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TMI Blog2024 (7) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... or cessation thereof is availed by the assessee. Considering the decision of Bhogilal Ramjibhai Atara [ 2014 (2) TMI 794 - GUJARAT HIGH COURT] and Dattatray Poultry Breeding Farm (P) Ltd [ 2019 (4) TMI 1171 - GUJARAT HIGH COURT] Tribunal has held that the provisions of Section 41 (1) of the Act cannot be invoked where the existence of liability was doubted as such the addition could have been made in the year in which it was claimed or it could have been treated as unexplained cash credit in hands of the assessee under Section 68 of the Act as there is nothing on record to suggest that there is remission or cessation for the year under consideration. Tribunal has not committed any error in deleting the addition by arriving at a finding of fact that the said amount pertaining to five parties, there was nothing on record to suggest that there was remission or cessation of such liability of the respondent assessee so as to invoke the provisions under Section 41 (1) - Assessee appeal allowed. - HONOURABLE MR. JUSTICE BHARGAV D. KARIA AND HONOURABLE MR. JUSTICE NIRAL R. MEHTA Appearance: For the Appellant(s) No. 1 : Mr Karan Sanghani Advocate With Mrs Kalpana K Raval(1046). For the O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted necessary evidences about party (M/s Sonoma exports Pvt. Ltd. Tirupur) or transaction and therefore falled to substantiate that these liabilities are existing which give presumption that appellant already paid such liability. It is therefore, though addition u/s 41 (1) of the Act may not be legally justified, but on the facts of the details explanation with tax auditor's qualifying remarks about balances of creditors are subjected to confirmation, such addition made by A.O. is justified. I am inclined with A.O. the ratio of cases relied on by him are applicable in the case of appellant. The appellant failed to establish that such liability exists / subsist and therefore as per accounting principle required to added as income. The addition of Rs. 75,38,74,413/- is upheld confirmed. This ground is dismissed. [4] The assessee, therefore, challenged the order passed by the CIT(A) before the Tribunal. The Tribunal deleted the addition pertaining to the following five parties: Name of the creditor Amount Rs. Purchase difference 169978 Sonoma Exports Pvt Ltd. Tirupur 874500 Allure Jewel 11994266 FIRC 7460839 Pest Mortem (India) Pvt. Ltd 7052 [5] So far as the addition pertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. [Explanation 1. - For the purposes of this sub-section, the expression loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof shall include the remission or cessation of any liability by a unilateral act by the first mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts.] [Explanation 2]. - For the purposes of this sub-section, successor in business means,- (i) where there has been an amalgamation of a company with another company, the amalgamated company; (ii) where the first-mentioned person is succeeded by any other person in that bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s books of accounts. Accordingly, this addition in also liable to be deleted. So far as addition on account of FIRC is concerned, we are in agreement with the counsel for the assessee that no expenditure has been incurred by the assessee in this case and it in a case of export sales and therefore, addition could not be sustained under section 41 (1) of the Act. Similarly, no addition is called for in the case of Pest Mortem (Rs. 7,052/-) in respect of which the assessee had furnished copies of ledger account and the same is a carry forward balance from earlier years. Accordingly, in respect of the aforesaid amounts, in our considered view, no addition is called for under 41 (1) of the Act. We note that in the case of Bhogilal Ramjibhai Atara 43 taxmann.com 55 (Gujarat ), the Gujarat High Court held that where assessee in return of income for assessment year 2007- 08 had shown certain amount by way of his debts and Assessing Officer applying provisions of section 41 (1) added back said amount to income of assessee as deemed income, since there was nothing on record to suggest that there was remission or cessation of liability and that too during assessment year 2007- 08, ab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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