TaxTMI 
TaxTMI 
2019 (2) TMI 1461
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....ively as at the year-end, i.e., 31.03.2007, per its final accounts, were sought to be verified by the Assessing Officer (AO) by calling information there-from u/s.133(6) of the Act. The dispute under reference pertains to two creditors, as under: (a) Jai Ram Jagdish Chandra, Mehatpur (JRJC) : Rs. 6,03,837.83 (b) Sohan Singh Satpal, Mehatpur (SSS) : Rs. 8,38,871.58 The copy of the assessee's account in the books of JRJC showed a sum of Rs. 9,03,837.83 as due from the assessee, which was duly recovered during financial year (f.y.) 2004-05 (Rs.4 lacs) and f.y. 2005-06 (Rs.5.04 lacs), fully liquidating the debt. The entire amount was received in cash, not exceeding Rs. 20,000/- per day. This position was confirmed per deposition on oath u/s.131 of the Act by Shri Jagdish Chander, proprietor, on 15.07.2009. The assessee's accounts revealed payment of Rs. 3 lacs during f.y. 2003-04, reducing the creditors' balance from Rs. 9.04 lacs to Rs. 6.04 lacs as on 31.03.2004, whereafter no payment was made. The payment recorded in the assesse's books was again in cash, at Rs. 20,000/- per day. Similarly, copy of the assessee's account in the books of SSS recorded the assessee to be a trade ....
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....se, and no adverse consequence on that basis should follow. On being questioned by the Bench that, assuming so, so that section 69A may not apply, how would section 41(1), also invoked by the Revenue, not become applicable inasmuch as the creditors have denied any debt as due to them by the assessee as on 31.03.2007. The ld. counsel, Shri Dhall, would submit that section 41(1) would not apply as the assessee still admits its' liability, to the extent stated, to the named creditors. The same finding reflection in the assessee's books of account from year to year, for which he would refer to the balance-sheets for the later years, enclosed as part of the paper-book (PB), the same amounts to an admission of liability, so that the limitation for legal recovery thereof would also not apply. The Revenue's case, on the other hand, is that the entries in the books of the creditors are backed by their statements u/s.131, which are admissible in evidence. Further, why would a creditor show receipt of money from a debtor without actually receiving it, jeopardizing his recovery, if any, in future? Why, he would rather claim the bad debt as a tax deductible expenditure. There is thus no merit ....
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....efit in respect of any such trading liability by way of remission or cessation thereof" shall include the remission or cessation of any liability by a unilateral act by the first mentioned person under clause (a) or the successor in business under clause (b) of that subsection by way of writing off such liability in his accounts. The assessee stating that it is liable to the creditors to the stated extent, as borne out by its' audited accounts, would amount to naught in view of their stating on oath - which has evidentiary value, of having received their dues from the assessee over a period of time, which is in agreement with their books of account. The said statements have not been rebutted in any manner, as through cross examination or in any other manner. That is, either way, the assessee cannot succeed. It would be a different matter where the decision rested only upon a finding as to whether, in the given facts and circumstances of the case, the assessee can be said to have paid or, as the case may be, not paid the two trade creditors under reference, and which would require the tribunal to examine closely the facts, sifting that proved from that unproved, to arrive at a find....
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....aimed and allowed in an earlier year in computing business income, so that it stands to gain to that extent. The same would stand to be regarded as business income, or a benefit or advantage, of commercial nature, arising from and in the course of business, i.e., on first principles, so as to regarded as business income, even if it were not to be codified u/s.41(1) reproduced supra (refer: CIT v. T.V. Sundaram Iyengar & Sons Ltd. [1996] 222 ITR 344 (SC)) Even if, therefore, agreeing with the assessee, that it did not pay the creditors, who were therefore paid by someone else, whoever it might be, the assessee stands to gain to that extent qua a trade liability arising in the course of its' business. Rather, it is only as the same is not paid by the assessee that it benefits from the cessation/ remission of liability, and s. 41(1) gets attracted. To put succinctly, in each of the three scenarios the assesee is liable to be assessed for the amount stated as received by the creditors during a particular year. If the assessee paid the creditors, s. 69A would come into play. If, on the other hand, someone paid them on assessee's behalf, s. 41(1) would get attracted on account of cessa....