Hassan Power Supply Company Ltd Vs DCIT (ITAT Bangalore)
Assessee company challenged addition made u/s 41(1) on account of long outstanding sundry creditors of ₹5,62,187. AO treated liabilities as ceased merely because they were stagnant for several years & director had admitted income during search u/s 132(4). CIT(A) confirmed addition.
Before ITAT, assessee argued that liabilities were still shown in books, never written back & hence no remission or cessation in law. Tribunal held that for invoking s.41(1), there must be actual cessation of liability & benefit derived by assessee. Mere old balances, absence of confirmation, or admission during search cannot trigger taxation when liability continues in books. Reliance placed on Karnataka HC decision in CIT vs Alvares & Thomas.
ITAT deleted addition holding that subsisting liabilities cannot be taxed u/s 41(1) without legal cessation or write-back. Appeal partly allowed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. ITA No. 2181/Bang/2025 is filed by M/s. Hassan Power Supply Company Ltd., (the Assessee/Appellant) for Assessment Year 201718 against the Appellate Order passed by the Commissioner of Income Tax, Appeals-15, Bangalore (the Ld. CIT(A)) wherein the Appeal filed by the Assessee against the Assessment Order passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) dated 26.12.2019 was dismissed.
