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Income Tax Appellate Tribunal, ‘A’ BENCH, BENGALURU
Before: SHRI SUNIL KUMAR YADAV & SHRI INTURI RAMA RAO
O R D E R Per INTURI RAMA RAO, AM :
This is an appeal filed by the revenue directed against the order of the learned Commissioner of Income-tax(Appeals)-14, Mumbai [CIT(A)] dated 21/03/2016 for the assessment year 2010-11.
Briefly, facts of the case are that the respondent-assessee is a company duly incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of trading and distribution of computers, components watches, DVR capture cards, etc. The return of income for the assessment year 2010-11 was filed disclosing loss of Rs.70,35,698/-. Against said return of income, the assessment was Page 2 of 4 completed u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] vide order dated 19/03/2013 by Deputy Commissioner of Income-tax (OSD)-7, Mumbai at total income of Rs.4,71,92,830/- before setting off brought forward loss and after set off of loss of Rs.nil. While doing so, the Assessing Officer (AO) disallowed sundry creditors outstanding in the name of Happy Worth Ltd., of Rs.5,42,28,528/- on the ground that the liability is very old and ceased to be payable. AO, after analyzing the transaction the respondent- assessee had with this company had come to conclusion that the amounts payable on account of purchases made from this party were converted into unsecured loan and this has been outstanding for a period of 4 to 5 years. He presumed that this amount ceased to be enforceable liability and therefore, invoking the provisions of section 41(1) of the IT Act, made addition of Rs.5,42,28,528/-.
Being aggrieved, an appeal was preferred before the ld.CIT(A) who vide impugned order, after placing reliance on the decision of the Hon’ble Delhi High Court in the case of 343 ITR 408 held that this amount cannot be added u/s 41(1) of the Act.
Being aggrieved, the revenue is in appeal before us raising the following grounds of appeal:
5. Learned Departmental Representative vehemently contended that the ld.CIT(A), without appreciating facts of the case, deleted the addition. He further submitted that the assessee never furnished confirmation letters and therefore, the liability ceased to exist which is clearly taxable in view of Explanation 2 to section 41(1) of the IT Act.
On the other hand, learned AR of the assessee contended that there is no write off of amounts payable. Therefore, there is no question of cessation of liability.
We heard rival submissions and perused the material on record. The only issue in the present appeal is whether the ld.CIT(A) was justified in granting relief in respect of liability outstanding of Rs.5,42,28,528/-. It is undisputed fact that the amount is not written off in the books of account by the respondent-assessee. The AO inferred that since amount is outstanding for long time, the liability has ceased to exist but the ld.CIT(A) granted relief by observing that the liability still exists as confirmation letters from sundry creditors were filed before the AO but from perusal of the assessment order, there is nothing to show that the respondent-assessee had discharged the onus of proving the genuineness, credit worthiness and identity of the sundry creditors. Therefore, in the fitness of things, we remit this issue back to the file of the AO to examine the issue de novo.
Page 4 of 4 8. In the result, the appeal filed by the revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 23rd March, 2018.