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2020 (5) TMI 121 - AT - Income TaxAddition u/s 41 - cessation of the liability - disallowance of credit entries from the parties - HELD THAT:- Liability continue to exist as on the close of the financial year 2011-12 as evidence by the fact that the permission to remit the money has been sought and granted by the RBI on 4/8/2015 and thereafter, the assessee had again applied for permission to remit on 19/8/2016. The fact that the payment has still not been made cannot be sole reason as reflective of remission or cessation of the said liability as there could be other financial constraints for not making the payment in time. The fact remains that the liability continue to exist and remain payable and the assessee continue to reflect the same as payable in its books of accounts as on close of the financial year 2011-12 and in view of the same, there is no basis for making the addition u/s 41(1) and the findings of the ld CIT(A) are hereby confirmed. Regarding amount of ₹ 1,20,54,761/-, the ld CIT(A) has returned a finding based on perusal of profit and loss account and return of income for A.Y 2017-18, that the assessee has written back the creditors in A.Y 2017-18 which indicates that the assessee was recognizing such liabilities till A.Y 2017-18. Revenue has not brought any evidence on record which suggests that liability in respect of these creditors have ceased to exist during the financial year relevant to impugned assessment year 2012-13. Where liabilities continue to exist and reflected in the assessee’s books of accounts, there is no basis to bring the same to tax u/s 41(1) of the Act. Further, in the A.Y 2017-18, where such liabilities have been written back in the books of accounts, the same have already been offered to tax by the assessee in his return of income. - Decided in favour of assessee.
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