If liabilities are outstanding provisions of sec.41(1) not attracted

Ld. Counsel of the assessee pointed out that detailed reply was given to the AO vide letter dated 19-12-2009 in which it was clearly explained that outstanding balance of Mala Export Corporation has gone down over the period of years and confirmation of M/s Surekha Overseas was also filed. Through this letter it was pointed out that AO was informed that Mr. Suresh Patel had been requested to give the

confirmation which will also be filed. This clearly shows that assessee has filed the evidence regarding liabilities being outstanding before the AO. After considering the rival submissions, we find that it is clear from letter dated 19-12-2009 that assessee has explained the position regarding liabilities in respect of three parties and even confirmation of M/s Surekha Overseas was filed. This reply clearly shows that the liabilities were still outstanding. Therefore, in our opinion, ld. CIT(A) has rightly held that since the liabilities are still outstanding, the provisions of sec.41[1] are not attracted.

INCOME TAX APPELLATE TRIBUNAL , MUMBAI

I.T.A.NO.6353/Mum/2010 – A.Y 2007-08

Income Tax Officer Vs. M/s Surekha International

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