Provision of section 41(1) not applicable where assessee is still showing some amount as liability in its books and not written off the same

RELEVANT PARAGRAPH

We have heard learned counsel for the appellant-revenue. As far as the addition of Rs. 3,30,000 is concerned, it has been held that during the proceedings under section 143(3) read with section 250 of the Act, the assessee furnished a confirmation certificate from M/s Axis Chemicals and Pharmaceuticals Ltd., Faridabad along with PAN number. On asking of the Assessing Officer, the assessee has confirmed that the said liability is still outstanding. In spite of that material, the Assessing Officer made the addition of the amount on the basis that this liability has ceased to exist and the same is not payable by the assessee, and treated the said liability as income by invoking provision of Section 41(1) of the Act. The Commissioner (Appeals), while deleting the said addition, has observed that the similar addition was made in the case of Febon Con, Faridabad, where the similar liability was shown to be payable to the same party i.e. M/s Axis Chemicals and Pharmaceuticals Ltd., Faridabad. In that case, the said addition was deleted by the ITAT. It is the admitted position that the said order of the ITAT passed in ITA No. 114 to 116/Del/2004 has become final. In view of these facts, in our opinion, the ITAT has rightly come to the conclusion that the aforesaid liability of the assessee cannot be said to have ceased to exist and the provision of Section 41(1) and explanation to this provision are not applicable, because the assessee is still showing it as a liability in its books and has not written off the same.