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2016 (11) TMI 944 - ITAT MUMBAI

2016 (11) TMI 944 - ITAT MUMBAI - [2016] 50 ITR (Trib) 204 - Addition under section 41(1) - liability of the assessee on account of amount payable to sundry creditors ceased to exist - Held that:- The expiry of the period of limitation prescribed under the Limitation Act would not extinguish the debt but it would only prevent the creditors from enforcing the debt. It has further been clearly held that obtaining by the assessee a benefit by virtue of remission or cessation is the sine qua non for .....

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6/Mum/2011 - Dated:- 29-4-2016 - Joginder Singh (Judicial Member) And Ashwani Taneja (Accountant Member) For the Appellant : Sanjiv M. Shah, Authorised Representative For the Respondent : Rajguru, Departmental Representative ORDER Ashwani Taneja (Accountant Member) 1. This appeal has been filed by the assessee against the order of the learned Commissioner of Income- tax (Appeals), Mumbai-3 (in short "CIT(A)"), dated July 22, 2011, passed against the assessment order under section 143(3 .....

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ficer are bad in law and on facts." 2. During the course of hearing, arguments were made by Shri Sanjiv M. Shah, authorised representative (AR) on behalf of the assessee and by Shri Rajguru, Departmental representative (DR) on behalf of the Revenue. 3. The solitary issue raised in this appeal is with regard to the addition of ₹ 17,71,210 made under section 41(1) on the ground that liability of the assessee on account of amount payable to sundry creditors ceased to exist. 3.1. During t .....

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1). 3.2. Being aggrieved, the assessee filed an appeal before the learned Commissioner of Income-tax (Appeals) wherein it was contended that merely because the outstanding was for more than three years, it cannot be concluded that the assessee is not liable to pay these amounts. It was further submitted that there were no basis with the Assessing Officer to presume that these liabilities ceased to exist. But the learned Commissioner of Income-tax (Appeals) was not convinced with the submissions .....

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Assessing Officer to show that some benefit has actually accrued to the assessee during the year under consideration. The reliance has been placed on the following cases in support of the proposition that no addition could have been made under section 41(1), unless the liabilities actually ceased to exist and that too during the impugned year : 1. CIT v. Sugauli Sugar Works (P) Ltd. [1999] 236 ITR 518 (SC) ; 2. CIT v. S. I. Group India Ltd. [2015] 379 ITR 326 (SC) ; 3. Chief CIT v. Kesaria Tea C .....

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tted facts are that the impugned creditors were continued to be shown by the assessee in its balance-sheet. It means that the assessee continue to acknowledge these liabilities in its books of account. Under these circumstances, even if more than three years have passed, then at the best these liabilities may be termed as not enforceable in the court of law but that alone would not finally exonerate the assessee from these liabilities. The assessee is carrying in the business and for its respect .....

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the assessee from payments of these liabilities and that too in the year under consideration. It is further noted by us that for the application of the provisions of section 41(1), an assessee must get some benefit in real terms by way of remission or cessation of the liabilities. Our view is supported by many judgments which have been relied upon by the learned counsel. We find it appropriate to reproduce the relevant observation of the honourable Supreme Court form its judgment rendered in the .....

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n amount either in cash or in any other manner whatsoever or a benefit by way of remission or cessation and it should be of a particular amount obtained by him. Thus, the obtaining by the assessee of a benefit by virtue of remission or cessation is the sine qua non for the application of this section. The mere fact that the assessee has made an entry of transfer in his accounts unilaterally will not enable the Department to say that section 41(1) would apply and the amount should be included in .....

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