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2015 (11) TMI 179 - ITAT BANGALOREAddition u/s 68 - cessation of liability u/s. 41(1) - whether addition u/s. 68 of the Act could not be made because, admittedly, the credits in question did not relate to the previous year relevant to AY 2009-10? - Held that:- In almost identical facts, the Hon’ble Delhi High Court in the case of Shri Vardhaman Overseas Ltd. ( 2011 (12) TMI 77 - DELHI HIGH COURT ), has clearly laid down that neither section 41(1) nor section 68 of the Act can be applied. On the applicability of section 68, we are of the view that those provisions will not apply as the balances shown in the creditors account do not arise out of any transaction during the previous year relevant to AY 2009-10. The provisions of sec. 68 are clear inasmuch as they refer to “sum found credited in the books of account of an assessee maintained for any previous year”. There is no dispute in the present case that the amounts due to the sundry creditors had been allowed in the earlier assessment years as purchase price in computing the business income of the assessee. The second question is whether by not paying them for a period of four years and above the assessee had obtained some benefit in respect of the trading liability allowed in the earlier years. The words “remission” and “cessation” are legal terms and have to be interpreted accordingly. In the present case, there is nothing on record to show that there was either remission or cessation of liability of the assessee. In fact, there is no reference either in the order of the AO or CIT(A) to the expression “remission or cessation of liability”. There is nothing on record to show any cessation or remission of liability by the creditor or even an unilateral act by the Assessee in this regard. In view of the above, we are of the view that the impugned addition cannot be sustained and the same was rightly directed to be deleted by the CIT(A). The order of the CIT(A) is therefore confirmed. - Decided in favour of assessee.
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