TMI Blog2016 (1) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld. AR in regard to the details submitted in the form of bills, Gate Pass entry, inward entry of machinery, copy of bills of machinery of original purchaser etc. In these circumstances and on the basis of our observations above, we are of the opinion that as the assessee has furnished sufficient documents and evidences to prove the genuineness of purchase of machineries from group companies and therefore, we do not find any reason to interfere with the finding of ld. CIT(A) - Decided in favour of assessee Addition under section 41(1) on account of cessation of liability - CIT(A) deleted the addition - Held that:- The liability of sundry creditors has not ceased to exist rather there were regular transactions with these parties in the latter years as well. Not a single instance has been brought to prove that sundry creditors have denied their claims nor the assessee has written off the liability in its books of account in the year under plea, and therefore, respectfully following the judgment of Hon’ble Apex Court in case of CIT vs. Sugauli Sugar Works (P) Ltd. (1999 (2) TMI 5 - SUPREME Court) and CIT vs. Bhogilal Ramjibhai Atara (2014 (2) TMI 794 - GUJARAT HIGH COURT ) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two additions have travelled to the Tribunal as appearing in the grounds of appeal :- 5. Ground No.1 relates to depreciation of ₹ 7,25,013/-. This disallowance of depreciation of ₹ 7,25,013/- comprises two parts and has arisen for following two reasons - (a) Disallowance of depreciation @ 15% on purchase of machineries of ₹ 46,43,000/- from group companies and the amount of disallowance works out at ₹ 6,96,450/-. (b) Disallowance of ₹ 28,563/- being calculated @ 7.5 on machines purchased at ₹ 3,80,835/- for the reason that assessee has claimed depreciation for whole year whereas the AO allowed depreciation for six months only as the machines of ₹ 3,80,835/- were put to use after 30th September, 2009. 6. As regards disallowance of ₹ 28,562/- mentioned in para 5(b) above, assessee did not reply to the questions raised by the AO during assessment proceeding and nor made available any further information before the CIT(A) and before the Tribunal. As such this disallowance of ₹ 28,563/- made by Assessing Officer is sustained. 7. Now we take up the disallowance of ₹ 6,96,450/- as referred in para 5(a) above. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orry receipt for the machines purchased from Prakash Finstock Pvt. Ltd. and Ashutosh Fibre Pvt. Ltd. Apart from this, nothing contrary has been brought on record by the Assessing Officer to controvert the submissions of the ld. AR in regard to the details submitted in the form of bills, Gate Pass entry, inward entry of machinery, copy of bills of machinery of original purchaser etc. In these circumstances and on the basis of our observations above, we are of the opinion that as the assessee has furnished sufficient documents and evidences to prove the genuineness of purchase of machineries from group companies and therefore, we do not find any reason to interfere with the finding of ld. CIT(A) in respect of deletion of disallowance of depreciation of ₹ 6,96,450/- and the same is upheld. Accordingly this ground of Revenue is partly allowed. 12. Ground No.2 relates to deletion of addition of ₹ 59,24,478/- under section 41(1) of the Act on account of cessation of liability by CIT(A)-XIV. 13. The ld. DR vehemently supported the order of Assessing Officer and referred to the decision of ITAT Mumbai Bench in the case Asht Laxmi Diamond Jewellery vs. ITO, 21(1)(1), Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extended their co-operation and accommodation to the company by not pressing hard for immediate payment and were agreeable for slow repayment but by no chance the claim of any of the sundry creditor has vanished. This fact was further supported by the ledger account of some of the parties wherein repayments have been made by the assessee through banking channel. The ld. AR submitted that as all the transactions entered with the sundry creditors were business transactions carried out in the normal course of business and the trading liability exhibited in the balance sheet are the liabilities to be paid by the company and has not written off the same to profit and loss account. It does not become income of the assessee during the year under consideration. 15. In support of his submissions, the ld. AR also relied on the decision of Hon ble Supreme Court in the case of CIT vs. Sugauli Sugar Works (P) Ltd. (1999) 236 ITR 518 (SC) and that of Hon ble Gujarat High Court in the case of CIT vs. Bhogilal Ramjibhai Atara (2014) 43 taxmann.com 55 (Gujarat). 16. We have heard the rival contentions and gone through the facts and circumstances of the case and perused the material on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Asht Laxmi Diamond Jewellery vs. ITO (supra) is not applicable to the facts of the case of assessee because in the above judgment debts were outstanding for several years and creditors had no dealing with the assessee for last many years and nor there was any demand for payment by any of the said parties from assessee for last more than 10 years. But this is not the case of the assessee as the transactions between the assessee and the sundry creditors are going on and nor the Assessing Officer has been able to prove that any of the sundry creditor has relinquished the right to his claim from the assessee. 18. On the other hand in the case of Sugauli Sugar Works (P) Ltd. (supra) Hon ble Supreme Court gave a land mark judgment wherein the Court categorically held- that the mere entry in the books of account of the debtor made unilaterally without any act on the part of the creditor will not able the debtor to say that the liability has come to an end. The court observed that the liability can remit or cease only by a bilateral and multilateral act between the creditors on the one side and the debtor on other and not by a unilateral act. The following words in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the strange cases where even if the debt itself is found to be non genuine from the very inception, at least in terms of section 41(1) there is no cure for it. Therefore, the appeal filed by the revenue was liable to be dismissed. The facts of the case of assessee are quite similar to the facts of the cases adjudicated in the above referred two judicial pronouncements. The liability of sundry creditors has not ceased to exist rather there were regular transactions with these parties in the latter years as well. Not a single instance has been brought to prove that sundry creditors have denied their claims nor the assessee has written off the liability in its books of account in the year under plea, and therefore, respectfully following the judgment of Hon ble Apex Court in case of CIT vs. Sugauli Sugar Works (P) Ltd. (supra) and Hon ble Jurisdictional High Court in case of CIT vs. Bhogilal Ramjibhai Atara (supra) and in light of our discussions made above, we find no reason to interfere with the order of CIT(A) and accordingly this ground of the Revenue is dismissed. 19. Other grounds are of general nature, which need no adjudication. 20. In the result, Revenue s appea ..... 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