Girish Raghavan Vs ACIT (ITAT Mumbai)
The appeal concerns the assessment year 2014–15, where the assessee challenged the order passed by the CIT(A), arising from the assessment order dated 26.12.2016. The assessee, an individual engaged in energy and fuel management, mining, and related consultancy services, had declared a total income of Rs. 93,82,420/- for the relevant year. During scrutiny, the Assessing Officer (AO) observed that the assessee had shown a liability of Rs. 2,04,71,565/- under ‘Sundry Creditors,’ which had remained outstanding since assessment year 2012–13.
The assessee explained that the liability arose due to professional services availed from Rockfort Gulf FZE during financial year 2011–12. The amount represented business and office expenses, and the liability continued due to difficult market conditions in the energy and fuel sector, which affected contract performance and delayed payments. The assessee also submitted that the liability was consistently acknowledged in the books and had not been waived or settled.
However, the AO noted that despite the assessee having substantial income in subsequent years, no payment had been made towards this liability. Consequently, the AO treated the outstanding amount as cessation of liability under Section 41(1) of the Income Tax Act and added it as deemed income. Additionally, the AO disallowed Rs. 6,04,043/- towards hotel and travel expenses under Section 37(1).
