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Facts
The assessee, engaged in the business of providing loans, filed its return for AY 2017-18. During assessment, the AO noted outstanding liabilities of Rs. 1,29,48,750/- to three parties, stagnant for over three years, and treated it as deemed income under Section 41(1) of the Act.
Held
The assessee contended that the liabilities had not ceased to exist and the creditors had confirmed the balances. However, the assessee failed to provide evidence to substantiate this claim or explain the non-payment.
Key Issues
Whether the addition of Rs. 1,29,48,750/- as deemed income under Section 41(1) on account of alleged cessation of liability is justified, when the assessee failed to provide supporting evidence.
Sections Cited
41(1), 250, 274, 270A, 143(3)
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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI JAGADISH
ORDER Per: SHRI JAGADISH, A.M.:
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-47, Mumbai dated 20.05.2025 passed under section 250 of the Income-tax Act, 1961 for the assessment year 2017-18.
Pro Fin Capital Services Ltd 2. When the appeal was called for hearing, none appeared on behalf of the assessee nor any adjournment application was filed. The notice of hearing having been duly served, we proceed to dispose of the appeal ex-parte qua the assessee after hearing the learned Departmental Representative and perusing the material available on record.
The assessee has filed a petition seeking condonation of delay in filing the present appeal stating that the order passed by the learned CIT(A) came to the knowledge of the assessee only when penalty notice under section 274 r.w.s. 270A dated 13.11.2025 was issued and thereafter on professional advice the appeal was filed before the Tribunal resulting in delay in filing the present appeal. Since none appeared on behalf of the assessee to substantiate the reasons stated in the petition, we proceed to dispose of the appeal on merits based on the material available on record.
The assessee has challenged the addition of Rs.1,29,48,750/- made by the Assessing Officer under section 41(1) of the Act contending that the said amount was shown as liability in the balance sheet and the liability had not ceased to exist and therefore the addition made by the Assessing Officer treating the same as deemed income under section 41(1) of the Act is bad in law. The assessee has further contended that the unsecured loans remained outstanding for more than three years but the creditors had confirmed the balances and therefore the liability continued to exist.
Briefly stated, the facts of the case are that the assessee is engaged in the business of accepting and providing secured and unsecured loans. The assessee filed its return of income for the assessment year 2017-18 declaring total income of Rs.96,40,950/-. The case was selected for Pro Fin Capital Services Ltd scrutiny and assessment was completed under section 143(3) of the Act determining the total income at Rs.2,25,89,700/-.
During the course of assessment proceedings, the Assessing Officer noticed that certain liabilities relating to three parties aggregating to Rs.1,29,48,750/- had remained outstanding for more than three years without any movement. The Assessing Officer was of the view that the liability had ceased to exist and accordingly treated the said amount as deemed income under section 41(1) of the Act and added the same to the total income of the assessee.
Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). After considering the submissions of the assessee and examining the material available on record, the learned CIT(A) confirmed the addition made by the Assessing Officer observing that the assessee failed to establish that the liability continued to exist and that no benefit had accrued to the assessee during the relevant previous year.
We have heard the learned Departmental Representative and perused the orders of the authorities below as well as the material available on record. The issue involved in the present appeal relates to the addition of Rs.1,29,48,750/- made under section 41(1) of the Act on account of alleged cessation of liability.
The Assessing Officer observed that the outstanding balances relating to three creditors had remained stagnant for a period exceeding three years and therefore treated the same as ceased liability and brought the amount to tax under section 41(1) of the Act. The learned CIT(A) after examining the facts of the case has observed that the assessee failed to demonstrate with supporting evidence that the liability continued to exist or that any payment was made subsequently to Pro Fin Capital Services Ltd discharge the liability. The learned CIT(A) further observed that the assessee had taken contradictory stands regarding the nature of liability and failed to furnish documentary evidence explaining the reasons for non-payment of the outstanding amounts.
Before us, the assessee has not appeared to contest the findings recorded by the learned CIT(A) nor has any material been placed on record to controvert the findings of the authorities below. In the absence of any rebuttal from the assessee and considering the findings recorded by the learned CIT(A), we do not find any infirmity in the order of the learned CIT(A) confirming the addition made by the Assessing Officer under section 41(1) of the Act. Accordingly, the grounds raised
by the assessee are dismissed.
11. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open court on 06/03/2026.
Sd/- Sd/- (SANDEEP GOSAIN) (JAGADISH) Judicial Member Accountant Member Mumbai, Dated: 06/03/2026 Ankit Sr. Private Secretary