The ITO, Ward-1(1), Surat V. M/s. Bhavesh Prints Pvt.Ltd., Surat

ITA 1302/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6437 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 26-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 133(6)

Judgement Text

FIT FOR PUBLICATION - 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M INCOME-TAX OFFICER, WARD 1(1), SURAT. VS. M/S BHAVESH PRINTS (P) LTD., 4, MULTI STOREY BUILDING, SINGAPURINIWADI, SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SAMIR TEKRIWALA, SR.DR RESPONDENT BY:- SHRI DIGANT S. NAIK, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUND:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-I, SURAT HAS ERRED IN DELETING ADDITION OF RS.18,09,757/- OUT OF THE TOTAL ADDITION MADE BY TH E AO OF RS.56,42,593/- ON ACCOUNT OF CESSATION OF LIABILITI ES U/S 41(1) OF THE ACT. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE HAS STOP PED FUNCTIONING FOR LAST 3 TO 10 YEARS AND ONLY SHOWN OPENING STOCK OF RAW MATERIAL WITH IT DURING THE YEAR UNDER CONSIDERATION. TOTAL OPENING STOCK SHOWN WAS OF RS.7,74,283/- AND IT WAS SOLD FOR A CONSIDERATION O F RS.7,97,772/-. THE AO FOUND THAT ASSESSEE HAD OUTSTANDING SUNDRY CREDI TORS, TOTAL AMOUNTING ITA NO.1302/AHD/2010 ASST. YEAR 2007-08 ITA NO.1302/AHD2010 ASST. YEAR 2007-08 2 TO RS.56,42,593/- FROM 52 PARTIES AS PER LIST GIVEN BY HIM FROM PAGE 3 TO 5 OF HIS ORDER. THE AO INITIATED ENQUIRIES AND FOUN D THAT NOTICE U/S 133(6) ISSUED TO FIRST NINE PARTIES (FROM SL.NO.1-9) WERE RETURNED UNSERVED. SIMILARLY IN RESPECT OF OTHER PARTIES NO CONFIRMATI ON WAS FILED OR NO FRESH INTEREST WAS PROVIDED BY THE ASSESSEE; OR IT WAS ON LY THAT NO BALANCE IS OUTSTANDING OR A DIFFERENT AMOUNT IS OUTSTANDING. O N THIS BASIS, THE AO HELD THAT THERE IS A REMISSION OF LIABILITY TAXABLE U/S 41(1). HE ACCORDINGLY MADE AN ADDITION OF RS.56,42,593/-. 3. THE MATTER CAME UP BEFORE LD. CIT (A). HE EXAMIN ED THE ISSUE AFRESH AND FOUND THAT AMOUNT IN RESPECT OF SOME PAR TIES CAN BE HELD SUBSISTING, THEREFORE, HE HAD DELETED THE ADDITION MADE IN RESPECT TO THEM. IN RESPECT TO THE SUM RELATING TO SOME OTHER PARTIE S, HE HELD THAT IF ASSESSEE HAS NOT FILED ANY CONFIRMATION OR THERE IS NO MOVEMENT FOR LAST SIX YEARS THEN IT CAN BE SAID THAT THE AMOUNT WAS S UBSISTING. HE ACCORDINGLY CONFIRMED THE ADDITION. THUS IN ALL THE LD. CIT (A) DELETED AN ADDITION OF RS.18,09,757/- OUT OF RS.56,42,593/- MA DE BY THE AO AGAINST WHICH THE REVENUE IS IN APPEAL. 4. THE LD. DR SUBMITTED THAT IN RESPECT OF MANY PAR TIES TO WHOM THE NOTICES U/S 133(6) WERE ISSUED HAVE REPLIED THAT TH ERE IS NO OUTSTANDING BALANCE IN THE NAME OF THE ASSESSEE AS ON 31.3.2007 . FURTHER THESE BALANCES WERE OUTSTANDING SINCE 1994-95 MEANING THE REBY THAT THESE ITA NO.1302/AHD2010 ASST. YEAR 2007-08 3 BALANCES ARE ABOUT 15 YEARS OLD AND MOST OF THE CRE DITORS WOULD HAVE WRITTEN OFF THE BALANCE IN THEIR BOOKS OF ACCOUNT. FURTHER THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE TO PROVE THAT THE LI ABILITIES IN SPITE OF SUNDRY CREDITORS HAD NOT CEASED TO EXIST. THE ASSES SEE HAD FAILED TO DISCHARGE HIS ONUS. THE AO HAD CARRIED OUT ENQUIRIE S AND MOST OF THE NOTICES ISSUED BY THE AO WERE RETURNED UNSERVED AND THUS THE ASSESSEE FAILED TO PROVE THE EXISTENCE OF THE CREDITORS AS O N 31.3.07. THE ASSESSEE ALSO FAILED TO PRODUCE ANY EVIDENCE TO PROVE THAT E ITHER ASSESSEE OR ANY GROUP CONCERN HAD ANY BUSINESS DEALING WITH THE ABO VE PARTIES IN THE YEAR UNDER CONSIDERATION OR IN THE IMMEDIATE PAST. FURTH ER THERE IS NO EVIDENCE THAT ANY OF THESE PARTIES ARE DEMANDING THE ALLEGED OUTSTANDING BALANCE FROM THE ASSESSEE. THERE IS ALSO NO EVIDENCE THAT A NY OF THESE PARTIES HAVE INSTITUTED ANY LEGAL PROCEEDINGS AGAINST THE ASSESS EE FOR RECOVERY OF THEIR DUES. THE ONUS IS ON THE ASSESSEE TO PROVIDE THE NE W ADDRESSES OR CONFIRMATIONS SO AS TO SUPPORT ITS ARGUMENTS THAT A MOUNT IS STILL LEGALLY OUTSTANDING. IF CERTAIN PARTIES HAVE WRITTEN OFF TH E AMOUNT IN THEIR BOOKS OF ACCOUNT AND CERTAINLY NO LIABILITY WOULD EXIST T O BE PAID BY THE ASSESSEE AND HENCE IT HAS CEASED TO EXIST AND THEREFORE, TAX ABLE U/S 41(1). 5. AGAINST THIS, THE LD. AR FOR THE ASSESSEE SUBMIT TED THAT CONDITIONS LAID DOWN U/S 41(1) ARE NOT SATISFIED. THERE IS NEI THER CESSATION NOR ANY REMISSION OF LIABILITY. BALANCES ARE OLD AND OUTSTA NDING IN THE BOOKS AND ITA NO.1302/AHD2010 ASST. YEAR 2007-08 4 CREDITORS CAN DEMAND THE SAME AT ANY TIME. EVEN IN A CASE OF TIME BARRED DEBT WHICH, THE CREDITOR WOULD NOT BE ABLE TO RECOV ER, BY ENFORCING HIS RIGHT IN THE COURT, HIS RIGHT AS SUCH WILL NOT COME TO AN END THEREFORE LIABILITY WILL NOT CEASE TO EXIST. A LIABILITY AGAI NST THE ASSESSEE DOES NOT CEASE MERELY BECAUSE LIABILITY HAS BECOME BARRED BY LIMITATION. CESSATION WOULD TAKE PLACE IF NOT ONLY LIABILITY IS BARRED BY LIMITATION BUT ALSO ASSESSEE EXPRESSES AN UNEQUIVOCAL INTENTION NOT TO OWN THE LIABILITY EVEN WHEN DEMANDED. HE REFERRED TO THE DECISION OF HON. KERALA HIGH COURT IN LIQUIDATOR, MYSORE AGENCIES (P) LTD. VS. CIT (19 78) 114 ITR 853 (KERAL) AND THAT HON. BOMBAY HIGH COURT IN THE CASE OF CIT VS. CHASE BRIGHT STEEL LTD. (NO.2) (1989) 177 ITR 128 (BOM) A ND THAT HON. BOMBAY HIGH COURT IN THE CASE OF J.K. CHEMICALS LTD . VS. CIT (1966) 62 ITR 34 WHEREIN IT IS HELD THAT REMISSION HAS TO BE GRANTED BY THE CREDITOR. A UNILATERAL ON THE PART OF THE DEBTOR I.E. THE ASS ESSEE CANNOT BRING ABOUT A CESSATION ON HIS LIABILITY. A CESSATION OF THE LIAB ILITY MAY OCCUR EITHER BY REASON OF THE OPERATION OF LAW I.E. WHEN LIABILITY BECOMES UNENFORCEABLE THROUGH LAW AND ALSO DEBTOR CLEARLY DECLARE HIS INT ENTION NOT TO HONOUR HIS LIABILITY WHEN PAYMENT IS DEMANDED BY THE CREDITOR. THE CESSATION MAY ALSO OCCUR THROUGH A CONTRACT BETWEEN THE PARTIES O R BY DISCHARGE OF THE DEBT I.E. DEBTOR MAKING PART PAYMENT THEREOF TO HIS CREDITOR. ITA NO.1302/AHD2010 ASST. YEAR 2007-08 5 6. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT THESE LIABILI TIES STANDING IN THE BOOKS OF THE ASSESSEE ARE VERY OLD AND AS FOUND BY THE LD . CIT(A), AS OLD AS 15 YEARS AND OUTSTANDING SINCE 1994-95. IN THE CURRENT YEAR THE AO THOUGHT TO ENQUIRE AS TO WHY THESE LIABILITIES ARE OUTSTAND ING FOR SO LONG AND FOUND THAT NOTICES ISSUED BY HIM EITHER REMAINED UN-SERVE D OR NO CONFIRMATION WAS FILED IN RESPECT OF OTHERS. THE LD. CIT (A) EXA MINED THE ISSUE AND FOUND THAT IN SOME CASES TRANSACTIONS HAD TAKEN PLA CE AS LATE AS ASST. YEAR 2005-06 AND, THEREFORE, LIABILITIES COULD NOT BE SA ID TO BE NOT SUBSISTING. HE, THEREFORE, DELETED THE ADDITION OF RS. 18,09,75 7/- AND RETAINED THE REST OF ADDITION MADE BY THE AO. THUS APPARENTLY NOTHING HAD HAPPENED THIS YEAR IN RESPECT OF THE SUM OUTSTANDING IN THE BOOKS OF THE ASSESSEE AND IN RESPECT OF WHICH ADDITION WAS ORIGINALLY PROPOSED B Y THE AO OR IN RESPECT OF WHICH ADDITION WAS SUSTAINED BY THE LD. CIT (A). NEITHER THE CREDITOR HAS TAKEN ANY ACTION NOR HAS THE DEBTOR DONE ANYTHI NG. THUS IN FACT NO EVENT HAS TAKEN PLACE DURING THE CURRENT YEAR. THUS APPARENTLY THERE WAS NO OCCASION TO HOLD THAT THE OUTSTANDING BALANCES H AVE BECOME PROFIT CHARGEABLE TO TAX U/S. 41(1) EXCEPT ENQUIRIES CARRI ED OUT BY THE A.O. FOR THE SAKE OF CONVENIENCE WE REPRODUCE SECTION 41(1) AS UNDER:- SEC.41(1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDI TURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO A S THE FIRST MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR; ITA NO.1302/AHD2010 ASST. YEAR 2007-08 6 (A) THE FIRST MENTIONED PERSON HAS OBTAINED , WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH EXPENDITURE, OR SOME BENEFIT IN RESPECT OF SUCH TRA DING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFE SSION AND ACCORDINGLY CHARGEABLE TO INCOME TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER THE BUSINESS OR PROFESSION I N RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS I N EXISTENCE IN THAT YEAR OR NOT; OR (B) THE SUCCESSOR IN BUSINESS HAS OBTAINED WHETHER IN C ASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF WHICH LOSS OR EXPENDITURE WAS INCURRED BY THE FIRST MENTI ONED PERSON OR SOME BENEFIT IN RESPECT OF THE TRADING LIABILITY REFERRED TO IN CLAUSE (A) BY WAY OF REMISSION OR CESSATION THEREOF THE AMOUNT OBTAINED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRUING TO THE SUCCESSOR IN BUSINESS SHALL BE DEEM ED TO BE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME TAX AS THE INCOME OF THAT PREV IOUS YEAR; EXPLANATION 1 FOR THE PURPOSES OF THIS SUB-SECTION , THE EXPRESSION LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SU CH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF SHALL INCLUDE THE REMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY T HE FIRST MENTIONED PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN THE BUSINESS U NDER CLAUSE (B) OF THAT SUB-SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS. EXPLANATION 2 FOR THE PURPOSES OF THIS SUB-SECTION SUCCESSOR IN BUSINESS MEANS - (I) WHERE THERE HAS BEEN AN AMALGAMATION OF A COMPANY W ITH ANOTHER COMPANY, THE AMALGAMATED COMPANY; (II) WHERE THE FIRST-MENTIONED PERSON IS SUCCEEDED BY AN Y OTHER PERSON IN THAT BUSINESS OR PROFESSION, THE OTHER PE RSON; (III) WHERE A FIRM CARRYING ON A BUSINESS OR PROFESSION I S SUCCEEDED BY ANOTHER FIRM, THE OTHER FIRM; (IV) WHERE THERE HAS BEEN A DEMERGER, THE RESULTING COMP ANY. ITA NO.1302/AHD2010 ASST. YEAR 2007-08 7 THE FIRST CONDITION REQUIRED TO BE SATISFIED FOR TR EATING A SUM TAXABLE U/S 41(1) IS THAT AN ALLOWANCE OR DEDUCTION HAS BEEN MA DE IN RESPECT OF THAT SUM IN THE CURRENT ASST. YEAR OR IN EARLIER ASST. Y EAR AS A LOSS, EXPENDITURE OR TRADING LIABILITY. IN OTHER WORDS, L IABILITY SHOULD RELATE EITHER TO TRADING ACCOUNT OR TO PROFIT AND LOSS ACC OUNT WHICH MUST HAVE BEEN DEBITED IN THE CURRENT YEAR OR IN AN EARLIER A SST. YEAR WHILE COMPUTING THE INCOME OF THE ASSESSEE. MERELY BECAUS E CERTAIN AMOUNTS WERE OUTSTANDING IN THE BOOKS OF THE ASSESSEE DOES NOT LEAD TO THE INFERENCE THAT THIS AMOUNT WOULD RELATE TO A TRADIN G LIABILITY OR TO A SUM ALREADY DEBITED IN THE PROFIT AND LOSS ACCOUNT IN A NY EARLIER YEAR OR IN THE CURRENT YEAR. THE SECOND CONDITION REQUIRED TO BE SATISFIED IS TH AT ASSESSEE MUST HAVE OBTAINED EITHER IN CASH OR IN OTHER MANNER SOME BEN EFIT IN RESPECT OF SUCH TRADING LIABILITY EITHER BY WAY OF REMISSION OR CES SATION THEREOF. THE CONCEPT OF CESSATION IN SECTION 41(1) IMPLIES T HAT LIABILITY OF THE ASSESSEE HAS CEASED TO EXIST IN THE YEAR UNDER CONS IDERATION, EITHER BY OPERATION OF LAW, OR BY MUTUAL CONTRACT BETWEEN THE PARTIES. OPERATION OF LAW WOULD INDICATE THAT LIABILITY HAS BECOME UNENFO RCEABLE AT LAW I.E. THE LIMITATION PRESCRIBED FOR RECOVERY OF THE DUES BY T HE CREDITOR HAS EXPIRED OR THERE IS A COURT DECREE OR ORDER FINALLY AGAINST THE CREDITOR THEREBY HE LOSES HIS RIGHT TO RECOVER THE MONEY FROM THE DEBTO R I.E. THE ASSESSEE. ITA NO.1302/AHD2010 ASST. YEAR 2007-08 8 THUS IT IS EITHER EXPIRY OF LIMITATION OR A DECREE OF A COURT THAT WOULD MAKE THE LIABILITY CEASED TO EXIST. HOWEVER, A FURT HER CONDITION IS IMPOSED WHERE LIMITATION IS EXPIRED. IT IS THAT THE DEBTOR I.E. THE ASSESSEE SHOULD UNEQUIVOCALLY DECLARE HIS INTENTION NOT TO H ONOUR HIS LIABILITY WHEN PAYMENT IS DEMANDED BY THE CREDITOR. FURTHER, IF THERE IS A CONTRACT BETWEEN THE PARTIES AND THE CREDITOR DISCHARGES THE DEBTOR OF THE DEBT EITHER FULLY OR PARTLY THEN TO THE EXTENT THE DEBT IS DISCHARGED BY THE CREDITOR WITHOUT PAYMENT BY THE ASSESSEE, LIABILITY WOULD CEASE TO EXIST. THUS THERE HAS TO BE AN EVENT FOR CESSATION OF LIAB ILITY TO TAKE PLACE. IF NOTHING HAPPENS DURING THE ASST. YEAR THEN IT CANNO T BE SAID THAT LIABILITY HAS CEASED TO EXIST. IN CASE OF REMISSION THERE HAS TO BE A WAIVER BY THE CREDITOR IN FAVOUR OF THE ASSESSEE EITHER UNILATERA LLY OR THROUGH CONTRACTUAL AGREEMENT. TO THE EXTENT SUCH REMISSION OR WAIVER O F THE LIABILITY IS GRANTED ASSESSEE WOULD GET BENEFIT AND ACCORDINGLY TO THAT EXTENT SAME WOULD BE TAXABLE U/S 41(1) SUBJECT TO THE BASIC CON DITION THAT SUCH LIABILITY REMITTED HAS BEEN TAKEN INTO ACCOUNT IN T HE TRADING ACCOUNT OR IN THE PROFIT AND LOSS ACCOUNT IN THE CURRENT YEAR OR IN AN EARLIER YEAR. THUS THERE HAS TO BE A POSITIVE ACT ON THE PART OF THE C REDITOR IN THE CURRENT YEAR WHICH WOULD PROVIDE THE BENEFIT TO THE ASSESSEE BY WAY OF REMISSION. IF NO SUCH ACT ON THE PART OF CREDITOR TAKES PLACE THE N THERE IS NO CASE FOR HOLDING THAT A LIABILITY HAS BEEN REMITTED IN FAVOU R OF THE ASSESSEE. ITA NO.1302/AHD2010 ASST. YEAR 2007-08 9 7. MERELY BECAUSE CERTAIN AMOUNT IS OUTSTANDING FOR NUMBER OF YEARS WILL NOT BE CASE FOR HOLDING THAT THERE IS A CESSAT ION OR REMISSION. HON. PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SITADEVI JUNEJA IN (2010) 325 ITR 593 (P & H) HELD THAT IF AO FAILED T O SHOW THAT IN ANY EARLIER YEAR ALLOWANCE OF DEDUCTION HAS BEEN MADE I N RESPECT OF ANY TRADING LIABILITY INCURRED BY THE ASSESSEE OR IF HE FAILS TO SHOW THAT ANY BENEFIT WAS OBTAINED BY THE ASSESSEE IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, DURING THE C URRENT YEAR THEN IT CANNOT BE SAID THAT ANY BENEFIT ACCRUED TO THE ASSE SSEE. HONBLE PUNJAB & HARYANA HIGH COURT IN CIT VS. GP INTERNATIONAL LTD. IN (2010) 325 ITR 25 (P & H) HELD THAT PROVISIONS OF SECTION 41(1) AN D EXPLANATION THERETO ARE NOT APPLICABLE WHERE ASSESSEE IS STILL SHOWING SAME AMOUNT AS LIABILITY IN ITS BOOKS AND HAS NOT WRITTEN OFF THE SAME. IN CHIEF CIT VS. KESARIA TEA CO. LTD. 254 ITR 434 (SC) IT WAS HELD T HAT FOR APPLYING PROVISIONS OF SECTION 41(1) FOLLOWING CONDITIONS AR E REQUIRED TO BE SATISFIED:- (1) IN THE COURSE OF ASSESSMENT FOR AN EARLIER YEAR , ALLOWANCE OR DEDUCTION HAS BEEN MADE IN RESPECT OF TRADING LIABILITY INCURRED BY TH E ASSESSEE ; (2) SUBSEQUENTLY, A BENEFIT IS OBTAINED IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF DURING THE YEAR IN W HICH SUCH EVENT OCCURRED ; (3] IN THAT SITUATION THE VALUE OF THE BENEFIT ACC RUING TO THE ASSESSEE IS DEEMED TO BE THE PROFIT AND GAINS OF BUSINESS WHICH OTHERWISE WO ULD NOT BE HIS INCOME ; AND (4) SUCH VALUE OF THE BENEFIT IS MADE CHARGEABLE T O INCOME-TAX AS THE INCOME OF THE PREVIOUS YEAR WHEREIN SUCH BENEFIT WAS OBTAINED. ITA NO.1302/AHD2010 ASST. YEAR 2007-08 10 HON. SUPREME COURT IN TERUNELVELI MOTOR BUS SERVICE CO. (P) LTD. VS. CIT (1970) 78 ITR 55 (SC) HELD THAT IF IT IS NOT PR OVED THAT ANY ALLOWANCE OR DEDUCTION WAS GIVEN IN ANY EARLIER YEAR THEN PRO VISION OF SECTION 41(1) CANNOT BE INVOKED. HON. GUJARAT HIGH COURT IN THE C ASE OF CIT VS. BHARAT IRON & STEEL INDUSTRIES (1993) 199 ITR 67 (GUJ) (FB ) HELD THAT SECTION 41(1) CREATES A FICTION WHICH IS INDIVISIBLE, IT CA NNOT BE ENLARGED BY IMPORTING ANOTHER FICTION NAMELY THAT IF THE AMOUNT WAS OBTAINABLE OR RECEIVABLE DURING THE PREVIOUS YEAR THEN IT MUST HA VE BEEN OBTAINED OR RECEIVED DURING THAT YEAR. THE WORDS USED ARE OBTAI NED WHETHER IN CASH OR ANY OTHER MANNER WHICH CLEARLY REFER TO ACTUALLY RE CEIVING CASH OR THE BENEFIT DURING THAT YEAR. THE AMOUNT MAY BE ACTUALL Y RECEIVED OR IT MAY BE ADJUSTED BY WAY OF AN ADJUSTMENT ENTRY OR A CRED IT NOTE OR IN ANY OTHER FORM. IN OTHER WORDS, THERE HAS TO BE A POSITIVE EV ENT SIGNIFYING OBTAINING A BENEFIT BY WAY OF REMISSION OR CESSATION DURING T HE CURRENT YEAR. 8. IN THE PRESENT CASE THE FINDING GIVEN BY THE AO IS THAT CERTAIN PARTIES ARE NOT TRACEABLE OR THAT SUCH AMOUNT IS NO T OUTSTANDING IN THE BOOKS OF THESE PARTIES AGAINST THE ASSESSEE. IT WO ULD MEAN ACCORDING TO LD. DR THAT LIABILITY HAS CEASED TO EXIST. BUT THI S IS NOT THE EVENT WHICH HAS TAKEN PLACE DURING THIS YEAR NOR IS VISUALIZED IN SECTION 41(1). THE SECTION CLEARLY STIPULATES OBTAINING A BENEFIT BY C ASH OR IN ANY OTHER MANNER. THEREFORE, THE AO HAS TO SHOW THAT ASSESSEE HAS OBTAINED SUCH ITA NO.1302/AHD2010 ASST. YEAR 2007-08 11 BENEFIT IN CASH OR OTHERWISE ONLY DURING THE CURREN T YEAR. THEREFORE, MERELY BECAUSE CERTAIN CREDITORS ARE NOT TRACEABLE OR THEY HAVE DENIED ANY LIABILITY AGAINST THE ASSESSEE WOULD NOT SHOW THAT LIABILITY CEASED TO EXIST ONLY IN THE CURRENT YEAR BY VIRTUE OF OPERATION OF LAW, OR IT WAS REMITTED BY THE CREDITOR ONLY DURING THE CURRENT YEAR. THE E NQUIRIES HAD TO BE FURTHER CARRIED OUT TO SHOW WHAT EVENT HAS TAKEN PL ACE. THEY SHOULD CLEARLY SHOW A CESSATION OR REMISSION AND WHEN IT H APPENED. IF THESE TWO ASPECTS ARE NOT CLEARLY PROVED BY THE REVENUE PROVI SIONS OF SECTION 41(1) COULD NOT BE INVOKED. IN ADDITION TO THIS, THE ONUS IS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION WHICH IS DEEMED AS PROFIT DURING THE CURRENT YEAR U/S 41(1) WAS IN FACT TAKEN INTO ACCOU NT IN ANY EARLIER YEAR EITHER IN THE TRADING ACCOUNT OR IN THE PROFIT AND LOSS ACCOUNT. SINCE REVENUE HAS FAILED TO DISCHARGE THE ONUS, AS TO - (I) WHAT EVENT HAS TAKEN PLACE DURING THE CURRENT YEAR; (II) WHEN THIS EVENT TOOK PLACE; (III) WHETHER THE SUM IN QUESTION WAS CONSIDERED IN THE T RADING A/C OR PROFIT OR LOSS ACCOUNT IN ANY EARLIER YEAR I.E. WHE THER IT IS A TRADING LIABILITY; THE OUTSTANDING BALANCES IN THE BOOKS OF THE ASSESS EE CANNOT BE TAXED U/S 41(1). AS A RESULT, THERE IS NO MERIT IN THE APPEAL FILED BY THE REVENUE AND THE SAME IS DISMISSED. ITA NO.1302/AHD2010 ASST. YEAR 2007-08 12 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 17.06.2011. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 17.06.2011. FIT FOR PUBLICATION. (JM) (AM) MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 7/6/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 14/6/2011 /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..