TMI Blog2019 (12) TMI 1188X X X X Extracts X X X X X X X X Extracts X X X X ..... ht any evidence on the record to show that liability has ceased. The assessee has not written off the liability in the accounts. Therefore, there would not be any addition under section 41(1) of the Act. Hon'ble High Court in the case of Bhogilal Ramjibbhai Atara [ 2014 (2) TMI 794 - GUJARAT HIGH COURT] considered this aspect and observed that even if debt itself is found to be non-genuine from the very inception that also in terms of section 41(1) of the Act, there is no solution for that. In other words, addition cannot be made unless liability in the accounts has been written off. - delete the disallowance - Decided in favour of assessee. Non-granting of set off of unabsorbed depreciation and carry forward of short term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was selected for scrutiny assessment by issuance of notice under section 143(2). During the scrutiny assessment it was noticed by the AO that though no transaction has been made with the following parties, however, their outstanding balance remained reflected in the balance sheet since long. The details are as under: 1) Binit Dyes Chemicals : ₹ 64,896/- 2) Indian Dyes Chemicals : ₹ 3,45,369/- 3) Shreeji Marketing : ₹ 7,22,526/- ₹ 11,32,791/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cover a particular fact situation. The section applies where a trading liability was allowed as a deduction in an earlier year in computing the business income of the assessee and the assessee has obtained a benefit in respect of such trading liability in a later year by way of remission or cessation of the liability. In such a case the section says that whatever benefit has arisen to the assessee in the later year by way of remission or cessation of the liability will be brought to tax in that year. The principle behind the section is that the provision is intended to ensure that the assessee does not get away with a double benefit - once by way of deduction in an earlier assessment year and again by not being taxed on the benefit received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test such findings. Nevertheless, even if such facts were established through bi-parte inquiries, the liability as it stands perhaps holds that there was no cessation or remission of liability and that therefore, the amount in question cannot be added back as a deemed income under section 41(c) of the Act. This is one of the strange cases where even if the debt itself is found to be non-genuine from the very inception, at least in terms of section 41(1) of the Act there is no cure for it. Be that as it may, insofar as the orders of the Revenue authorities are concerned, the Tribunal not having made any error, this Tax Appeal is dismissed. 7. In the light of the above, if we examine facts of the present case, then it would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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