TMI Blog2023 (6) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... 71 - GUJARAT HIGH COURT] as similarly observed that where the existence of liability was doubted, same could have been disallowed in the year in which it is claimed or could have been treated as unexplained credit in that relevant year - while the assessee has continued to declare the trading liability in its books of account, no benefit can be said to have been obtained in respect of such trading liability by way of remission or cessation thereof and thus the requirement of Section 41(1) are not satisfied. The additions made u/s 41(1) is thus set aside and reversed. Decided in favour of assessee. - I.T.A. No. 2311/DEL/2019 - - - Dated:- 23-5-2023 - Shri Kul Bharat, Judicial Member And Shri Pradip Kumar Kedia, Accountant Member Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst these bills. All these bills are from registered VAT dealers and proper entries have been made in the books of account in this regard. Copies of bills of all parties were also presented before the Assessing Officer for verification. The assessee further contended before the Assessing Officer that some payments were made to these parties but however due to ongoing financial problem and lack of fund, the assessee could not make full payment resulting in outstanding balances in the books of account. The assessee thus contended before the Assessing Officer that the liability existed in the books of account and therefore provisions of Section 41(1) cannot be invoked. The Assessing Officer however based on non service of notice under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1) of the Act states that when allowances in respect of an expenditure or trading liability etc. is made in a year and the assessee obtains any benefit, whether in cash or otherwise in a subsequent year, such benefit shall be deemed to be profits and gains of the business in that subsequent year, whether such business is in existence or not in the subsequent year. The Section has the effect of deeming such cessation or remission of liability as income in departure with the general law where such remission or cessation is not treated as an income. 7.3. Coming to the facts, as emerges above from the case records, it is the case of the assessee that trading liabilities of Rs. 69,59,056/- claimed to be payable to several parties are subsis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of liability was doubted, same could have been disallowed in the year in which it is claimed or could have been treated as unexplained credit in that relevant year. The Hon ble Gujarat High Court observed that while the assessee has continued to declare the trading liability in its books of account, no benefit can be said to have been obtained in respect of such trading liability by way of remission or cessation thereof and thus the requirement of Section 41(1) are not satisfied. Guided by the observations in the judicial precedents, we find merit in the case of the assessee for reversal of additions. The additions made under Section 41(1) is thus set aside and reversed. 8. In the result, the appeal of the assessee is allowed. Order ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
