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TMI Blog2022 (4) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... ear (A.Y) 2014-15. 2. The solitary issue in the present appeal pertains to addition made to the income of the assessee by the Assessing Officer(AO) on account of cessation of liability relating to sundry creditors amounting to Rs. 1,92,46,069/-, as per the provisions of section 41(1) of the Act, which stood deleted in appeal by the ld. CIT(A). 3. The facts relating to the case are that the assessee is in the business of construction of residential and commercial units. During assessment proceedings the Assessing Officer (AO) noted that there was increase in sundry creditors though the income had decreased as compared to the previous year. He noted from the details relating to creditors, filed by the assessee, aggregating in all to Rs. 3,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on facts in not appreciating that during the year the assessee had failed to produce confirmations from these trade creditors to demonstrate that such liabilities still existed during the year and thereby the assessee had obtained benefit in respect of such liabilities by way of remission/cessation thereof. 1.2 That the Id. CIT(A) has failed to appreciate that the write off of liabilities in the books is not a accounting criterion for invoking the provisions of section 41(1) of the Act. 1.3 That the Id. CIT(A) has failed to appreciate that under similar circumstances, the Hon'ble Gujarat High Court in the case of Gujtron Electronics Pvt. Ltd. [2017] 83 taxmann.com 389 (Gujarat) has decided the issue in favour of the Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year." 8. As is evident from a literal reading of the section, if any expenditure, loss or trading liability is claimed as a deduction or allowance and subsequently the assessee obtains back any amount relating to the same in cash or otherwise or obtains any benefit on account of remission or cessation of the liability, it is treated as income of the assessee, in the nature of profits and gains of business or profession. The prerequisites for deeming income by invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction material including Sands, bricks, steel wooded frames and various construction material during the year and therefore, there remain the creditors for such purchases. However, entire purchases have resulted in the construction work in progress at the end of the year and the units have become ready for sale in the consequent year. So, there is no corresponding sale in the year but the effective sale of the units had take place in the F.Y.2014-15 onwards. During the year, there is an increase in the creditors by Rs. 66,97,678/-there is corresponding increase in the value of inventories, being W WIP by Rs. 3,43,67,618/- which is much more that the increase in the creditors during the year." 11. The expenditure relating to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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