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2020 (2) TMI 886 - AT - Income TaxAddition u/s 41(1) - Cessation of liability to pay - HELD THAT:- Admittedly the assessee constructed a society named Matrinagar Co-operative Housing Society Bharuch and was thus required to incur expenses on account of drainage boundary wall, temple etc. towards development of the society. Since these expenses were incurred by the owner of the society for which assessee was required to reimburse them therefore the assessee had created a provision in the books of account towards this liability. We also found that Matrinagar Association has not given up their right to recover the amount from the assessee. In the absence of confirmation it cannot be presumed that Matri Nagar Association has given up right of recovery of the said amount from the assessee and moreover the said amount has also been shown as payable by the assessee is also a pointer that assessee still admits the liability to pay. After appreciating the facts of the present case, we are of the view that for invoking provisions of section 41(1) of the Act, there has to be remission of liability. There is no remission or cession of liability in the case of assessee. Remission has to be granted by the creditors and the cession of the lability may occur either by reason of operation of law. Remission of liability arises only when the creditor voluntarily gives up the claim. The cession of liability arises when it ceases to exist in the eyes of law for all purposes - Since as far as the facts of the present case, the assessee has still shown the creditors as payable, therefore, there is no cessation of liability. - Decided in favour of assessee Advance towards sale of house property - HELD THAT:- From the records, we are noticed that assessee has received the money from three different persons who were not relatives of the assessee and it is also undisputed fact that assessee had received the money in pursuance of an authority to sell entered into on 01-09-2008. A.O. has recorded the statements of the persons from whom the advance was received. These persons have categorically confirmed and admitted of have doing agricultural activities. The land holdings in the form of 7/12 and also the certificate of Talati cum mantri has already been placed on record. The method by which the tissue were procured by the creditors was sold in the market has also been mentioned by the respective persons. All those persons have specifically stated that agricultural activities being carried out by them. The certificate of Talati also shows that the land owned by those persons are very fertile and the early income for the year under consideration was between 8 to 9 lacs for these individuals. Apart from that they have also specifically stated before the assessing officer that the amount was advanced from accumulated savings of past years. Since there is ample documentary evidence on record which proves the identity, creditworthiness and genuineness of transactions on the record in the form of agreement to sell, affidavits, statement of persons who had made the payment to the assessee and their source of payment, certificate of Talati and mantri and also proof of land holdings, therefore, all those documentary evidences cannot be disbelieved and additions cannot be made, merely rejecting the evidences filed and the evidences given by the assessee do not entitle the AO to make the addition u/s. 68 of the Income Tax Act as held by the Hon’ble Supreme court in the case of Orissa Corporation Pvt. Ltd. [1986 (3) TMI 3 - SUPREME COURT] . More particularly in this case the assessee has discharged his onus by putting forth all the documents, evidence placed on record clearly shows that agreement to sell was entered into by the assessee with the above three persons who had substantial land and confirmed the payments made in the statement also in an affidavit, therefore, the creditworthiness of the persons as well as genuineness of the transactions with the assessee stood established and thus the addition u/s. 69 could not be sustained. - Decided in favour of assessee
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