2013 (8) TMI 945

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....e addition made by the AO on account of cessation of liability u/s 41(1) in respect of M/s.Jagruti Corporation, M/s.Argass Chemicals, M/s.Universal Enterprises and M/s.Samidha Engineering. Briefly stated the facts of the case are that there were certain credit balances appearing in the books of account of the assessee. The Assessing Officer issued notices u/s 133(6) randomly in respect of these creditors to check up their balances. The notices sent to six parties, in respect of which credit balances totalled Rs. 50.76 lakh, were returned unserved. In respect of other three parties, confirmations were received but there was a difference of Rs. 2.05 lakh in the balance shown by these parties vis-à-vis that by the assessee. The A.O. acc....

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....s existing, then the same cannot be treated as extinguished calling for addition. With this background, we advert to the facts of the present case. First party is Jagruti Corporation with an opening balance of Rs. 8.52 lakh. Page 35 of the paper book shows the payment of Rs. 1.45 lakh made by the assessee to this party thereby bringing closing balance down to Rs. 7.07 lakh. We fail to appreciate as to how this closing balance can be considered as remission or cessation by the party, even after three years of outstanding balance, so as to qualify as income u/s 41(1) when the assessee is paying the liability and there is nothing to indicate, even remotely, that the creditor has given up his claim. The assessee was supposed to pay Rs. 8.52 ....