ITAT Deletes ₹9.59 Crore Addition U/s 41(1) – Liability Cannot ‘Cease’ When Creditor Itself Confirms Amount Receivable

ITO Vs Seth Carbon & Alloys Private Limited (ITAT Mumbai) The Mumbai ITAT upheld deletion of addition of ₹9.59 crore made u/s 41(1) on account of alleged cessation of trading liability. The AO had treated outstanding payable to M/s Pipavav Defence and Offshore Engineering Co. Ltd. as ceased liability mainly because the creditor denied receipt of subsequent payments allegedly claimed by the assessee. Before the CIT(A) and Tribunal, the assessee contended that the liability was continuously reflected in the books, had never been written back, and most importantly, the creditor itself had c...