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TMI Blog2019 (3) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... es leave to add, alter or amend or delete any or all the grounds of appeal on or before the hearing of the appeal. 2. The brief facts of the case are that the return of income was filed on 15/01/07 declaring NIL income. Vide order dated 24/12/09 income of the assessee was assessed at Rs. 16,25,96,110/- u/s 143(3) of the Act, thereby making additions on account of new loan received during the year and on account of outstanding expenses. As per AO, the assessee could not satisfy with regard to genuineness of trading liabilities and thus additions u/s 41(1) of the I.T. Act was made. Similarly in the absence of confirmation from the parties advancing the new loans during the year, the assessing officer added the same as unexplained credit u/s. 68 of the I.T. Act. Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, partly allowed the appeal of the assessee thereby restricting the additions u/s 41(1) of the Act. Now before us, the assessee has preferred the present appeal by raising the above ground. 3. The solitary ground raised by the assessee relates to challenging the order of Ld. CIT(A) in confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter having gone through the facts of the present case as well as considering the judgment cited by the parties, we find that it is an undisputed fact that the said liability is continuing in the books of account of the assessee for a long period without being paid by the assessee. Even in the decision rendered by the Coordinate Bench of Hon'ble ITAT in the case of ACIT vrs. M/s Trans Freight Containers (ITA No. 5979/Mum/12), it had categorically been held that if a liability is continued in the books of accounts of the assessee for a long period, then in that eventuality, the genuineness of such transactions have to be examined in that assessment year when the liability was created and not in the assessment year under consideration. The operative portion of the order of ITAT is contained in para No. 7 to 9, which are reproduced below:- 7. We have heard the ld.Counsels appearing for the parties and perused the material on record. As could be seen, the AO himself in the assessment order has stated that the sundry credits amounting to Rs. 7.29 crores originated in assessment years 1997-98 to 2002-03 and continuing unchanged till the impugned assessment year. Therefore, the AO has as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blish that the assessee has obtained any benefit in respect of the liability on account of sundry creditors in the impugned assessment year merely on surmises and assumptions it cannot be said that there is remission/cessation of liability in the impugned assessment year. More so, when there is no unilateral act by the assessee in writing off of liability in its books of accounts. Further, it is evident from the material on record that in course of assessment proceedings the assessee had furnished the necessary details and submitted that part of the liability has already been written off or paid back in the subsequent years. However, the AO without any valid reasons has failed to recognise such facts. In fact, as pointed out by the ld. AR, such repayment or writing off of the liability in subsequent years was prior to the query raised by the AO on 07.12.2011 for invoking the provisions of section 41(1) of the Act. Thus, the Act of the assessee in repaying a part of the sundry creditors of writing off the liability in its books of account cannot be held to be an afterthought but has to be considered to have been done in good faith. Moreover, a part of the liability is due to Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry, thus does not arise in the current year and this issue could only be examined in the year when the liability was recorded as having arisen, that is, in the year 1984- 1985. The department having accepted the balances outstanding over several years, it was not open for the CIT (Appeals) to confirm the addition of the amount of ` 1,53,48,850/- on the ground that the assessee could not produce sufficient evidence to prove the genuineness of the transactions which were undertaken in the year 1984-85. 23. The present appeal does not disclose any substantial question of law for our consideration and is, accordingly, dismissed." 11. We have also considerd the decision of Hon'ble Gujarat High Court in the case of PCIT Vrs. Matruprasad C Pandey (2015) 377 ITR 363 (Guj), wherein it was held as under:- "6.1 At the outset, it is required to be noted that the Assessing Officer made the addition of Rs. 56,96,645/- invoking Section 41(1) of the Income Tax Act by doubting certain sundry creditors amounting to Rs. 56,96,645/- appearing in the balance sheet of the assessee since past several years. However, it is required to be noted that as such those sundry creditors mentioned in the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case is ordered to be deleted. In paragraph 8 the Division Bench has observed and held as under; "We are in agreement with the view of the Tribunal. Section 41(1) of the Act as discussed in the above three decisions would apply in a case where there has been remission or cessation of liability during the year under consideration subject to the conditions contained in the statute being fulfilled. Additionally, such cessation or remission has to be during the previous year relevant to the assessment year under consideration. In the present case, both elements are missing. There was nothing on record to suggest there was remission or cessation of liability that too during the previous year relevant to the assessment year 2007-08 which was the year under consideration. It is undoubtedly a curious case. Even the liability itself seems under serious doubt. The Assessing Officer undertook the exercise to verify the records of the so called creditors. Many of them were not found at all in the given address. Some of them stated that they had no dealing with the assessee. In one or two cases, the response was that they had no dealing with the assessee nor did they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the amount outstanding as deemed income of the assessee u/s 41(1) on account of remission/cessation of liability, the AO is duty bound to examine whether the condition laid down u/s 41(1) are fulfilled or not. As per the reading of section 41(1) along with explanation (1) to section 41(1), the liability ceases to exist in the books of account of the assessee in a particular previous year, if the person showing such liability had obtained benefit either in cash or in any other manner in respect of such liability. It further provides that such remission or cessation of liability is also acceptable by unilateral act of writing off such liability in its account by the person showing such liability. Therefore, before applying the provisions of section 41(1), it is necessary to establish on record that the assessee had obtained a benefit either in cash or in any form in respect of such liability in the relevant previous year. Thus, when in AO's own admission liability continued from past so many years, then what prompted the AO to conclude that the assessee has obtained benefit in respect of such liability in the impugned assessment year must be clearly brought on record. In the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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