TMI Blog2015 (1) TMI 1429X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted as genuine by the Department in the earlier years, assessee did not write off liabilities to its profit and loss account and there was no cessation of liability. Therefore the provisions of Sec. 41(1) were not applicable because the liabilities ceases only when the assessee equivocally expresses its intention not to honour of the liability as and when demanded. In the present case, nothing was brought on record to substantiate that the assessee expressed its intention not to honour the liability when the creditors demanded the same, rather the assessee had continued to acknowledge its liability which who evident from its audited balance sheets furnished along with returns of income for the earlier years which were accepted as g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) has erred on the facts circumstances of the case, in accepting the assessee s contention that the liabilities still existed and same were remained outstanding in the balance sheet, without appreciating the fact that the AO has brought sufficient evidence on record to prove that the liabilities had ceased to exist. 3. From the above ground, it is gathered that only grievance of the Department relates to the deletion of addition of ₹1,41,52,793/- made by the Assessing Officer u/s 41(1) of the Income Tax Act, 1961 (hereinafter the Act in short) as cessation of liability on account of sundry creditors and advance from customers. 4. The facts of the case in brief are that the assessee filed the return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be repaid by the assessee due to want of funds. It was further stated that assessee had acknowledged the fact of its owing indebtedness to those parties by continuing to show in its Balances Sheets and there was no change in the amount of current liabilities and provisions, sundry creditors for others and advances from customers as compared to earlier years. It was submitted that as and when liability was incurred, the same was duly reflected and was accepted as genuine in the respective years for which assessee had duly submitted its returns. It was further submitted that provisions of Sec. 41(1) of the Act were not applicable and assessee had not obtained whether in cash or in any other manner whatsoever any benefit in respect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where a debt became barred by time and the creditor was not able to recover the amount by enforcing his right in court, such right did not come to an end nor the liability of the debtor cease so as to attract provisions of Sec. 41(1) of the Act. Reliance was placed on the judgment of Hon ble Karnataka High Court in the case of Liquidator, Mysore Benches Pvt. Ltd. v. CIT 114 ITR 853 (Karn). The Ld. CIT(A) held that AO was not justified in making the addition of ₹1,41,52,793/- as the assessee s deemed income u/s 41(1) of the Act. Accordingly, the impugned addition was deleted. 7. Now the Department is in appeal. 8. Ld. DR reiterated the observation made by the Assessing Officer and strongly supported the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly when the assessee equivocally expresses its intention not to honour of the liability as and when demanded. In the present case, nothing was brought on record to substantiate that the assessee expressed its intention not to honour the liability when the creditors demanded the same, rather the assessee had continued to acknowledge its liability which who evident from its audited balance sheets furnished along with returns of income for the earlier years which were accepted as genuine by the Department. We therefore considering the totality of the facts do not see any valid ground to interfere with the findings of Ld. CIT(A). Accordingly, we do not see any merit in the appeal of Department. 9. In the result, appeal of Department i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
