2011 (4) TMI 1474

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....the AO u/s 41(1)(a) of the I T Act. 3. Briefly stated the facts are as follows:- The assessee is an individual. He is the Director of M/s Jyothi Krishna Trading Co. Private Limited. He was the Proprietor of M/s Ramakrishna Wines. The proprietary concern M/s Ramakrishna Wines was dealing in wholesale distributor of Indian Made Foreign Liquor. For the concerned asst. year, return of income was filed on 30.10.2006 declaring an income of Rs. 6,88,440/-. The return was processed u/s 143(1) of the Act. Later, scrutiny assessment was taken up by issuance of notice u/s 143(2). In the course of scrutiny assessment, it was noticed that there was outstanding trade liability in the name of M/s Venkateshwara Distillers in the books of accounts ....

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....onfirmation from the party, but the same was not furnished. 7. In the circumstances, the entire amount of Rs. 8,90,880/- is treated as cessation of liability u/s 41(1)(a) of the I T Act, 1961 and is added to the total income of the assessee". 4. Aggrieved by the assessment, the assessee carried the matter in appeal before the first appellate authority. 5. It was submitted that the AO has added the outstanding amount of Rs. 8,90,880/- to the total income of the assessee as cessation of liability u/s 41(1)(a) without appreciating the fact that the liability is still existing and uncleared. It was submitted that the assessee had not credited this amount in any of his profit and loss account at any point of time. The amount is cl....

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.... the ratio of decision in the case of - CIT v Sugauli Sugar Works (P) Ltd. (1999) 236 ITR 518 (S.C.)". 7. The revenue, being aggrieved, is in appeal before us. 8. The learned DR submitted that inspite of several opportunities the assessee was not able to produce any details with regard to the trade creditor. Hence, the AO had no other option but to add the outstanding trade liability in the name of M/s Venkateshwara Distilleries u/s 41(1) of the Act. It was also submitted that the burden to prove the liability still exists as on the closing of the accounting year, is on the assessee and it is not for the revenue to prove that the trading liability has ceased to exist. 9. The learned AR, on the other hand, supported the fin....