AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 823
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....ccount of a party. The addition made by the A.O. and sustained by the Ld. CIT(A) is arbitrary, baseless and not justified. 3. Without prejudice to above grounds, Ld. CIT(A) erred in confirming the additions of Rs. 25,60,829/- made by the A.O. u/s. 41(1) without appreciating the fact that the additions were outside the ambit of sec. 41(1) and were liable to be deleted. 4. The appellant reserves the right to add, amend or alter any of the ground/s of appeal." 2. On a perusal of the records it transpires that the present appeal is barred by limitation by a period of 141 days. Explaining the reasons leading to the delay involved in filing of the present appeal, Shri Dhiraj Kumar Surana, director of the assessee company has filed a letter dated 05.03.2020 seeking condonation of the same which is accompanied with his affidavit dated 16.09.2022 a/w. affidavit of his employee, viz. Shri Satish Sahu. On a perusal of the aforesaid letter/affidavits, it transpires that the delay in filing of the present appeal had occasioned for the reason that Shri Satish Sahu (supra), an employee of the assessee company had inadvertently failed to bring the order passed by the CIT(Appeals) dated 01.07.....
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....assessee carried the matter in appeal before the CIT(Appeals) but without any success in so far the aforesaid additions made by the A.O. u/s. 41(1) of the Act were concerned. 6. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 7. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 8. Admittedly, it is a matter of fact borne from record that the liabilities in question were in the nature of unmoved balance in the books of accounts of the assessee company, i.e., outstanding balances that were brought forward from the preceding year. On a perusal of the assessment order, it transpires that the A.O. being solely guided by the fact that the respective liabilities of the assessee company towards the aforementioned parties, viz. (i) M/s. Ashoka Buildcon Ltd. : Rs. 2,96,878/-; and (ii) Jetha Ram Concreeto : Rs. 22,63,951/- had neither been paid nor adjusted against its sales, therefore, dubbed the same....
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....at the liabilities in question which the assessee company had projected as outstanding in its balance sheet had in fact ceased, nor has he given any cogent reason as to why the same was to be assessed in its hands during the year under consideration i.e. A.Y. 2013-14. On the contrary, we find that the only reason given by the A.O. was that the said respective liabilities had remained unpaid till 31.03.2014. We are unable to concur with the aforesaid observation of the A.O., as the same is seriously short of the preconditions which were indispensably required before giving the liabilities in question a color as that of "ceased liabilities", and much the less in the year under consideration. Neither is anything discernible from the orders of the lower authorities which would reveal that the liabilities in question had ceased, nor anything can be gathered therefrom as to on what basis the alleged remission or cessation of the liabilities in question were to be assessed during the year under consideration. Merely for the reason that the aforesaid liabilities are outstanding would by no means justify dubbing the same as ceased liabilities in the hands of the assessee company. Our afores....
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....m shall be deemed to be profits and gains of business or profession 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 income-tax as the income of that previous year. Explanation 1.--For the purposes of this sub-section, the expression "loss or expenditure or some benefit 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 un....
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....n be decided by considering the assessee's case alone but it is a matter which has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable. There may be circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act, The principle that expiry of period of limitation prescribed under the Limitation Act could not extinguish the debt but it would only prevent the creditor from enforcing the debt, has been well settled. If that principle is applied, it is clear that mere entry in the books of accounts of the debtor made unilaterally without any act on the part creditor will not enable the debtor to say that the liability has come to an end. Apart from that, that will not by itself confer any benefit on the debtor as contemplated by the section." (ii). Hon'ble Gujrat High Court in the case of CIT vs. Bhogilal Ramjibhai Atara, 222 Taxman 313 (Guj.) has held as under: "Section 41(1) would apply in a ....
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....he assessee explained that the amount relates to purchase of building materials for their project at Kutch which has been shown as capital goods in progress and that the amount has not been paid due to inferior quality of the material, would prove that the assessee has not claimed any allowance or deduction in any assessment year in respect of loss/expenditure or treating of liability and has not obtained any benefits whatsoever in subsequent year. Therefore, there is no question of remission or cessation of liability. Since the liability shown in the balance sheet of the assessee, therefore, facts and circumstances of the case would prove that the case of the assessee is not covered by the provisions of section 41(i) of the IT Act. We, therefore, do not find any justification to interfere with the order of the learned CIT(A). We confirm his findings and dismiss this ground of appeal of the revenue." Following the aforesaid decisions, we are of the opinion that the Ld. Authorities below are not justified to make addition by resorting to the provisions of section 41(1) of the Act. Accordingly, the addition of Rs. 90,36,451/- made by the authorities below is found fit to be deleted....