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2023 (11) TMI 648 - GUJARAT HIGH COURTAddition u/s 41(1) - cessation of liability - as per AO assessee failed to prove genuineness of the outstanding credit balance - HELD THAT:- When the transaction between the assessee and the M/s.Paper Star Marketing was found to be genuine in the preceding AY 2012-13 as per the assessment order after the same being examined by the AO, then the outstanding balance pertaining to the same transaction could not have been stated to be non-genuine since the AO in preceding year after conducting inquiry had found that the adverse material on record in form of denial by the said party did not lead to the conclusion that the transaction of the assessee with the said party was non-genuine. Tribunal therefore has rightly come to the conclusion that for such reason only the CIT (Appeals) has rightly deleted the addition made by the AO by invoking Section 41(1). Considering the provision of Section 41(1) no addition can be made under the said provision unless the liability ceased to exist during the previous year and the assessee write off the same in its books of accounts. It is also found as a matter of fact that the assessee has made payment to the said party in the next year i.e. AY 2014-15 so the liability cannot be said to have ceased to exist during the year under consideration and the appellant has also not written out the same in its books of accounts. No substantial question of law arises.
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