TaxTMI 
TaxTMI 
2021 (9) TMI 1213
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.... of appeal in this case are related to the addition made by the AO u/s 41(1) of the Income Tax Act, 1961 (in short 'Act') in respect of outstanding loan of M/s Sravan Shipping Services Pvt. Ltd.(M/s Sravan Shipping). During the assessment proceedings, the Assessing Officer (AO) found that a sum of Rs. 17,66,259/- was outstanding against M/s Sravan Shipping as a creditor. The AO called for the confirmation letter from the creditor and it was noticed from the confirmation letter that the creditor had written off the outstanding debt and hence viewed that the assessee does not owe any amount to the creditor, therefore, invoked the provisions of section 41(1) and made the addition holding that the liability stands ceased. 3. Against the order ....
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.... right to receive the amount, therefore, argued that the Ld.CIT(A) rightly confirmed the addition, hence, no interference is called for in the order of the Ld.CIT(A). 6. Responding to the argument of the Ld.DR, the Ld.AR submitted that as per explanation to section 41(1) of the Act, the first mentioned person shall include remission of cessation of liability by unilateral act as income, but not the second mentioned person, who happens to be the creditor and the assessee relied on the decision of Sonodyne Television Co. Ltd of ITAT Kolkata Bench. In the instant case, the assessee is the debtor who has incurred the expenditure and therefore, argued that in case, the assessee treats the same as not payable, the same required to be brought to ....
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....ofession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to inco....
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....s, perused the relevant finding given in the impugned order as well as the material on record. The sole basis for taxing the amount of Rs. 59,75,631/- by the Assessing Officer under section 41(1) is that the genuineness of sundry creditors was not established as the assessee failed to furnish the addresses of creditors. Before we deal with the issue involved here, it would be relevant to quote the relevant section 41(1), which reads as under:- "Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (a) the first-mentioned person has obtained, w....
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....ssion, which is chargeable to income-tax as the income of that previous year, that is, in the year in which benefit such derived by the assessee. Explanation 1 provides that loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation shall be includible by a unilateral act by the first person who is assessee, i.e., debtor. There is no stipulation of such unilateral act by the creditor. Here in the instant case, Explanation 1 cannot be held to be attracted at all, since there was no writingoff of the liability by the assessee to pay to the creditors in the assessee's account. In the judgment of Hon'ble Gujarat High Court in the case of CIT Vs. Nitin. S. Garg reported in 208 taxman 16 ....