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of <h1>ITAT Kolkata upholds CIT(A)'s deletion of Rs.1,04,06,000 under Income Tax Act section 41(1)</h1> <h3>ITO., Kolkata Versus M/s. ML. Sarkar & Bros.</h3> ITO., Kolkata Versus M/s. ML. Sarkar & Bros. - TMI Issues Involved:Deletion of addition under section 41(1) of the Income Tax Act based on outstanding liabilities towards creditors.Detailed Analysis:1. Issue: Deletion of addition under section 41(1)- The AO added Rs.1,04,06,599/- as cessation of liability under section 41(1) based on outstanding liabilities towards creditors.- The CIT(A) deleted the addition, emphasizing that the AO did not provide a categorical finding or mention the legal provision for the addition.- The CIT(A) highlighted that if the claim related to outstanding liability was considered bogus, no addition could be made for the current year.- Reference was made to legal precedents like CIT vs Tamilnadu Warehousing Corporation and Visnagar Taluka Audyogik Sahakari Mandli Ltd to support the decision.- The CIT(A) noted that the appellant continued to show the liabilities in the balance sheet, and the AO failed to establish any cessation of liability.- Lack of evidence or material showing payment of liabilities from unaccounted sources or their non-existence further supported the deletion of the addition.- The AO's presumption of cessation of liability without concrete proof was deemed unjustified.2. Judgment Analysis:- The ITAT Kolkata bench upheld the CIT(A)'s decision to delete the addition, stating that no intervention was necessary.- The bench agreed that the facts were appropriately considered by the CIT(A), and there was no justification for interference.- The order confirmed the deletion of Rs.1,04,06,000/- from the appellant's tax liability.3. Conclusion:- The appeal filed by the Revenue was dismissed, affirming the CIT(A)'s decision to delete the addition under section 41(1) concerning outstanding liabilities towards creditors.- The judgment emphasized the importance of concrete evidence and legal provisions in determining the cessation of liability under the Income Tax Act, protecting taxpayers from unjustified additions based on presumptions.
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