ACIT, Jaipur V. SHRI RADHEY SHYAM AGARWAL, Jaipur

ITA 1080/JPR/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7556 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 08-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Keywords: Period of limitation; Bad and doubtful debts; Capital expenditure
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.1080/ JP/2011 ASSESSMENT YEAR : 2007-08 PAN: AAOA 6659 H THE ACIT VS. SHRI RADHEY SHYAM AGARWAL CIRCLE- 5 31, AGARWAL SADAN, SANTOSH NAGAR COLO NY JAIPUR BRAHMPURI,JAIPUR (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI D.K. MEENA ASSESSEE BY : SHRI VIJAY GOYAL DATE OF HEARING: 11-01-2012 DATE OF PRONOUNCEMENT: 25-01-2012 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 12-09-2011 FOR THE ASSESSMENT YEAR 2007-08. 2.1 THE GROUND OF APPEAL RAISED BY REVENUE IS AS UN DER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN:- (1) DELETING ADDITION OF RS. 11,39,270/- MADE BY TH E AO U/S 41(1) OF I.T. ACT, 1961 OBSERVING THAT THERE IS NO MATERIAL TO SUGGEST THAT THESE LIABILITIES HAS CEASED TO EXI ST OR THE ASSESSEE HAS NO INTENTION TO REPAY THE LIABILITIES WITHOUT A PPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDEN CE IN ORDER TO SUBSTANTIATE HIS CLAIM THAT THE LIABILITY STILL EXI STS. 2.2 DURING THE COURSE OF PROCEEDING, THE AO REQUIRE D THE ASSESSEE TO SUBMIT AGE- WISE ANALYSIS OF TRADE CREDITORS. THE AO NOTICED TH AT THERE ARE 8 CREDITORS IN THE CASES OF WHICH NO TRANSACTION HAS BEEN DONE AFTER 7-10-2002 . THE AO THEREFORE, ASKED THE 2 ASSESSEE AS TO WHY THE ADDITION SHOULD NOT BE MADE U/S 41(1) OF THE ACT BY HOLDING THAT LIABILITY TO PAY THE CREDITORS HAS CEASED.. 2.3 BEFORE THE AO, IT WAS SUBMITTED THAT THE LIABIL ITY STILL PERSISTS AND THEREFORE, THE PROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE. TH E AO WAS OF THE OPINION THAT MERE INTENTION TO REPAY OUTSTANDING AMOUNT BY THE ASSESS EE IN THE CASE OF ABOVE CREDITORS DOES NOT SUFFICE THE RESPONSIBILITY OF THE ASSESSEE. THE ASSESSEE HAS NOT FURNISHED ANY PROOF OF COMMUNICATION THAT HAS EVER TAKEN PLACE BETWEEN TH ESE CREDITORS AND THE ASSESSEE. THE AMOUNT REMAINED WITH HE ASSESSEE FOR A LONG PERIOD UNCLAIMED BY THE TRADE PARTIES. SUCH CREDITS HAVE BECOME TIME BARED AND THE AMOUNT PAYAB LE CANNOT BE DEMANDED BY THE CREDITORS. THE AMOUNT SO CREDITED IN THE NAME OF 08 PARTIES BECAME ASSESSEES OWN MONEY ON ACCOUNT OF LIMITATION OF ANY STATUTORY RI GHT. THE AO ACCORDINGLY ADDED A SUM OF RS. 11,39,270/-. 2.4 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT TH E AO HAS MADE ADDITION WITHOUT PROVIDING ADEQUATE AND REASONABLE OPPORTUNITY TO TH E ASSESSEE. BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS. THE AO FAILED TO APPRECIATE THAT THE ASSESSEE ALSO OWNED (SHOWN UNDER SUNDRY DEBTORS) AMOUNT OF RS. 11,23,93 4/- SINCE 08.06.2000 FROM M/S DEEP INTERNATIONAL. THE ASSESSEE PURCHASED GOODS FROM THE ABOVE MENTIONED PARTIES ON REFERENCE OF M/S DEEP IN TERNATIONAL. SINCE M/S DEEP INTERNATIONAL WAS NOT PAYING THE ASSESSEE' S AMOUNT, THE ASSESSEE STOPPED THE PAYMENTS TO THESE PARTIES WHICH WERE RE FERRED BY M/S DEEP INTERNATIONAL. THE ASSESSEE HAD ALSO FILED CIVIL AN D CRIMINAL CASE AGAINST M/S DEEP INTERNATIONAL FOR RECOVERY OF HIS OUTSTAND ING AMOUNT. THE AMOUNT OWNED BY THE ASSESSEE WAS ALMOST EQUAL TO TH E AMOUNT PAYABLE BY THE ASSESSEE. THE ASSESSEE HAD STOPPED THE PAYMENTS PAYABLE TO THESE 3 PARTIES JUST TO PRESSURIZE M/S DEEP INTERNATIONAL T O PAY HIS OUTSTANDING AMOUNT. THE ASSESSEE HAD FULL INTENTION TO PAY THE AMOUNT TO THE ABOVE CREDITORS. IF THE AMOUNT PAYABLE BY THE ASSESSEE WA S TREATED AS CESSATION OF LIABILITY THEN THE AMOUNT RECOVERABLE BY THE ASSESS EE SHOULD HAVE ALSO BEEN TREATED AS BAD DEBTS. FURTHER THE LIABILITY OF THE ASSESSEE DID NOT CEASE MERELY BECAUSE THE LIABILITY HAD BECOME TIME BARRED BY THE LIMITATION. THE LIABILITY CEASED WHEN IT HAD BECOME BARRED BY THE L IMITATION AND THE ASSESSEE HAD UNEQUIVOCALLY EXPRESSED HIS INTENTION NOT TO HONOUR THE LIABILITY EVEN WHEN DEMANDED. BUT THE ASSESSEE HAD INTENTION TO PAY THE AMOUNT AND WAS SHOWING THE SAME AS HIS LIABILITY IN THE BALANCE SHEET. THE ASSESSMENTS OF THE ASSESSEE FOR AY 2003-04 AND 2004 -05 WERE COMPLETED U/S 143(3) AND THE DEPARTMENT HAD ACCEPTED THIS LIA BILITY. THE AO HAD NO MATERIAL TO SHOW THAT THE LIABILITY HAS CEASED TO E XIST IN AY 2007-2008. SECTION 41(1) OF I T ACT, 1961 PROVIDES THAT THE RE CESSION/REMISSION OF LIABILITY CHARGEABLE TO TAX IF THE FOLLOWING TWO CO NDITIONS WERE SATISFIED:- I) IN ANY OF THE EARLIER YEAR, DEDUCTION WAS ALLOWE D TO THE TAX PAYER IN RESPECT OF LOSS/EXPENDITURE (REVENUE O R CAPITAL EXPENDITURE) OR TRADING LIABILITY INCURRED BY THE A SSESSEE. II) DURING THE CURRENT PREVIOUS YEAR, THE TAX PAYER HAS OBTAINED A REFUND OF SUCH TRADING LIABILITY (IT MAY BE IN CASH OR ANY OTHER MANNER) OR HAS OBTAINED SOME BENEFIT IN RESPE CT OF SUCH TRADING LIABILITY BY WAY OF REMISSION/CESSION THERE OF ('REMISSION OR CESSION' FOR THIS PURPOSE INCLUDES UNILATERAL ACT O F THE ASSESSEE BY WAY OF WRITING OFF OF SUCH LIABILITY IN HIS BOOKS O F ACCOUNTS). DURING THIS YEAR, THE ASSESSEE HAD NEITHER OBTAINE D REFUND OF SUCH TRADING LIABILITY NOR HAD OBTAINED SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION/CESSION. THE PROVISIO NS OF SUB-SECTION (1) OF SECTION 41,INTERALIA, PROVIDED THAT, WHERE AN ASSES SEE, WHO HAD BEEN ALLOWED DEDUCTION IN RESPECT OF ANY EXPENDITURE OR TRADING LIABILITY, OBTAINS ANY AMOUNT IN RESPECT OF SUCH EXPENDITURE O R ANY BENEFIT BY WAY 4 OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAI NED BY HIM OR THE VALUE OF BENEFIT ACCRUING TO HIM WAS DEEMED TO BE PROFITS AND GAINS OF BUSINESS. HERE THE 'RECEIPT' OF AMOUNT OR BENEFIT WAS A NECES SARY CONDITION, AND IN THE CASE OF THE ASSESSEE, THERE WAS NO MATERIAL ON RECORD TO SHOW THAT THIS CONDITION WAS , FULFILLED. THIS WAS A DEEMING PROVI SION WHICH HAD BEEN INVOKED BY THE AO ON MERE ASSUMPTION. THEREFORE, TH E ADDITION OF RS. 11,39,270/- MADE BY AO APPLYING PROVISIONS OF SECTI ON 41(1) OF I T ACT, WAS BAD IN LAW, WITHOUT ANY BASIS AND WITHOUT CONSI DERING THE FACTS AND SUBMISSION MADE BY THE ASSESSEE DURING THE COURSE O F ASSESSMENT PROCEEDINGS. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS:- I) UTTAM AIT PRODUCTS (P) LTD! VS DEPUTY COMMISSION ER OF INCOME TAX ITAT, DELHI 'C BENCH (99 TT.I 718) WH EREIN IT WAS HELD THAT LIABILITY TOWARDS CREDITOR HAVING BEEN SH OWN BY THE ASSESSEE IN ITS BALANCE SHEET AND THERE BEING NO MA TERIAL OR EVIDENCE WITH THE REVENUE TO SHOW THAT THE SUPPLIER (CREDITOR) HAD GIVEN UP ITS CLAIM, NO ADDITION WAS CALLED FOR. II) DEPUTY COMMISSIONER OF INCOME TAX VS THAKKER DEVELOPMENTS ITAT, PUNE 'A' BENCH (115 TTJ 841) IT WAS HELD THAT THE PROVISIONS OF SUB-SECTION (1) OF SECTION 4 1, INTER ALIA, PROVIDE THAT, WHERE AN ASSESSEE, WHO HAD BEEN ALLOW ED DEDUCTION IN RESPECT OF ANY EXPENDITURE OR TRADING LIABILITY, OBTAINS ANY AMOUNT IN RESPECT OF SUCH EXPENDITURE OR ANY BENEFI T BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY HIM OR THE VALUE OF BENEFIT ACCRUING TO HIM IS DEEMED TO BE PR OFITS AND GAINS OF BUSINESS HERE ONE HAS TO REMEMBER THAT THE 'REC EIPT' OF AMOUNT OR BENEFIT IS A NECESSARY CONDITION, AND THERE IS N O MATERIAL ON RECORD TO SHOW THAT THIS CONDITION IS FULFILLED IN THE PRESENT CASE. THIS IS A DEEMING PROVISION WHICH HAS BEEN INVOKED BY THE AO ON MERE ASSUMPTION. THEREFORE, CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. 5 2.5 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S DELETED THE ADDITION AFTER OBSERVING AS UNDER:- 5.1 I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. IT IS SEEN THAT THE AO HAD MADE THE IMPUGNED ADDITION ALL EGEDLY ON THE GROUNDS THAT THE ASSESSEE HAD FAILED TO PRODUCE ANY EVIDENCE WITH RE GARD TO COMMUNICATION WITH THESE CREDITORS, NO TRANSACTIONS WERE CARRIED OUT WITH TH ESE PARTIES IN THE SUBSEQUENT YEARS, THE MERE INTENTION TO REPAY WAS NOT SUFFICIENT, WITH TH E LAPSE OF TIME THE CLAIM HAD BECOME TIME BARRED AND THERE WAS NO MATERIAL ON RECORD TO SUGGEST THAT THESE LIABILITIES WERE STILL SUBSISTING. THE AO WAS THEREFORE OF THE OPINI ON THAT THESE LIABILITIES HAD CEASED TO EXIST AND HE MADE THE ADDITION OF RS. 11,39,270/ - BY APPLYING THE PROVISIONS OF SECTION 41(1) OF INCOME TAX ACT. ON PERUSAL OF BALA NCE SHEET OF THE ASSESSEE, I FIND THAT SUNDRY DEBTORS OF ALMOST EQUIVALENT AMOUNT OF RS 11,23,934/-] ALSO APPEARED THEREIN. IT WAS CLARIFIED BY THE APPELLANT THAT HE HAD PURCHASED THE GOODS WORTH RS 11,39,270/- FROM 8 SUPPLIERS AT THE REFERENCE OF M/ S DEEP INTERNATIONAL. SUBSEQUENTLY M/S DEEP INTERNATIONAL DID NOT PAY THE AMOUNT TO THE ASSESSEE. IN TURN, THE ASSESSEE STOPPED PAYMENT TO THESE 8 SUPPLIERS W HO WERE REFERRED TO HIM BY M/S DEEP INTERNATIONAL. THE ASSESSEE HAD ALSO FILED CIV IL & CRIMINAL CASE AGAINST M/S DEEP INTERNATIONAL FOR RECOVERY OF OUTSTANDING AMOU NT. THE ASSESSEE HAD NOT WRITTEN OFF THE AMOUNT RECEIVABLE FROM M/S DEEP INTERNATION AL. IT WAS ARGUED THAT IN CASE IF THE LIABILITIES ARE TREATED AS CEASED TO EXIST THEN THE ASSESSEE SHOULD ALSO BE ALLOWED DEDUCTION ON ACCOUNT OF BAD DEBTS. ON CAREFUL CONSIDERATION O F FACTS IN ENTIRETY, I AM INCLINED TO ACCEPT THE CONTENTIONS OF THE APPELLANT. THE CESSAT ION OF THE LIABILITY MAY ACCRUE EITHER BY OPERATION OF LAW, I.E., ON THE LIABILITY BECOMING U NENFORCEABLE IN LAW BY THE CREDITOR, PROVIDED THE DEBTOR UNEQUIVOCALLY DECLARES HIS INTE NTION NOT TO OWN THE LIABILITY EVEN IF DEMANDED BY THE CREDITOR. IT MAY ALSO ACCRUE BY WAY OF A JUDICIAL PRONOUNCEME NT, ABSOLVING THE ASSESSEE OF THE LIABILITY. IT MAY ACC RUE IF THERE IS A CONTRACT BETWEEN THE PARTIES WHEREBY THE LIABILITY GETS EXTINGUISHED OR IT MAY COME TO AN END BY DISCHARGE OF THE DEBT. SOME BENEFIT HOWEVER MUST ACCRUE TO THE ASSES SEE BY VIRTUE OF REMISSION OR CESSATION OF THE LIABILITY, AS THE CASE MAY BE. IN THE PRESEN T CASE, THE AO HAS ASSUMED ON HIS OWN THAT LIABILITIES HAVE CEASED TO EXIST ON THE GROUND THAT THE ASSESSEE HAD FAILED TO SHOW ANY COMMUNICATION WITH THE ALLEGED CREDITORS. IT WA S ALLEGED THAT MERE INTENTION TO 6 REPAY WAS ALSO NOT SUFFICIENT. HOWEVER IT WAS ALSO NOT PROVED BY THE AO AS TO WHAT AND HOW ANY BENEFIT WAS OBTAINED BY THE ASSESSEE CO NCERNING SUCH LIABILITIES BY WAY OF REMISSION OR CESSATION THEREOF DURING THE CONCER NED YEAR. THE AGE OF LIABILITY IS NOT A DECISIVE FACTOR IN INVOKING PROVISIONS OF SEC TION 41(1). IN THE CASE OF NITIN S GARG VS ACIT (40 SOT 253), IT WAS HELD THAT MERELY BECAUSE THE LIABILITIES WER E OUTSTANDING FOR LAST MANY YEARS, IT CANNOT BE INFER RED THAT THE SAID LIABILITIES HAD CEASED TO EXIST. IT IS ALSO A FACT THAT ASSESSEE HA D NOT WRITTEN OFF THE OUTSTANDING LIABILITIES IN THE BOOKS OF ACCOUNT AND THE OUTSTAN DING LIABILITIES WERE STILL IN EXISTENCE WOULD PROVE THAT THE ASSESSEE ACKNOWLEDGED THIS LIA BILITIES AS PER THE BOOKS OF ACCOUNT. IN THE CASE OF CIT VS SITA DEVI JUNEJA (187 TAXMAN 96), IT WAS HELD BY HONOURABLE PUNJAB & HARYANA HIGH COURT THAT IN THE ASSESSEE S BALANCE-SHEET, THE LIABILITIES PAYABLE TO THE SUNDR Y CREDITORS HAD BEEN SHOWN. SUCH LIABILITIES SHOWN IN THE BALANCE-SHEET INDICATED TH E ACKNOWLEDGMENT OF THE DEBTS PAYABLE BY THE ASSESSEE. MERELY BECAUSE SUCH LIABIL ITY WAS OUTSTANDING FOR THE LAST SIX YEARS, IT COULD NOT BE PRESUMED THAT THE LIABIL ITIES HAD CEASED TO EXIST. THAT THERE WAS NO BILATERAL ACT OF THE ASSESSEE AND THE CREDIT ORS WHICH COULD INDICATE THAT THE LIABILITY HAD CEASED TO EXIST. IT WAS.IALSO NOT PRO VED THAT ANY BENEFIT WAS OBTAINED BY THE ASSESSEE CONCERNING SUCH TRADING LIABILITY BY W AY OF REMISSION OR CESSATION THEREOF DURING THE CONCERNED YEAR. ACCORDINGLY THE ADDITION WAS DELETED. IN THE CASE OF COMMISSIONER OF INCOME-TAX VS TAMILNADU WAREHOUSING CORPORATION (292 ITR 310), IT WAS HELD BY HONOURABLE MADRAS HIGH COURT THAT TH E ASSESSEE HAD CONTINUED TO SHOW THE ADMITTED AMOUNT OF RS 8,22,925 AS LIABILITY IN THE BALANCE-SHEET. THE UNDISPUTED FACT WAS THAT IT WAS A LIABILITY REFLECTED IN THE BALANCE-SH EET. ONCE IT WAS SHOWN AS LIABILITY BY THE ASSESSEE, THE COMMISSIONER WAS WRONG IN HOLDING THA T IT WAS ASSESSABLE UNDER SECTION 41(1) OF THE ACT. IT WAS HELD THAT UNLESS AND UNTIL THERE IS A CESSATION OF LIABILITY, SECTION 41 IS NOT APPLICABLE. RELIANCE IS ALSO PLACED UPON THE DECISION IN THE CA SE OF DCIT VS ALLIED LEATHER FINISHERS PVT LTD (32 SOT 549) WHEREIN IT WAS HELD THAT EVEN IN A CASE WHERE THE LIABILITY CEASED TO EXIST DUE TO LIMITATI ON, IE. CLAIM OF THE CREDITOR BEING BARRED BY LIMITATION UNDER LIMITATION ACT OF 1963 BUT IF THE LIABILITY SUBSISTS OR HAS NOT BEEN WRITTEN OFF BY THE ASSESSEE, OR THE ASSESSEE DOES NOT ABSOL VE HIMSELF FROM THE LIABILITY, THOUGH NOT LEGALLY ENFORCEABLE, IT CANNOT BE TAXED UNDER SECTI ON 41(1) OF THE I T ACT RELIANCE IS ALSO PLACED ON THE DECISION IN THE CASE OF ACIT VS VIP I NDUSTRIES LTD (30 SOT 254) WHEREIN IT WAS HELD THAT SECTION 41(1) IS ATTRACTED WHEN THERE IS CESSATION OR REMISSION OF A TRADING LIABILITY. SIMPLY BECAUSE A PERIOD OF THREE YEARS HAS EXPIRED AND THE CREDITOR CANNOT 7 LAWFULLY ENFORCE HIS CLAIM, IT DOES NOT MEAN THAT T HERE IS A ESSATION OR REMISSION OF LIABILITY. THERE MAY BE SEVERAL SITUATIONS WHEN THE MONEY IS NOT CLAIMED OR PAID BY ONE PARTY TO ANOTHER WITHIN THREE YEARS AND THEREAFTER THE CLAIM IS MADE AND HONOURED BY OTHER. SO, SIMPLY BECAUSE A PARTICULAR AMOUNT IS OUTSTANDI NG FOR A PERIOD OF MORE THAN THREE YEARS, THAT DOES NOT CONSTITUTE INCOME UNDER SECTION 41(1) . IN THE CASE OF DSA ENGINEERS (BOMBAY) VS INCOME TAX OFFICER (30 SOT 31), SIMILAR FINDINGS WERE GIVEN. THIS SECTION CONTEMPLATES THAT THE ASSESSEE HAS OBTAINED EITHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER A BENEFIT BY WAY OF REMISSION OR CESSATI ON AND IT SHOULD BE OF A PARTICULAR AMOUNT OBTAINED BY HIM. THUS, THE OBTAINING A BENEFIT BY THE ASSESSEE BY VIRTUE O F REMISSION OR CESSATION IS INEVITABLE FOR THE APPLIC ATION OF THIS SECTION. THE PRINCIPLE THAT EXPIRY OF THE PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMITATION ACT COULD NOT EXTINGUISH THE DEBT BUT IT WOULD ONLY PREVENT THE CREDITOR FRO M ENFORCING THE DEBT, HAS BEEN WELL SETTLED. IT IS ALSO NOT THE CASE THAT AMOUNTS IN QU ESTION WERE GIVEN UP BY THE CREDITORS. A CESSATION OF LIABILITY FOR THE PURPOSES OF SECTION 41(1) OF THE ACT WOULD MEAN IRREVOCABLE CESSATION SO THAT THERE IS NO POSSIBILITY OF THE LI ABILITY BEING REVIVED IN FUTURE. THE AO HAS TO PROVE THAT THE ASSESSEE HAS OBTAINED THE BENEFIT S IN RESPECT OF SUCH LIABILITIES BY WAY OF REMISSION OR CESSATION THEREOF MERELY BECAUSE THE A SSESSEE CLAIMED DEDUCTION IN THE EARLIER YEARS AND BALANCES ARE CARRIED FORWARD TO THE SUBSE QUENT YEAR, WOULD NOT PROVE THAT THE TRADING LIABILITIES OF THE ASSESSEE HAD BECOME NON- EXISTENT. IN THE PRESENT CASE, THE ASSESSEE HAS ALSO NOT WRITTEN THE BAD DEBTS OF RS 11,23,934/ - RECEIVABLE FROM M/S DEEP INTERNATIONAL. AT THE INSISTENCE OF M/S DEEP INTERN ATIONAL, THE ASSESSEE HAD PURCHASED GOODS FROM THESE ALLEGED CREDITORS. THE ASSESSEE HA D ALSO FILED CRIMINAL CASE AGAINST M/S DEEP INTERNATIONAL FOR RECOVERY OF OUTSTANDING AMOU NT. FROM THE LEDGER ACCOUNTS SUBMITTED BY THE APPELLANT, IT IS CLEAR THAT GOODS PURCHASED FROM THE ALLEGED CREDITORS WERE SUPPLIED TO M/S DEEP INTERNATIONAL. THERE IS NO MAT ERIAL ON RECORD TO SUGGEST THAT THESE LIABILITIES HAD CEASED TO EXIST OR THE ASSESSEE HAD HO INTENTION TO REPAY THE LIABILITIES. FOLLOWING THE ABOVE DECISIONS AND FACTS OF THE PRES ENT CASE, I DIRECT THE AO TO DELETE THE ADDITION OF RS 11,39,270/-. 2.5 WE HAVE HEARD BOTH THE PARTIES. IT IS NOTICED F ROM THE ORDER OF THE LD. CIT(A) THAT THE ASSESSEE HAS TO RECEIVE CERTAIN AMOUNT FROM M/S . DEEP INTERNATIONAL AND THE MATERIALS WERE RECEIVED FROM 08 CREDITORS AT THE REFERENCE OF M/S. DEEP INTERNATIONAL. THE ASSESSEE 8 HAS NOT PAID THE AMOUNT TO THE CREDITORS BECAUSE TH E AMOUNT RECEIVABLE BY HIM FROM M/S. DEEP INTERNATIONAL HAS NOT BEEN RECEIVED. THUS THE LD. CIT(A) HAS VERIFIED THE FACTS AND THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. IT WOULD HAVE BETTER IN CASE THE LD. CIT(A) SHOULD HAVE PROVIDED THE OPPORT UNITY TO THE AO. HOWEVER, IN THE INSTANT CASE, WE DO NOT FEEL TO SET ASIDE THE ISSUE BECAUSE THE PROVISION OF SECTION 41(1) CANNOT BE APPLIED UNLESS THERE IS MATERIAL ON RECOR D THAT THE CREDITORS HAVE WAIVED THE AMOUNTS RECEIVABLE FROM THE ASSESSEE. THE ASSESSEE HAS NOT WRITTEN OFF ANY SUCH LIABILITY AND THERE IS NO UNILATERAL WRITING OFF THE CREDIT. HENCE, THIS WAS NOT A CASE WHERE PROVISION OF SECTION 41(1) WERE APPLICABLE BECAUSE THE REVENUE HAS NOT COLLECTED ANY EVIDENCE TO SUGGEST THAT THERE HAS BEEN ANY CESSATI ON OF LIABILITY FROM THE CREDITORS SIDE. 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 25-01 -2012. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 25 /01/2012 *MISHRA COPY FORWARDED TO :- 1. THE ACIT, CIRCLE- 5 JAIPUR 2. SHRI RADHEY SHYAM AGARWAL, JAIPUR 3. THE LD. CIT(A) 4 THE LD. CIT BY ORDER 5 THE LD.DR 6 THE GUARD FILE (ITA NO. 1080/JP /11) A.R, ITAT, JAIPUR 9