Nsp Straw & Paper Products Pvt.Ltd.,, ... vs Department Of Income Tax

आयकर अपील सं./I.T.A. No.1976/Ahd/20111 ( नधा रण वष / Assessment Year : 2007-08) Asst.Commissioner of बनाम/ NSP Straw & Paper Income-tax Vs. Products Pvt.Ltd. Navsari Circle, Digendranagar Navsari Vansada Dist.Navsari थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAACN 8133 E (अपीलाथ# /Appellant) .. ($%यथ# / Respondent)

अपीलाथ# ओर से / Appellant by : Shri M.K. Singh, Sr.DR $%यथ# क' ओर से/Respondent by : -NONE-

ु वाई क' तार*ख / सन Date of Hearing 13/02/2015 घोषणा क' तार*ख /Date of Pronounce ment 20/02/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-Valsad, ('CIT(A)' in short) pertaining to Assessment Year (AY) 2007-08. The Revenue has raised the following grounds of appeal:-

ITA No.1976/Ahd/2011 Asst.CIT vs. NSP Straw & Paper Products Pvt.Ltd.

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[1] On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in deleting the addition of Rs.14,79,040/- made on account of disallowance u/s.41(1) of the Act for cessation of liability.

[2] On the facts and in the circumstances of the case and in law, the Ld.CIT(A) ought to have upheld the addition made by the A.O.

[3] It is, therefore, prayed to set aside the order passed by the CIT(A) and that of the order passed by the AO be restored.

[4] The appellant craves leave to add, alter or amend any grounds of appeal.

2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 28/07/2009, thereby the Assessing Officer (AO in short) made addition of Rs.14,79,040/- on account of disallowance u/s.41(1) of the Act for cessation of liability. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions of the assessee, allowed the appeal. Aggrieved by the order of the ld.CIT(A), now the Revenue is in appeal before us.

3. At the time of hearing, no one appeared on behalf of the assessee, however an application for seeking adjournment by the Authorised Representative of the assessee is placed on record. The request for ITA No.1976/Ahd/2011 Asst.CIT vs. NSP Straw & Paper Products Pvt.Ltd.

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adjournment was rejected and the appeal was taken up for hearing in the absence of the ld.counsel for the assessee.

4. The ld.Sr.DR supported the order of the AO and submitted that the ld.CIT(A) was not justified in deleting the addition. He submitted that the AO has given a finding that the liability is existing for many years. The only reason given by the assessee-company is that the company is desired to make the payments to the creditors, but the financial position of the company does not permit to make the payment immediately. The AO did not accept the explanation as given by the assessee-company.

5. We have heard the ld.Sr.DR, perused the material available on record and gone through the orders of the authorities below. We find that the AO had made addition by invoking the provisions of section 41(1) of the Act. The finding of the AO contained in paras-5.2 & 5.3 are reproduced hereinbelow:-

"[5.2]. The contention of the assessee is carefully considered. It is concluded that even if the financial position does not permit and also intended to make payment in future, the fact is that the said liability is unpaid/outstanding since 31/03/2005 is no more payable by it, benefited in respect of such liability by way of remission or cessation thereof shall be deemed to be profits and gains of the business or profession and chargeable to tax as income of that previous year."

ITA No.1976/Ahd/2011 Asst.CIT vs. NSP Straw & Paper Products Pvt.Ltd.

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[5.3]. In view of the above facts, the aggregate liability of Rs.1479040/- as shown above is treated as income within the meaning of section 41(1) of the I.T. Act and added to the total income of the assessee-company."

5.1. However, the ld.CIT(A) in para-4.3 of his order has given a finding on fact as under:-

"4.3. DECISION:-

I have carefully considered the relevant facts, argument advanced and decisions cited. The assessee has shown the liability as outstanding in its books of account. Thus, the assessee is acknowledging the liability. Even under the Limitation Act, though the creditors may not be able to enforce the claim for recovery of the sum, still if the assessee acknowledges the liability, the liability cannot be said to have ceased. If the provisions of section 41(1) are to be applied, it is for the AO to prove that the allowance or deductions has been made in the assessment for any year in effect of loss or trading liability incurred by the assessee and such liability has ceased or the assessee has obtained whether in cash or in any other manner some benefit in respect of such liability. Explanation(1) inserted to section(1) by Finance Act-II with effect from 1997 will also not apply. For such Explanation to apply, there should be at least unilateral act on the part of the assessee to write off such liability in its account. Since, the assessee the assessee has acknowledged the liability through out and such liability in subsequent years was either settled by returning the goods or by making payment by account payee cheques is sufficient evidence to hold that the liability has not ceased and hence addition u/s.41(1) of the Act is not warranted. I, therefore, delete the addition made of Rs.14,79,040/- on account of ITA No.1976/Ahd/2011 Asst.CIT vs. NSP Straw & Paper Products Pvt.Ltd.

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alleged cessation of trading liability. Thus, this ground of appeal is allowed."

5.2. The aforesaid finding of the ld.CIT(A) is not controverted by the Revenue by placing any contrary material on record. The ld.CIT(A) has given a finding that in subsequent years, the assessee has acknowledged the liability throughout and such liability was either settled by returning the goods or by making payment by 'account payee cheques'. This specific finding of the ld.CIT(A) is not rebutted by the ld.Sr.DR, therefore we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby sustained. Thus, grounds raised in the Revenue's appeal are rejected.

6. In the result, the appeal of the Revenue is dismissed.

Order pronounced in the Court on Friday, the day of February, 2015 at Ahmedabad.

Sd/- Sd/- (एन.एस.सैनी) (कुल भारत) लेखा सद य या यक सद य ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 20/ 02 /2015 ट*.सी.नायर, व. न.स./T.C. NAIR, Sr. PS ITA No.1976/Ahd/2011

Asst.CIT vs. NSP Straw & Paper Products Pvt.Ltd.

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आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ# / The Appellant

2. $%यथ# / The Respondent.

3. संबं4धत आयकर आयु6त / Concerned CIT

4. आयकर आय6 ु त(अपील) / The CIT(A)-Valsad

5. 7वभागीय $ त न4ध, आयकर अपील*य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड; फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स%या7पत $ त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 19.2.15(dictation-pad 5- pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ..19.2.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......20.2.15

7. Date on which the file goes to the Bench Clerk.....................20.2.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................