TMI Blog2011 (5) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... Y.2009-10. It was accordingly requested that no addition should be made in the concerned year. The AO however observed that the assessee itself had accepted that the amount was taxable as income. The party had not come forward to claim the amount since 1992. The transaction was revenue in nature. He therefore treated the amount as income under section 41(1). In appeal the assessee submitted that the amount continued to be payable as the creditor had not foregone the same. The assessee had already submitted before AO that amount will be voluntarily written back in A.Y.2009-10. The assessee placed reliance on the judgment of Hon ble Supreme Court in case of CIT Vs Sagauli Sugar Works Pvt. Ltd. (236 ITR 518) in which it was held that the liability could not treated as ceased to exist only on the ground that the claim was barred by limitation. CIT(A) however did not accept the contention raised. It was observed by him that the assessee itself before the AO had submitted that the amount will be offered as income in A.Y.2009-10 which showed that the party was not claiming the amount. The assessee had however not offered the amount of income in A.Y.2009-10. The claim of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgment of Hon ble High Court of Punjab Haryana in case of CIT Vs Smt. Sitadevi Juneja (supra) in which the High Court observed that the fact that liability was shown in the balance sheet indicated that the assessee had acknowledged the debt. Merely because it was pending for several years could not be the ground to presume that the liability had ceased to exist. In the present case the revenue has not made any enquiry and has placed no material on record to show that the creditor had forgone the claim and the liability was no longer existing. Further under the amended provisions the liability could be treated as income in case the assessee unilaterally writes it back which is also not the case here. Therefore in our view on the facts of the case liability cannot be treated as ceased to exist in the year under consideration. We therefore set aside the order of CIT(A) and delete the addition made. 3. The second dispute is regarding addition of ₹ 3,58,845/- on account of advances taken by the assessee from the trade parties which remained outstanding. The AO noted that the amount was outstanding for several years. On being questioned, the assessee explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore set aside the order of CIT(A) and delete the addition made. 4. The third dispute is regarding addition of ₹ 10,16,054/- on account of security deposits shown under the head current liabilities . The assessee explained that the said deposits were from dealers at various locations which had been taken to protect the trading interest of the assessee. The deposits had been taken several years ago and the same remained unchanged. It was also submitted that trading activities of the assessee had been revived in A.Y.2007-08 and the assessee was likely to effect sales through the aforesaid dealer and therefore it was imperative that security deposits should continue. It was also submitted that the amounts were deposits and therefore there was no income element involved. Accordingly it was urged that no addition should be made. The AO however observed that the assessee had not give reasons for the amount being outstanding and whether any trading activities were done with the parties and also did not furnish any confirmation from the parties. The amounts were outstanding for a long time and no one had come forward to claim it. It was further observed by him that the depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore the same could not be treated as income. The AO however did not accept the contention on the ground that the liability was outstanding for several years and no one had come forward to claim it. AO therefore treated the amount as trading receipts and added to the total income following the judgment of Hon ble Supreme Court in case of Punjab Distilleries Industries Ltd. Vs CIT (supra). In appeal CIT(A) has confirmed the order of AO. 4.3 We have carefully considered the various aspects of the issue. There is no dispute that no deduction had been claimed by the assessee on account of these liabilities in the earlier year and therefore even if the liability had ceased the same could not be taxed under section 41(1). The authorities below have relied on the judgment of Hon ble Supreme Court in case of Punjab Distilleries Industries (supra) which in our view is distinguishable. In that case the assessee who was in the business of distiller, had taken deposits for bottles which were refundable on the return of bottles. Hon ble Supreme Court observed that the buyers were under no obligation to return the bottles and therefore the additional amounts taken were not security dep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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