2012 (6) TMI 804 - AT - Income Tax

Appeal dismissed for deletion of addition under Income Tax Act; Tribunal rules in favor of assessee.

The Income Tax Officer Ward 2 (3) (4), Mumbai Versus M/s Veeyenes Shipping Services P Ltd

The revenue's appeal against the deletion of an addition made under section 41(1) of the Income Tax Act for cessation of liabilities was dismissed. The ... - Issues Involved: Appeal against deletion of addition made u/s 41(1) of the Income Tax Act for cessation of liabilities due to lack of confirmation from creditors.Summary:The revenue appealed against the CIT(A)'s order for the AY 2007-08, specifically challenging the deletion of an addition made u/s 41(1) of the IT Act amounting to `. 7,55,806/- due to cessation of liabilities. The main contention was the failure of the assessee to prove the existence and subsistence of alleged liabilities.The Assessing Officer treated the creditors as ceased liabilities due to lack of confirmation filed by the assessee. However, the assessee argued that the creditors were genuine and existing, with payments withheld due to disputes. The liabilities were still shown in the books as payable. The Tribunal noted that sec. 41(1) cannot be invoked unless it is proven that the liability actually ceased to exist.The Assessing Officer did not provide evidence that the liabilities no longer existed, basing the addition solely on non-confirmation of creditors and no change in their account balances. The assessee's explanation of ongoing litigation with creditors for non-payment was considered valid. Consequently, the Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.In conclusion, the appeal by the revenue was dismissed, affirming the deletion of the addition u/s 41(1) for cessation of liabilities.