Gujarat High Court
The Commissioner Of Income Tax-I vs Haribhai Tulsidas Thacker on 12 September, 2011
Author: Akil Kureshi
Bench: Akil Kureshi
TAXAP/1347/2010 1/4 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL No. 1347 of 2010
To
TAX APPEAL No. 1348 of 2010
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THE COMMISSIONER OF INCOME TAX-I, - Appellant(s)
Versus
HARIBHAI TULSIDAS THACKER, - Opponent(s)
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Appearance :
MR MR BHATT, SR. ADV. WITH MRS MAUNA M BHATT for Appellant(s) : 1,
None for Opponent(s) : 1,
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CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MS JUSTICE SONIA GOKANI
Date : 12/09/2011
ORAL ORDER
(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) These appeals arise out of a common judgment of the Tribunal dated 30th November 2009. In both the appeals, the Revenue has raised questions in identical form, which read as under:
"A. Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.12,32,846/- made by the Assessing Officer on account of disallowance of cessation of liability u/s.41(1)?
"B. Whether the Appellate Tribunal is right in law and on facts in restricting to Rs.1,77,325/- as against addition of Rs.9,47,702/- made on account of disallowance of G.P.?"
HC-NIC Page 1 of 4 Created On Wed Jul 20 02:15:51 IST 2016 TAXAP/1347/2010 2/4 ORDER Question A arises in following factual background.
The Assessing Officer during the course of assessment for the assessment year 2000-01 found that the assessee had shown one M/s.Gautam Overseas Pvt. Ltd. as a sundry creditor with a balance of Rs.12,32,846/-. When confirmation of accounts was called for from M/s.Gautam Overseas Pvt. Ltd., it was revealed from their books of accounts that there was nil balance in the name of the assessee. The Assessing Officer was, therefore, of the opinion that liability of the assesseee had ceased to exist and such amount therefore on the principle of cessation of liability should be taxed as income of the assessee.
The assessee took up two fold contentions. First contention was that writing off debt by Gautam Overseas was a unilateral act. Second contention was that out of the said amount of Rs.12,32,000/-, a sum of Rs.7,77,000/- was adjusted towards the debit balance of one Ashirvad Traders which was written off in the accounts of the assessee.
The Assessing Officer, discarded the assessee's defence and taxed the entire income of Rs.12,32,000/- as assessee's income for the assessment year in question. The assessee carried the issue in appeal. CIT(Appeals) gave partial relief to the assessee to the extent the assessee should reconcile the amount of HC-NIC Page 2 of 4 Created On Wed Jul 20 02:15:51 IST 2016 TAXAP/1347/2010 3/4 ORDER Rs.7,77,000/-, the same was deleted from the assessee total income and to the extent of difference of Rs.4,55,000/-, the CIT (Appeals) confirmed the view of the Assessing Officer.
Both sides carried the issue in separate appeals to the Tribunal. The Tribunal rejected the Revenue's appeal and allowed the assessee's appeal. In the process, the Tribunal relied on a decision of the Apex Court in the case of CIT v. Sugauli Sugar Works (P) Ltd., 236 ITR 518.
Before us, counsel for the Revenue submitted that the Tribunal misapplied the decision in the case of Sugali Sugar Works (supra). In the present case, there was confirmation from the creditor that the entire debt had been written off. That being the position, the Assessing Officer was justified in making full addition.
We are, however, of the opinion that to the extent the assessee could explain the portion of the debt and which was accepted by the CIT(Appeals), the Revenue cannot carry the issue any further. As already noted, out of the total sum of Rs.12,32,000/-, an amount of Rs.7,77,000/- pertained to the debit balance of one Ashirvad Trades which was written off by the assessee. This adjustment would thus have to be taken into account as rightly done by the CIT (Appeals). In other words, the original creditor i.e. Guatam Overseas Pvt. Ltd. had in effect not written off th entire debt of Rs.12,32,000/- but only HC-NIC Page 3 of 4 Created On Wed Jul 20 02:15:51 IST 2016 TAXAP/1347/2010 4/4 ORDER a part of it.
In the result, we are not inclined to entertain Revenue's appeal being Tax Appeal No.1348 of 2010 on this issue, while we are inclined to admit Revenue's Appeal being Tax Appeal No.1347 of 2010.
With respect to question B raised in both the appeals, the same pertains to the profit on the basis of GP rate. The Assessing Officer recalculated the profit at the rate of 3%. CIT (Appeals) however reduced to 1%. Both sides approached the Tribunal in separate appeals. The Tribunal rejected both the appeals. We are of the opinion that the entire issue is factual in nature and does not give rise to any substantial question of law.
In the result, Tax Appeal No.1348 of 2010 is dismissed. Tax appeal No.1347 of 2010 is admitted only for consideration of question A. (Akil Kureshi J.) (Ms.Sonia Gokani, J.) (vjn) HC-NIC Page 4 of 4 Created On Wed Jul 20 02:15:51 IST 2016