2012 (11) TMI 1212 - AT - Income Tax

Summary

Issues involved: Appeal filed by Revenue regarding deletion of addition on account of cessation of liability u/s.41(1) and disallowance of excess claim of diesel expenses.

Cessation of liability u/s.41(1):
The AO noted outstanding liabilities in the books for more than three years, considering them ceased due to limitation. The ld.CIT(A) reversed this, citing lack of evidence of remission or waiver by creditors. The Tribunal held that without evidence of cessation, adding unpaid liability to income u/s 41(1) is unjustifiable. Referring to precedent, it stated that liabilities in books should subsist unless legally held otherwise. Upholding the ld.CIT(A)'s view, the Tribunal dismissed this ground of the Revenue.

Excess claim of diesel expenses:
AO disallowed 5% of claimed diesel expenses due to an increase from the previous year, adding an amount to taxable income. The ld.CIT(A) accepted the assessee's explanation of increased expenses due to a 7.19% rise in diesel prices and customer contributions. No specific defects were pointed out by the AO for the ad hoc disallowance. The Tribunal, after considering the factual aspect and comparative chart, upheld the ld.CIT(A)'s decision to delete the addition. It noted the reasons for increased diesel expenses provided by the assessee and dismissed this ground of the Revenue.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the ld.CIT(A)'s decisions regarding both the cessation of liability u/s.41(1) and the excess claim of diesel expenses.