AI Drafter 
TaxTMI 
TaxTMI 
2020 (4) TMI 612
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....aimed without evidences. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 6,71,504/- made by the A.O. treating the loss as inadmissible loss. 5. It is prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. restored. 6. The Appellant craves leave to add any other ground of appeal which may arise at the time of hearing. 3. Vide ground No. 1 the grievance of the Department relates to the deletion of addition of Rs. 3,12,44,216/- made by the A.O. under section 41(1) of the Income Tax Act, 1961 (hereinafter referred to as 'Act') on account of cessation of liability. 4. The facts relating to this issue in brief are that the assessee e-filed its return of income on 30/09/2015 declaring an income of Rs. 25,98,91,178/-. Later on the case was selected for scrutiny. During the course of assessment proceedings the A.O. noticed that the assessee had shown liability of Rs. 3,12,44,216/- on account of " Loan from Ex Partners' in the Schedule Forming Part of the Balance Sheet. He asked the assessee to state the nature of the liability alongwith the confirmation of the creditors. In res....
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....e firm, she was not paid the due amount, which was with the mutual consent of her". This language or wording does not mean that Ms. Shivani Singhal was never be paid the said amount due to be paid to her. On her retirement from the firm, this amount was retained with the firm, as there was some liquidity crunch at that point of time with the firm and as she had no other avenue for investment, she requested for retention of her due amount with the firm. At no point of time, she consented to waive off the said amount due to her. Had it been so, the appellant would have squared up her account, which was not done and the amount due to her continued to be shown in her account and in the balance sheet as on 31.3.2015, a copy of which is placed at page 30 to 40, which is a conclusive evidence that the amount is still due to her. 3. It is a well settled law that if the amount is shown as due in the accounts, then it continues to be due unless and until the same is paid or written back in the books of the accounts. 4. In support of the fact that Ms. Shivani Singhal had not consented to waive off the said amount due from the firm, a copy of her Statement of Affairs prepared....
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....this regard, strong reliance is placed on the pronouncement A of the Hon'ble Punjab and Haryana High Court in the case of Smt. Sita Devi Juneja 187 Taxman 96. 10. Further more, the amount due to Ms Shivani Singhal represent her capital balance outstanding in her account when she ceased to be a Partner and to that extent the entire amount represent either the capital contributed by her or the share of profit received by her as a partner, which is after payment of taxes by the firm and to that extent the provisions of section 41(1) of the IT act are not attracted. 11. It is also humbly submitted that the cessation of such liability arises only when it ceases to exist in the eye of law for all intents and purposes. When a debt becomes barred by time the creditor would not be able to recover the amount by enforcing his right in a court. But the right will not come to an end nor does the liability cease. A mere entry of credit in the accounts in respect of the amount would also not bring about a remission or cessation of the liability. In this regard, reliance is placed on CIT vs. Sadul Textiles Ltd. (1987) 167 ITR 634, J. K. Chemicals Ltd. vs. CIT (1966) 62 ITR 34....
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....ssions made before the authorities below and further submitted that the liability towards Ex partner was never waived and was shown as the liability in the balance sheet, reference was made to page no. 53 of the assessee's paper book. It was submitted that the amount payable to the Ex partner was not a trading liability rather it represented the capital contributed by the Ex partner which was to be paid to her. Therefore the Ld. CIT(A) was fully justified in deleting the arbitrary addition made by the A.O. Reliance was placed on the following case laws: a. CIT v. Hotline Electronics 205 Taxman 245 (Delhi) b. CIT v. Smt. Sita Devi Juneja 325 ITR 593(P&H) c. Pr. CIT v. Pukhraj Jain IT Appeal No. 1288 of 2016 dated 4.1.2019 d. Pr. CIT v. Mahalaxmi Infra Projects Ltd. IT Appeal No. 1769 dt. 30.1.2019 e. UOI v. J.K.Synthetics Ltd. 199 ITR 14 (SC) f. CIT v. Sagauli Sugar Works P. Ltd. 236 ITR 518 (SC) g. Brahma Steyr Tractors Ltd. v. ITO 33 NYPTTJ 711 (Chd) 10. We have considered the submissions of both the parties and perused the material available on the record. In the present case it is not in dispute that the impugn....
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....to earn tax free income. The satisfaction to be recorded must be based upon credible and relevant evidence. The onus, therefore, to prove that interest bearing funds were used, lies squarely on the shoulders of the revenue. Thus, if the Assessing Officer is able to refer to relevant material while recording satisfaction that borrowed funds were used to earn interest free income as opposed to the assessee's own funds, the Assessing Officer may legitimately disallow such a claim. The Assessing Officer, however, cannot, by recording general observations, particularly where the assessee has denied using interest bearing funds, proceed to infer that interest bearing income must has been used to earn exempted income. Section 14A of the Act, being in the nature of an exception, has to be construed strictly and only where the Assessing Officer records satisfaction, on the basis of clear and cogent material, shall an order be passed under Section 14A of the Act, disallowing such a claim. As there is no tangible material on record that could have enabled the Assessing Officer to record satisfaction in terms of Section 14A of the Act, findings recorded by the CIT(A) and the ITAT that the ....
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....esponse thereto about the nature of the liability pursuant to the note sheet entry dated 24.10.2017. 2. In regard to the observation of the Ld. AO regarding the disallowance of Rs. 2,36,456/- on account of repairs to building, it is submitted that the appellant vide its letter dated 24.10.2017 had submitted the major bills of repairs with the statement of accounts of the repairs carried out on the building, which are placed on page No. 1 and 15 to 29 of the paper book for your kind perusal and therefore, the observation of the Ld. AO that no reply was submitted by the appellant is factually incorrect. 3. In the normal course of business every building will require certain repairs and maintenance every year and the amount so incurred by the appellant, which is duly supported with the bills submitted to the Ld. AO during the course of assessment proceedings, are conclusive evidence that expenses have in fact been incurred on the repairs of the building, which is an allowable business expenses u/s 37 of the IT Act. 4. In view of above, the action of the Ld AO is arbitrary, unjustified and not in accordance to the law and therefore the appeal of the assesse d....
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....of Rs. 6,71,504/- made by the A.O. treating the loss as inadmissible loss. 23. The facts relating to this issue in brief are that the A.O. made this disallowance by observing that the assessee had claimed in its Profit & Loss Account a loss of Rs. 6,71,504/- on account of " Loss on Retiring Assets" which could not be claimed as an admissible business loss / expenditure and that the main business of the assessee was the manufacturing of Current Voltage Transformer, Terminal Lid assemblies & other electronics Assemblies and in the absence of any plausible explanation from the assessee, the claim that the loss arising from the retiring asset was its business loss was not tenable. Accordingly the addition of Rs. 6,71,504/- was made. 24. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: " 1. The Ld. AO has erred in law as well as on facts in disallowing Rs. 6,71,504/- relating to the loss on retiring assets by treating the same as short term loss. The Ld. AO has observed in para 7 of the order that no reply has been filed by the assesse in response thereto about the nature of the amount pursuant to the note sheet entry dated 24.10.2....