TaxTMI 
TaxTMI 
2026 (5) TMI 1208
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.... of appeal, the Revenue has challenged the action of the learned CIT(A) in deleting the addition of Rs. 9,59,78,916/- made by the Assessing Officer under section 41(1) of the Act on account of alleged cessation of trading liability. 2. Briefly stated, the facts borne out from the assessment records are that the assessee company is engaged in the business of trading in ferrous and non-ferrous metals and had filed its return of income declaring total income of Rs. 18,51,959/-. During the course of scrutiny assessment proceedings, the Assessing Officer observed that there was substantial outstanding liability appearing in the name of M/s Pipavav Defence and Offshore Engineering Co. Ltd. amounting to Rs. 9,59,78,916/-. In order to verify the....
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....cknowledgment of subsisting debt by the creditor itself. It was argued that once the creditor had confirmed the outstanding balance, there could not be any occasion to infer remission or cessation of liability within the meaning of section 41(1). The assessee further explained that due to financial difficulties and stress in business operations, payments to the creditor had been delayed and the bank account of the assessee had also become NPA, however, mere non-payment or long pendency of liability could never lead to automatic invocation of section 41(1). The assessee also submitted details of payments made in subsequent years and placed reliance upon various judicial precedents including the judgment of the Hon'ble Supreme Court in the ca....
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....ion of liability under section 41(1). Accordingly, the addition was deleted. 5. Before us, the learned Departmental Representative strongly relied upon the reasoning given in the assessment order and submitted that the assessee had failed to reconcile the discrepancy between its statement regarding payment and the confirmation received from the creditor. It was thus contended that the Assessing Officer had rightly inferred that the liability was no longer payable and had ceased to exist. 6. On the other hand, the learned counsel for the assessee reiterated the submissions made before the lower authorities and submitted that there was absolutely no material brought on record by the Revenue to establish either remission or cessation of ....
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....nt or cessation thereof, either by operation of law or by some conscious bilateral act between the parties. Such cessation cannot be inferred merely on conjectures, surmises or on account of delayed payments, especially when the liability continues to remain acknowledged and reflected in the books of account. 8. In the present case, the most striking feature which completely demolishes the case of the Revenue is that the very creditor, namely M/s Pipavav Defence and Offshore Engineering Co. Ltd., in response to notice issued under section 133(6), had categorically and unequivocally confirmed that the amount in question was receivable from the assessee. Thus, the evidence collected by the Assessing Officer himself does not support the con....