Akshay Gujral Vs DCIT (ITAT Delhi)
No Entry Written Back, No 41(1): ITAT Delhi Deletes ₹10 Lakh ‘Cessation of Liability’ Addition
Delhi ITAT “SMC” Bench allowed the appeal of Akshay Gujral for AY 2016-17 and deleted the addition of ₹10 lakh made u/s 41(1) on account of alleged cessation of liability.
The AO, in proceedings u/s 153C/143(3), treated the amount as income on the premise of cessation of liability, which was affirmed by the CIT(A). However, the Tribunal noted a fatal jurisdictional lapse—the assessment order did not record any finding that the liability had actually ceased to exist in the books of account during the relevant previous year.
Relying on the binding Supreme Court judgment in CIT v. Sugauli Sugar Works (P) Ltd. (236 ITR 518), the ITAT held that mere passage of time or inference is insufficient; for section 41(1) to apply, there must be clear evidence of remission or cessation, typically reflected by a write-back in the assessee’s books. In the absence of such a finding, the statutory condition precedent was not satisfied.
Accordingly, the Tribunal held that the impugned addition u/s 41(1) was unsustainable in law and directed its deletion. The appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT DELHI
