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TMI Blog2013 (8) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... laim. The assessee was supposed to pay ₹ 8.52 lakh to the party, out of which a sum of ₹ 1.45 lakh has paid either by cheque or by cash. When the position is so and the assessee is regularly making payment to such party, there can be no question of treating the closing balance as income u/s 41(1) of the Act. The second party is M/s Samidha Engineering. It had opening balance of ₹ 1.77 lakh. A sum of ₹ 10,000 was paid by cheque during the year under question bringing down the balance payable at ₹ 1.67 lakh at the end of the year. It is further relevant to note that the assessee made payments to this party in the immediately succeeding year for the full amount. Copy of this account for the financial year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sanjiv Shah O R D E R Per R.S.Syal ( AM) : This appeal by the Revenue and cross objection by the assessee arise out of the order passed by the Commissioner of Income-tax (Appeals) on 30.04.2012 in relation to the assessment year 2009- 2010. 2. The only issue raised through various grounds is against the deletion made by the learned CIT(A) of the addition made by the AO on account of cessation of liability u/s 41(1) in respect of M/s.Jagruti Corporation, M/s.Argass Chemicals, M/s.Universal Enterprises and M/s.Samidha Engineering. Briefly stated the facts of the case are that there were certain credit balances appearing in the books of account of the assessee. The Assessing Officer issued notices u/s 133(6) randomly in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Argass Chemicals 25,67,269 2,58,544 26,54,990 3. We have heard the rival submissions and perused the relevant material on record. Section 41(1) provides that where an allowance or deduction has been made in the assessment for any year in respect of loss or trading liability incurred by the assessee and subsequently during any previous year the assessee obtains whether in cash or in any other manner remission or cessations thereof, such amount shall be considered as profit chargeable to tax. The essence of section 41(1) is that the liability should cease to exist so as to qualify for income under this section. In other words, if the liability is existing, then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... howing nil balance as at the end of the subsequent year. By no stretch of imagination, this amount can be considered as income u/s 41(1) of the Act for the year relevant to the assessment year under consideration. 4.2 Similar is the position regarding Universal Enterprises. It had opening balance of ₹ 8.52 lakh. Though no amount was paid during the year but in subsequent year the entire amount has been paid. Copy of account of this party for the financial year 2009-2010 is available on pages 40 and 41 of the paper book showing nil balance. We cannot consider the outstanding amount at the end of the year as income chargeable to tax u/s 41(1). 4.3 The last is M/s Argass Chemicals. It had opening balance of ₹ 25.67 lakh. Page ..... X X X X Extracts X X X X X X X X Extracts X X X X
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