2017 (2) TMI 560 - ITAT KOLKATA - Income Tax

Head Note / Extract:
Additions u/s 41(1) on account of seizure of current liability - whether the liability of assessee has ceased to exist in the books of account - Held that:- The liability has been shown in the balance-sheet for ₹ 26,27,186/-. Merely the notices issued under section 133(6) of the Act to the parties returned as un-served cannot be ground for the addition under section 41(1) of the Act as the liability has not ceased to exist. Therefore, it cannot be concluded that the liability has ceased to exist. It has not actually been written off in the books of account of assessee and the ld. DR has not brought anything on record suggesting that the trading liability has actually been written off in the books of account. In the instant case, the Authorities Below has presumed that the trading liability ceased to exist as the notice u/s 133(6) of the Act issued were not served. As such on examination of orders of Authorities Below, we find that the liability has not been written off in the books of account of assessee. In our considered view, liability cannot cease to exist until and unless it is written off in the books of account of assessee. In this view of the matter, we hold that the liability which has actually been written off can only be treated as income of assessee u/s 41(1) of the Act