TaxTMI 
TaxTMI 
2024 (7) TMI 441
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....t") arising out of the order dated 19th May 2023 passed by the Income Tax Appellate Tribunal, "D" Bench, Ahmedabad (for short, "the Tribunal") in ITA No. 1847/Ahd/2014 for the Assessment Year 2007-08. [2] The appellant - Revenue has proposed the following substantial question of law for the consideration of this Court: "(A) Whether on the facts and circumstances of the case and in law, the order of the Appellate Tribunal is ex facie perverse, because the Appellate Tribunal has deleted the addition of Rs. 2,05,06,635/- made u/s. 41 (1) of the Act without appreciating the entire gamut of evidence on brought on record by the AO?" [2] The brief facts of the case are that during the course of assessment, the AO observed that....
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..... The appellant failed to submitted necessary evidences about party (M/s Sonoma exports Pvt. Ltd. Tirupur) or transaction and therefore falled to substantiate that these liabilities are existing which give presumption that appellant already paid such liability. It is therefore, though addition u/s 41 (1) of the Act may not be legally justified, but on the facts of the details & explanation with tax auditor's qualifying remarks about balances of creditors are subjected to confirmation, such addition made by A.O. is justified. I am inclined with A.O. the ratio of cases relied on by him are applicable in the case of appellant. The appellant failed to establish that such liability exists / subsist and therefore as per accounting pr....
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....against the assessee and therefore, it would be clear case of remission or cessation of the liability of the assessee. [8] It was, therefore, submitted that the Tribunal ought not to have deleted the addition as the right to recovery of the said amount has become time barred and therefore, the Assessing Officer has rightly invoked the provisions of Section 41 (1) of the Act by making addition for cessation of the liability of the assessee. [9] Section 41 (1) of the Act reads as under: "Profits chargeable to tax. 41 (1) 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-mentione....
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....unilateral act by the first mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts.] [Explanation 2]. -For the purposes of this sub-section, "successor in business" means,- (i) where there has been an amalgamation of a company with another company, the amalgamated company; (ii) where the first-mentioned person is succeeded by any other person in that business or profession, the other person; (iii) where a firm carrying on a business or profession is succeeded by another firm, the other firm;] [(iv) where there has been a demerger, the resulting company.] " [10] The provisions of Section 41 (1) of ....
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.... outstanding differential amount towards marine exports, section 41 (1) of the Act cannot be invoiced in the first instance since the original party has not been doubted by the assessing officer. With respect to Senoma Exports (Rs. 8,74,500/-), we are of the view that in this case, it cannot be presumed that the liability has ceased to exist and the Department has not brought forth any conclusive evidence in support of the same. With respect to Allure jewels (Rs. 1,19,94,266/-), we observe that the assessee has furnished complete ledger account with respect to the aforesaid party in order to support the fact that the liability to make such payment exists in the assessee's books of accounts. Accordingly, this addition in also liable to be de....
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.... section 68, but same could not be taxed under section 41 (1), inasmuch as if liability itself was not genuine, question of remission or cessation thereof would not arise." [13] Thus, finding of fact arrived at by the Tribunal in respect of the five parties for addition of Rs. 2,05,06,635/- after examining the relevant copy of ledger account placed on record, it was also found from the record that so far as addition of Rs. 1,59,978/- is concerned, the same was on account of purchase difference being outstanding differential amount towards marine exports and with respect to addition of Rs. 8,74,500/- of amount payable to Sonoma Exports Pvt. Ltd. Tirupur, it cannot be presumed that the liability has ceased to exist in absence of any eviden....