Income Tax Appellate Tribunal - Mumbai
Vaishali Pharma Pvt. Ltd, Mumbai vs Dcit Cir. - 13(3)(2), Mumbai on 20 April, 2017
आयकर अपील
य अ धकरण "I" यायपीठ मंब
ु ई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "I" BENCH, MUMBAI
BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER
AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No. 519 1/Mum/2016
( नधा रण वष / Assessment Year : 2012-13)
Vaishali Pharma Pvt. Ltd ., बनाम/ The Dy. Commissioner of
706-709, A Wi ng, Income Tax - 13 (3)(2),
v.
Aravali Business Centre, Room No. 229,
R.C. Pate l Road , Aayakar Bhavan,
Borivali (W), M.K. Road,
Mumbai - 400 092. Mumbai.
थायी ले खा सं . /P AN : AACCV7258 G
(अपीलाथ /Appellant) .. ( यथ / Respondent)
Assessee by : Ms. Dinkle Hariya
Revenue by : Shri Sanjay Kumar Agarwal,
DR
ु वाई क तार ख / Date of Hearing
सन : 12-04-2017
घोषणा क तार ख /Date of Pronouncement : 20-04-2017
आदे श / O R D E R
PER RAMIT KOCHAR, Accountant Member
This appeal, filed by the assessee, being ITA No. 5191/Mum/2016, is directed against the appellate order dated 23rd May, 2016 passed by learned Commissioner of Income Tax (Appeals)- 21, Mumbai (hereinafter called "the CIT(A)"), for the assessment year 2012-13, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 20th February, 2015 passed by learned Assessing Officer ( hereinafter called " the AO") u/s 143(3) of the Income-tax Act,1961 (Hereinafter called "the Act").
2 ITA 5191/Mum/2016
2. The grounds of appeal raised by the assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") read as under:-
"1.1 The learned Commissioner of Income Tax (Appeals) - 21 , Mumbai ["the Id. CIT (A)"], erred in holding that the assessment is not time barred.
2.1 The Id. CIT (A) erred in confirming addition of Rs. 2,02,403/- being sundry creditors (i.e. Ajanta Enterprises Rs.75,762 and Calyx Chemicals & Pharmaceuticals Rs. 1,26,641) outstanding for last four years, to the total income as cessation of liability u/s 41(1)(a).
2.2 While doing so, the ld. CIT(A) failed to appreciate that -
(a) the Appellant has not obtained, whether in cash or in any other manner whatsoever, any amount in respect of sundry creditors outstanding.
(b) merely because the liability to some creditors is outstanding for more than four years and the liability is shown in the accounts of the Appellant, the amount cannot be assessable as income under section 41 (1) of the IT Act.
(c) the Appellant had not unilaterally written back the accounts of the sundry creditors in its profit & loss account for the year.
(d) the liability was shown in the balance sheet as on 31.03.2012. The assessee being a limited liability company, this amounted to acknowledging the debt in favour of the creditors for purposes of section 18 of the Limitation Act, 1963.
(e) the Appellants liability to the creditors subsisted and did not cease nor was it remitted by the creditors as on 31.03.1012. The liability was enforceable in a court of law.
2.3 It is submitted that in the facts and the circumstances of the case, and in law, no such disallowance is called for."
3. Brief facts of the case are that the assessee is engaged in the trading of bulk drug and pharmaceutical products. The case of the assessee was selected for scrutiny assessments and accordingly notices u/s 143(2) and 142(1) of the Act was issued to the assessee by the AO. The dispute which 3 ITA 5191/Mum/2016 had arisen between the parties is in very narrow compass. The assessee was showing certain sundry creditors in its balance sheet as at 31-03-2012 , hence, the assessee was asked by the AO to the submit the details and from the details submitted by the assessee, the A.O. observed that the following parties , inter-alia, are appearing as its sundry creditors for the last four years and the dispute between the Revenue and the assessee is now w.r.t. these under mentioned parties:-
(In Rupees) Sr Name of the party Amt in Amount in Amount Amount in No. 2011-12 2010-11 in 2009- 2008-09 10 1 Ajanta 75,762 75,762 75,762 75,762 Enterprises 2 Calyx Chemical 1,26,641 1,26,641 1,26,641 1,26,641 and Pharmaceutical No explanation was submitted by the assessee w.r.t. above creditors outstanding in its books of accounts for last four years, hence, the A.O., inter-
alia, brought to tax the above amount of Rs. 2,02,403/- and , inter- alia, added the aforesaid sum to the total income of the assessee u/s 41(1)(a) of the Act as cessation of the liability, as the aforesaid amount was outstanding for a very long time in assessee's books of accounts , vide assessment order dated 20-02-2015 passed by the AO u/s 143(3) of 1961 Act.
4. Aggrieved by the assessment order dated 20-02-2015 passed by the A.O. u/s 143(3) of 1961 Act, the assessee filed first appeal before the ld. CIT(A) who also confirmed the additions made by the A,O. as the assessee did not submit any explanations even before the learned CIT(A), vide appellate order dated 23rd May, 2016 passed by learned CIT(A). The learned CIT(A) observed that there were no transactions w.r.t. these two parties with the assessee in the last four years. It was also observed by learned CIT(A) that no 4 ITA 5191/Mum/2016 confirmations were filed by the assessee from these creditors and the liability cannot be allowed to be outstanding forever in the books of accounts of the assessee which had ceased to exist and was rightly brought to tax by AO u/s 41(1)(a) of 1961 Act.
5. Aggrieved by the appellate order dated 23-05-2016 passed by ld. CIT(A), the assessee filed an appeal before the tribunal.
6. The ld. Counsel for the assessee submitted that the said amounts are existing in its books of account for last four years and the said liability has arisen on account of raw material purchased by the assessee from the said parties in the earlier years against which no payment have been made by the assessee. It is submitted that there was no cessation of liability as at 31-03- 2012 and existence of outstanding credit in assessee's books of accounts is an acknowledgement of debt payable by the assessee which cannot be treated as cessation of liability of the assessee chargeable to tax u/s 41(1)(a) of 1961 Act. It is also submitted by learned counsel for the assessee that the assessee has written back/adjusted the said amount and offered the same for taxation in the assessment year 2015-16 which can be verified by authorities below, which were existing as outstanding to be payable in its books of account as at 31-03-2015. The assessee placed before us as an additional evidences vide copy of the computation of income for assessment year 2015-16 along with balance sheet as at 31-03-2015 , P&L account for financial year 2014-15 and ledger account of the said two parties for the financial year 2014-15. The learned counsel for assessee would argue that these credit balances have now suffered taxation in the assessment year 2015-16 and hence additions to income made in the impugned assessment year be deleted. These are additional evidences which were not placed before the A.O. and learned CIT(A). Now, these documents are placed before the Tribunal vide page No. 19 to 43.
5 ITA 5191/Mum/2016
7. The ld. D.R. relied upon the orders of authorities below.
8. We have considered rival contentions and also perused the material available on record. We have observed that the assessee is in the business of trading in bulk drugs and pharmaceutical products. There are two credit balances appearing in the name of M/s Ajanta Enterprises of Rs. 75762/- and M/s Calyx Chemical and Pharmaceutical of Rs. 126641/- which were appearing as outstanding to be payable for last four years in the books of account of the assessee as at 31-03-2012. The Revenue has brought to tax the said aggregate amount of Rs.2,02,403/- on account of cessation of liability u/s 41(1)(a) of the Act. The assessee has claimed that these were bona fide purchases of raw material made in earlier years for which payments were not made by the assessee to these parties. The assessee did not gave explanation before the authorities below nor filed any confirmations , but now has claimed before the tribunal that purchases were genuine/bonafide and these liabilities were outstanding to be payable as at 31-03-2012 which were reflected in books of accounts and there were no cessation of liability. The assessee has also claimed before us that the assessee had already offered the said amount for taxation in the assessment year 2015-16. The contentions of the assessee about genuineness/bonafide of purchases as well that these two accounts stood adjusted/written back and the income was offered to tax in assessment year 2015-16 , for which necessary verification needs to be done by the authorities below as to said claims of the assessee. Thus, we are inclined to restore this matter to the file of the A.O. for verification of the afore-said contentions of the assesse and de novo determination of the issues on merits in accordance with law after considering the submissions/explanations of the assessee in the light of evidences filed by the assessee. The assessee is directed to produce all necessary and relevant evidences and explanations before the A.O. to substantiate its claim in its 6 ITA 5191/Mum/2016 defense which shall be admitted by the AO in the interest of justice . Needless to say that proper and adequate opportunity of being heard shall be provided by the A.O. to the assessee in accordance with principles of natural justice in accordance with law. We order accordingly.
9. In the result, appeal filed by the assessee in ITA No. 5191/Mum/2016 for assessment year 2012-13 is allowed for statistical purposes as indicated above.
Order pronounced in the open court on 20th April, 2017. आदे श क घोषणा खल ु े #यायालय म% &दनांकः 20-04-2017 को क गई ।
Sd/- sd/-
(MAHAVIR SINGH) (RAMIT KOCHAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
मंब
ु ई Mumbai; &दनांक Dated 20-04-2017
[
व.9न.स./ R.K., Ex. Sr. PS
आदे श क! " त$ल%प अ&े%षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु:त(अपील) / The CIT(A)- concerned, Mumbai
4. आयकर आयु:त / CIT- Concerned, Mumbai
5. =वभागीय 9त9न?ध, आयकर अपील य अ?धकरण, मंब ु ई / DR, ITAT, Mumbai "I" Bench
6. गाडC फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या=पत 9त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai