9911796707
TMI Blog2018 (11) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of Rs. 53,96,970. During the assessment proceedings u/s 143(3) of the Act, the AO observed that the assessee had debited a sum of Rs. 1,50,00,000 in the P&L A/c towards lease rights of a film. The assessee was asked to produce the copy of the agreement in support of its claim. The assessee submitted a note stating that the assessee had purchased lease rights relating to "Krishnaarjuna" movie during the financial year 2007-08 on outright basis excluding the cost of prints and publicity expenses for a consideration of Rs. 1,75,00,000 from Sri Lakshmi Prasanna Pictures for the area of NIZAM as known in the film trade for a period of five years from the date of its first release and that the movie was released on 1.2.2008 and exhib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors. The assessee could not submit the confirmation from the following three creditors and stated that they are not traceable: i) Sri S. Panduranga Rao - Rs.50,00,000 ii) M/s.Larsco Entertainment P.Ltd Rs.51,50,601 iii) M/s.Vizag Film Dist.Assoc. Rs.63,05,000 Total: Rs.1,64,55,601 4. Further, the assessee also submitted a letter dated 26.03.2014 stating that the assessee is not able to obtain the letters of confirmation of balances from the following creditors: S. No Name of the party Balance as at 31.3.2011 1 K Rajendra - Mehbubnagar 42,27,824 2 K.Vidya Sagar 15,98,600 3 Manjith Singh Secunderabad 18,58,918 4 Miryalguda - Lalitha Mahal 16,00,000 5 Durga Devi Enterprises-Secunderabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee could not submit confirmations from the creditors to the extent of Rs. 1,64,55,601 and since the liability has not been settled till the last date of financial year, the assessee was asked to show-cause as to why this amount should not be added u/s 41 of the Act. The AR of the assessee agreed for such disallowance and therefore, the AO brought it to tax. 8. The AO also observed that the creditors to extent of Rs. 1,64,55,601 have already been added and therefore, no separate addition is called for on these amounts. Therefore, he made an addition of Rs. 11,00,000 only as cessation of liability and brought it to tax. 9. Aggrieved, the assessee preferred an appeal before the CIT (A) who granted partial relief to the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on facts and in law while passing the appellant order. 2. (a) The learned CIT (A) is not justified in sustaining additions amounting to Rs. 1,64,55,601 u/s 41(1) of the I.T. Act, 1961 made in the assessment order. (b) The learned CIT (A) has failed to appreciate that section 41(1) applies only in case of trading liability in the course of business or profession allowed in an earlier year and such liability ceased in the current year. None of the credits items forming part of Rs. 1,64,55,601 was trading liability. 3. CIT (A) has erred in sustaining the additions to the extent of advances received in the year ignoring the trade agreements/confirmations under which advances were received. CIT (A) also ignored the adjustment of trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of Rs. 50,00,000. Rs. 50,00,000 is not a trading liability in respect of which a deduction had been allowed in any past assessment. (b) Rs. 51,50,601 though a trading liability, no benefit been obtained in the previous year by way of its cessation. Provisions of section 41(1) are not applicable. (c) The assessee company did not unilaterally write off any of the above liabilities in its accounts. 5. There could be no agreement against the provisions of law, that is section 41(1) of the I.T. Act". 12. The learned Counsel for the assessee reiterated the submissions made by the assessee before the authorities below, while the learned DR objected to the admission of additional grounds of appeal. The learned DR also filed the copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have gone through the consequential order passed to give effect to the order of the CIT (A) and we find that there are computational errors in the said order. Further, with regard to certain parties, the addition of which is confirmed by the CIT (A), the learned Counsel for the assessee submitted that they are outstanding liabilities a/c and that the assessee has discharged its liabilities in the subsequent A.Y. Copies of the relevant accounts have been filed before us. Taking the same into consideration, we deem it fit and proper to remand the issue of the addition u/s 68 which has been confirmed by the CIT (A) also to the file of the AO for reconsideration in accordance with law. The AO shall permit the assessee to submit the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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