2009 (12) TMI 34 - PUNJAB AND HARYANA HIGH COURT

Addition on account of cessation of liability – liability was six years old - and on inquiry conducted by the Assessing Officer creditors were untraceable and also the assessee failed to produce the creditors, their Income Tax particulars and even present address of the creditors despite opportunity being afforded to the assessee – AO made the addition u/s 41(1) – CIT(A) and ITAT deleted the additions - Assessing Officer in his assessment order has observed that though copies of accounts of sundry creditors appearing in the books of the assessee signed by the concerned creditors were filed by the assessee, the assessee herself admitted during the assessment proceedings that she had lost contact with the creditors and their latest addresses are being located and further, the addresses of creditors and their PANs were also not given during the assessment proceedings – held that - It is the conceded position that in the assessee's balance sheet, the aforesaid liabilities have been shown, which are payable to the sundry creditors. Such liabilities, shown in the balance sheet, indicate the acknowledgment of the debts payable by the assessee. Merely because such liability is outstanding for the last six years, it cannot be presumed that the said liabilities have ceased to exist. It is also conceded position that there is no bilateral act of the assessee and the creditors, which indicates that the said liabilities have ceased to exist – Order of ITAT sustained – not addition to be made