The assessee company had shown the liability as outstanding...

The assessee company had shown the liability as outstanding amounts payable to three disputed creditors in its balance sheet as of 31.03.2015. The assessee provided evidence that these disputed sundry creditors were discharged in full in the subsequent assessment year. When amounts are shown as payable in the balance sheet, the debt is acknowledged by the assessee, and there cannot be any remission or cessation of liability u/s 41(1) of the Act. The assessee provided confirmations from the three sundry creditors, and if any discrepancy is found with their balance sheets, action should be taken against them, not the assessee. The assessee discharged its primary onus, and Section 41(1) cannot be applied in this case, as per the New World Synthetics Ltd. case. Regarding the unsecured loan treated as unexplained cash credit u/s 68, the assessee furnished necessary documents to prove the identity of creditors, genuineness of the transaction, and creditworthiness of lenders. The lender is duly assessed to tax and provided confirmation. The loan was received through banking channels. The summons issued u/s 131 to the lender was served but not responded to, but no adverse inference can be drawn against the assessee based on the Orissa Corporation Limited case. The assessee's appeal was allowed.