The Commissioner Of Income Tax – 9, Mumbai v. M/S.international Clothing Industries Private Limited

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2194 OF 2011 The Commissioner of Income Tax – 9, MumbaiVersusM/s.International Clothing Industries Private Limited ..Appellant. ..Respondent. Mr.Vimal Gupta, Senior Advocate with Ms.Padma Divakar for the appellant.None for the respondent. CORAM : J.P. Devadhar &M.S. Sanklecha, JJ. P.C. : DATE : 6[th] March 2013 1.In this appeal by the Revenue for assessment year 2006-07, following re-framed question of law has been proposed for our consideration. “Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that provision of Section 41(1) of the Act were not attracted to the amount of Rs.3,04,93,753/- shown as sundry creditors by the assessee even though such liabilities were more than three years old and further the business of the assessee was on the verge of closure as the assessee had disposed its inventory and plant and machinery ?” 2.The respondent – assessee in its balance-sheet for assessment year 2006-07 has shown an amount of Rs.3.4 crores as due to various sundry creditors. The assessing officer held that the out-standings were in excess of itxa2194-11 three years though there were disputes with some creditors. However, the assessing officer held that the liabilities in respect of these creditors has ceased and accordingly subjected the amount to tax under Section 41(1) of the Income Tax Act, 1961 ('Act' for short). 3.In appeal, the Commissioner of Income Tax (A) confirmed the order of the assessing officer. On further appeal, the Tribunal deleted the additions by holding that the liability cannot be said to have been ceased merely because it has become time-barred. This was evident from the fact that in certain cases the respondent – assessee has also made payments to some of the creditors. On the aforesaid facts, the Tribunal concluded that there was intention on the part of the respondent – assessee to pay the amounts to its creditors and in view thereof, same had not been written off by the respondent – assessee. The Tribunal pointed out that perhaps the Department could invoke Section 41(1) of the Act in the later year as and when if finds that the liability had ceased. 4.In view of the above, since the decision of the Tribunal is essentially based on finding of fact, we see no reason to entertain the proposed question of law. Accordingly, the appeal is dismissed with no order as to costs. (M.S. Sanklecha, J.)(J.P. Devadhar, J.)