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Income Tax Appellate Tribunal - Ahmedabad

Narendrasingh C.Saini, Bharuch vs Department Of Income Tax on 8 November, 2012

         आयकर अपीलीय अिधकरण,
                     अिधकरण, अहमदाबाद Ûयायपीठ 'डȣ
                                               डȣ'
                                               डȣ अहमदाबाद ।
       IN THE INCOME TAX APPELLATE TRIBUNAL
               " D" BENCH, AHMEDABAD

सव[ौी मुकुल कुमार ौावत, Ûयाियक सदःय एवं ौी अिनल चतुवद
                                                    ȶ ȣ, लेखा सदःय के सम¢ ।
  BEFORE SHRI MUKUL Kr.SHRAWAT, JUDICIAL MEMBER And
      SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER

              आयकर अपील सं./I.T.A.  No.1985/Ahd/2010
             ( िनधा[रण वष[ / Assessment Year : 2007-08)
 Dy.CIT                        बनाम/ Shri Narendrasingh C.Saini
 Bharuch Circle                 Vs. Prop. of M/s.Amrit Crange
 Bharuch                             & Amrit Const.
                                     4, Mangalam Shopping
                                     Centre
                                     Dahej By-Pass Road
                                     Bharuch
 ःथायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AHXPS 1400 J
    (अपीलाथȸ /Appellant)        ..       (ू×यथȸ / Respondent)

            अपीलाथȸ ओर से / Appellant by   :    Shri T.Sankar, Sr.D.R.
            ू×यथȸ कȧ ओर से/Respondent by :     Ms. Urvashi Shodhan, A.R.

          सुनवाई कȧ तारȣख / Date of Hearing     : 08.11.2012
          घोषणा कȧ तारȣख /Date of Pronouncement : 23.11.12


                              आदे श / O R D E R

PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER :

This is an appeal filed by the Revenue arising from the order of the ld.CIT(A)-VI, Baroda dated 10.03.2010 passed for A.Y. 2007-08 by raising following grounds:-

1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in deleting the addition of Rs.3,87,421/-

on account of cessation of liability u/s.41(1) out of various creditors appearing in the books of the assessee.

Dy.CIT vs. Shri Narendrasingh C.Saini Asst.Year - 2007-08 -2-

2. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in deleting the disallowance of Rs.2,90,621/- on account of exce3ss claim of diesel expenses.

2. Apropos to Ground No.1, facts in brief as also the issue emerged from the corresponding assessment order passed u/s.143(3) dated 23.11.2009 were that the assessee is a supplier of Hydro -Mobile Cranes and JCB. Out of the list of the creditors as per the balance-sheet of the assessee, it was noted by the AO that there were six sundry creditors appeared in the accounts. The assessee has informed that in respect of trading liability the names have appeared and carried over in the accounts. As per AO, the outstanding liability was appearing in the books as an outstanding liability for more than three years. In his opinion, the liability ceased to exist because the same was barred by limitation. By referring Bennett Coleman & Co. Ltd. (113 CTR 391) and Indian Motors Transport Co. (201 ITR 1021), the AO had invoked the provisions of section 41(1) of IT Act and added the said amount in the taxable income.

3. Before ld.CIT(A), the assessee has referred following decisions:-

(1) New Commercial Mills Co.Ltd. vs. DCIT, 73 TTJ 893. (2) CIT Vs. Bharat Iron & Steel Industries, 199 ITR 67. (3) CIT Vs. Sugauli Sugar Works (P) Ltd., 236 ITR 518 3.1. The ld.CIT(A) has reversed the action of the AO in the following manner:-

"3.3. I have considered the submission of the ld. AR and facts of the case. It is true that the liabilities existed for more than three ITA No.1985/Ahd/2010 Dy.CIT vs. Shri Narendrasingh C.Saini Asst.Year - 2007-08 -3- years. There is no finding by the Assessing Officer that in these cases there has been either remission of liability by the concerned creditors or there was nothing on record to show that the creditors had waived their right to receive the amounts. Merely because the liabilities continued to exist for a period which according to the Assessing Officer was unjustified, it cannot be arbitrarily said that there was a cessation of liability or remission of liability and as such the addition made by the Assessing Officer in such circumstances cannot be sustained. Thus this ground of appeal is allowed."

4. Having heard the submissions of both the sides, we are of the considered view that in the absence of any cogent evidence to believe that the liabilities in question have actually ceased to exist, it was unjustifiable on the part of the AO to assume on his own that the same have become barred by limitation being appearing in the books of accounts for more than three years. Rather, in the case of CIT vs. Silver Cotton Mills Company 125 Taxman 741(Guj.), the Hon'ble Court has held that the liabilities if appearing in the books of accounts should subsist although it might not be enforceable on account of some provisions of law of limitation unless and until it was legally held so. We therefore hold that unpaid liability cannot be added in the total income of the assessee by invoking section 41(1) of IT Act merely because the liability remained unpaid for few years unless and until there is an evidence to show that either by operation of law or the creditor had remitted the debt. Considering the facts of the case, we hereby approve the view taken by the ld.CIT(A) and dismiss this ground of the Revenue.

5. Apropos to Ground No.2, it was noted by the AO that during the year under consideration, there was an increase in the "Diesel Expenses"

Dy.CIT vs. Shri Narendrasingh C.Saini Asst.Year - 2007-08 -4- comparing the last year. For the year under consideration, assessee has claimed "Diesel Expenses" at Rs.58,12,421/- as against Rs.34,26,083/- of the past. In this regard, assessee has furnished comparative figures and informed that there was price hike, hence there was increase in the "Diesel Expenses". However, AO has disallowed 5% of the "Diesel Expenses" and added an amount of Rs.2,90,621/- in the taxable income of the assessee. Ld. CIT(A) has considered the assessee's contention and thereafter held as under:-

"4.3. I have considered the submissions of the ld. AR and facts of the case. It is sent hat in some cases, in terms of the conditions of the contract, diesel is supplied by customer and in other cases, the diesel expenses are borne by the appellant. It is also mentioned that diesel expenses are borne by the appellant. It is also mentioned that diesel price has increase by 7.19% as compared to the preceding year. In view of these parameters and also in view of the fact that the contention of the appellant was not countered by the Assessing Officer by cogent material the plea of the AR is acceptable. It is also a fact that no specific defects were pointed out by the Assessing Officer, where the AO has made the addition on ad hoc basis. In the given factual matrix, I am of the opinion that there is no justification for ad hoc disallowance out of diesel expenses. The addition is therefore directed to be deleted."

6. Having heard the submission of both the sides and also considering the factual aspect of the case in the light of comparative chart placed on record, we have noted that the admitted factual position was that there was increase in the price of the Diesel by 7.04% and that was stated to be one of the reasons for the impugned increase in the Diesel expenditure. It has also been explained by ld.AR that considering the break-up of the ITA No.1985/Ahd/2010 Dy.CIT vs. Shri Narendrasingh C.Saini Asst.Year - 2007-08 -5- "Transport Receipt" it was found that the Diesel expenditure incurred by the assessee for running the machinery was higher in comparison to the past years since the customers have contributed Diesel less than the past year. All these facts have, therefore, duly explained the reason for increase in Diesel expenses for the year under consideration, hence we hereby uphold the view taken by the ld.CIT(A) and dismiss this ground of the Revenue.

7. In the result, Revenue's appeal is dismissed.

             Sd/-                                                   Sd/-
         ( अिनल चतुवद
                    ȶ ȣ)                                  ( मुकुल कुमार ौावत )
          लेखा सदःय                                           Ûयाियक सदःय
( ANIL CHATURVEDI )                                 ( MUKUL Kr. SHRAWAT )
ACCOUNTANT MEMBER                                      JUDICIAL MEMBER

Ahmedabad;            Dated         23 / 11 /2012

टȣ.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS


आदे श कȧ ूितिलǒप अमेǒषत/Copy
                     षत      of the Order forwarded to :
1.    अपीलाथȸ / The Appellant
2.    ू×यथȸ / The Respondent.
3.    संबंिधत आयकर आयुƠ / Concerned CIT
4.    आयकर आयुƠ(अपील) / The CIT(A)-VI, Baroda

5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड[ फाईल / Guard file.

आदे शानुसार/ BY ORDER, स×याǒपत ूित //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) उप/ आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद / ITAT, Ahmedabad