Case Law Details
Jasmeet Singh Bhasin Vs DCIT (ITAT Raipur)
The appeal before the ITAT Raipur arose from the order of the CIT(Appeals)/NFAC dated 26.11.2025 for Assessment Year 2023-24. None appeared on behalf of the assessee during hearing, though an adjournment petition was filed and rejected. The Tribunal proceeded to hear the matter after considering the submissions of the Senior Departmental Representative and the material available on record.
The assessee, an individual, had filed a return declaring total income of Rs.85,07,030/-. During assessment proceedings, the assessee submitted bank statements, Form 26AS, income tax return, computation of income, ledger accounts relating to unsecured loans along with confirmations and proof of creditworthiness, stock inventory details, and other documents. The Assessing Officer observed that seven creditors had remained outstanding in the books for more than three years and issued a show cause notice asking why the liabilities should not be treated as income under Section 41(1) of the Income Tax Act on account of cessation of liability.
In response, the assessee furnished details of creditors including PAN, addresses, ledger accounts, and related documents. The Assessing Officer nevertheless made an addition of Rs.7,07,070 under Section 41(1) solely on the ground that confirmations from the creditors regarding the liabilities were not produced.
The Tribunal noted that the Department had not disputed the genuineness of the documents submitted by the assessee and had accepted that full details had been furnished during assessment proceedings. It observed that once ledger accounts, PAN details, addresses, and bank statements establishing the liabilities were produced, it was incumbent upon the Assessing Officer to conduct further enquiry if unsatisfied, instead of making additions based on suspicion and guesswork.
The Tribunal further observed that neither the Assessing Officer nor the CIT(Appeals)/NFAC recorded findings regarding the applicability of Section 41(1). It also noted that the CIT(Appeals)/NFAC failed to verify the documents despite possessing co-terminus powers under Section 250(4) and (6). Accordingly, the Tribunal set aside the order of the CIT(Appeals)/NFAC and directed deletion of the addition. The appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, NFAC dated 26.11.2025 for the assessment year 2023-24 as per the grounds of appeal on record.
2. At the time of hearing, none appeared for the assessee. However, an adjournment petition has been filed which is rejected. The matter is heard after recording the submissions of the Ld. Sr. DR and on a careful perusal of the materials available on record.
3. The brief facts in this case are that the assessee is an individual and filed his return of income on 31.10.2023 declaring total income at Rs.85,07,030/- for A.Y.2023-24. At the time of assessment proceedings, the assessee had filed bank account statement maintained by the assessee, copy of form 26AS along with copy of ITR and computation of income, ledger accounts for the unsecured loans along with confirmation and proof of creditworthiness, details of stock inventory and other relevant documents. That on perusal of the these documents, it was observed by the A.O that there were seven creditors which were existing in the books of the assessee for more than 3 years and accordingly, the assessee was show caused vide notice dated 06.03.2025 as to why these liabilities should not be treated as income u/s.41(1) of the Act being cessation of liability. In response to the statutory notice, the assessee had provided full details of the creditors a/w. identity, PAN, addresses and copy of the ledgers etc. The only reason for the A.O to make additions was that the assessee did not provide confirmations from parties concerned regarding the existing liabilities. The A.O completed the assessment making addition of Rs.7,07,070/- u/s.41(1) of the Act.
4. The matter, thereafter, went before the Ld. CIT(Appeals)/NFAC and therein at Page 4 in the extracted assessment order, the A.O expressed that the assessee had provided the full details of the creditors, along with their identity, copy of ledger but since the assessee could not provide confirmations of the liability, hence, the additions were made. That further, the assessee had made submissions before the First Appellate Authority which reads as follows:
5. Admittedly, the assessee had provided full details of the creditors including PAN, addresses and ledger accounts. The Department has not doubted the gentility of these documents. In fact, the A.O has accepted that the assessee had provided all documents at the assessment stage itself. Only grievance of the A.O while making the addition was that the assessee had not provided the liability confirmation from the said creditors. That when the Revenue has accepted the relevant documents from the assessee wherein he had established clearly the existence of liability from the creditors by furnishing ledger account, PAN, bank statement, address, thereafter, if the A.O was not satisfied, it was incumbent upon him to conduct further inquiry. Rather, he chooses to sit on these documents and give opinion which is purely based on suspicion and guess work. There is no finding either by the A.O or by the Ld. CIT(Appeals)/NFAC as to the applicability of Section 41(1) of the Act for the addition for cessation of liability. In fact, in the written submission the assessee mentions about a dispute after which financial transactions with the said concerns were stopped. The Department should have enquired on these submissions and their genuineness instead made additions summarily and in routine perverse manner. That when the entire liability and the details of the creditors have been provided to the Department, it was not open therefore for the Revenue to make addition on summary basis without examining the said evidence/documents. That even the order of the Ld.CIT(Appeals)/NFAC is not in terms with Section 250(4) & (6) of the Act. His powers are co-terminus with that of the A.O. The Ld. CIT(Appeals)/NFAC should have verified the documents placed on record by the assessee. There is no whisper in the order of the Ld. CIT(Appeals)/NFAC that such an exercise was done and in absence thereof, sustaining the addition is unlawful and bad in law. In view thereof, we set-aside the order of the Ld. CIT(Appeals)/NFAC and direct the A.O to delete the addition from the hands of the assessee while providing appeal effect of this order.
6. That as per above terms, appeal of the assessee is allowed.
Order pronounced in the open court on 6th April, 2026.
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