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TMI Blog2011 (12) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... standing counsel For Respondent : Mr. Mayank Bugani and Mr.Saurabh Mishra, Advs. R.V. EASWAR, J.: In this appeal by the revenue filed under Section 260A of the Income Tax Act, 1961 (the Act, for short), the order of the Income Tax Appellate Tribunal (The Tribunal, for short) dated 28.01.2011 in ITA No.2635/Delhi of 2010 (assessment year 2005-06) is challenged. 2. The respondent assessee is a limited company engaged in the business of manufacturing and trading in television sets. In respect of the assessment year 2005-06, it filed a return of income declaring income of Rs.1,79,90,660/-. The return was processed under Section 143(1) of the Act but was later selected for scrutiny and notice was issued to the assessee under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 027731 According to the Assessing Officer since the advances had not been liquidated till date and the assessee was not able to file any confirmation from the creditors, it was clear that there was a cessation of liability in respect of those advances and that the assessee had no further obligation to return them. In this view of the matter, the receipt of Rs.50,27,731/- received by the assessee was taken as a revenue receipt and was added to income of the assessee in the assessment order passed on 24.12.2007. 3. The assessee appealed and contended that it had given advances to parties for purchases and also received advances against supplies, that it would be evident from the balance sheet that the credit balances in favour of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove that there is actual remission and cessation or the liability. It is not the case the Assessing Officer has issued notices to the creditors and they have declined that they have paid said amount. Under the circumstances, when Assessing Officer has not brought about any cogent basis and these amounts have been written off in the books of accounts, we do not find any reason to hold that the amount is liable to be added u/s 41(1) of the IT Act. The assessee s appeal on this point was thus allowed by the Tribunal. 6. The revenue challenges the order of the Tribunal and has raised the following questions of law as substantial questions of law: 1. Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the income tax authorities, merely on the ground that the debts remained unpaid in the assessee s books for a number of years, that the liability has ceased or has been remitted. In the present case the Assessing Officer has not issued any notice to the creditors to confirm from them whether they have given up their dues from the assessee. It must be remembered that the debts were not written back in the assessee s accounts as found by the Tribunal. Except for the fact that the amounts were outstanding there was no material or evidence to show that there was remission or cessation of liability. It is the Assessing Officer who has invoked Section 41(1). It is he who has stated that there was a remission or cessation of the assessee s liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78 by holding that cessation of liability can take place even as a result of an unilateral act and where a debt has become barred by limitation by operation of law, the unilateral act of the assessee transferring the same to his profit and loss account and thereby treating as his income would attract the provisions of Section 41(1) of the Act. The Bombay High Court had also observed that there was a cessation of the liability due to the expiry of period of limitation to enforce the same. Disapproving the line of reasoning of the Bombay High Court in CIT v. Bennett Coleman Co. Ltd. (supra) the Supreme Court held as under:- We are unable to accept the reasoning of the Bombay High Court in that case. Just because an assessee makes an entr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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