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2021 (7) TMI 980 - AT - Income TaxAddition u/s 41(1) - HELD THAT - The contention of the assessee merits consideration that the provisions under section 41 (1) of the Act are not applicable to the facts of the case. This view is fortified by the decision of the Hon ble jurisdictional High Court in the case of Shri Vardhaman Overseas 2011 (12) TMI 77 - DELHI HIGH COURT - In the circumstances, we are of the considered opinion that the Ld. CIT(A) rightly applied the law to the facts of the case and reached an unassailable conclusion. We accordingly hold that the findings of the Ld. CIT(A) do not suffer any illegality or irregularity and they cannot be disturbed. Consequently grounds of appeal of Revenue are found devoid of merits and are liable to be dismissed. In view of our findings in the appeal of the Revenue, the cross objections become infructuous and are also liable to be dismissed.
Issues:
1. Addition under section 41(1) of the Income Tax Act, 1961 for converting trading credit liability into a loan liability. 2. Appeal against the order of the learned Assessing Officer regarding the liability amount. 3. Application of the provisions of section 41(1) of the Act. 4. Consideration of findings by the Ld. CIT(A) and the legality of the conclusions reached. Analysis: 1. Addition under section 41(1) of the Income Tax Act: The case involved the conversion of trading credit liability into a loan liability by the assessee. The Assessing Officer made an addition of the outstanding amount under section 41(1) of the Act. However, the Ld. CIT(A) deleted the addition, emphasizing that the liability had been paid in subsequent years. The Ld. CIT(A) found no defects in the assessee's books of accounts and accepted the explanation provided by the assessee regarding the conversion of the liability. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the liability was repaid between 1/4/2013 and 31/3/2017, as evidenced by the books of accounts. 2. Appeal against the Assessing Officer's order: The assessee appealed against the Assessing Officer's order, presenting details of purchases, export sales, and relevant documents. The Ld. CIT(A) considered these submissions and concluded that the books of accounts were not rejected, and the sales and purchase figures were not in doubt. The Ld. CIT(A) also noted that the amount due to the supplier was paid in subsequent years, leading to the deletion of the addition. The Tribunal supported the Ld. CIT(A)'s decision, emphasizing the absence of defects in the books of accounts and the subsequent repayment of the liability. 3. Application of section 41(1) of the Act: The Revenue argued that section 41(1) of the Act applied due to the outstanding liability shown in the books. However, the Tribunal referenced a decision by the Hon'ble jurisdictional High Court, stating that the provision did not apply as the liability was repaid subsequently. The Tribunal also highlighted the factual findings by the Ld. CIT(A) regarding the repayment of the liability, further supporting the non-applicability of section 41(1) in this case. 4. Consideration of Ld. CIT(A)'s findings: The Tribunal reviewed the findings of the Ld. CIT(A) and found them legally sound and well-supported by the facts of the case. The Tribunal concluded that the Ld. CIT(A) correctly applied the law to the circumstances and reached a valid conclusion. Consequently, the Tribunal dismissed the Revenue's appeal and the assessee's cross objections, affirming the decision of the Ld. CIT(A) regarding the deletion of the addition under section 41(1) of the Act. This comprehensive analysis of the judgment highlights the key issues addressed in the case and the reasoning behind the decisions made by the authorities and the Tribunal.
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