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TMI Blog2016 (5) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in disallowing Rs. 11,12,947/- u/s 41(1) of the I.T. Act, 1961. 2. It is therefore prayed that the above addition/disallowance made by the assessing officer may please be deleted. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal 3. The brief facts of the case, as culled out from the records, are that the assessee is an individual, carrying out business of sale of processed yarn, stamping foils and cloth. The assessee filed its return of income for the year under consideration on 24.07.2012, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se - Rs. 1,00,430/- 3.1 Aggrieved the assessee went in appeal before the learned CIT(A), who confirmed the addition u/s 41(1) of the Act at Rs. 11,12,947/- and partly allowed the ground of disallowance of expenses by restricting it to 10% at the place of 20% made by the learned Assessing Officer. 3.2 Aggrieved the assessee is now in appeal before the Tribunal only against the action of learned CIT(A) in sustaining the disallowance of Rs. 11,12,947/- made u/s 41(1) of the Income-tax Act. 4. The learned Authorized Representative submitted that during the year under consideration assessee's real sister Smt. Kiranben Jayant Gandhi has given the sum to the assessee as gift amounting to Rs. 40,69,952/- which was outstanding in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the proceeds thereof for making payment to Kiranben Jayant Gandhi, the net effect of which would be reduction of the outstanding balance in that account. Accordingly, it is submitted that the book entry passed by the assessee also had the very same effect and hence a different view could not have been taken by the tax authorities. The single book entry passed by the assessee should be considered as two separate entries as 'constructive receipt of gift and 'constructive payment of outstanding liability. Accordingly, the provisions of section 41(1) would not apply to the impugned transaction, as there was no cessation or remission of liability. He further submitted that when in a scenario Kiranben Jayant Gandhi would have first gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative supported the orders of the lower authorities. 5. We have heard the rival contentions and perused the material on record. The only issue before us for adjudication is that whether the learned CIT(A) erred in sustaining the disallowance u/s 41(1) of the Act at Rs. 11,12,947. From going through the records, we find that as on 01.04.2007, there was opening balance of Rs. 26,15,430/- in the name of Smt. Kiranben Jayant Gandhi in the books of assessee. Thereafter, upto the financial year 2010-11, there were transactions of additions and repayment and also interest of Rs. 11,12,947/- was credited in her account and the same was claimed as an interest expenditure by the assessee during the financial years 2007-08 to 2010-11. Thereafter, dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been dealt in by the Co-ordinate Bench (ITAT, Cochin Bench) in the case of Rajesh Kumar vs. ACIT, Circle-1, Kottayam, reported in [2012] 24 taxmann.com 133 (Coch.), wherein following issue was involved:- "The assessee, a retail trader in textiles, had received Rs. 75 lakhs as gift from his maternal uncle by way of book entry, i.e., by crediting his capital account and debiting the business account of Vee, i.e. the proprietary concern of the donor. Prior to passing the gift entry, the assessee owed Rs. 72.55 lakhs to Vee. Though the assessee filed a letter from his uncle confirming the payment of gift, yet the Assessing Officer opined that the said gift was required to be treated as cessation/remission of trading liability as per sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee received the gift by way of cheque and utilised the proceeds thereof for making payment to Vee, the net effect of which would be reduction of the outstanding balance in that account. Accordingly, the assessee submitted that the book entry passed by the assessee also had the very same effect and hence a different view could not have been taken by the tax authorities. He further submitted that the book entry passed by the assessee should be considered as 'constructive receipt of gift' and 'constructive payment of outstanding liability'. Accordingly, he contended that the provisions of section 41(1) would not apply to the impugned transaction, as there was no cessation or remission of liability. [Para 7]" 5.2 Applying f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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