Case Law Details
Brief of the Case
ITAT Jaipur held In the case of M/s Brothers Pharma Pvt. Ltd. vs. ITO that the case laws referred by the CIT (A) are squarely distinguishable on the ground that there was a written off either by the assessee or bilaterally, but in the given case no such w/off has been made by the party nor it was agreed between the parties. A bare reading of Section 41(1) makes it clear that the underlying idea behind introduction of this provision is that the legislature wanted to tax the amount of deductions/allowances which an assessee had already taken/allowed in the earlier years but the liability relating thereto was not discharged. However, in case of loan taken, there is no question of the appellant having taken the advantage of any deduction/allowance in the past inasmuch as it was not at all an expenditure claimed and allowed in the earlier years. Hence no addition u/s 41(1) is sustainable.
Facts of the Case
Addition on account of cessation of liability U/s 41(1)
The Assessing Officer observed that the assessee had shown number of outstanding since long, therefore, he asked to file the confirmation during the course of assessment proceedings. Assessee submitted confirmations received till date and confirmed that some balance have already w/off and some balance related to security deposits and remaining confirmation will be submitted as soon as possible. After considering the assessee’s reply the Assessing Officer held that he issued notice U/s 133(6) to M/s Healmen Pharmaceuticals, which has been returned back with postal remark “Firm Closed hence returned”. Therefore, the claim of the assessee was not verifiable. The entries subsequently written off during F.Y. 2008-09 has been excluded.
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