TMI Blog2017 (11) TMI 1991X X X X Extracts X X X X X X X X Extracts X X X X ..... ilaterally made an entry in its books of accounts, however, there was no such act on the part of the creditors. We thus are of the considered view that the case laws relied upon by the ld. A.R, being distinguishable on facts, would thus not be of any assistance to him in the backdrop of the facts of the case before us. We thus restore the matter to the file of the A.O, with a direction to readjudicate the issue after making necessary verifications as to when the aforementioned amounts had been written off by the abovementioned parties in their books of accounts, and the consequential benefit had been obtained by the assessee in terms of Sec. 41(1) - Appeal of the assessee is allowed for statistical purposes. - I.T.A. No.182/ASR/2017 - - - Dated:- 17-11-2017 - SHRI T.S. KAPOOR, AM AND SHRI RAVISH SOOD, JM For the Appellant : Shri Parveen Jain, A.R For the Respondent : Shri Dharm Singh, D.R. ORDER PER RAVISH SOOD, JUDICIAL MEMBER: The present appeal is directed against the order passed by the CIT(A), dated 01.02.2017, which in itself arises from the assessment order passed by the A.O under Sec.143(3) of the Income Tax Act, (for short Act ), dated 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s processed as such under Sec. 143(1) of the Act on 20.07.2014. The case of the assessee was thereafter taken up for scrutiny assessment under Sec. 143(2). 3. During the course of the assessment proceedings the A.O in order to make necessary verifications issued letters to the sundry creditors. In cases of two sundry creditors, i.e. M/s Gee Dee Stonex Pvt. Ltd. and M/s Jindal Tiles Pvt. Ltd., the parties stated that they had no business dealing with the assessee during the year and there was no balance of the assessee as per their books of accounts. That in the backdrop of the fact that contrary to the claim of the aforementioned parties, the assessee had shown an amount of ₹ 13,61,311/- payable to M/s Gee Dee Stonex Pvt. Ltd. and an amount of ₹ 13,68,014/-payable to M/s Jindal Tiles Pvt. Ltd., the A.O called upon the assessee to explain as to why the amount reflected against the accounts of the said respective parties in its balance sheet may not be assessed as his income for the year under consideration. The assessee instead of reconciling the aforesaid discrepancy rather came forth with an evasive reply and submitted that the difference in the account of the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash or any amount in respect of the outstanding liability by way of cessation thereof in the year under consideration, therefore, the amount could not be brought to tax by invoking the provisions of Sec. 41(1) of the Act . However, the CIT(A) not finding herself as being in agreement with the explanation of the assessee, therein observed that now when the aforementioned creditors had stated that no sum was owed to them by the assessee, therefore, it could safely be concluded that such denial by the aforesaid parties had brought the benefit of complete write-off of the aforesaid amount which was due to them by the assessee. Thus, the CIT(A) held a conviction that the liability of ₹ 27,29,325/- which was owed by the assessee to the aforesaid creditors had ceased to exist the moment they had acknowledged in writing before the A.O that nothing was owed to them by the assessee. The CIT(A) on the basis of her aforesaid observations, taking a shift from the basis on which addition was made by the A.O, therein concluded that the addition of ₹ 27,29,325/- made by the A.O in the hands of the assessee was justified in terms of Sec. 41(1). 5. The assessee being aggrieved with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bilities had ceased, but are unable to comprehend that as to on what basis the CIT(A) had related such cessation of liability to the year under consideration, viz. A.Y 2013- 14. We are of the considered view that Section 41(1)(a) which is relevant to the case of the present assessee clearly provides that it is only where the assessee during any previous year has obtained some benefit in respect of such trading liability by way of remission of cessation thereof, the value of benefit accruing to him shall be deemed to be profit and gain of business or profession and accordingly chargeable to income tax as income of that previous year. We are of the considered view that now when the aforesaid statutory provision clearly provides that the remission or cessation of a trading liability is to be deemed as the income of the assessee only in the previous year in which the assessee had obtained some benefit in respect of such trading liability by either of the aforesaid act, therefore, the addition can only be made in the hands of the assessee in the said year alone. We are of the considered view that it would be absolutely impermissible on the part of the authorities to take a departure fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had taken place in the books of accounts of the aforesaid parties. We find that neither of the lower authorities had verified the aforesaid fact, which to our understanding would be crucial for identifying the year in which the benefit emerging from cessation or remission of the trade liabilities relatable to the aforesaid parties was obtained by the assessee. We are unable to persuade ourselves to be in agreement with the view taken by the CIT(A) that as the parties had during the course of the assessment proceedings for the year under consideration stated that as per their books of account nothing was due to them from the assessee, therefore, merely on the said count the cessation or remission of the trading liabilities was to be related to and brought to tax in the hands of the assessee in the said year. We are of a strong conviction that the year in which the benefit from cessation or remission of trading liabilities under consideration was obtained by the assessee had been lost sight of by the CIT(A) while justifying the addition under Sec. 41(1) in the hands of the assessee for the year under consideration. We have also deliberated on the judicial pronouncements relied upon b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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