TMI Blog2011 (1) TMI 1362X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings AO noticed from the balance-sheet that a sum of ₹ 3,04,98,753/- was being shown under the head current liability in the names of various sundry creditors. The assessee was asked to furnish the details which were, accordingly, furnished. The AO noticed that the assessee had legal disputes with many creditors for which some documentary evidence was also available. It was further noticed that all these credits were outstanding for more than three years. Since the credits were outstanding for more than three years, and there were disputes also AO was of the view that liability in respect of these creditors has ceased and accordingly he subjected this amount to income of the assessee u/s.41[1]. 3. Before the CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute that the appellant has not written back the impugned sum either in the P L A/c or in any other manner. The appellant contends that the liabilities are existing and subsisting. It contends in contradiction to the claim of the AO that it is not in litigation with the concerned creditors and instead it states that only the loan creditors and not the trade creditors are litigating with it. 3.3.7 It is to be noted that in order to show that the liabilities have ceased to exist or remitted it is not necessary that the appellant should necessarily write them back in accounts in any manner [see CIT vs. Markanda Vanaspati Mills Limited 311 ITR 306 P H]. It is seen that the appellant is not in litigation with the trade creditors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that the creditors have not sued the appellant for recovery, that there is no evidence that they still insist on payment by the appellant, that the appellant itself has written back substantial sum of other liability, and that the appellant has given up its business operations by disposing the income earning apparatus (plant machinery) and all inventories show that the impugned liability has remitted or ceased to exist in the year under consideration and the benefit has accrued to the appellant by way of not paying them off. The impugned sum, therefore, represents liability which has remitted or ceased to exist during the year under consideration. It has rightly been added as income of the appellant under section 41[1]. I, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had even disposed of its inventory and plant and machinery also. This clearly shows that the business was on the verge of closure and assessee had no intention to pay back such creditors. Moreover, no evidence was produced to show that such creditors had made any demand on the assessee even till date. He further argued that the Hon ble Bombay High Court in the case of CIT vs. Chaste Bright Steel Ltd. [supra] has clearly held that once a debt had become time barred, then it can be said that such liability had ceased to exist and, therefore, these liabilities had ceased to exist and sec.41[1] has been attracted. He also relied on the decision of Delhi Bench of the Tribunal in the case of Distinctive Properties Leasing Ltd. vs. ITO 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing off the liability and crediting the amount to the profit and loss appropriation account. The Tribunal has held that the liability did not cease. We have to answer the question on basis of the facts found. In the circumstances, so far as this case is concerned, it will not be possible for this Court to interfere. From the above it is clear that the liability cannot be said to have ceased merely because the same became time barred. From the copy of accounts of various creditors at pages 137 to 154 of the paper book it becomes clear that payments had been made in certain cases. It is also found that some of the amounts have been written off also e.g. in the case of Cargomar Bombay Pavt. Ltd. (Clg) amounting to ₹ 46,871/- [pg.138 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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