TMI Blog2012 (7) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... nd they have been repaid now by crediting the account of Shri Mahesh Belwal and by debiting the respective account of the lenders – Held that:- Provision of section 41(1) are not attracted as these are attracted only if the liability ceased to exist by way of remission or cessation thereof - assessee has written back this amount and a corresponding credit of an equivalent amount has been given to Mr. Mahesh Belwal and therefore no benefit can be said to have arisen to the assessee In respect of Rs.3,29,748 - assessee has not written back and liability has not ceased to exist – only stand taken by the Assessing Officer that the amount is outstanding for long and hence need to be written back - Held that:- Assessing Officer directed to delete the addition - appeal filed by the assessee is allowed. - I.T.A. No.4128/Del/2010 - - - Dated:- 25-5-2012 - SHRI I.P. BANSAL, SHRI T.S. KAPOOR, JJ. Appellant by : Shri S.N. Nautial, Advocate. Respondent by : Shri Satpal Singh, Sr. DR. ORDER PER TS KAPOOR, AM: This is an appeal filed by the assessee against the order of Ld CIT(A)-XI, New Delhi dated 2.7.2010 for assessment year 2003-04. The grounds raised by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered service for the appellant company. It is easier for an appellant company like it where both the Chairman and directors are close relations of Smt. Belwal to make adjustment to show that salary was paid to her. The appellant has failed to establish both before the Assessing Officer and also before me that Smt. Belwal at all rendered any service at that given point of time. This is essentially a question of fact which was rightly raised by the Assessing Officer and the appellant has failed to establish the same. I have no reason to interfere with the order of the Assessing Officer on this ground. 5. Aggrieved the assessee filed appeal before this Tribunal 6. The Ld AR argued before us that the salary paid to Smt. Savita Belwal was not paid as an employee but as a Director s salary. Therefore, query of Assessing Officer that Mrs. Belwal s name was not in the list of employees submitted by the assessee stands replied. He further argued that in the immediately preceding year also the salary was paid to Smt. Belwal and was not disallowed. 7. Ld DR, on the other hand, relied upon the order of the Assessing Officer and the Ld CIT(A) and argued that the assessee was not able t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been repaid now by crediting the account of Shri Mahesh Belwal and by debiting the respective account of the lenders. On being asked by the Assessing Officer regarding mode of acceptance of loans, the assessee could not file the details and argued the matter was too old to remember. The Assessing Officer then from the old record of the assessee from his file found that during 1990-91 the amounts from these lenders were shown as sundry creditor in the balance sheet and not as un-secured loans. The Assessing Officer confronted the assessee and asked the assessee as follows:- As per record held in this office the above parties was sundry creditors (trade creditors) and no loans have ever been obtained from them. Neither any repayment of un-secured loans have been reported by the auditor. You have also not able to provide any evidence of paying was liability towards the above sundry creditors. Accordingly, you are required to show cause as to why the squared up loans towards the above persons should not be treated as cessation of trade liability and be deemed to be profit gain of business of your company. 11. The Assessing Officer then wrote to all creditors and direct t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time is also held to have ceased and to be deemed to the profit and gain of business of the assessee company and accordingly charged to income tax. 12. Aggrieved, the assessee filed an appeal before Ld CIT(A). 13. Before the ld CIT(A), the Ld AR stated as below:- That no expenditure or disallowance has been claimed by the appellant by crediting these liabilities in the book in any of the previous years. Chief CIT v. Kerala Tea Co. Ltd. (2002) 254 ITR 434 (SC). These are not trade liabilities as on 31.3.2003. These parties have not ceased their right to claim the amount from the appellant as on 31.3.2003. There cannot be any application of section 41(1) if no expenditure or allowance is claimed by the appellant in previous assessment years and hence the section has no applicability in the present circumstances. As on 31.3,.2003 all the liabilities (barring Rs..3,29,748/-) have been squared up and in case of Aditya Cottage Industries, Kolkatta the balance is still pending as on 31.3.2010. 14. The Ld CIT(A) after hearing the submission of Ld AR decided the matter against the assessee and upheld the order of Assessing Officer. The operative part of the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qual amount of Rs..6,81,652/- was credited to the account of Shri Mahesh Belwal. Therefore, the assessee did not gain anything. On the one hand this liability to the tune of Rs..6,81,652/- ceased to exist and on the other hand, the receivable amount from Shri Mahesh Belwal reduced by the equivalent amount. The liabilities of the assessee stand adjusted against the assets of the company by an equal amount and as such no benefit has arisen to the company. The second amount added back u/s 41(1) amounting to Rs..3,29,748/- represent the outstanding balance as on 31.3.2003 in respect of Aditya Cottage Industries. The Assessing Officer had made the addition of this amount on the basis that this amount was a trade creditor and in his opinion since it was outstanding since long and it needed to be written back. In this respect let us examine provisions of section 41(1) which reads as under:- Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first mentioned person) and subsequently during any previous year the first mentioned person has obtained whether ..... X X X X Extracts X X X X X X X X Extracts X X X X
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