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2016 (11) TMI 1047 - ITAT MUMBAIAddition u/s 41 - cessation of liability - Held that:- When the Assessing Officer was of the view that there was cessation of liability in the case on hand, it was incumbent upon him to cause necessary enquiries to be made in order to bring on record material evidence to establish the requirement for invoking the provisions of section 41(1) of the Act. The very fact that the assessee reflects these amounts as creditors in his Balance Sheet as on 31/3/2007, is an acknowledgement of his liability to these creditors and this also automatically extends the period of limitation under section 18 of the Limitation Act. Once the assessee acknowledges that the debts to creditors are outstanding in his Balance Sheet, that he is liable to pay his creditors, Revenue cannot suo-moto conclude that the creditors have remitted their liability or that the liability has otherwise ceased to exist, without bringing on record any material evidence to the contrary. In the case on hand, the creditors aggregating to ₹ 33,44,827/- continue to be reflected in the assessee’s Balance Sheet as on 31/3/2007. We are of the opinion that the Assessing Officer has not brought on record any material evidence to establish that there was cessation of liability in respect of the outstanding creditors balances represented in the assessee’s Balance Sheet as on 31/3/2007, and concur with the finding of the Ld. CIT(A) that the addition under section 41(1) of the Act as cessation of liability being unsustainable, is to be deleted. - Decided in favour of assessee.
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