Arintex Global Limited Vs ITO (ITAT Delhi)
Outstanding trading liabilities cannot be treated as deemed income under section 41(1) unless the assessee has actually obtained a benefit by way of remission or cessation of liability. Further, non-compliance with notices under sections 131/133(6), by itself, cannot justify treating sundry creditors as bogus where the assessee has furnished supporting evidence and the liabilities continue to subsist.
The content is a Legal Case/Judgment/Tribunal Order. The ITAT Delhi held that outstanding foreign trade liabilities could not be taxed under section 41(1) of the Income-tax Act, 1961, as there was no remission or cessation of liability and the assessee had not obtained any benefit. The Tribunal noted that the liabilities continued to be reflected as payable in the books, and the suspension or non-functioning of the foreign creditors or suspension of the assessee’s business did not establish cessation of liability. It further held that domestic sundry creditors could not be treated as bogus merely because they failed to comply with summons under section 131 or notices under section 133(6), where the assessee had furnished confirmations, ledger accounts and other documentary evidence, the Revenue had not pointed out defects or carried out further investigation, and the liabilities continued to subsist. The Tribunal also noted that two creditors were fully paid and one was partly paid in subsequent years. Accordingly, it set aside the CIT(A)’s order, deleted both additions and allowed the assessee’s appeal.
