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2016 (10) TMI 312 - AT - Income TaxAddition u/s 41 - unexplained difference in account - cessation of trading liability (in respect of which the assessee had at any time in the past claimed and been allowed deduction - Held that:- prima facie suggestive or indicative of a liability, that by itself could not be conclusive of the matter, particularly considering that we have found the assessee’s books of account as not reflecting the actual state of affairs. Similarly, the non write off of the debt by KRL, which may be hopeful of recovery, would also not conclude or be determinative of the matter. The principal question, despite legal obligation, i.e., assuming so, is: Does the assessee intend of pay the same? Going by the assessee’s conduct, it does not. Or else it would not have stopped paying KRL, which appears to be for long, compelling it to charge delayed payment charges and, finally, invoke the bank guarantee in its’ favour. A good part of the amount outstanding stands paid directly by a customer. Why? The supplier (KRL), it needs to be borne in mind, is selling a licensed item (through registered dealers), and recovers, as a matter of policy, payment of goods in advance (refer Ground # 2 before the ld. CIT(A), reproduced at pg. 1 of the impugned order), i.e., does not extend any credit to its’ customers. It is for these reasons that we regard the establishment of intent by the assessee as relevant; the creditor having already, as it appears, exhausted the bank guarantee issued in its’ favour. How would the assessee establish its intent to pay the said amount, as implied by its’ holding out the same as a subsisting liability, we cannot predicate, being in fact a matter of evidence. Does the company have any means to recover except, of course, by initiating a legal process? Has it done so at any time? When does the same get barred by time? Has any part of liability been discharged subsequent to 31.3.2008? These and other related questions arise, on the basis of answers to all of which only would it be possible to say if there has occurred, or not so, a cessation of liability qua the said balance amount of ₹ 7.63 lacs, i.e., as on 31.3.2008. The matter is, in view of the foregoing, restored to the file of the AO for proper determination, to be decided after allowing a reasonable opportunity to the assessee to present its’ case before him, issuing definite findings of fact, in accordance with law. We may clarify that we may not be construed as having issued any finding in the matter, but as having only analyzed the facts and circumstances with reference to the assessment of the (whole or any part of the) said credit balance appearing in the assessee’s books of account as income under the Act.
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