TMI Blog2017 (10) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... Act - Decided in favour of assessee. - ITA No. 69/JP/2016 - - - Dated:- 6-10-2017 - Shri Bhagchand, Accountant Member Assessee by : Shri P.C. Parwal ( CA ) Revenue by : Smt. Poonam Roy ( DCIT ) ORDER Per: Bhagchand, A. M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-I, Jaipur dated 24/11/2015 for the A.Y. 2012-13, wherein the assessee has raised sole effective ground of appeal, which is as under: 1. That the authorities below erred in making an addition of ₹ 43,66,283/- on account of alleged liabilities of sundry creditors of following creditors considering the same as having ceased to exist during the year under consideration and added back to the income of the petitioner income U/s 41(1) of the IT Act, 1961. (i) M/s Coral Gems ₹ 19,96,783/- (ii) M/s Hem Gems, Mumbai ₹ 20,50,500/- (iii) M/s Priya Jewels ₹ 75,000/- (iv) M/s United Gems India ₹ 2,44,000/- ₹ 43,66,283/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT Vs. Narendra Mohan Mathur (2014) 97 DTR 428 (Raj.) (HC) The assessee was showing certain liabilities in the shape of sundry creditors in his books of accounts from year to year. The AO invoked sec. 41(1). It was held that merely because there was no response by the creditors or the parties choose not to appear, it does not prove that the trade creditors were not genuine and were not in existence so as to invoke sec. 41(1). The assessee claimed that the amount was payable and it has not been proved by the AO as to how the so called liabilities ceased or crystallized during the previous year relevant to the assessment year under appeal. Therefore, no addition could be made u/s 41(1). PC1T Vs. Ramgopal Minerals (2017) 246 Taxman 267 (Kar.) (HC) Where creditors were not traceable but assessee had proved genuineness of transaction by producing ledger accounts and proof of payments made through bank channels and PAN numbers, there was no cessation of liability of debt to be paid by assessee to creditors and therefore, condition precedent for invoking section 41(1) was not satisfied. CIT Vs. Alvares Thomas (2016) 239 Taxman 456 (Kar.) (HC) In this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is the conceded position that in the assessee's balance sheet, the impugned liabilities have been shown, which are payable to the sundry creditors. Such liabilities, shown in the balance-sheet, indicate the acknowledgment of the debts payable by the assessee. Merely because such liability is outstanding for the last six years, it cannot be presumed that the said liabilities have ceased to exist. It is also conceded position that there is no bilateral act of the assessee and the creditors, which indicates that the said liabilities have ceased to exist. In absence of any bilateral act, the said liabilities could not have been treated to have ceased. In view of these facts, the CIT(A) as well as the Tribunal has rightly come to the conclusion that the AO has wrongly invoked the Expln. 1 of s. 41(1) and made the addition on the basis of presumption, conjectures and surmises. It has been further found that the AO failed to show that in any earlier year, allowance or deduction had been in respect of any trading liability incurred by the assessee. It was also not proved that any benefit was obtained by the assessee concerning such trading liability by way of remission or cessation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed that there was no cessation of the liability. For invoking the provisions of Section 41, there must be two conditions fulfilled (i) there should be cessation/remission of liability and (ii) it should be ceased during the previous years relevant to assessment year under consideration. Even when the amount remained unclaimed for considerable period but it remains to be payable then there is no cessation or remission of such liability. Further it is also not established that the assessee was not having intention to repay these liabilities. These liabilities were clearly reflected in the accounts of the assessee thus the assessee continued to acknowledge the liability payable by him. Therefore, merely on the fact that the liability is outstanding for many years shall not amount to cessation or remission of the liability. It is pertinent to note that in the case of Coral Gems, purchases were made in F.Y. 2001-02, it is evident from page No. 5 12 of the paper book, against those purchases, an amount of ₹ 32,50,000/- was paid in F.Y.2004-05 and an amount of ₹ 19,96,783/- was outstanding as evident from page No. 4 of the paper book. Coral Gems demanded the balance amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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