TMI Blog2022 (11) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... Packaging made u/s. 41(1) treating it as cessation of liability. Grounds are partly allowed. - ITA No. 308/GAU/2018 - - - Dated:- 19-9-2022 - SHRI MANISH BORAD , ACCOUNTANT MEMBER And SHRI SONJOY SARMA , JUDICIAL MEMBER By Respondent : Shri Nirmal Kumar Agarwal, CA, Ld.AR By Appellant : Shri PS Thuingaleng, JCIT, Ld. SR DR ORDER Per Manish Borad , AM The present appeal has been preferred by the revenue against the order dated 29-08-2018 of the Ld. Commissioner of Income-tax (Appeals), [hereinafter referred to as 'CIT(A)'], Guwahati-1, Guwahati for the assessment year 2015-16. 2. The revenue has raised the following grounds:- (i) For that on the facts and circumstances of the case the Ld. CIT(A) is not justified in facts as well as in law in deleting the addition of Rs. 29,15,73,211- without appreciating the fact that the assessee had failed to produce details of purchases made during the F.Y. 2014-15 relevant to A.Y. 2015-16. (ii) For that on the facts and circumstances of the case the Ld. CIT(A) is not justified in facts as well as in law in ignoring the enquiry conducted by the AO in respect of sundry creditors namely Mr. Dip Sharma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'payable' to the creditors and had not written them off in the books of account and moreover, there was no evidence to indicate that said liabilities had ceased to exist. 5. Aggrieved, the revenue is now in appeal before this Tribunal raising the aforementioned grounds of appeal. 6. The Ld. Departmental Representative vehemently argued referring to the detailed finding of the ld. AO and further submitted that spot enquiry was conducted by the inspector regarding the creditworthiness of sundry creditor, Dip Sarma and found that Shri Dip Sarma is an auto van driver, who has no business premises or any office and he has not maintained any books of account. Further, it was submitted that the assessee was given sufficient opportunity to produce the required documents, but the assessee deliberately did not comply with the same issued u/s. 131(1) of the Act and awaited for submissions of document, The ld. DR asserted that finding of the ld. AO may please be restored. 7. Per contra, Ld. Counsel for the assessee vehemently argued supporting the finding of the ld. CIT(A) also referring to various judgments stating that provisions of section u/s. 41(1) of the Act are not appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) way of remission or cessation thereof , the amount obtained by the successor in business or the value of benefit accruing to 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. Explanation 1.-For the purposes of this sub-section, the expression loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof shall include the remission or cessation of any liability by a unilateral act by the first-mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by writing off such liability in his accounts. Explanation 2.-For the purposes of this sub-section, successor in business means,- (i) where there has been an amalgamation of a company with another company, the amalgamated company; (ii) where the first-mentioned person is succeeded by in that business or profession, the other person; (iii) where a firm carrying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 41(1) of the Act cannot apply since the liability is still 'payable' to sundry creditor and had not been written off in the books of account.... 13. Now as per finding of the ld. CIT(A) we find that basis of giving relief is that the appellant/assessee continued to reflect or record liabilities standing in books of account 'payable' to the creditors and had not written them off in the books of account and there is no evidence to indicate that said liabilities had ceased to exist. In our humble understanding if the liability is written off by a person in the books of account, there is no need to apply section 41(1) of the Act as the person at his own had written off and necessary entries will be made in the books of account to show the income arising out of writing off the liability. Invoking of Section 41(1) arises on various counts including remission and cessation of liability. If in a case there is cessation of liability, it means that though there is a liability standing in the books, but if it is fictious in nature and in real terms the assessee has not to pay such liability and liability cease to exist, then in such case section 41(1) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rag Packaging for the FY 2014-15(1.4.2014 to 31.3.2015), we notice that there is opening balance of Rs. 63,71,547/-. During the year there are further entries of purchase and only payment of Rs. 97,183/- was made. It is also surprising to note that on the credit side of ledger account the assessee has received transfer from bank at Rs. 24,576/-, Rs. 2,30,201/-, Rs. 15,000/-, Rs. 28,811/- Rs. 6000/- and Rs. 18,600/-. It is surprisingly to note that the person who is a creditor for selling goods has also made some payments to the assessee for the reason best known to the assessee. Similarly in case of M/s. Maa Kamakshya Packaging against the total credit balance of Rs. 98,51,634/- the assessee has only paid 51,000/- and remaining amount is outstanding. It is hard to believe that a person who is physically verified to be an Auto Van Driver has been able to procure goods worth crores and given then on credit to assessee and total outstanding at the year end is Rs. 1,97,68,335/-. 16. Looking to these facts and spot enquiry in respect of Shri Dip Sharma, who is said to be proprietor of M/s. Anurag Packaging M/s. Maa Kamakhya Packaging and the observations made hereinabove, we are of ..... 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