2022 (6) TMI 28

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....s) whereby addition of Rs.4,60,581/- made by the Assessing Officer under Section 41(1) of the Income Tax Act, 1961 (for short, 'the Act') was upheld, has been dismissed. 3. Assessee filed return declaring income of Rs.3,93,610/- on 2^nd September, 2014 for the relevant year. As per Profit & Loss account furnished by the assessee during the assessment proceedings total sale of Rs.87,81,060/- was declared showing gross profit of Rs.12,03,004/- and Net Profit of Rs.3,53,950/-. During the course of assessment proceedings, vide questionnaire dated 13th June, 2016 the assessee was asked to furnish details of opening and closing stock (quantitative and in value) and produce the stock register, if maintained. The assessee could not furni....

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....s received from M/s Bansal Iron Traders, Jalandhar. As per the copies of account furnished by the assessee, there were following closing balances in the account of these parties : (i) Sanjeev Tweezer, Jalandhar 01.04.2013 Opening balance B/F 2,91,722.00 Cr. (ii) Satish Surgincal Works 01.04.2013 Opening balance B/F 1,68,859,00 Cr. Total 4,60,581.00 Cr. 5. In the absence of any confirmation from the above parties, it was held that the trading liability amounting to Rs.4,60,581/- had ceased to exist as per provisions of Section 41(1) of the Income Tax Act, 1961 and addition of Rs.4,60,581/- was made to the total income of the assessee apart from other additions. 6. The assessee preferred an appeal before the CIT (Appea....

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....account, contending that therefore no deduction qua sales-tax paid had been claimed by him for section 41(1) to apply on the refund of the sales-tax from the Government. The contention was not accepted by the Hon'ble Court, further explaining that the provision is a machinery provision. In fact, as explained in CIT v. Balabux Birla & Co. [1986] 157 ITR 759 (P&H), the method of accounting, cash or mercantile, adopted by the assessee is also irrelevant as far as section 41(1) is concerned, so that as soon as the assessee is found to have benefited from the remission or cessation of a trading liability, allowed in an earlier year, the provision would get attracted in the facts and circumstances of the case. The said condition, in view of t....