2025 (2) TMI 572 - AT - Income Tax

Assessee's appeal succeeds: Tribunal overturns AO's additions under Sections 41(1) and 69 for 2015-16.

Prabir Roy Chowdhury Versus DCIT, Circle-10 (1), Kolkata

Prabir Roy Chowdhury Versus DCIT, Circle-10 (1), Kolkata - TMI The appeal before the Appellate Tribunal involved issues related to additions made by the Assessing Officer (AO) under sections 41(1), 69, and 56(2)(vii) of the Income Tax Act for the assessment year 2015-16. The Tribunal considered the arguments presented by the assessee challenging these additions and the decision of the Commissioner of Income Tax (Appeals) (CIT(A)) partially allowing the appeal. The key issues and the Tribunal's analysis are as follows:Issues Presented and Considered:1. Whether the addition under section 41(1) of the Income Tax Act was justified.2. Whether the addition under section 69 for undisclosed investment was valid.Issue-wise Detailed Analysis:Issue 1: Addition under Section 41(1)- Relevant legal framework and precedents: The Tribunal referred to the provisions of section 41(1) of the Income Tax Act and cited the decision of the Hon'ble Gujarat High Court in the case of Dattatray Poultry Breeding Pvt. Ltd. The Tribunal also mentioned the judgment of the Hon'ble Calcutta High Court in the case of Goodricke Group Ltd. vs. CIT.- Court's interpretation and reasoning: The Tribunal noted that the liability in question was duly disclosed in the books of account of the assessee. Referring to the cited judgments, the Tribunal held that the addition under section 41(1) was not justified as there was no cessation of liabilities and the trading liability was still declared in the books of accounts.- Key evidence and findings: The Tribunal considered the explanation provided by the assessee regarding the outstanding balance and the history of the liability.- Application of law to facts: The Tribunal applied the legal principles from the cited judgments to the facts of the case and concluded that the addition under section 41(1) was baseless.- Conclusions: The Tribunal directed the deletion of the addition made under section 41(1) of the Act.Issue 2: Addition under Section 69- Relevant legal framework and precedents: The Tribunal examined the provisions of section 69 of the Income Tax Act.- Court's interpretation and reasoning: The Tribunal found that the demand draft for registration of land was duly recorded as a fixed asset in the books of account for the relevant year. Therefore, the Tribunal concluded that the addition under section 69 was not applicable.- Key evidence and findings: The Tribunal reviewed the details of the demand drafts and the purpose for which they were utilized.- Application of law to facts: The Tribunal applied the provisions of section 69 to the facts presented by the assessee.- Conclusions: The Tribunal directed the deletion of the addition made under section 69 of the Act.Significant Holdings:- The Tribunal held that the addition under section 41(1) of the Income Tax Act was not justified as the liability was duly disclosed and there was no cessation of liabilities.- The Tribunal also determined that the addition under section 69 for undisclosed investment was not applicable as the investment was properly recorded in the books of account.The Tribunal allowed the appeal of the assessee and pronounced the order on 17th January 2025.