Case Law Details
M/s. Flo Dyne Controls (India) Pvt. Ltd. Vs ITO (ITAT Mumbai)
In so far as addition made u/s. 41(1) of the Act is concerned the Assessing Officer after going through the balance sheet of the assessee noticed that assessee has shown liability of Rs. 75,82,362/- as payable to M/s. Camy Plant, the assessee was required to furnish the confirmations from the creditors and also required to explain as to why the same should not be treated as cessation of liability u/s. 41(1) of the Act. Assessee vide letter dated 01.03.2014 submitted that in its case the conditions u/s. 41(1) are not satisfied as there is no remission or cessation of liability during the year under consideration. Assessee relied on the decisions in the cases of CIT v. Miraa Processors (P.) Ltd., [208 Taxman 93 (Guj.)] and CIT v. Nitin S. Garg [208 Taxman 16 (Guj).].
However, the Assessing Officer treated the said amount of Rs. 75,83,302/-shown as sundry credit in the balance sheet as cessation of liability u/s. 41(1) of the Act and taxed in the hands of the assessee observing that assessee has not submitted the confirmation from the creditor, genuineness of the transactions is not proved and the case law relied upon are distinguishable. Assessing Officer relied on the decision of the Hon’ble Supreme Court in the case of T.V. Sundaram Iyengar and Sons Ltd. [222 ITR 344] and concluded that there is a cessation of liability and accordingly he made the addition.
Held by ITAT
It is not in dispute that the assessee is having dispute with the other party the creditor who executed the work beyond the stipulated time and the dispute is going on. It is an admitted fact that neither the assessee nor the creditor have written off the liability from their Books of Accounts. In such circumstances simply because the liability is outstanding for quite some years the liability does not seize to exist.
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