A claim of creditor cannot be said to be barred by limitation if acknowledged by the debtor

CIT Vs. M/S Banaras House Ltd. (Delhi High Court)

Income Tax Appellate Tribunal on the said issue held that the assessee had carried forward the balances from earlier years. Some credit balances were written off in the year in question and some in succeeding years. Further, when a liability was acknowledged by the debtor, it cannot be said that the claim of the creditor was barred by limitation. In case of 16 creditors, the credit balance was returned or adjusted for the next financial year. Provisions of Section 4 1(1) of the Act were not attracted.

The respondent assessee is a company and accounts were audited as per the mandate of the Companies Act. In the accounts, the respondent assessee had accepted and acknowledged its liability. The creditors can rely on the said acknowledgement. Even otherwise many of the creditors were paid, adjusted or eased in the subsequent years as accepted by the Commissioner of Income Tax (Appeals) and the Tribunal. No special facts or reasons were given by the Assessing Officer to hold and observe that the liabilities had ceased and amounts should be added under Section 41(1) of the Act.

FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:-

This appeal by the Revenue pertains to the Assessment Year 1996-1997 and arises from the order of the ITAT dated 29.11.2004 passed in ITA No. 2074/Del/2000 in the case of M/s Banaras House Ltd.

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