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TMI Blog2016 (1) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... ose not to reconcile the balance in the assessee’s books of accounts with the parties’ accounts and agreed to offer the above amount as income under section 41(1) of the I.T. Act. The assessee’s authorized representative accepted before the AO, the addition u/s. 41(1) of the Act. This shows that the assessee has no explanation to prove that the creditors in its books of account are genuine. To put it differently, the assessee has failed to discharge its onus cast on it to substantiate its claim. Being so, the lower authorities are justified in holding that such liabilities did not exist at the end of the accounting year under dispute and rightly added the said liabilities which had ceased to exist. Accordingly, the addition sustained by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a cessation of liability u/s.41(1) of the Act. The assessee relied on the judgment of the Delhi High Court in the case of CIT v. Vardhman Overseas Ltd. in ITA No.774/2009, wherein it was held that the Assessing Officer was not correct in invoking sec.41(1) as the liability is still in the balance-sheet. However, the Commissioner of Income-tax(Appeals), has not agreed with the contention of the assessee and dismissed the appeal of the assessee. Against this, the assessee is in appeal before us. 5. The ld. AR has submitted the following documents : (i). Xerox copy of the letter dated 7.12.2010 filed with the ACIT, Circle-I, Salem. (ii). Xerox copy of the financial statement filed along with return of income. (iii). Xerox copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not sustainable. Accordingly the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition of ₹ 3,19,901/- made u/s 41(1) of the Act. 6. On the other hand, the ld. DR relied on the order of the Commissioner of Income-tax(Appeals). 7. We have heard both the parties and perused the material available on record. In this case, in the course of assessment, the Assessing officer asked the assessee to produce account copies/confirmation letters from the sundry creditors. The assessee has failed to file confirmation letters from creditors. The Assessing Officer required the assessee to reconcile the creditors account with the books of accounts of the assessee. However, the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, the liability is outstanding in the books of account of the assessee for the assessment year under consideration. As per the recent judgment of the Delhi High Court in the case of CIT vs. Chipsoft Technology (P.) Ltd. [2012] 210 Taxman 173 (Del), the provisions of sec. 41(1) could be applied in this type of credits. 7.3 The Delhi high court as per its recent decision in the case of CIT vs. Chipsoft Technology (P.) Ltd. [2012] 210 Taxman 173 (Del), examining the legal aspect of the matter, has clarified the view that merely because a liability outstanding in books, and that lapse of time bars the remedy but does not efface the liability, is an abstract and theoretical one which does not ground itself in reality. The interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 839, holding that a stale dispute ousts itself from being entertained and adjudicated. As would be seen, the hon ble court has sought to read the provision consistent with the facts of the case, and not on the basis of a theoretical construct alone, divorced from the facts of the case. Reference was made both by the hon ble court as well as the tribunal in the afore-referred decisions to the decision in the case of Kesoram Industries Cotton Mills Ltd. vs. CIT [1992] 196 ITR 845 (Cal.) to the effect that the non-discharge of a liability over a long period of time, coupled with absence of any dispute and/or of legal recourse, would lead to a firm basis to infer remission or cessation of liability. The said decision by the hon ble court st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e genuineness of these liabilities by citing credible evidence. Simply the liabilities being reflected against certain names in its books of accounts would not establish the genuineness of such liabilities. The assessee chose not to reconcile the balance in the assessee s books of accounts with the parties accounts and agreed to offer the above amount as income under section 41(1) of the I.T. Act. The assessee s authorized representative accepted before the AO, the addition u/s. 41(1) of the Act. This shows that the assessee has no explanation to prove that the creditors in its books of account are genuine. To put it differently, the assessee has failed to discharge its onus cast on it to substantiate its claim. Being so, the lower authori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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