2009 (12) TMI 34

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....g substantial questions of law : (i) Whether on the facts and circumstances of the case, the learned ITAT was justified in law in confirming the order of CIT (A) deleting the addition of Rs. 1,47,71,696/- made on account of cessation of liability despite the fact that the liabilities were outstanding for a period of more than six years and on inquiry conducted by the Assessing Officer creditors were untraceable and also the assessee failed to produce the creditors, their Income Tax particulars and even present address of the creditors despite opportunity being afforded to the assessee? (ii) Whether on the facts and circumstances of the case and in law, the learned ITAT was right in holding that "confirmations from the creditors were produ....

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....ing to the conclusion that in the facts and circumstances of the case, the Assessing Officer has wrongly invoked the provision of Section 41 (1), Explanation-I of the Act. It has been observed that in the instant case, there was no unilateral cessation or remission of liabilities of Rs. 1,47,71,696/-, therefore, the provision of Explanation-I to Section 41 (1) of the Act is not attracted. It was further observed that if the income is to be assessed under Section 41 (1) of the Act, the burden is on the revenue to prove this income, whereas the Assessing Officer has failed to give any finding in his assessment order regarding the mandatory requirement of Section 41 (1) of the Act. The Assessing Officer has also not given any finding regarding....

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....gard, which the deduction had been claimed and allowed. No such trading liability had been proved herein. The addition was clearly made on the basis of mere presumptions, conjectures and surmises. The AO failed to show that in any earlier year, allowance of deduction had been made in respect of any trading liability incurred by the assessee, nor was it proved that any benefit was obtained by the assessee concerning such trading liability by way of remission or cessation thereof during the concerned year. There thus, did not accrue any benefit to the assessee which could be deemed to be the profits or gains of the assessee's business which would otherwise not be the assessee's income. The assessment order, as such, is directly against the de....