TaxTMI 
TaxTMI 
2013 (2) TMI 264
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....ssessee by invoking provisions of sec. 41(1)(a) of the IT Act, 1961 (herein after referred to as "The Act"). The material facts of the case are as follows; 3. The assessee is an individual. She is engaged in the business of trading in Copper anodes, PCB drives and other items, besides deriving income as commission agent. For the assessment year 2008-09, the assessee filed return of income declaring a total income of Rs. 25,51,750/-. The AO found from the balance sheet of the assessee that on 31-03-2008, a sum of Rs. 55,21,457.86 was reflected in the name of M/s International Metal and Chemicals, USA (M/s IMC), as sundry creditors. As on 31-03-2007 the amount payable to the aforesaid parties was Rs. 25,30,792.86. The AO called upon the as....
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....MC on credit basis. The Assessee had a running account with M/s IMC and the assessee used to make payments to M/s IMC promptly. The Assessee as on 31-03-2007 had shown a sum of Rs. 25,30,762.86 as payable to IMC for the goods imported from them. The said outstanding liability was also shown in the balance sheet annexed to the assessment year 2007-08. 6. The Assessee further submitted that M/s IMC wanted to diversify its business in India and were looking for certain other Indian customers to market their product. M/s IMC approached the Assessee to look for an Indian customer for its products and the appellant identified M/s Synergy, Vishakapatnam. M/s IMC started supplying its goods to M/s Synergy, Vishakapatnam and M/s IMC was carrying ....
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....tion and the said outstanding continues to be shown in the books of account of the appellant as liability, and is running account. The Assessee submitted that as on 31-03-2008, the assessee has shown a sum of Rs. 55,21,457/-as payable to M/s IMC in its books of account. On the above facts the Assessee submitted that the addition of a sum of Rs. 25,30,792.86 made by the AO by invoking the provisions of sec.41(1)(a) of the Act cannot be sustained. 10. The CIT(A) firstly, held that the assessee did not file any confirmation of outstanding dues to M/s IMC. The CIT(A) thereafter found that as on 01-04-2007, there was a opening balance of Rs. 25,30,792.86 and this continued even in FY: 2008-09 and 2009. The CIT(A) was therefore, of the view th....
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.... shall be deemed to be profits and gains of business or profession and accordingly chargeable to income tax as the income of the previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not of such liability in respect of such loss, expenditure or trading liability, it is chargeable to tax. Sec.41(1) actually contains two limbs and caters to two different situation; (a) Where an allowance or deduction has been made in respect of any loss expenditure incurred by the assessee in an earlier year, and subsequently, the assessee receives any amount in respect of such loss or expenditure in a later year. (b) Where an allowance or deduction has ....
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....The fact that no confirmation was filed from M/s IMC cannot lead to the conclusion that there was a cessation or remission of liability of the assessee to M/s IMC warranting invocation of provisions of sec.41(1) of the IT Act, 1961. The reliance placed by the learned counsel for the Assessee on the decision of the Hon'ble Delhi High Court in the case of CIT v. Shri Vardhman Overseas Ltd. [2012] 343 ITR 408 supports the plea of the Assessee. In that case the Assessee wrote of the liability by crediting the amounts outstanding in the profit and loss account but showed them as liability in the Balance Sheet. The Hon'ble Delhi High Court held that the fact that the liability is reflected in the balance sheet of the Assessee was an acknowledgeme....