2010 (7) TMI 134

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....ity "Act, 1961") challenging the order dated 25th February, 2009 passed in ITA No. 89/Del/08 by the Income Tax Appellate Tribunal (in short "ITAT"), for the assessment year 2004-2005. 2. Mr. N.P. Sahni, learned counsel for Revenue submitted that the ITAT erred in law in allowing the relief of Rs. 51,18,051/- to the assessee in the absence of confirmation of undischarged liabilities. In this context, Mr. Sahni relied upon Section 41(1) of Act, 1961. 3. ITAT by the impugned order has confirmed the order passed by the Commissioner of Income Tax (Appeals) (hereinafter referred to as "Commissioner") and dismissed the appeal filed by the Revenue. In the impugned order, ITAT has observed as under:- "6. On careful consideration of rival su....

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....ecord to draw such an inference. The mere fact that some of the liabilities were more than three years old is not sufficient to apply provisions of Section 41(1). Each liability was required to be examined and case established u/s 41(1) of the I.T. Act. This has not been done. Even provisions for "taxes" and other provisions of similar nature been added on presumption. We, therefore, hold that no cessation of any liability has been shown and the Assessing Officer was not justified in making addition of disputed amount u/s 41(1) of the I.T. Act. Learned CIT(A) rightly deleted the addition. We confirm his action." 4. Since the controversy in the present case involves interpretation of Section 41(1) of Act, 1961, the same is reproduced here....

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.... [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 business or profession, the othe....