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2008 (7) TMI 617 - AT - Income TaxApplicability of section 41(1) - Remission or cessation of trading liability - non-genuineness of credit - HELD THAT:- It is observed that assessee company is a limited company and its accounts are accessible to general public. The balances are brought forward balances. If the same are added on account of their non-genuineness, then also these amounts cannot be added to the income of the assessee for the year under consideration as the question of genuineness thereof can be examined only in the year in which they were credited in the account of the assessee. The amount also cannot be considered to be the income of the assessee on the ground of expiry of limitation as, according to well settled law explained by Hon’ble Supreme Court in the case of Sugauli Sugar Works (P.) Ltd.[1999 (2) TMI 5 - SUPREME COURT] in the absence of creditor, it is not possible for the Department to come to the conclusion that the debt is barred and has become unenforceable and there may be some circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act. In the case of the assessee amount has not even been credited to the Profit & Loss Account. Therefore, on the ground of expiry of limitation, the addition upheld by the CIT(A) u/s 41(1) cannot be held justified. Hon’ble Supreme Court in the case of Kesaria Tea Co. Ltd.[2002 (3) TMI 1 - SUPREME COURT] have examined the provisions of section 41(1). Relying on the same, it will be inferred that it has not been shown by ld. CIT(A) that the assessee has acquired any benefit from this particular liabilities which are still outstanding in the balance sheet of the assessee and it has also not been shown that these liabilities have ceased finally without the possibility of revival. In our opinion, the onus has wrongly been shifted by the revenue on the assessee. The assessee has shown these liabilities outstanding in its balance sheet. Therefore, there was no occasion to treat the said amount as taxable u/s 41(1) of the Act and if Department intends to assess the same by applying the provisions of section 41(1), then the onus will be on the revenue to show that the liability which is appearing in the balance sheet has ceased finally and there is no possibility of the revival of the liability. Therefore, the addition cannot be sustained either u/s 68 or u/s 41(1) of the Act and, therefore, deleted. The appeal filed by the assessee is allowed. In the result, the appeal filed by the assessee is allowed.
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