Maideen Pitchai Rawther Peer Vs ACIT (ITAT Chennai)
ITAT Chennai held that liability ceased to exist when amount is written off by the borrower. Accordingly, the addition of such cessation of liability under section 41(1) of the Income Tax Act justified.
Facts- The assessee is an individual and filed his return of income declaring total income of ₹1,01,29,340/-. The assessing Officer concluded the assessment u/s. 143(3) of the Act and determined the total income of the assessee at ₹1,71,57,581/-, inter alia making addition on account of cessation of liability u/s. 41(1) of the Act and also addition of ₹.85,795/- u/s. 14A of the Act. Against such additions, the assessee preferred an appeal before the ld. CIT(A), wherein, the ld. CIT(A) upheld the additions made by the Assessing Officer.
ITAT set aside the additions and remitted the issues to the file of AO. AO made addition on account of cessation of liability u/s. 41(1) of the Act to an extent of ₹.59,42,446/- as against ₹.69,42,446/- and no addition made on account of disallowance u/s. 14A of the Act. CIT(A) confirmed the addition. Being aggrieved, the present appeal is filed.
Conclusion- Held that we find force in the argument of the ld. DR that when the liability is reflecting in the balance sheet in the year under consideration and the assessee enjoyed the benefit of expenditure out of it and no income offered in case of written off the said liability, the provisions under section 41(1) of the Act is attracted.
