Pr. Commissioner Of Income Tax-19 v. Pukhraj S. Jain

DDR IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONINCOME TAX APPEAL NO. 1288 OF 2016 Pr. Commissioner of Income Tax-19..AppellantVs.Pukhraj S. Jain..Respondent …......... Mr. Ashok Kotangle a/w. Ms. Padma Divakar for appellant.Mr. Tanzil Padvekar for respondent. …......... CORAM : AKIL KURESHI & M.S. KARNIK, JJ. DATE : 4[th] JANUARY, 2019 P.C.: The Revenue is in Appeal against the judgment of Income Tax Appellate Tribunal dated 10/11/2015. Followingquestions have been presented for our consideration : 1.Whether on the facts and circumstances ofthe case and in Law, the Hon. ITAT was justified inupholding the decision of the Ld. CIT(A) by completelyignoring the contention of the revenue in respect ofviolation of Rule 46A of the I T Rules, 1962 ? 2.Whether on the facts and circumstances ofthe case and in Law, the Hon. ITAT was justified inupholding the decision of the Ld. CIT(A) wherein theaddition by the A.O., by invoking section 41 of the I TAct, 1961 was deleted ? 51.itxa 1288-16.doc 2.Briefly stated the facts are that, The respondent – assessee is an individual andengaged in the business of imports. The Assessing Officer whileassessing return of the respondent – assessee for the assessmentyear 2010-11 noticed that there were several sundry creditorstowards whom the assessee had not repaid a sum of Rs.1.79crores (rounded off) for over three years. The Assessing Officertherefore after putting the assessee to notice invoked Section41(1) of the Income Tax Act, 1961 ('the Act' for short). 3.The assessee carried the matter in Appeal and inaddition to raising legal contentions, the appellant contendedthat in subsequent years most of the creditors were paid off. Theevidence in this respect was produced before the Commissioner(Appeals). The Commissioner (Appeals) allowed the Appealupon which the Revenue approached the Tribunal. The Tribunalby the impugned judgment dismissed the Revenue's Appeal. TheTribunal noted that the assessee was unable to repay thecreditors because of weak financial position and further that the 51.itxa 1288-16.doc assessee had never completely stopped making repayments. TheTribunal also noted that in next couple of years the assessee hadin fact repaid a sum of Rs. 1.54 crores out of Rs.1.79 crores. TheTribunal, therefore, concluded that the assessee never treatedthe liability to have ceased. 4.It is well settled through series of judgments thatmerely because a debt has not been repaid for over three years,would not automatically imply cessation of liability. Exhaustionof period of limitation may prevent filing of recoveryproceedings in a Court of law, nevertheless it cannot be statedby itself that the liability to repay the amount had ceased. Goingby this logic itself, the Assessing Officer, in our opinion,committed an error invoking Section 41(1) of the Act. Furtherthe assessee had produced additional evidence on record beforethe Appellate Authority after following the procedure andpointed out that substantial portion of the debt was cleared inlater assessment years. 51.itxa 1288-16.doc 5.We do not find any error in the decision of theTribunal. Income Tax Appeal is dismissed. (M.S. KARNIK, J.) (AKIL KURESHI, J.)