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The Acit, Kheda Circle,, Nadiad vs M/S. Dattatray Poultry Breeding Farm ... on 19 June, 2018 cites

Cit vs Chipsoft Technology Pvt. Ltd. on 20 July, 2012

or more reasons. We notice that similar views have been echoed by the hon'ble Delhi High Court in the case of CIT vs. Chipsoft Technology (supra) cited on behalf of Revenue. The hon'ble Delhi High Court in that case observed that the assessee could not claim benefit of showing unpaid dues of employees outstanding for 6-7 years and it was found that there was cessation of such liability on facts which was liable to be added to the income of the assessee. The hon'ble Delhi High Court also negated the contention of assessee that a liability does not cease as long as it is reflected in the books and that mere lapse of time given to the creditor to recover the amount due does not efface the liability. The hon'ble High Court took note of expression 'include' occurring in Explanation to Section 41(1) of the Act and held that the Explanation does not restrict the scope of remission or cessation of any liability by a unilateral act alone. The hon'ble High Court held that in view of the phraseology of Explanation to Section 41(1), even omission to pay over a period of time and resultant benefit derived by the assessee would qualif y as cessation of liability albeit by operation of law. In this backdrop, where the Revenue Authorities have found as a matter of fact after detailed inquiry that the liabilities shown in the balance sheet do not, in fact, exist, the Revenue Authorities are not expected to put blinkers while looking at the outstanding trading liability. Merely because the liabilities have been shown in the books of accounts and not written back, would not, in our view tie down the Revenue to hold such liabilities to be subsisting liability. The ground realities on facts were found to be altogether different in the present case. It does not accord with human probabilities to infer that trading liabilities do exist where the parties are not traceable, denied the outstanding, no repayment made for last many many years and till date. Such approach would be quite theoretical and abstract.
Delhi High Court Cites 17 - Cited by 31 - S R Bhat - Full Document

Gvk Inds. Ltd & Anr vs The Income Tax Officer & Anr on 1 March, 2011

Ltd. vs. ITO (2017) 83 taxmann.com 389 (Guj) and contended that the hon'ble Gujarat High Court in the later decision has clearly held that cessation of liability occurred where not a single customer had demanded money back nor assessee had made any attempt to repay the same. It was also observed by the hon'be Gujarat High Court that in such a situation where the liability is reflected in the books of accounts whereas over years, assessee had also invested such amount and earned interest and used such interest for its purpose, the AO was justified in adding the impugned amount to the income of the assessee on the grounds of cessation of liability contemplated u/s.41(1) of the Act. It was also pointed out that the hon'ble Gujarat High Court took cognizance of the fact that there is absolutely no movement or correspondence between assessee and its creditors with respect to the claim or with respect to the deposited amounts while deciding the issue against the assessee.
Supreme Court of India Cites 25 - Cited by 855 - Full Document

Commissioner Of Income Tax, Calcutta vs Sugauli Sugar Works (P) Ltd on 4 February, 1999

liability ceases to exist by the reason of operation of law i.e. on the liability becoming unenforceable at law, (iii) by discharge of the debt as referred to in the decision of the Hon'ble Supreme Court of India in CIT vs. Sugauli Sugar Works (P.) Ltd. 236 ITR 518 (SC). The learned AR insisted that merely because the liabilities have remained outstanding in the books of accounts for last many years is an irrelevant consideration to ascertain taxability with reference to Section 41(1) of the Act. It was also contended that the expiry of period of limitation prescribed under the Limitation Act cannot extinguish the debts as it would only prevent the creditor from enforcing these debts. The learned AR submitted that in the absence of removal of the liability from the balance sheet by way of write back, no benefit can be said to be conferred on the assessee by way of cessation which can be deemed to be profit and gains of business of the assessee.
Supreme Court of India Cites 11 - Cited by 260 - Full Document

Barkha Investments And Trading Co. Pvt. ... vs Income-Tax Officer on 7 October, 1987

11. Adverting to the legal claim made before us on behalf of the assessee that liabilities shown in the balance sheet was itself sufficient to hold such liability exists and bonafide is not understood at all. The liabilities shown in the balance sheet as existing by assessee was found to be symbolic by AO. The onus is on the assessee to show the reasons why it believed at the time of filing the return that the liabilities were true. No such attempt was even made to prove the existence of liabilities. In this view of the matter, the incidence of taxation under s.41(1) of the Act cannot be escaped on non-existing liability. Our this view also finds support from yet another decision of the hon'ble Bombay High Court in the case of Palkhi Investments and Trading Co. Pvt. Ltd. vs. ITO 288 CTR 473 (Bom.) where the hon'ble Bombay High Court went to the extent of confirming penalty for not offering such trading liability under s.41(1) of the Act. Thus, the conclusion apparently leans against the Assessee. However, we are left with one pertinent question hurled at us on behalf of the Assessee i.e. year of taxability. In this regard, we are not impressed by the plea the AO did not bring anything on record to allege that cessation took place during the financial year in question for the purposes of taxability under s.41(1) of the Act. We find that AO has assertive justification to bring the outstanding liability within the net of s.41(1) of the Act in the Financial Year under inquiry. The onus is on the Assessee to show that year of cessation is different. In the instant case, the Assessee does not admit cessation at first place. The AO therefore is within its right to hold the Financial Year in question as the right year for taxability when the facts concurring the non- existence were unrevealed. The Assessee was failed to discharge onus. Besides, the defect of year of taxation if any can be cured under s.153(6) in such cases. However, we do not consider it expedient to dwell further. In the totality of the facts and I T A N o . 2 1 9 3 / Ah d / 1 4 [ AC I T v s . M s . D a t t a t r a y P o u l t r y B r e e d i n g F a r m P v t . L t d . ] A. Y . 2 0 1 0 - 1 1 - 13 -
Income Tax Appellate Tribunal - Ahmedabad Cites 25 - Cited by 22 - Full Document
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