2019 (2) TMI 1263 - AT - Income Tax

Addition u/s 41(1) on cessation of liability - addition in respect of sundry creditors - HELD THAT - There was no dispute in respect of the liability of ₹ 1,37,860/- shown against M/s. S. I. International Ltd., and the amount is offered to tax as cessation of liability u/s 41(1) of the Act. In these circumstances, the finding rendered in impugned order of the learned CIT(A) on this issue in respect of ₹ 1,37,860/- is upheld and to this extent the assessee s appeal is dismissed. For the other sundry creditor, the addition u/s 41(1) of the Act on account of cessation of liability is to be sustained only to the extent of ₹ 2,54,550/- and I hold and direct accordingly. - Decided partly in favour of assessee

Summary

Issues:
1. Addition of &8377; 9,17,410/- made in the order of assessment for Assessment Year 2008-09.
2. Disputed liability against M/s. S. I. International Ltd.
3. Liability of &8377; 7,79,550/- against M/s. Beijia Industrial Co. Ltd.

Analysis:
1. The initial appeal by the assessee challenged the addition of &8377; 9,17,410/- made in the assessment order for AY 2008-09. The Tribunal set aside the issue for re-examination by the AO in light of a previous judgment. The AO, upon re-examination, completed the assessment ex-parte and added the disputed amount to the taxable income of the assessee. The CIT(A) upheld this addition, leading to the current appeal.

2. Regarding the liability of &8377; 1,37,860/- against M/s. S. I. International Ltd., the CIT(A) confirmed the addition to the income of the assessee under sec. 41(1) of the Act, as the liability was waived by M/s. SI International Ltd. and offered for tax. The Tribunal upheld this decision, dismissing the appeal in this regard.

3. Concerning the liability of &8377; 7,79,550/- against M/s. Beijia Industrial Co. Ltd., the Tribunal found that the liability was extinguished through a tripartite settlement. The CIT(A) failed to credit the &8377; 5,25,000/- paid by M/s. Associated Safety Glass Pvt. Ltd. towards this liability. The Tribunal directed that the addition under sec. 41(1) of the Act should only be sustained to the extent of &8377; 2,54,550/-, after considering the payments made. Consequently, the appeal was partly allowed in this aspect.

Overall, the Tribunal partially allowed the assessee's appeal for AY 2008-09, addressing the disputed liabilities against M/s. S. I. International Ltd. and M/s. Beijia Industrial Co. Ltd. The judgment provided detailed reasoning for each issue, ensuring a fair and just determination based on the facts and legal provisions presented during the proceedings.