Vidya Online Private Limited Vs ITO (ITAT Pune)
No Section 41(1) Addition Without Cessation of Liability; Old Share Application Money Not Taxable u/s 68: ITAT Pune Grants Full Relief
The Pune Bench of the ITAT allowed the assessee-company’s appeal for AY 2012-13, deleting all major additions made by the Assessing Officer and confirmed by the CIT(A), holding that section 41(1) cannot be invoked unless there is a clear remission or cessation of liability, and section 68 cannot be applied to opening balances not received during the year.
Key findings of the Tribunal:
- ₹37.50 lakh payable to EBZ Online Pvt. Ltd. (s.41(1))
The AO wrongly assumed the liability pertained to FY 2004-05. The Tribunal found, based on the Business Transfer Agreement and ledger records (pp. 79–96), that the liability arose in FY 2009-10, was still outstanding, and had not been written off or waived. Hence, no cessation of liability occurred and section 41(1) was inapplicable. - ₹1.92 crore loan from Shree Suvarna Sahakari Bank (s.41(1))
Information obtained directly by the AO under section 133(6) from the bank’s liquidator (letter dated 30.01.2015, p.6) showed that the bank’s claim was alive and had increased to ₹3.31 crore, with recovery proceedings ongoing. Since the liability was subsisting, the addition under section 41(1) was unsustainable. - ₹19.19 lakh share application money pending allotment (s.68)
The Tribunal noted from Note 2 to the audited balance sheet (p.47) that this amount was only an opening balance, with no fresh receipt during the year. As section 68 applies only to credits received during the relevant previous year, the addition was deleted.
With all substantive grounds decided in favour of the assessee, the ITAT reversed the findings of the CIT(A) and allowed the appeal in full.
FULL TEXT OF THE ORDER OF ITAT PUNE
The captioned appeal at the instance of assessee pertaining to A.Y. 2012-13 is directed against the order dated 27.01.2025 framed by National Faceless Appeal Centre, Delhi emanating out of Assessment Order dated 31.03.2015 passed u/s.143(3) of the Income Tax Act, 1961.
