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TMI Blog2015 (7) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals) who vide order dated 26.02.2009 allowed the appeal of the assessee on the issue of addition on account of cessation of liabilities and addition on account of disallowance of commodity loss. Later on, vide order under section 154 of the Income Tax Act, the income was assessed at Rs. 19,26,586/-. The Department as well as assessee went in appeal before ITAT Chandigarh Bench. The Tribunal decided the cross appeals in ITA 481/2009 and ITA 497/2009 vide order dated 26.06.2009 and set aside the case to the file of Assessing Officer for fresh adjudication. Regarding the issue of cessation of liabilities, the ITAT directed as under : "In the light of submissions of the parties, we are of the view that the matter should be examined in accordance with law by the Assessing Officer on the basis of material on record. The basic findings required to be recorded for disposing of the matter are : i) That liabilities represented allowance or deductions in respect of loss, expenditure or trading liability and ; ii) That such liabilities have ceased to exist in the period under consideration." 5. Further, regarding the issue of commodity loss, ITAT directed as under : "Accordingly, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sundry creditors found that assessee has shown these liabilities under the head 'sundry creditors' for which addition was made under section 41 (1) of the Income Tax Act. The Assessing Officer was, therefore, of the view that since the assessee has shown these liabilities under the head 'sundry creditors' there is no reason to conclude otherwise. As regards genuineness of the commodity loss, the Assessing Officer has written letter to the Manager, LSE Commodities Trading Service Ltd., Ludhiana seeking details of transaction carried out by the assessee for his client. The Ludhiana Commodity Trading Services Ltd. intimated the Assessing Officer that no client in the name of M/s SMS & Co. Proprietor Sham Sunder Khanna (assessee) is registered as a client with M/s Anand Commodities Services Ltd. in the year under consideration. Hence, no account of the said person is appearing in the books of account maintained by them. Therefore, no transaction was also noticed between them. It was also reported that no commodity transactions have been carried out, either by M/s Anand Commodities Services Ltd. or M/s SMS & Co., Proprietor Sham Sunder Khanna (assessee) in the name of persons mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of cheque would not prove genuineness of the loss in the light of the evidences received from Ludhiana Stock Exchange. The assessee failed to prove genuineness of the loss and accordingly, this addition was also confirmed. 13. We have heard ld. Representatives of both the parties and perused the material available on record. The ld. counsel for the assessee reiterated the submissions made before authorities below and ld. DR relied upon orders of the authorities below and submitted that ld. CIT(Appeals) got the enquiries conducted at appellate stage also which proved the facts against the assessee. Therefore, both additions may be confirmed. 13 (i) On consideration of the above facts, we decide both the issues. As regards addition under section 41 (1) of the Act is concerned, the assessee submitted that the said liabilities represented the advances received from the clients as margin money to carry out the transactions on their behalf. No allowance or deduction was ever claimed by the assessee in respect of these outstanding sums. These liabilities had not ceased to exist during the year under consideration. It was, therefore, claimed that Section 41(1) of the Income Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll in existence which would prove that the assessee acknowledged his liabilities as per the books of account. Section 41(1) is attracted when there is cessation or remission of a trading liability. The Assessing Officer shall have to prove that the assessee has obtained the benefits in respect of such trading liabilities by way of remission or cessation thereof. Merely because the assessee obtained benefit of deduction in the earlier year and balances were carried forward in the subsequent year, would not prove that the trading liabilities of the assessee had become non-existent. It may also be noted in the instant case that the assessee had not claimed any deduction of the expenditure in all the assessment years under appeal Therefore, it was to be opined that provisions of section 41(l)(a.) had wrongly been applied in the matter. It was also noted that the assessee had filed details of particulars of payments of liabilities in the subsequent years which were in the nature of adjustment through journal entry, cash payment and some payments by banking channel The revenue objected to the filing of such details at the instant stage and further submitted that the payment by cash and j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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