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Shri Sahadeb Kundu Versus Assistant Commissioner of Income-Tax, Bankura Circle, Bankura

2015 (6) TMI 885 - ITAT KOLKATA

Cessation of liability in respect to trade creditors - CIT(A) deleted part addition - Held that:- Section 41 (1) would apply in a case where there has been remission or cessation of liability during the year under consideration subject to the conditions contained in the statute being fulfilled. Additionally, such cessation or remission has to be during the previous year relevant to the assessment year under consideration.

In the present case, both elements are missing. There was noth .....

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, the response was that they had no dealing with the assessee nor did they know him. Of course, these inquiries were made ex parte and in that view of the matter, the assessee would be allowed to contest such findings. Nevertheless, even if such facts were established through bi-parte inquiries, the liability as it stands perhaps holds that there was no cessation or remission of liability and that, therefore, the amount in question cannot be added back as a deemed income under section 41(1) of t .....

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hajharia, FCA For the Respondent : Shri K L Kanak, JCIT, Sr. DR ORDER Per Mahavir Singh, JM. Both these cross appeals, by assessee and revenue, are arising out of common order of CIT(A), Durgapur in Appeal No. 100/CIT(A)/DGP/2010-11 dated 22.07.2011. Assessment was framed by ACIT, Bankura Circle, Bankura u/s. 143(3) of the Incometax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2008-09 vide his order dated 30.12.2010. 2. At the outset, it is noticed that the reve .....

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sue in these cross appeals of revenue and assessee is as regards to the order of CIT(A) restricting the addition of ₹ 10,04,557/- out of total addition made by AO at ₹ 54,43,228/- of cessation of liability in respect to trade creditors. For this, assessee as well as revenue raised their respective sole ground, which reads as under: Assessee s ground: "1. That on the facts and on the circumstances of the case, the Ld. CIT(A) had grossly erred in confirming the addition of ₹ .....

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ting legal comments." 4. We have heard rival submissions and gone through facts and circumstances of the case. Briefly stated facts are that the assessee filed a list of sundry creditors amounting to ₹ 54,43,228/- pertaining to 33 creditors before the AO during the course of assessment proceedings. The AO noted from the list of such persons that sum of the opening balances of all the 33 creditors is ₹ 59,76,442/- as on 31.03.2007. According to AO, during FY 2007-08 i.e. from the .....

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under the provisions of section 41(1) of the Act. The AO deputed his Inspector to make enquiries in respect to these creditors but according to the Inspector s report these creditors are fake and for this, Inspector has reported to the AO, which is reproduced in the assessment order as under: "The Inspector visited Jhantipahari to enquire into the transaction with Gobinda Rakshit. He enquired a few persons at Jhantipahari dealing in lottery about Gobinda Rakshit. But none of the persons, wh .....

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bay informed the ITI that there appear names of some of his near relatives in the list. Thus Sri Arvind is the name of his father-in-law who hails from Bansol which happens the address of M/s Arvind Agency. Thus Ms. Anima is his sister-in-law and address of M/s Anima Agency is Bansol. In this regard Sri Tantubay stated that the assessee knew the names of his family members and the assessee seems to have planted their names. He categoricallv denied having any activities of lottery business in the .....

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d that the following three persons happen to be the namesakes of the relatives of the assessee: i. Abhay Lottery Agency Abhay is assessee s nephew (sister s son) ii. Rindu Kundu Assessee s sister in law. iii. Bishwnath Pal Brother in law Addresses of all the persons happen to be the same as mentioned in the list of the creditors as furnished by the assessee and none of the above named three persons were said to have ever dealt in lottery." Accordingly, the AO treated the trade creditors as .....

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assessee has not written-off the liability or liability has not ceased or remitted. In such circumstances, now we have to go to the provisions of section 41(1) of the Act and see the legal possession. Section 41 (1) would apply in a case where there has been remission or cessation of liability during the year under consideration subject to the conditions contained in the statute being fulfilled. Additionally, such cessation or remission has to be during the previous year relevant to the assessm .....

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