Cessation’ of liability cannot be claimed by AO if proceedings for recovery pending against Assessee

DCIT Vs Surbhit Impex Pvt. Ltd (ITAT Mumbai)

It is undisputed position that as on the relevant point of time, the proceedings against the assessee for recovery of these amounts were pending before the Hon’ble judicial forums. It was only on 29.01.2018, i.e., which much after the end of the relevant previous year, that Their Lordships of Hon’ble Bombay High Court dismissed the Winding up Petitions filed by these creditors in the judgments reported at Jiangsu Go Intl Group Hua Tai Import & export Co., China vs. Surbhit Impex Private Limited (CP 744 of 2014) dated December 21, 2017 and Zhejaing Hengdian Apeloa Imp & Exp Co Ltd. vs. Surbhit Impex Private Limited (CP 501 of 2015) dated January 29, 2018. Clearly, therefore, as on the relevant point, even the proceedings with respect to the recoveries of these amounts were pending in the judicial forums and by no stretch of logic, it can be said that these amounts ceased to be payable by the assessee. It is only elementary that in order to bring an amount to tax u/s.41(1)(a), three fundamental conditions are to be satisfied, but the very foundational condition is that there has to be benefit in respect of such trading liability by way of ‘remission and cessation’ and clearly that condition was not satisfied atleast in this year. We, therefore, approve the well reasoned finding given by the learned CIT(A) and decline to interfere in the matter.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

1. By way of this appeal, the Assessing Officer has challenged correctness of the order dated 03.12.2018 passed by the learned CIT(A)-14, Mumbai in the matter of assessment u/s.143(3) of the Income Tax Act, 1961, for the assessment year 2014-15.

2. The grievance raised by the appellant, by way of a question posted for our consideration, is as follows:

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