Section 41(1) of the Income-tax Act, 1961—Remission or cessation of trading liability— It was for the assessee to rebut that material by either producing the relevant documentary evidence or the Sundry Creditors to show that the liability had not ceased in the eye of law so as to attract Section 41 (1).

Facts: Assessee has filed this appeal aggrieved by the order passed by the Tribunal allowing the Revenue's appeal for upholding the additions made in the assessment of the assessee under Section 41 (1).

Held, that this matter requires re-adjudication at the hands of the Assessing Authority. Apparently, it was found that the Assessing Authority had made due inquiry from the Sundry Creditors whose addresses and details were supplied by assessee during the course of assessment proceedings and the communications thereon from the assessee. However, assessee failed to rebut the adverse material with regard to the Creditors viz., Hari Traders and another M/s.Sunil, who had apparently confirmed that they did not make any claim of the amount of the unpaid amount due to them. It was thus for the assessee to rebut that material by either producing the relevant documentary evidence or the Sundry Creditors to show that the liability had not ceased in the eye of law so as to attract Section 41 (1). Now, on the fact finding exercise undertaken by the learned Appellate Authority also, except making the averments to the effect that these Sundry Creditors were paid, no documentary proof thereof has been produced by the assessee and, therefore, Tribunal has rightly held that the said averments of the assessee could not be believed on their face value. However, we feel that the matter requires further investigation and inquiry at the hands of the Assessing Authority and, the learned Tribunal, instead of reversing the order of the learned CIT (A), ought to have remanded the matter back to the Assessing Authority in such facts and circumstances of the case to ascertain whether the trade liability towards the Sundry Creditors shown in the Balance Sheet had ceased in the eye of law or whether such trade liability genuinely continued or not.
Therefore, we are inclined to dispose of this appeal with the remand of the case to the Assessing Authority without answering the Substantial Question of law, framed above. - SWAMINATHAN (V.R.) V/s ITO - [2019] 267 TAXMAN 208 (MAD)