Appeal details
Counselvise Citation
[2011] 100 COUNSELVISE.COM (IT) 2213 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-03-2011
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
22-03-2011
Assessment Year
2005-2006
Appeal Filed On
08-04-2009
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C DELHI) BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL ITA NO. 1320(DEL)009 ASSESSMENT YEAR: 2005-06 DY.COMMISSIONER OF INCOME TAX, M/S. GCG TRANSGLOB AL HOUSING PROJECTS CIRCLE 12(1), NEW DELHI. V. (P) LTD., MCT HOUSE, BLOCK A, OKHLA CENTRE, OPP.HOLY FAMILY HOSPITAL, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. MONA MOHANTY, SR. DR RESPONDENT BY: SMT. JYOTI NARULA, CA ORDER PER A.D. JAIN, J.M . THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2005-06. THE ONLY GROUND TAKEN IS AS FOLLOWS:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 1,63,20,000/- IGNORING THAT THE AMOUNT BEING FORFEITED, WAS CLEAR CASE OF CESSATION OF LIABILITY ARISING DURING THE COURSE OF BUSINESS. 2. THE MAIN OBJECT OF THE ASSESSEE COMPANY IS TO CA RRY ON THE BUSINESS OF BUILDERS, COLONIZERS, DEVELOPERS AND MORTGAGERS OF RESIDENTIAL, COMMERCIAL AND INDUSTRIAL PROPERTIES AND TO CARRY ON THE BUSIN ESS OF PURCHASE, SALE AND ITA 1320(DEL)09 2 DEVELOPMENT OF ANY TYPE OF LAND. IN THE NOTES TO A CCOUNTS FILED BY THE ASSESSEE WITH ITS RETURN OF INCOME FOR THE ASSESSME NT YEAR UNDER CONSIDERATION, I.E., ASSESSMENT YEAR 2005-06, IT HA D BEEN STATED THAT THE ASSESSEE HAD FORFEITED CERTAIN TRADING ADVANCES WHI CH WERE RECEIVED BY IT FROM CERTAIN PARTIES AGAINST SALE OF FLATS. THE T OTAL AMOUNT FORFEITED WAS STATED TO BE AT ` 1,63,20,000/-. ON QUERY BY THE AO, THE ASSESSEE SUBMITTED VIDE REPLY DATED 27.8.2007, THAT IT HAD ENTERED INT O A COLLABORATION AGREEMENT FOR SALE OF FLATS TO BE BUILT ON THE PROPERTY, L- 1/7, HAUZ KHAS ENCLAVE, NEW DELHI; THAT HOWEVER, THE APPLICANTS, TO WHOM THE L ETTERS OF ALLOTMENT WERE ISSUED, DID NOT PAY THE AGREED AMOUNTS IN TIME; THA T THEREFORE, THE AMOUNTS RECEIVED WERE FORFEITED; THAT THESE WERE AMOUNTS OF ` 50,10,000/- FROM DAMSON CHEMICALS PVT. LTD., ` 18,10,000/- FROM ROOPANSHI VINLYOG PVT.LTD., ` 20,00,000/- FROM SUNCITY FIN-CON PVT. LTD., ` 15,00,000/- FROM SUNCITY FIN-LEASE PVT. LTD. AND ` 60,00,000/- FROM SURAKSHIT EXPORTS PVT. LTD.; THAT THESE PARTIES HAD FILED SUITS AGAINST TH E ASSESSEE, ALLEGING THAT THE AMOUNTS HAD BEEN GIVEN TO THE ASSESSEE AS LOANS FOR PURCHASE OF LAND AND CLAIMING REFUNDS; AND THAT THE ASSESSEE HAD DENIED THESE ALLEGATIONS IN THE SUITS. ITA 1320(DEL)09 3 3. ON THIS, THE AO REQUIRED THE ASSESSEE TO EXPLAI N AS TO WHY THIS FORFEITURE OF PART PAYMENT OF EARNEST MONEY RECEIVE D AGAINST PROPOSED SALE OF FLATS BE NOT HELD AS A CESSATION OF TRADING LIAB ILITY. IN ITS REPLY DATED 3.10.07, THE ASSESSEE CONTENDED THAT SINCE IT HAD N OT WRITTEN OFF THIS LIABILITY FROM ITS BOOKS OF ACCOUNT AND IT HAD NOT CLAIMED AN Y DEPRECIATION OR ALLOWANCE IN RESPECT OF THIS AMOUNT IN ANY PREVIOUS YEAR, AND SINCE THE MATTER WAS SUB-JUDICE , THE PROVISIONS OF SECTION 4 1(1) OF THE INCOME TAX ACT COULD NOT BE INVOKED. 4. REJECTING THE AFORESAID STAND TAKEN BY THE ASSES SEE, THE AO, HOLDING THAT THERE WAS A CLEAR CESSATION OF THE TRADING LIA BILITIES, CONSIDERED THE AMOUNT OF ` 1,63,20,000/- REPRESENTING EARNEST MONEY FORFEITED BY THE ASSESSEE, AS THE ASSESSEES BUSINESS INCOME RECEIVE D IN THE COURSE OF ITS REGULAR BUSINESS. THIS AMOUNT WAS, AS SUCH, ADDED TO THE ASSESSEES INCOME. WHILE DOING SO, THE AO OBSERVED THAT THE ASSESSEE H AD ITSELF STATED THAT THE ADVANCES IN QUESTION WERE TRADING ADVANCES WHICH WE RE RECEIVED AGAINST THE PROPOSED SALE OF FLATS; THAT THE ASSESSEE HAD ALSO ACCEPTED THE FORFEITURE; THAT EVEN IN THE SUITS FILED BY THE PARTIES AGAINST THE ASSESSEE, THE ASSESSEE HAD ACCEPTED THAT THESE ADVANCES WERE IN THE NATURE OF TRADING ADVANCES WHICH HAD BEEN FORFEITED BY THE ASSESSEE; THAT IT WAS THU S CLEAR THAT THESE TRADING LIABILITIES HAD CEASED TO EXIST AND THAT AS PER THE ASSESSEES OWN ADMISSION, ITA 1320(DEL)09 4 THESE AMOUNTS WERE NOT TO BE REFUNDED TO THE RESPEC TIVE PARTIES; AND THAT THE FORFEITED AMOUNTS WERE, THEREFORE, IN THE NATURE OF BUSINESS INCOME OF THE ASSESSEE. THE AO DREW SUPPORT FROM CIT V. LAKSHM I VILAS BANK LTD. 220 ITR 305(SC) AND CIT V. STATE TRADING CORPN. OF INDIA LTD. 247 ITR 115(DEL). 5. BEFORE THE LD. CIT(A), THE ASSESSEE MAINTAINED T HE STAND IT HAD TAKEN BEFORE THE AO. IT WAS FURTHER SUBMITTED THAT THE S UITS FILED AGAINST IT WERE AT THE APPELLATE STAGE AND WERE SUB-JUDICE DURING THE YEAR UNDER CONSIDERATION; THAT THE ASSESSEE HAD NOT ACTUALLY FORFEITED THE AM OUNTS, BUT HAD MERELY TRIED TO MAKE A DISCLOSURE IN ITS BOOKS OF ACCOUNT, REGAR DING THE LIABILITIES PENDING AGAINST IT; THAT EVEN OTHERWISE, THIS DISCLOSURE WA S MADE IN THE ACCOUNTS FOR ASSESSMENT YEAR 2000-01 AND DID NOT HAVE ANY BEARIN G ON THE YEAR UNDER CONSIDERATION, I.E., ASSESSMENT YEAR 2005-06. 6. ALLOWING THE APPEAL OF THE ASSESSEE, THE LEARNED CIT(A) OBSERVED, INTER ALIA, THAT THE AMOUNTS/ADVANCES SHOWN RECEIVE D BY THE ASSESSEE, IN THE ACCOUNTS FOR ASSESSMENT YEAR 2000-01, WERE OF ` 1,63,20,000/-, UNDER CURRENT LIABILITIES AND PROVISIONS, WITHIN SCHEDULE D OF THE AUDITED ACCOUNTS; THAT IN THE ACCOUNTS FOR THE YEAR UNDER C ONSIDERATION, I.E., ASSESSMENT YEAR 2005-06, UNDER SCHEDULE E OF THE AC COUNTS, ADVANCES FROM CUSTOMERS HAD BEEN SHOWN UNDER CURRENT LIABILITIES AT ` 1,92,68,000/-; THAT ITA 1320(DEL)09 5 THESE ADVANCES INCLUDED THOSE SHOWN IN THE ACCOUNTS FOR THE ASSESSMENT YEAR 2000-01; THAT IN THE ACCOUNTS FOR THE YEAR UND ER CONSIDERATION, UNDER SCHEDULE 5 THEREOF, THE ASSESSEE HAD MADE A DISCLOS URE, STATING THE AMOUNTS RECEIVED AS ADVANCES RECEIVED FOR SALE OF FLATS, TO HAVE BEEN FORFEITED, SINCE THE APPLICANT COMPANIES, TO WHOM LETTERS OF ALLOTME NT HAD BEEN ISSUED, DID NOT PAY THE AGREED AMOUNT AT THE AGREED TIME, WHICH FORFEITURE HAD BEEN CHALLENGED BY THE PARTIES IN LEGAL SUITS, SEEKING R EFUNDS, THE REPLY OF THE ASSESSEE TO WHICH HAD BEEN THAT OF DENIAL AND THE M ATTER BEING SUB-JUDICE, NO FINANCIAL ENTRIES HAD BEEN PASSED FOR THE FORFEITED AMOUNT OF ` 1,63,20,000/- ; THAT AS SUCH, THERE WAS NO CESSATION OF LIABILITY , SINCE THE ASSESSEE HAD NOT WRITTEN BACK THE LIABILITIES IN ITS ACCOUNTS; THAT AS SUCH, SECTION 41 OF THE I.T. ACT WAS NOT APPLICABLE; THAT THE ASSESSEE HAD MADE THE DISCLOSURE FOR THE FIRST TIME IN ITS ACCOUNT, IN ASSESSMENT YEAR 2000-01; AN D THAT SO, THE PROVISIONS OF SECTION 41(1) OF THE I.T. ACT COULD HAVE BEEN IN VOKED ONLY IN RESPECT OF ASSESSMENT YEAR 2000-01. THE LEARNED CIT(A) DISTI NGUISHED LAKSHMI VILAS BANK LTD.(SUPRA), WHICH WAS RELIED ON BY THE AO TO MAKE THE ADDITION. THE LEARNED CIT(A) PLACED RELIANCE ON C ERTAIN CASE LAWS TO SUPPORT THE DELETION OF THE ADDITION. 7. AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE US . ITA 1320(DEL)09 6 8. CHALLENGING THE IMPUGNED ORDER, THE LEARNED DR H AS ARGUED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 1,63,20,000/- CORRECTLY MADE BY THE AO; THAT WHILE DOING SO, THE LEARNED CI T(A) HAS LOST SIGHT OF THE FACT THAT THIS IS A CASE WHERE THE ASSESSEE HAS ITSELF ADMITTED THE FORFEITURE; THAT SINCE THE AMOUNT OF ` 1,63,20,000/- STANDS ADMITTEDLY FORFEITED, IT IS A CLEAR-CUT CASE OF CESSATION OF LIABILITY, SQUARELY FALLING UNDER THE PROVISIONS OF SECTION 41 OF THE I.T. ACT, AS PER WHICH, WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSM ENT, FOR ANY YEAR IN RESPECT OF, INTER ALIA, TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, THE ASSESSEE HAS OBTAINED ANY AMOUNT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF CESSATION THEREOF, THE AMOUNT SO OBTAINED SHALL BE DEEMED TO BE PROFITS AN D GAINS OF BUSINESS OR PROFESSION, CHARGEABLE TO INCOME TAX AS THE INCOME OF THAT PREVIOUS YEAR; THAT EXPLANATION 1 TO SECTION 41(1) OF THE ACT IS E XPLICIT IN TERMS, WHEN IT PROVIDES THAT FOR THE PURPOSE OF SECTION 41(1), CES SATION OF TRADING LIABILITY INCLUDES CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY THE ASSESSEE BY WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS; THAT TH E DISCLOSURE MADE BY THE ASSESSEE BY WAY OF NOTES TO ACCOUNTS, IS UNAMBIGUOU S, INASMUCH AS IT ACCEPTS THE FACTUM OF FORFEITURE; THAT AS PER LAKS HMI VILAS BANK LTD. 220 ITR 305(SC) AND STATE TRADING CORPN. OF INDIA LTD. 247 ITR 115(DEL), ITA 1320(DEL)09 7 BOTH OF WHICH ARE BINDING, FORFEITURE RESULTS IN IN COME; THAT THE LD. CIT(A) HAS ERRED IN DISTINGUISHING THESE DECISIONS EVEN TH OUGH THESE ARE SQUARELY APPLICABLE. 9. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT THE LEARNED CIT(A) HAS RIGHTLY DELETED THE ADDITION WRO NGLY MADE; THAT IN FACT, AS RIGHTLY CONSIDERED, THERE WAS NO CESSATION OF LI ABILITY; THAT THERE IS NO DENYING THE FACT THAT IN THE NOTES TO THE ACCOUNTS, THE ASSESSEE HAD DECLARED THE FORFEITURE; THAT HOWEVER, UNDISPUTEDLY, NO FINA NCIAL ENTRIES WERE MADE IN THE ACCOUNT WITH REGARD TO THE AMOUNT OF ` 1,63,20,000/-, SINCE THE MATTER WAS PENDING IN THE COURT, IN THE SUITS FILED BY THE PARTIES AGAINST THE ASSESSEE COMPANY; THAT NO APPLICABILITY OF THE PROVISIONS OF SECTION 41 OF THE ACT CAN BE ENVISAGED IN A CASE WHERE THERE IS NO CESSATION OF LIABILITY, AS IS THE FACT HEREIN; THAT MOREOVER, AS RIGHTLY OBSERVED BY THE L D. CIT(A), IT IS ONLY CONCERNING ASSESSMENT YEAR 2000-01, THAT THE PROVIS IONS OF SECTION 41(1) OF THE ACT COULD HAVE BEEN SOUGHT TO BE INVOKED, IF AT ALL, SINCE IT WAS IN ASSESSMENT YEAR 2000-01, THAT THE DISCLOSURE WAS FI RST MADE IN THE ACCOUNTS; AND THAT THERE BEING NO FORCE THEREIN, THE APPEAL F ILED BY THE DEPARTMENT BE DISMISSED. ITA 1320(DEL)09 8 10. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE FACTS ARE NOT DISPUTED. THE ONLY QUE STION IS AS TO WHETHER THE DISCLOSURE IN THE NOTES TO THE ACCOUNTS, AS MADE BY THE ASSESSEE, IN THE ABSENCE OF ENTRIES IN THE ASSESSEES BOOKS OF ACCOU NT, WOULD AMOUNT TO A FORFEITURE OF THE AMOUNT OF ` 1,63,20,000/-, VALIDATING THE ACTION OF THE AO IN INVOKING THE PROVISIONS OF SECTION 41 OF THE I.T. A CT AND RENDERING THE ORDER UNDER APPEAL INVALID. 11. THE DISCLOSURE IN PARA 6 OF THE NOTES TO THE AC COUNTS, AS MADE BY THE ASSESSEE, FOR THE ASSESSMENT YEAR 2000-01, IS AS FO LLOWS:- THE COMPANY HAD ENTERED INTO A COLLABORATION AGRE EMENT FOR SALE OF HE FLATS TO BE BUILT ON L-1/7, HAUZ KHAS ENCLAVE, NEW DELHI, BUT THE APPLICANT COMPANIES TO WHOM LETTER OF ALLOTMENTS WE RE ISSUED DID NOT PAY THE AGREED AMOUNT AT THE AGREED TIME. THEREFO RE, THE AMOUNTS RECEIVED FROM THE APPLICANTS (PART PAYMENTS OF EARN EST MONEY) WERE FORFEITED. HOWEVER, THE PARTIES FROM WHOM PART PAY MENTS TOWARDS EARNEST MONEY WERE RECEIVED HAVE FILED SUITS ALLEGI NG THAT THE AMOUNTS WERE GIVEN AS LOANS TO THE COMPANY FOR PURC HASE OF LAND AND CLAIMED REFUND ACCORDINGLY. THE COMPANY HAS DENIE D THE SAME IN REPLIES TO THE COURT. HOWEVER, THE MATTER BEING SU B-JUDICE, NO FINANCIAL ENTRIES HAVE BEEN PASSED FOR THE AMOUNT M ENTIONED BELOW WHICH STANDS FORFEITED. THE TOTAL AMOUNT RECEIVED FROM THE DEFAULTING PARTI ES AND FORFEITED STANDS TO ` 1,63,20,000/-.(EMPHASIS SUPPLIED) 12. THE ABOVE NOTE SHOWS THAT THE ASSESSEE ITSELF T REATED THE AMOUNT OF ` 1,63,20,000/-, AS HAVING BEEN FORFEITED. THE UNDE R-LINED PORTION OF THE ITA 1320(DEL)09 9 NOTE, HOWEVER, SHOWS THAT THIS FORFEITURE WAS NOT R ECOGNIZED BY PASSING FINANCIAL ENTRIES IN THE ACCOUNTS. IT WAS ONLY BY WAY OF THIS NOTE, THAT THE ASSESSEE STATED TO HAVE FORFEITED THE AMOUNT OF ` 1,63,20,000/-. THE REASON FOR NOT PASSING FINANCIAL ENTRIES WITH REGARD THERE TO HAS BEEN STATED IN THE NOTE, AS LIS PENDENCE. AS PER THE NOTE, THE PARTI ES TO WHOM LETTERS OF ALLOTMENT HAD BEEN ISSUED, HAD GIVEN TRADING ADVANC ES TO THE ASSESSEE COMPANY AGAINST CONSTRUCTION OF FLATS. HOWEVER, T HESE PARTIES DID NOT MAKE PAYMENTS AS PER THE TERMS AGREED UPON. IT WAS, THE REFORE, THAT IT WAS CONVEYED TO THESE PARTIES BY THE ASSESSEE COMPANY T HAT THE AMOUNTS ALREADY RECEIVED AS ADVANCE WOULD BE FORFEITED. AGGRIEVED , THESE PARTIES MOVED COURT BY WAY OF FILING CIVIL SUITS AND SEEKING A R EFUND OF THE ADVANCES MADE BY THEM AMOUNTING TO ` 1,63,20,000/-. THE MATTER HAD HITHERTO NOT ATTAIN ED FINALITY AND WHEN THE ASSESSEE WAS BEFORE THE LD. C IT(A), APPEALS IN THE SAID SUITS WERE PENDING DISPOSAL. IT WAS, AS SUCH, THAT THE ASSESSEE DID NOT PASS ANY FINANCIAL ENTRIES FOR THE AMOUNT OF ` 1,63,20,000/-. 13. SECTION 41(1) (RELEVANT PORTION) OF THE INCOME TAX ACT RUNS AS FOLLOWS:- PROFIT CHARGEABLE TO TAX (1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE AS SESSEE (HEREINAFTER ITA 1320(DEL)09 10 REFERRED TO AS THE FIRST MENTIONED PERSON) AND, SUB SEQUENTLY, DURING ANY PREVIOUS YEAR, - (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH T RADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUN T OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFE SSION AND, ACCORDINGLY, CHARGEABLE TO INCOME TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION I N RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS I N EXISTENCE IN THAT YEAR OR NOT; OR (B) EXPLANATION 1 FOR THE PURPOSES OF THIS SUB-SECTIO N, THE EXPRESSION LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF SHALL INCLUDE THE REMISSION OR CESSATION OF ANY LIABILITY BY A UNILAT ERAL ACT BY THE FIRST- MENTIONED PERSON UNDER CLAUSE (A)OF THAT SUB-SECT ION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. THUS, AS PER SECTION 41(1) OF THE ACT, WHERE THERE IS A CESSATION OF A LIABILITY, THE ALLOWANCE OR DEDUCTION EARLIER GRANTED WITH REG ARD TO SUCH LIABILITY IS NO LONGER ALLOWABLE TO OR DEDUCTIBLE BY THE ASSESSEE A ND THE BENEFIT OBTAINED BY THE ASSESSEE WITH REGARD TO THE TRADING LIABILITY, BY WAY OF CESSATION THEREOF, SHALL BE DEEMED TO BE THE ASSESSEES BUSINESS INCOM E FOR THE YEAR IN WHICH SUCH BENEFIT IS OBTAINED BY THE ASSESSEE. THE CES SATION ENVISAGED IN THE SECTION, AS PER EXPLANATION 1 THERETO, SHALL INCLUD E CESSATION OF A LIABILITY BY A UNILATERAL ACT OF THE ASSESSEE, BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. ITA 1320(DEL)09 11 14. IT IS, THEREFORE, EXPLANATION 1 TO SECTION 41(1 ) WHICH HOLDS THE KEY TO THE QUESTION ARISEN FOR CONSIDERATION. EXPLANATIO N 1 TO SECTION 41(1) EMPLOYS THE EXPRESSION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. HENCE, IT IS THE WRITING OFF OF THE LIABILITY BY TH E ASSESSEE IN HIS ACCOUNTS, WHICH IS DETERMINATIVE OF THE ACTUAL CESSATION OF T HE LIABILITY. 15. THE ABOVE DOES NOT STAND DISPUTED. IT IS ONLY THAT THE AO CONSIDERED THE DISCLOSURE MADE BY THE ASSESSEE BY WAY OF RECIT AL IN THE NOTES TO ACCOUNTS FOR ASSESSMENT YEAR 2000-01, AS THE ASSESS EES ACT OF WRITING OFF THE LIABILITY IN HIS BOOKS OF ACCOUNT. THE AO HAS LAID MUCH STRESS ON THE FACT THAT IN THE NOTES TO THE ACCOUNTS, THE ASSESSE E HAD ITSELF ACCEPTED THE FACTUM OF FORFEITURE OF THE AMOUNT OF ` 1,63,20,000/- ADVANCED BY THE PARTIES TO THE ASSESSEE COMPANY. HOWEVER, IT CANNOT BE GAI NSAID, AS IT IS WELL SETTLED, THAT A DOCUMENT HAS TO BE READ AND CONSIDE RED IN FULL. A FRAGMENT THEREOF CANNOT BE PICKED AND CHOSEN TO THE DETRIME NT OF A PARTY. AS DISCUSSED HEREINABOVE, WHEN THE COMPLETE PARA 6 OF THE NOTES TO THE ACCOUNTS FOR ASSESSMENT YEAR 2000-01 OF THE ASSESSE E IS CONSTRUED, IT COMES OUT THAT YES, THAT THE ASSESSEE DID CONSIDER THE AM OUNT OF ` 1,63,20,000/- AS HAVING BEEN FORFEITED, SINCE THE PARTIES CONCERNED HAD FAILED TO MAKE THE PAYMENTS IN ACCORDANCE WITH THE TERMS AGREED UPON. HOWEVER, IN THIS VERY NOTE, THE ASSESSEE ALSO RELATED THAT SINCE THIS AMO UNT WAS SUBJECT MATTER OF ITA 1320(DEL)09 12 LITIGATION WHICH HAD NOT ATTAINED FINALITY, NO FIN ANCIAL ENTRIES WITH REGARD TO THIS AMOUNT OF ` 1,63,20,000/- WERE BEING PASSED. IT WOULD BE APPRO PRIATE TO EXTRACT HEREIN, ONCE AGAIN, FOR FACILITY AND READY REFERENCE, THE RELEVANT SENTENCE:- .HOWEVER, THE MATTER BEING SUB-JUDICE, NO FIN ANCIAL ENTRIES HAVE BEEN PASSED FOR THE AMOUNT MENTIONED BELOW WHICH STANDS FORFEITED.(STRESS IS OURS) 16. NOW, EVIDENTLY, THE AO MISSED OUT ON THIS RECIT AL. THE ASSESSEE IS UNAMBIGUOUS WHEN IT STATES THAT NO FINANCIAL ENTRIE S HAVE BEEN PASSED WITH REGARD TO THE AMOUNT OF ` 1,63,20,000/-. IN VIEW OF THIS RECITAL, IT IS AMPL Y CLEAR THAT THE ASSESSEE NEVER WROTE OFF THE LIABILI TY OF ` 1,63,20,000/-, IN ITS BOOKS OF ACCOUNT. ONCE THIS WAS SO, EXPLANATION 1 TO SECTION 41(1) OF THE ACT DID NOT AT ALL COME INTO PLAY, SINCE IN THE ABS ENCE OF THE WRITING OFF OF THE LIABILITY IN THE ACCOUNTS, THE LIABILITY SUBSIS TED AND NO CESSATION OF LIABILITY COULD BE PRESUMED. 17. THEREFORE, WE DO NOT FIND ANY FAULT WITH THE OR DER OF THE LD. CIT(A), WHEREBY HE RIGHTLY DELETED THE ADDITION MADE. OBV IOUSLY, NEITHER LAKSHMI VILAS BANK LTD.(SUPRA) NOR STATE TRADING CORPN. O F INDIA LTD.(SUPRA), IS APPLICABLE, IN THE FACTS DISCUSSED HEREINABOVE. ITA 1320(DEL)09 13 18. IN VIEW OF THE FACT THAT THERE HAS NOT BEEN ANY CESSATION OF LIABILITY AT ALL, THERE IS NO QUESTION OF SEEKING TO APPLY THE P ROVISIONS OF SECTION 41(1) OF THE ACT, IN THE YEAR UNDER CONSIDERATION. 19. IN VIEW OF THE ABOVE, FINDING NO MERIT IN THE G ROUND RAISED BY THE DEPARTMENT, THE SAME IS HEREBY REJECTED. 20. CONSEQUENTLY, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.03.2011. SD/- SD/- (K.G. BANSAL) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31.03.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR
