AI Drafter 
TaxTMI 
TaxTMI 
2015 (8) TMI 974
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....ay of about 456 days in filing the appeal before the Tribunal. The assessee has filed an affidavit explaining the reasons for the delay. In his affidavit, the assessee has stated that the order of CIT(Appeals) was passed on 12.3.2013 and was received by the CA of the assessee on 22.3.2013. The same was given by the CA to his assistant to be given to the assessee. The assistant of the CA however not deliver the order of CIT(A) to the assessee. It appears that the revenue proceeded to recover the arrears of tax due consequent to the order of CIT(A) and thereupon the assessee could get the order of CIT(A) from his CA, after making enquiries from the CA. The facts as stated in the application for condonation of delay are affirmed by the assessee in an affidavit of the CA, Shri T.V. Subramanya Bhat, which confirms the fact of non-delivery of the order of CIT(A) to the assessee. 4. The ld. DR, however, pointed out before us that the assessee claims to have got the knowledge of the order of CIT(A) when recovery proceedings were initiated. He brought to our notice that the appeal was filed before the Tribunal on 25.8.2014. According to him, even as early as 21.7.2014, a notice u/s. 271(....
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....at the assessee who is a dealer in sale of bakery and confectionary products, filed his return of income for AY 2009-10 on 30.9.09 declaring an income of Rs. 29,07,340. In the course of assessment proceedings, the AO called for confirmations and complete names and addresses of sundry creditors totaling to Rs. 68,59,477. These creditors were 22 in number and their names have been listed in para 2 of Assessing Officer's order. It is not dispute that none of the transactions with the creditors listed in para 2 of the AO's took place during the previous year. In other words, the balances were opening balances of the earlier financial years and no balance arose out of the transactions during the previous year. 7. The assessee gave confirmations from the creditors which did not have complete details. The AO therefore called for the names and address of the creditors. The assessee furnished the names & addresses of 12 creditors out of 22 creditors. The AO sent a letter u/s. 133(6) to these creditors, but those letters were returned with the endorsement "no such person", except in the case of one creditor. When this fact was confronted to the assessee, the assessee submitted that the cr....
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....urt held that neither section 68 nor section 41(1) of the Act would be attracted. In this regard, we have already observed that neither the order of the AO nor the order of CIT(A) is clear as to whether the impugned addition is being made u/s. 68 or 41(1) of the Act. U/s. 41(1) of the Act, if there is a cessation of liability of the assessee, then the same should be brought to tax, subject to other requirements to be satisfied u/s. 41(1). On the question of cessation of liability, ld. counsel for the assessee submitted that there is no evidence brought on record to show that liability of the assessee vis-à-vis creditors has ceased to exist. It was therefore submitted by the ld. counsel for the assessee that the impugned additions cannot be sustained in law and the same will have to be deleted. 12. The ld. DR, on the order, placed reliance on the orders of the Revenue authorities. 13. We have given a careful consideration to the rival submissions. On almost identical facts, the Hon'ble Delhi High Court in the case of Shri Vardhaman Overseas Ltd. (supra), has clearly laid down that neither section 41(1) nor section 68 of the Act can be applied. On the applicability of se....
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....(underlining ours) 15. Explanation 1 which was inserted w.e.f. 1.4.1997 is not attracted to the present case since there was no writing off of the liability to pay the sundry creditors in the assessee's accounts. The question has to be considered de hors Explanation 1 to Section 41(1). In order to invoke clause (a) of Sec.41(1) of the Act, it must be first established that the assessee had obtained some benefit in respect of the trading liability which was earlier allowed as a deduction. There is no dispute in the present case that the amounts due to the sundry creditors had been allowed in the earlier assessment years as purchase price in computing the business income of the assessee. The second question is whether by not paying them for a period of four years and above the assessee had obtained some benefit in respect of the trading liability allowed in the earlier years. The words "remission" and "cessation" are legal terms and have to be interpreted accordingly. In the present case, there is nothing on record to show that there was either remission or cessation of liability of the assessee. In fact, there is no reference either in the order of the AO or CIT(A) to the express....
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....tible character, unless either from the nature of the contract, or from its terms, it be limited in point of duration." But though the right possesses this permanent character, the remedies arising from its violation are withdrawn after a certain lapse of time; interest reipublicaeut si finis litium. The remedies are barred, though the right is not extinguished.' And if the law requires that a debtor should get a discharge before he can be compelled to pay, that requirement is not satisfied if he is merely told that requirement is the normal course he is not likely to be exposed to action by the creditor." (underlining, italicised in print, ours) This was also the view taken by the Supreme Court in CIT vs. Sugauli Sugar Works (P) Ltd. (supra). 14. Since the Tribunal has relied on the judgment of the Supreme Court in the case of CIT vs. Sugauli Sugar Works (P) Ltd. (supra) we may usefully refer to the decision in order to appreciate the controversy therein and the ratio laid down. That was a case of a private limited company. In respect of the asst. yr. 1965-66, it transferred a sum of 3,45,000 from the suspense account running from 1946-47 to 1948-49 to the capita....
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....aid clause by the Finance Act, 1992 w.e.f. 1st April, 1993, by which the words "some benefit in respect of such trading liability by way of remission or cessation thereof" were inserted. After the amendment, therefore, it is not necessary that in respect of a trading liability earlier allowed as a deduction, the assessee should have received any amount, in cash or otherwise, but it is necessary that the assessee should have received "some benefit" in respect of such trading liability. However, we have already seen that this benefit in respect of trading liability should be "by way of remission or cessation of the liability", after the amendment made to the clause w.e.f. 1st April, 1993. The second part of the reasoning of the Supreme Court in CIT vs. Sugauli Sugar Works (P) Ltd. (supra) is based on the interpretation of the words "cessation or remission" of the trading liability. The Supreme Court noticed a judgment of the Bombay High Court in J.K. Chemicals Ltd. vs. CIT (1996) 62 ITR 34 (Bom) in which it was explained as to what could bring out a cessation or remission of the assessee's liability. The observations of the Bombay High Court in the judgment cited above are as under :....