M/s J. R. Modi Associates Ltd. & Anr. vs DCIT

Per Satbeer Singh Godara, Judicial Member:

The instant batch o f three cases involving the twin assessees herein i.e. M/s J. R. Modi Associates Ltd.’s twin appeals ITA Nos. 6866 & 7728/Del/2019 arise against CIT(A)-31, New Delhi (A.Y. 2012-13) and CIT(A)-5, New Delhi (A.Y. 2014-15) and the latter assessee Sh. Surender Modi’s IT A No. 7489/Del/2019 arise against CIT(A)-31, New Delhi (A.Y. 2012-13), orders dated 18.06.2019, 31.07.2019 & 0 6.08.2019, in case Nos. 304/17-18/22/15-16 , Del/CIT (A)-5/0440/2016-17 & 305/17-18/26/15-16, in proceedings u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”), respe ctively.

Heard bo th these assessees as well as the departme nt at length. Case files perused.

We proceed appeal wise for the sake of co nvenience and brevity.

It emer ges during the course of hear ing that the assessee/appe llant herein is aggrieved against bo th the learned lower authorities’ respective assessment findings dated 30.12.2016 making the impugned section 41(1) disallowance/addition of cessation of liability amounting to Rs.20 ,96,00,000/-; in assessment order dated 30.12.2016 as uphe ld in the lower appellate discussion.

That being the case, learned CIT-DR invites our attention to page 5 of the assessment order making the impugned addition in the assessee’s hands for the reason that neither it could prove genuineness thereof nor the corresponding confirmations came from the parties co ncerned u/s 133(6) of the Act. There is further no dispute that the lear ned CIT(A) has uphe ld the same against the assessee.

We have given our thoughtful consideration to the assessee’s and the Revenue’s respective veheme nt submissions against and in suppor t of the impugne d additio n. It is made clear that there is not even an indication in both the le arned lower authorities’ respective findings that the impugned liability has undergone actual cessation u/s 41(1) of the Act going by the assessee’s books of accounts. Learned CIT -DR see ks to buttress the point in support of the impugned addition that given the fact that the assessee has faile d to prove genuineness thereof, it is indeed an instance of deemed cessation thereof forming subject matter of adjudication before the tribunal.

We find no reason to sustain impugned section 41(1) cessation of liability addition inter alia in absence of actual cessation thereof in the assessee’s books of account. Case law CIT Vs. Sugauli Sugar Works (P) Ltd. (1999) 236 ITR 518 (SC) has already settled the issue in the assessee’s favour and against the department that it is not deemed cessation of liability with the afflux of time but the actual one only going by the relevant books of accounts which could fo rm subject of section 41(1) addition. We thus delete the impugned addition for this precise reason in very terms. This assesse e’s appeal ITA No. 6866/Del/2019 succeeds therefore.

It next transpires that both these assessee’s respective appeals ITA Nos. 7489 & 7728/Del/2019 are directed against the learned lower authorities’ respective findings inter alia making various disallowance and additions. And the main issue there in is stated to be that of unexplained cash credit involving varying sums.

It is in this factual backdrop that the learned counsel infor ms us during the course of hearing that both these assessee’s have sought to admit their respective additional evidence comprising all the detailed supportive material running into 72 to 107 pages in the nature of confirmations, agreements, letter etc which could no t be filed before the learned lower authorities on account of various communication gaps and circumstances beyond contro l. The Revenue could hardly dispute that the asse ssee’s foregoing docume ntary evidence is very much relevant to adjudicate all these issues herein since go to the root of the matter .

It is in this factual backdrop that we deem it appropriate to admit the assessee’s additional evidence under Rule 29 of the Income T ax (Appellate Tribunal) R ules, 19 63 herein and restore both these appeals filed by Sh. Surender Modi and M/s J. R. Modi Associates Ltd. back to the learned CIT(A) with a direction that he shall get a remand report from the Asse ssing Officer(s) qua the same so as to comply with the principles of natur al justice. It is further made clear that both these assessee’s shall be or the entire risk and responsibility to prove their respective pleadings and additional evidence in remand proceedings within three effective oppor tunities of hearing only failing which o ur instant direction shall stand vacated. Or dered accor dingly.

To sum up, the former assessee’s appeal ITA No. 6866/Del/2019 is accepted/allowed and the remaining twin appeals ITA Nos. 7489 & 7728/Del/2019 are allowe d for statistical pur poses. A copy of this common order be placed in the respective case files.