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The ITO, Ward 8 (1) , Ahmedabad Versus Sanghvi Fincap Ltd

2016 (2) TMI 75 - ITAT AHMEDABAD

Disallowances of cessation of liability u/s. 41(1) - CIT(A) deleted the addition - Held that:- View of CIT(A) is fortified by the Hon’ble Gujarat High Court in case of Commissioner of Income Tax vs. Dhobibhai Ramjeelal Atara [2014 (2) TMI 794 - GUJARAT HIGH COURT] wherein it has been held that provisions of section 41(1) of the Act would apply in case where there has been remission or cessation of liability during the year under consideration subject to conditions contained in statute being fulf .....

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t - Decided in favour of assessee

Unaccounted purchase and sale of share - CIT(A) deleted the addition - Held that:- Assessing Officer was of the view that assessee should have shown 62,272/- shares of Spectra Industries as closing stock while assessee had been showing 61772 shares i.e. 4791 as per demat account 5698 in the pool holding account. The details of closing stock furnished revealed that assessee had shown 62272 shares of Spectra Industries and not 71772 shares as stated by .....

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s and only after 7-8 days thereof brokers are able to confirm whether delivery of shares had come or not or whether they got close out opportunities of the shares. Sell delivery then it will show short to the extent in the pool account until brokers get confirmed from exchange. In closing, as per books and account total stock was shown as 62272 shares in not 61772 shares as assumed by Assessing Officer. Accordingly, CIT(A) held that there is no reason for addition on the basis of shortage of del .....

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been filed by revenue against the order of Ld. CIT(A)-XIV, Ahmedabad dated 05th October, 2010 on following grounds:- 1. The Ld. CIT(A)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of disallowances of cessation of liability made by the Assessing Officer u/s. 41(1) of the Act amounting to ₹ 81,60,350/- 2. The Ld. CIT(A)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of unaccounted purchase and sale of shares of ₹ 14,727/-. 2. Assessee is .....

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r Assessing Officer, the liability in dispute was incurred on account of purchase of shares from various parties for trading purposes, but payment had not been made to them. The assessee also furnished list of such creditors to whom payment had to be made. Assessing Officer has observed that assessee has debited the amount in profit and loss account in respective year in which transaction has taken place. Copy of account in respect of these parties from end of the year in which transaction had t .....

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ingle rupee has been paid in spite of lapses of 12 to 13 years. According to Assessing Officer, assessee could neither bring any confirmation from creditor nor could it produce supporting evidence to prove that liability still exists. Ultimately, Assessing Officer concluded that all liability towards creditors totaling to ₹ 81,60,350/- was no more paid by assessee and are ceased liability as covered by section 41(1) of the Act. Matter was carried before First Appellate Authority wherein va .....

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nd, Ld. AR supported the order of CIT(A). 2.1 After going through rival submissions and material on record, we find that assessee-company had purchased shares from various parties and the same were delivered to company in physical form. Since the same could not be subsequently transferred in the name of assessee-company on account of certain disputes between parties. The payments towards said shares were not made and it remained outstanding in books of company since 1996-97. Even today company i .....

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nce 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, - (a) the first mentioned person has obtained, 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 by such person or the value of benefit accruing to him .....

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ect of the liability, referred to in clause(a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits & gains of the business or profession and accordingly chargeable to income-tax as the income of that previous year. [ Explanation 1 - For the purposes of this subsection, the expression "loss or expenditure or some benefit in respect of any such trading liabili .....

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Where the first mentioned person is succeeded by any other person in that business or profession , the other person; (vii) Where a firm carrying on a business or profession is succeeded by another firm, the other firm:] (viii) Where there has been a demerger, the resulting company.]" That from the perusal of the above Section, in order to apply and invoke the provisions of section 41(1) of the Act, the following points are to be kept in mind; (a) In the course of assessment for an earlier y .....

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espect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation of thereof, the amount obtained by such person or value of benefit accruing to him shall be deemed to be profit and gain of business or profession and accordingly chargeable to income tax as the income of that previous year. In case before us it is not the case of Assessing Officer that assesseecompany has received any cash or benefit in respect of trading liability by way of .....

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ailable with him. In respect of Goenka Group it was clarified that there was certain dispute with them resulting in non-transfer of shares in name of company hence resulting in unpaid liability. Assessing Officer has not dealt confirmations filed in this regard. In view of above, CIT(A) rightly held that addition to the extent of ₹ 81,44,439/- u/s. 41(1) of the Act was not justified. Same was deleted. This view of CIT(A) is fortified by the Hon ble Gujarat High Court in case of Commissione .....

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that there was remission or cessation of liability that too previous year relevant to the assessment year under consideration. In view of above, order of CIT(A) is upheld whereby he has deleted the addition of disallowance of cessation of liability made by AO u/s. 41(1) of the Act amounting to ₹ 81,60,350/-. 3. Next issue is with regard to addition of ₹ 14,727/- on account of alleged unaccounted sale. 4. The said addition was made in two parts; (a) unaccounted sale of shares 14,490/ .....

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nce of only 61772 shares and in absence of any reply or evidence, the balance of 500 shares valued at 14,490/-, same was added and similarly addition of 237/- was also made. 4.1 In appeal, various contentions were raised on behalf of the assessee and having considered the same CIT(A) granted relief with regard to addition of ₹ 14,490/- and rest addition of ₹ 237/- was confirmed. Unfortunately, revenue has taken whole amount of ₹ 14,270/- so practically issue before us is with r .....

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