Case: ITO Vs Mohinder Pal Singla (ITAT Chandigarh)
Appeal No. ITA No. 606/CHD/2019
Authority: ITAT Chandigarh
Order passed on: 14.06.2022
During the course of assessment, the AO noted that the assessee had raised unsecured loans amounting to Rs. 2,11,37,381 of which Rs. 1,12,37,381 had been raised from M/s Aadi Krishna Agro Foods, Sunam, and Rs. 99,00,000 had been raised from M/s Track Tech Engineering Ludhiana. In the assessment year 2012-13, these amounts were shown under ‘sundry creditors’, subsequently due to some mistake, these amounts were shown as ‘unsecured loans’. The AO issued notice proposing to add back the amount of Rs. 2,11,37,381.
The assessee carried the matter before the Ld. First Appellate Authority challenging the addition. There was a delay in filing the appeal before the Ld. CIT(A) because it was the contention of the assessee before the Ld. CIT(A) that the assessment order had not been served upon him neither at the address as per the PAN data base nor at the address as appearing in return of income. The Ld. CIT(A) condoned the delay in filing the appeal before him and also allowed the appeal of the assessee on merits.
The Revenue Department has approached this Tribunal against the condonation of delay by the Ld. CIT(A) and against the deletion of impugned addition on merits.
The ITAT held that since the Department could not bring any document or evidence on record to establish that these findings of the Ld. CIT(A) regarding non-service of assessment order were perverse the appeal stands dismissed. The Department is merely trying to grab at straws to somehow make a case that the condonation of delay being bad in law would nullify the First Appellate Order on the merits of the case.
Further, the assessee had not debited the aforesaid liability to its Profit and Loss account in any of the earlier years (admitted by the AO at Pg-7 and by Ld. CIT(A) at pg-9) and thus, the question of receiving any benefit, allowance or deduction by the assessee in earlier years, as specified in (i) above, has not been fulfilled in the instant case and, therefore, there lies no application of section 41 (1) in the instant case. Further, the assessee had also not received any benefit either in cash or otherwise during the relevant year. In fact, the said sum will decrease the cash inflows of the assessee in the subsequent years. The assessee has not written back the liability during the relevant year and the said liability continued to appear as the closing liability and has been carried forward to next year.
Therefore, it can be said that both the conditions needed for the application of section 41(1) of the Act have not been fulfilled in the instant case and, therefore, the addition made under section 41(1) of the Act would have no legs to stand and has been rightly deleted by the Ld. CIT(A).
The appeal of department stands dismissed.
The complete order can be downloaded from this link: https://www.itat.gov.in/files/uploads/categoryImage/1655292050-606-c-19-mohinder%20pal%20singla%20(ss-nks).pdf
