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| The Tax Publishers2020 TaxPub(DT) 2525 (Hyd-Trib) INCOME TAX ACT, 1961
Section 41(1)
As there was no evidence that there was a cessation of liability during the year under consideration, no addition could be made under section 41(1) though payables in assessee's balance-sheet were pending for many years.
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Business income under section 41(1) - Remission or cessation of trading liability - Trade payables pending for many years - No evidence that there was a cessation of liability during the concerned year
AO noticed that payables in assessee's balance-sheet were pending for many years. Accordingly, AO desired to examine veracity of payables and since assessee failed to produce necessary details of trade payables, AO held that there was cessation of liability during relevant assessment year calling for addition under section 41(1). Held: Genuineness of payables or creditors was to be examined in the year in which they originated and unless liability became unenforceable or was written off by assessee or was given up by other party or something was brought on record that there was cessation of liability, same could not be brought to tax under section 41(1). As there was no evidence that there was a cessation of liability during the year under consideration, no addition could be made under section 41(1).
Followed:Pr. CIT v. Matruprasad C. Pandey (2015) 59 Taxmann.com 428 (Guj) : 2015 TaxPub(DT) 3634 (Guj-HC) CIT v. Bhogilal Ramjibhai Atara (2014) 43 Taxmann.com 55 (Guj.) : 2014 TaxPub(DT) 1536 (Guj-HC) CIT v. Shri Vardhman Overseas Ltd. (2011) 16 Taxmann.com 350 (Delhi) : 2012 TaxPub(DT) 1722 (Del-HC) ITO v. Maharashtra State Co-operative Consumers Federation Ltd. (2011) 13 Taxmann.com 163 (Mum)
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2012-13
IN THE ITAT, HYDERABAD BENCH
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