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TMI Blog2022 (7) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... e was making consistent losses for the last several years and therefore, the promoter company was supporting the assessee in continuing its survival. The sums payable to the promoter towards commission, knowhow fees and royalty are outstanding constantly for 2012-13 onwards. On careful examination of section 41(1) of the Act, we find that assessee has not obtained any amount in respect of the above liability outstanding and there is no remission of the liability. Unless, there is an evidence of remission or cessation of liability, provisions of Section 41(1) of the Act does not apply. In fact, in this case assessee has acknowledged the existence of liability in its balance sheet year to year, shown relationship with the creditor and rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of liabilities for the purpose of section 41(1) of the Act? 2) On the facts and in the circumstances of the case, whether the Ld. CIT(A) was correct in law, in allowing the ground of the assessee, in spite of the fact that the assessee failed to explain and justify as to why only Rs. 33,23,957/- out of Rs. 3,45,97,948/- is no longer payable. 3) On the facts and circumstances of the case and in law, whether the Ld. CIT (A) was correct in law, in merely holding that the Assessing Officer was not justified in bringing to tax Rs. 3,12,73,991/- as remission of liability under section 41(1) of the Act and directing the Assessing Officer to delete the addition, without adjudication that why assessee company written back the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy the above amount are pending for payment. The learned Assessing Officer also noticed that a Sum of Rs.33,23,957/- with respect to this Scholler Textile AG and Rs.11,70,000/- payable to Shrenik Zaveri were written back during the year. 07. Assessee submitted that Scholler Textile AG hold 74% of the share capital and is a promoter of the company. As the assessee is having financial difficulties due to falling turnover and losses, therefore, this amount could not be paid and hence, outstanding. 08. The learned Assessing Officer found that assessee himself has written back Rs. 33,23,957/- during the year and offered the same as income, however, assessee has not filed any response for non taxability of the balance sum of Rs.3,12,73,991/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which was also added to the income of the assessee. 012. Accordingly, assessment order under Section 143(3) of the Act was passed on 27th December, 2017 determining the total income of the assessee at Rs.3,52,97,150/-. 013. The assessee preferred an appeal before the learned CIT (A), who passed an order on 14th January, 2019. With respect to the addition under Section 41(1) of the Act, the learned CIT (A) held that the learned Assessing Officer failed to satisfy the basic requirement under Section 41(1) of the Act. Hence, he deleted the addition. With respect to the disallowance of Rs.24,12,250/-, he confirmed the action of the learned Assessing Officer as no further evidence were produced. With respect to the AIR mismatch, he uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and a sum of Rs.3,01,66,005/- was on account of various expenditure incurred by the assessee in earlier years. The learned CIT (A) noted that the learned Assessing Officer did not have any evidence that above sum has become an income of the assessee by remission or cessation of the liability to pay to the holding company. He held that unless the liability for payment ceases, the amount could not have been taxed under Section 41(1) of the Act. He further relied upon several judicial precedents where, it has been held that non-payment of outstanding liability where the liability still exists, cannot be added under Section 41(1) of the Act. He noted that assessee is showing liability in his books of account and therefore, same exists. The tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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