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2019 (8) TMI 728

..... LD THAT:- As regards the liability standing in the name of M/s. Basanti Finance & Investment Co. Limited, the assessee has submitted that the same represented an advance received by the assessee and since the same was not claimed by the assessee as deduction while computed the income for the year under consideration or any of the earlier years, we find merit in the contention of the assessee that the same cannot be treated as income by invoking the provisions of section 41(1) - keeping in view that this claim is made by the assessee specifically for the first time before the Tribunal, we consider it just and proper to give an opportunity to the AO to verify the same. We accordingly direct the AO to verify this claim of the assessee from the relevant record and decide the issue afresh in accordance with law. As regards the liability standing in the name of M/s. Shree Mahalaxmi Trading & Investment Co. we are of the view that the liability standing in the name of M/s. Shree Mahalaxmi Trading & Investment Co. Limited could not be treated as ceased to have existed during the year under consideration, especially when nothing was brought on record by the AO to conclusively pr .....

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..... he said party to show that the amount of ₹ 17,99,020/- in question was receivable from the assessee-company towards invoices raised in the month of August, 2009 and the same was outstanding as on 31.03.2012. Keeping in view this documentary evidence placed on record and having regard to the fact that the liability in question was settled by the assessee subsequently through proper banking channel, which was duly acknowledged by M/s. Daga Trading Company, we are of the view that the existence of the liability in question was duly established by the assessee and in the absence of anything brought on record by the Assessing Officer to prove otherwise, the addition made by him under section 41(1) and confirmed by the ld. CIT(Appeals) is not sustainable. We accordingly delete the said addition and allow Ground No. 3 of the assessee’s appeal. Addition on account of the amounts payable to M/s. Bimal Kumar Jhanwar (HUF) and Bimal Kumar Jhanwar respectively - HELD THAT:- We restore this matter to the file of the AO for deciding the same afresh after verifying the claim of the assessee that the amounts in question have been duly paid through banking channel to the concerned parti .....

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..... ld the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee for additional depreciation. - I.T.A. No. 572/KOL/2017, I.T.A. No. 1774/KOL/2017 - 9-8-2019 - Shri P.M. Jagtap, Vice-President (KZ) And Shri A.T. Varkey, Judicial Member For the Assessee : Shri Subash Agarwal, Advocate For the Department : Shri Robin Choudhury, Addl. CIT, Sr. D.R ORDER PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ):- These two appeals, one filed by the assessee being ITA No. 1774/KOL/2017 and the other filed by the Revenue being ITA No. 572/KOL/2017 are cross appeals, which are directed against the order of ld. Commissioner of Income Tax (Appeals)-18, Kolkata dated 27.01.2017. 2. First we shall take up the appeal of the assessee being ITA No. 1774/KOL/2017. The issue raised in Ground No. 1 of this appeal relates to the additions of ₹ 86,58,069/- and ₹ 1,35,51,000/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of the amounts payable by the assessee to M/s. Shree Mahalaxmi Trading & Investment Co. Limited and M/s. Basanti Finance & Investment Co. Limited respectively by treating the same as liabilities, which have ceased to exist as per th .....

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..... ,000/- is noticed. During appeal proceedings assessee was asked to submit ledger account since beginning in respect of all the liabilities which were shown outstanding. However, assessee has submitted ledger account from assessment Year 2010-11 and nature of the outstanding liability is not ascertainable. Assessee has also claimed to have submitted confirmations before the A.O. during assessment proceedings of assessment year 2013-14. A.O.'s notice u/s 133(6) shows that nine queries were raised, including query relating to the nature of balances outstanding. However, in reply only the copy of ledger account since assessment year 2010-11 have been submitted. Another important aspect is that A.O. had issued letter on 07.03.2016 and a letter claiming to be from M/s Basanti Finance & Investment Co. Ltd. has been submitted on 15.03.2016, which shows the same address which was not found to be correct during assessment proceedings for assmt. Year 2011-12. Further if assessee was able to contact the other party in March, 2016, then assessee could have provided the correct address and contact details of the party in appeal proceedings. However, this has not been done. Under the circ .....

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..... levant ledger account placed at page no. 56 to show that the amount of ₹ 1,35,51,000/- was received by the assessee from M/s. Basanti Finance & Investment Co. Limited as advance. He contended that the said liability thus did not represent any amount claimed as deduction by the assessee and section 41(1) has no application. He contended that the Assessing Officer can verify this position and allow appropriate relief to the assessee. 6. As regards the amount payable to M/s. Shree Mahalaxmi Trading & Investment Co. Limited, he again relied on the similar letter filed by the said party during the course of assessment proceedings for A.Y. 2010-11 to support the assessee s claim that the said trading liability was very much inexistence and there was nothing brought on record by the Assessing Officer to show that the said liability had ceased to exist during the year under consideration. He contended that there was a family dispute which kept the said liability outstanding and the onus that lay on the Assessing Officer to show that the said liability had ceased to exist during the year under consideration was not discharged by him. In support of this contention, he relied on .....

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..... h had exist. He contended that the evidence produced by the assessee in the form of letters submitted by the concerned parties during the course of assessment proceedings for the immediately preceding year, i.e. A.Y. 2010-11 was not reliable as pointed out by the Assessing Officer and since the additional evidence filed by the assessee before the ld. CIT(Appeals) was also not found reliable, the addition made by the Assessing Officer under section 41(1) was rightly confirmed by the ld. CIT(Appeals). 8. We have considered the rival submissions and also perused the relevant material available on record. As regards the liability standing in the name of M/s. Basanti Finance & Investment Co. Limited, the ld. Counsel for the assessee has submitted that the same represented an advance received by the assessee and since the same was not claimed by the assessee as deduction while computed the income for the year under consideration or any of the earlier years, we find merit in the contention of the ld. Counsel for the assessee that the same cannot be treated as income by invoking the provisions of section 41(1) of the Act. However, keeping in view that this claim is made by the assessee .....

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..... eated as allowed. 10. The issue involved in Ground No. 2 relates to the addition of ₹ 18,36,091/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) by treating the amount payable by assessee to Bhikam Chand Jhawar(HUF) as ceased to have existed as per section 41(1) of the Act. 11. The liability of ₹ 18,36,091/- was shown by the assessee in the name of Bhikam Chand Jhawar(HUF) as on 31.03.2011. In order to verify the same, a notice was issued by the Assessing Officer at the address of the said party as given by the assessee. The same, however, was returned back with the Postal remarks not known . When this position was brought by the Assessing Officer to the notice of the assessee, a new address of the said party was provided by the assessee. In order to make the verification at the said new address, Inspector of the Department was deputed by the Assessing Officer. As reported by the said Inspector to the Assessing Officer, he failed to locate any such party even at the new address given by the assessee after a long effort. The Assessing Officer, therefore, treated the liability standing in the name of Bhikam Chand Jhawar(HUF) as ceased to have existed .....

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..... tence of the liability in the name of the said party as claimed. At the time of hearing, the ld. Counsel for the assessee was asked by the Bench to show any documentary evidence whereby the amount in question was ever demanded by Bhikam Chand Jhawar(HUF). He, however, has failed to show any such evidence. On the other hand, he has admitted that the amount in question is still not paid by the assessee to the said party even after a period of more than eight years and the same is still shown as outstanding in the books of account of the assessee. Keeping in view all these facts and circumstances of the case, we are of the view that the liability in question was rightly treated by the Assessing Officer as ceased to have existed and the ld. CIT(Appeals) is fully justified in confirming the addition made by the Assessing Officer on this issue under section 41(1) of the Act. We accordingly uphold the impugned order of the ld. CIT(Appeals) and dismiss Ground No. 2 of the assessee s appeal. 15. The issue raised in Ground No. 3 relates to the addition of ₹ 17,99,020/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of trading liability payable to M/s. Da .....

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..... e month of August, 2009 and the same was outstanding as on 31.03.2012. Keeping in view this documentary evidence placed on record and having regard to the fact that the liability in question was settled by the assessee subsequently through proper banking channel, which was duly acknowledged by M/s. Daga Trading Company, we are of the view that the existence of the liability in question was duly established by the assessee and in the absence of anything brought on record by the Assessing Officer to prove otherwise, the addition made by him under section 41(1) and confirmed by the ld. CIT(Appeals) is not sustainable. We accordingly delete the said addition and allow Ground No. 3 of the assessee s appeal. 18. The issue raised in Ground No. 4 relates to the additions of ₹ 46,87,982/- and ₹ 36,11,432/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of the amounts payable to M/s. Bimal Kumar Jhanwar (HUF) and Bimal Kumar Jhanwar respectively. 19. The assessee had shown trading liabilities of ₹ 46,87,982/- and ₹ 33,65,484/- in the name of M/s. Bimal Kumar Jhanwar (HUF) and Bimal Kumar Jhanwar respectively as on 31.03.2011. In respons .....

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..... see has also not raised any objection in this regard, we restore this matter to the file of the Assessing Officer for deciding the same afresh after verifying the claim of the assessee that the amounts in question have been duly paid through banking channel to the concerned parties in the subsequent years. If the amount is found to have been paid by the said parties as claimed by the ld. Counsel for the assessee, the Assessing Officer shall delete the addition made to the total income of the assessee on this issue. Ground No. 4 of the assessee s appeal is accordingly treated as allowed. 21. As regards the issue raised in Ground No. 5 of the assessee s appeal relating to the addition of ₹ 1,82,03,626/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of provision made for Gratuity payable while computing the book profit of the assessee under section 115JB of the Act by treating the same as unascertained liability, the ld. Counsel for the assessee has submitted that the said amount actually did not represent any provision made for any liability by the assessee but it was paid on account of Gratuity to the employees, who had actually retired during .....

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..... case of CIT - vs.- Alom s Extrusions Limited [185 Taxman 416] and that of Hon ble Jurisdictional High Court in the case of CIT -vs.- Vijay Shree Limited (ITA No. 245 of 2011 dated 06.09.2011). Accordingly we respectfully follow the said judicial pronouncements and uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this ground. Ground No. 1 of the Revenue s appeal is accordingly dismissed. 24. The issue raised in Ground No. 2 of the Revenue s appeal relates to the deletion by the ld. CIT(Appeals) of the disallowance of ₹ 21,59,862/- made by the Assessing Officer on account of assessee s claim for additional depreciation on new plant and machinery. 25. The additional depreciation of ₹ 21,59,862/- claimed by the assessee was disallowed by the Assessing Officer on the ground that the same was claimed in respect of certain parts of plant and machinery, which could not function on its own as plant and machinery. The ld. CIT(Appeals), however, found that a similar issue was decided by the Chandigarh Bench of this Tribunal in favour of the assessee in the case of Adarsh Steel Rolling Mills -vs.- DCIT (ITA No. 523/CHD/2013) and following the same, .....

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