Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (8) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (8) TMI 1487 - ITAT KOLKATAAddition of bogus sundry creditors u/s 41 - setting off of the same amount in AY 2001-02 - HELD THAT:- The provision of Sec. 41(1) comes into operation where the assessee has incurred a trading liability and trading liability has been allowed as a deduction in any earlier year, and something has, later on, being recovered in respect of such liability or such liability has either been remitted or has seized to exist. Hon'ble jurisdictional High Court in the case of CIT v S.K. Reference Ltd [1994 (1) TMI 278 - CALCUTTA HIGH COURT] has held that where the liability to pay commission on sugarcane was later allowed as deduction pursuant to State Government’s Ordinance which was later enacted into Act, provision for such liability cannot be taxed by invoking the provision of Sec. 41(1) of the Act on the mere ground that amount allowed was returned back to profit and loss account, unless such liability was remitted or seized to exists. In the present case, the liability very much in existence in on account of sundry credit and this is trading liability and once it is not seize to exist, or remitted, the mere non-existence of the parties cannot be added as an ‘income’ of the assessee. Accordingly, this appeal of assessee is allowed on merits. Set off of sundry creditors and carried forward from earlier year, as the appeal for AY 2000-01 has already been allowed in favour of assessee, this will not be treated as ‘income’ for AY 2001-02. Hence, these two appeals of assessee are allowed.
|