Unless there is positive act on part of creditor in current year providing benefit to assessee by way of remission, outstanding credit liability cannot be held to have been remitted in favour of assessee

IN THE ITAT AHMEDABAD BENCH ‘B’

Income-tax Officer, Ward 1(1), Surat

v.

Bhavesh Prints (P.) Ltd.

BHAVNESH SAINI, JUDICIAL MEMBER

AND D.C. AGRAWAL, ACCOUNTANT MEMBER IT APPEAL NO. 1302 (AHD.) OF 2010

[ASSESSMENT YEAR 2007-08]

JUNE 17, 2011

ORDER

D.C. Agrawal, Accountant Member. –

This is an appeal filed by the revenue raising following ground :—

(1) On the facts and in the circumstances of the case and in law, the ld. CIT(A)-I, Surat has erred in deleting addition of Rs. 18,09,757 out of the total addition made by the Assessing Officer of Rs. 56,42,593 on account of cessation of liabilities under section 41(1) of the Act.

2. The facts of the case are that assessee has stopped functioning for last 3 to 10 years and only shown opening stock of raw material with it during the year under consideration. Total opening stock shown was of Rs. 7,74,283 and it was sold for a consideration of Rs. 7,97,772. The Assessing Officer found that assessee had outstanding sundry creditors, total amounting to Rs. 56,42,593 from 52 parties as per list given by him from pages 3 to 5 of his order. The Assessing Officer initiated enquiries and found that notice under section 133(6) issued to first nine parties (from Sl. Nos. 1-9) were returned unserved. Similarly in respect of other parties no confirmation was filed or no fresh interest was provided by the assessee; or it was only that no balance is outstanding or a different amount is outstanding. On this basis, the Assessing Officerheld that there is a remission of liability taxable under section 41(1). He accordingly made an addition of Rs. 56,42,593.