for the assessment year 2006-07. After analyzing the facts on record and agreeing with the contention of the respondent-assessee that the liability, if any, pertained to the assessment year 2006-07, in which year the same was declared along with interest and admittedly the amount of ₹ 24,13,591 was shown as payment of tax towards the said liability, the Commissioner (Appeals) deleted the addition in question. 7. The matter was carried in appeal by the Revenue before the Tribunal and the respondent-assessee also, by way of cross-objection, objected to the invokin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-assessee notices were issued and almost all notices returned unserved and therefore, the assessing officer was justified in holding that the liability claimed by the respondent-assessee was a paper liability and did never existed while the claim is that the liabilities pertained to earlier years but the same continued to be carried in the books of accounts of the respondent-assessee it was proved that the liabilities were fictitious or not payable and therefore, the assessing officer rightly assessed the same by invoking the provisions of section 41(1) of the Income Tax Act. He submits that admittedly these were trade liabilities and since they were not payable even after more than 10 years and the respondent-assessee was unable to prove genuineness of the payments, therefore, the assessing officer rightly came to the conclusion that the liabilities ceased to exist and had correctly made the addition by invoking provisions of section 41(1). He submits that there was a claim by the respondent-assessee that there was a mutual agreement between the respondent-assessee and the claimants (trade creditors) that the amount would be retained on payment of interest but the so-called agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, which provides as under : 41(1). Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,-- (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year 2005-06, relevant for the assessment year 2006-07 and offered the same to tax in the assessment year 2006-07. It is a finding of fact by the CIT(A) as well as by the Tribunal that in the case of Narendra Mohan Mathur, the assessee offered as deemed income under section 41(1) amounting to ₹ 55,77,779 and even paid total tax payment of ₹ 24,13,591 in the assessment year 2006-07. In the case of Smt. Rita Mathur, the assessee offered as deemed income under section 41(1) amounting to ₹ 94,08,970 (including interest) and even paid total tax payment of ₹ 38,87,002 in the assessment year 2006-07. 18. This factum has not been disputed by counsel for the Revenue also that such amount was not offered and that the tax thereon was not paid. Therefore, when the entire amount, as claimed by the assessing officer along with accrued interest, has been offered to tax, in the assessment year 2006-07, in our view, it could not have been taxed again in the year under appeal. The same cannot be taxed in two different years and the income has to be rightly taxed only in the year to which it pertains and in our view, both the appellate-authorities have come to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee came to the conclusion and rightly so when the amount changed its character in the assessment year 2006-07 and not during the previous year relevant to the year under appeal. 22. The Delhi High Court, in the case of CIT v. Delhi Automobiles: (2005) 272 ITR 381 (Del), after referring to the judgment of the Hon'ble Apex Court in the case of CIT v. Sugauli Sugar Works (P.) Ltd. [reported at: (1999) 152 CTR (SC) 46--Ed.] and of Bombay High Court in the case of J.K. Chemicals Ltd. v. CIT (1966) 62 ITR 34 (Bom) has observed as under : The transfer of an entry is a unilateral act of the assessee, who is a debtor to its employees. We fail to see how a debtor, by his own unilateral act, can bring about the cessation or remission of his liability. Remission has to be granted by the creditor. It is not in dispute, and it indeed cannot be disputed, that it is not a case of remission of liability. Similarly, a unilateral act on the part of the debtor cannot bring about a cessation of his liability. The cessation of the liability may occur either by reason of the operation of law, i.e. on the liability becoming unenforceable at law by the creditor and the debtor declaring ..... X X X X Extracts X X X X X X X X Extracts X X X X
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