NACSTONE MARKETING,VISAKHAPATNAM vs. INCOME TAX OFFICER, WARD-1(1), VISAKHAPATNAM

ITA 710/VIZ/2025Status: DisposedITAT Visakhapatnam31 August 2026AY 2023-2412 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition under Section 41(1) was not sustainable. It followed the Gujarat High Court's ruling that for Section 41(1) to apply, there must be actual remission or cessation of liability during the previous year, and the Assessing Officer cannot treat outstanding trade liabilities as ceased to exist without disturbing the underlying purchase transactions.

What were the facts?

The assessee, a partnership firm, had a significant amount of outstanding liabilities shown as sundry creditors. The Assessing Officer treated these liabilities as ceased to exist and made an addition under Section 41(1) of the Income Tax Act after some creditors did not respond to notices.

What were the issues?

Whether outstanding sundry creditors can be treated as cessation of liability under Section 41(1) when the Assessing Officer has not doubted the genuineness of the purchases made.

Which sections of the Income-tax Act were involved?

Section 41(1),Section 133(6),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM DB BENCH VISAKHAPATNAM

Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G.

Hearing: 19.08.2026Pronounced: 31.08.2026

PER VIJAY PAL RAO, VICE PRESIDENT :

This appeal by the Assessee is directed against the Order dated 12.09.2025 of the learned CIT(A)-National Faceless Appeal Centre [in short "NFAC"], Delhi, for the assessment year 2023-2024. 2. The assessee has raised the following grounds of appeal:

2 ITA.No.710/Viz./2025 1. “The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case.

2.

The learned Commissioner of Income Tax (Appeals) ought to have quashed the notice issued u/s 143(2) of the Act as invalid and consequently the learned Commissioner of Income Tax (Appeals) ought to have quashed

The order continues below.

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