2017 (12) TMI 1284

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....hort "the Act"). 3. Brief facts are, the assessee, an individual, is stated to be engaged in the business of trading in lube oil. For the assessment year under dispute, the assessee filed his return of income on 29th September 2012, declaring total income of Rs. 3,44,521. During the assessment proceedings, the Assessing Officer on examining the Balance Sheet of the assessee noticed outstanding sundry creditors of Rs. 1,80,12,997. The Assessing Officer, therefore, called upon the assessee to furnish confirmations of the sundry creditors. In response, assessee furnished a chart indicating the name and address of the sundry creditors along with outstanding credit balance of each sundry creditor. From the details furnished, the Assessing Offic....

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.... on verifying the details filed before the Assessing Officer, the learned Commissioner (Appeals) found that after the end of relevant financial year i.e., financial year 2011-12, the assessee has also made payment aggregating to Rs..41,31,504 to these parties. Thus, the learned Commissioner (Appeals) was of the view that the sundry creditors are available and the liability still continues in the books of the assessee. Relying upon the decision of the Hon'ble Supreme Court in Sugauli Sugar Works Pvt. Ltd., 236 ITR 518 (SC) and few other decisions of different High Courts, the learned Commissioner (Appeals) held that there cannot be remission / cessation of liability under section 41(1) of the Act merely because the liability remains unpa....

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....it in the aforesaid submissions of the assessee. At this stage, it is necessary to have a look at the provisions of section 41(1) of the Act. A plain reading of the aforesaid provisions would make it clear that before coming to the conclusion that a liability has ceased to exist or there is remission / cessation of a particular liability, three conditions are to be fulfilled. Firstly, it must be a trading liability; secondly, the person showing such liability must have obtained some benefit either in cash or in any other manner in respect of such liability and thirdly, such benefit by way of remission / cessation has accrued to the assessee in the relevant financial year. If we juxtapose the facts of the present case against the conditions ....

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.... account of remission or cessation of liability in a particular assessment year. In the facts of the present case, it is evident, in the course of assessment proceedings itself, the assessee has furnished evidence before the Assessing Officer to demonstrate that payments have been made to the concerned creditors subsequent to the relevant financial year. Surprisingly, the Assessing Officer has glossed over the contention of the assessee on the presumption that the assessee might have issued bearer cheques in the name of the concerned parties. In our view, aforesaid conclusion of the assessing officer without making any enquiry with the concerned bank or from any other source cannot be given much weightage. When the assessee has furnished na....