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2016 (7) TMI 749 - GUJARAT HIGH COURT

2016 (7) TMI 749 - GUJARAT HIGH COURT - TMI - Addition invoking sec 41(1) - remission or cessation of liability - ITAT deleted the addition - Held that:- There is nothing on record to suggest that there was any remission or cessation of liability in the previous year relevant to the assessment year under consideration. Even if the submission advanced by the learned counsel for the revenue that some of the creditors had written off the liability in their books was to be accepted, even then, such .....

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in any way translate into income in the hands of the assessee. As is evident from the material on record, the assessee has shown these liabilities in its books and continues to show the same. Thus, the assessee has not written off the liabilities in its books of account. There is nothing on record to indicate that the creditors have given up their rights to recover such amounts from the assessee. Under the circumstances, it is clear that the addition is based upon an assumption on the part of t .....

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e Act ) has challenged the order dated 14th May, 2015 made by the Income Tax Appellate Tribunal, D Bench, Ahmedabad (hereinafter referred to as the Tribunal ) in ITA No.536/Ahd/2011 by proposing the following question stated to be a substantial question of law:- Whether the Appellate Tribunal has substantially erred in law and on fact in overlooking that the liability amounting to ₹ 81,60,350/- ceased to exist as the creditors were found to be non-existing and were also barred by limitatio .....

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during the course of the assessment proceedings. The assessee could produce confirmation from some of the creditors for a sum of ₹ 94,61,159/-, however, in respect of the balance amount of ₹ 81,60,350/-, the assessee could not produce any confirmation from the creditors and in some cases, the complete address could not be provided despite several opportunities having been granted. The Assessing Officer also noticed that not a single rupee had been paid by the assessee to the said cre .....

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on the given address. The Assessing Officer also made enquiries on the basis of PAN data after finding out the jurisdiction in respect of some of the creditors and obtained copy of the Balance Sheet and return of income (which formed part of the assessment order) but on perusal of the Balance Sheet so obtained, it was found that none of them was showing the assessee as a debtor. The Assessing Officer was accordingly of the view that these liabilities amounting to ₹ 57,46,631/- were no more .....

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ities are in fact payable, the same will be treated as ceased liabilities. The assessee, however, failed to furnish any detail to establish that these creditors still exist. The Assessing Officer, after giving ample opportunities to the assessee, recorded that the creditors were not available at the given address and the assessee himself was not aware about their whereabouts. The inter-departmental investigation of the records of eight creditors did not show any amount receivable from the assess .....

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n indivisible one. It cannot be enlarged by importing another fiction, namely, that if the amount was obtainable or receivable during the previous year, it must be deemed to have been obtained or received during that year. The only meaning that can be attached to the words obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure incurred in any previous year clearly refers to the actual receiving of the cash of that amount. The amount may be .....

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n the case of C.I.T. v. Bharat Iron and Steel Industries. He further was of the view that no proper opportunity had been given to the assessee for defending his case and that the material gathered by the Assessing Officer and relied upon and made part of the assessment order, did not appear to have been furnished to the assessee though confronted in the order sheet during the course of assessment proceedings. He, accordingly, was of the view that the principles of natural justice and equity prim .....

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urther of the view that the material and evidences gathered by the Assessing Officer and made part of the order were not conclusive enough and did not give the correct and complete picture of the action taken by the parties and the entry made in their books of account as logical. The Commissioner (Appeals) also agreed that it was highly unlikely that the concerned parties have written off the said amounts since the physical shares of the companies in which they are Directors, were still with the .....

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y had arisen had been duly shown as stock-in-trade in the books of the company. Since, the Assessing Officer had not confronted the assessee with the material gathered behind its back for rebuttal and cross examination of the parties as well as having regard to the fact that the unilateral act on the part of the parties does not in any way translate into income in the hands of the assessee, the Commissioner (Appeals) deleted the addition made by the Assessing Officer under section 41(1) of the A .....

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, therefore, not justified in upholding the deletion made by the Assessing Officer. It was submitted that once the liability ceased to exist, a benefit had accrued to the assessee and, therefore, the Assessing Officer had rightly made the addition in the year under consideration. It was, accordingly, urged that the appeal does give rise to a substantial question of law as proposed or as may be formulated by the court. 6. As can be seen from the impugned order, the Tribunal has found that the ass .....

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ade in the books of account. Copies of shares had also been supplied with submissions before authorities below and original shares had been produced for verification. The Tribunal referred to the provisions of section 41(1) of the Act and found that the same would be applicable only if the assessee has obtained, whether in cash or in any 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 there .....

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and explanation in respect of outstanding creditors in the form of complete list of creditors, copy of ledger account of parties from the year 1996-97 in which the liability was raised till the year under consideration, original bills for purchase of shares for which liability was outstanding, etc. The assessee had also furnished confirmation of a few parties and also furnished the addresses as was available with it. It appears that the Tribunal noted that the Assessing Officer had not dealt wi .....

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ng and there was nothing on record to suggest that there was remission or cessation of liability, that too, in the previous year relevant to the assessment year under consideration. 7. Thus, the Tribunal, on the basis of the material which has come on record, has held that there is nothing on record to suggest that there was any remission or cessation of liability in the previous year relevant to the assessment year under consideration. Even if the submission advanced by the learned counsel for .....

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