Case Law Details
Pelican Tobacco India Pvt Ltd Vs DCIT (ITAT Delhi)
ITAT Delhi held that addition by invoking provisions of section 41(1) of the Income Tax Act unjustified as liability reflected as outstanding in books of accounts and there is no evidence that such liability has ceased during the year.
Facts- The assessee filed its return of income on 24.11.2016, declaring loss of INR 38,41,211/-. Subsequently, the case was selected for limited scrutiny through CASS. During the course of assessment proceedings, the assessee was asked to furnish the address and confirmation of creditors from credit amounting to INR 66,84,815/- was obtained in response thereto, only one creditor namely, M/s. Desert Sands General Trading LLC, Dubai filed its confirmation. However, AO had issued notice u/s 133(6) of the Act to the creditors but of no avail. Hence, the AO treated the sum of INR 58,35,246/- as cessation of liabilities u/s 41(1) of the Act and assessed the income of the assessee at INR 19,94,035/- after giving set off of loss of INR 38,41,211/-.
CIT(A) partly allowed the appeal of the assessee. Being aggrieved, the present appeal is filed.
Conclusion- In the case of PCIT vs. Adani Agro (P.) Ltd held that merely because liability had remained outstanding for more than three years and same was not written back in profit and loss account, application of provisions of section 41(1) could not be made to consider such liability as income for year under consideration without there being any remission or cessation of liability.
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