TMI Blog2013 (2) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, even if the entries are made to write back the expenditure, the amount so written back cannot be added in the income of the assessee as per the provision of section 41(1) of the Act - Assessee has not obtained any benefit either by way of remission or cessation of any liability while the aforesaid liabilities are continually admitted by the assessee in their balance sheet. Further section 41(1) of the Act would naturally not apply. Section 41(1) applies in a case 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 and subsequently, during any previous year he has obtained whether in cash or in any other manner any amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and were shown as outstanding even in later returns furnished by the assessee including the year 2004-2005. Assessing Officer inquired into such liability and called upon the assessee to provide complete names, addresses and PAN card of creditors along with the details of outstanding amount. The assessee furnished only list of creditors without their addresses and PAN numbers. Assessing Officer was of the opinion that despite opportunity given to the creditors with respect to some of them, confirmation of outstanding balance was not forthcoming. On that basis Assessing Officer concluded that these creditors were not genuine. To that extent the Assessing Officer invoked Section 41(1) of the Income Tax Act, 1961 and added a sum of Rs.46. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequently during any previous year, the assessee obtains whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not. The ld. CIT(A) without even adverting to the decisions cited on behalf of the assessee, sustained the addition made by the AO u/s 41(1) of the Act. Undisputedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Similarly, Hon'ble Gujarat High Court in the case of CIT vs. Chetan Chemicals Pvt. Ltd. 267 ITR 770 (Guj) held that: On a reading of the provisions, it is apparent that before the Section can be invoked, it is necessary that an allowance or a deduction has been granted during the course of assessment for any year in respect of loss, expenditure or trading liability which is incurred by the assessee, and subsequently during any previous year the assessee obtains, whether in cash or in any other manner, any amount in respect of such trading liability by way of remission or cessation of such liability. In that case, either the amount obtained by the assessee or the value of the benefit accruing to the assessee can be deemed to be the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant case, there is nothing to suggest that the assessee has obtained any benefit either by way of remission or cessation of any liability while the aforesaid liabilities are continually admitted by the assessee in their balance sheet. In these circumstances, we have no alternative but to vacate the findings of the ld. CIT(A) and delete the addition sustained by the ld. CIT(A). Therefore, ground nos. 3 to 5 in the appeal of the assessee are allowed while ground nos. 1 2 in the appeal of the Revenue are dismissed. 5. In fact, we are of the opinion that if Revenue's case is that there was no genuine credit, section 41(1) of the Act would naturally not apply. Section 41(1) applies in a case where an allowance or deduction has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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