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2016 (3) TMI 863 - ITAT MUMBAI

2016 (3) TMI 863 - ITAT MUMBAI - TMI - Addition u/s 41(1) - amount payable by the assessee company to 5 creditors - Held that:- Hon’ble Supreme Court in the case of CIT Vs Sugauli Sugar Works (P) Ltd. (1999 (2) TMI 5 - SUPREME Court) held that mere unilateral entry made by the assessee in accounts, there is no cessation of liability. In the case on hand, the assessee has not even written back the creditors in its accounts. The Hon’ble Bombay High Court in the case of Indian Rayon & Industries (2 .....

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heavy rains and selling of' goods on minimal prices. The fact of loss to appellant on account of heavy rains occurred in Mumbai, in July 2005, and consequently damage of appellant's stock was also subject matter of appeals of earlier years. In A.Y. 2006-07, the appellant's claim of gross loss of ₹ 8.25 crore was disallowed by the AO. In appeal order, the disallowance made by AO was deleted. The Sales Tax Authorities have also considered the effect of heavy rains of 2005, on appellant's bus .....

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circumstances, there was no case for rejecting the appellant’s claim. The disallowance made by AO is therefore, deleted. - Decided in favour of assessee - I.TA Nos.2404 & 6277/Mum/2011 - Dated:- 10-2-2016 - SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For The Appellant : Shri R.A. Dhyani For The Respondent : Shri Ishwar P. Rathi Order ORDER PER C.N. PRASAD, JM: These two appeals by the Revenue are filed against the very orders of the Ld. CIT(A)-21, Mumbai dated 23.0 .....

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ting the same as cessation of liability. The AO stated that sundry creditors as on 31.3.2005 which stood at ₹ 2,92,71,073 as against ₹ 2,65,48,762/- as on 31.3.2004 and no details of the sundry creditors were available on record. He was also of the view that debtors as on 1.4.2005 amounted to ₹ 2,12,36,856/- got reduced to ₹ 80,05,080/- as on 31.3.2006 and this shows that the assessee collected its dues from the debtors and at the same time not made any payments to the cr .....

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re not in existence is not correct. 5. The Ld. Departmental Representative vehemently supports the orders of the AO in treating the balance of sundry creditors as income u/s. 41(1) of the Act as cessation of liability. 6. The Ld. Counsel for the assessee strongly supports the orders of the Ld. CIT(A). He further placed reliance on the decision of the Hon ble Supreme Court in the case of CIT Vs Sugauli Sugar Works (P) Ltd., 236 ITR 518 and submits that the Hon ble Supreme Court held that even tho .....

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ditors and therefore he came to the conclusion that creditors are not in existence and made addition u/s. 41(1) of the Act. It was the submission of the assessee that complete details were furnished in respect of the creditors by letter dated 5.11.2008 and therefore there is no justification in stating that no details were furnished. The Ld. CIT(A) deleted the addition observing that the assessee has furnished all the details and the AO failed to prove that the liability in respect of the trade .....

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n back the creditors in its accounts. The Hon ble Bombay High Court in the case of Indian Rayon & Industries (supra) held that there is no remission or cessation of liability within the meaning of Sec. 41(1) of the Act on unilateral entry of write back of the unclaimed credit balances by the assessee. In view of the above, we hold that the addition made by the AO u/s. 41(1) of the Act is to be deleted. Thus, we affirm the order of the Ld. CIT(A) on this issue. 8. The next issue in the appeal .....

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o the extent of ₹ 1.15 crores and sales are only ₹ 7,76,000/-. 8.2. The assessee submitted that stock of shoes were damaged and not in a condition to sell in the market due to heavy rains in July, 2005, the stock dumped in water and the same was not in a position to sell in the market. It was submitted that the entire business activity was closed down in the earlier financial year and also the Delhi office which the prime place for this market and there was no option left but to disp .....

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ease in stock. 11. The Ld. Counsel for the assessee while supporting the orders of the Ld. CIT(A) reiterating the submissions made before him submits that the disallowance may be deleted. 12. Heard both sides, perused the orders of the lower authorities. This aspect of the matter has been considered by the Ld. CIT(A) with reference to the averments of the AO and submissions of the assessee and deleted the disallowance holding as under: During appellate proceedings, the appellant explained that d .....

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deration, it had to sell the stock at throw away price to reduce loss which was evident from the statement of sales. The appellant further explained that the fact of heavy loss due to heavy rains of 25th July 2005, in its godown in Bhiwandi, had also been explained to the Sales Tax authorities which had been accepted by them. The appellant filed a copy of order u/s.29(8) of Maharashtra Value Added Tax Act dated 21.04.2009 in support of its claim of heavy loss due to rains and consequently suffer .....

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