IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. No: 1443/AHD/2013 (Assessment Year: 2009-10) Income-tax Officer, Ward- V/S M/s. Uma Cotton co. Opp. 4, Gandhinagar Vadilal Industries At. Pundhra, ETal-ansa, Dist. Gandhinagar-382830 (Appellant) (Respondent) PAN: AABFU2158C Appellant by : Shri K. Madhusudan, Sr. D.R. Respondent by : None ORDER Date of hearing : 19 -09-2016 Date of Pronouncement : 21 -09-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. This appeal by Revenue is preferred against order of Ld. CIT(A), Gandhinagar, Ahmedabad dated 06.02.2013 pertaining to A.Y. 2009-10. 2 ITA No. 1443/Ahd/2013 . A.Y. 2009-10 2. only grievance of revenue is that ld. CIT(A) erred in deleting disallowance made by A.O. u/s. 41(1) of Act amounting to Rs. 65,54,568/- on account of non-genuine/non-existent creditors. 3. None appeared on behalf of assessee in spite of service of notice. We decided to proceed ex-parte, after having heard ld. D.R. at length, we have given thoughtful consideration to orders of authorities below. 4. facts of case are that assessee declared total loss of Rs. 21,675/-. return was selected for scrutiny assessment under CASS and accordingly statutory notices were issued and served upon assessee. 5. During course of scrutiny assessment proceedings and in view of verification of genuineness of outstanding liability shown by assessee in balance-sheet, A.O. issued letters u/s. 133(6) to following parties:- Sr. No. Name of party O/s. Balance as on 31/03/2009 1 Saikrupa Freight Forwarders Pvt. Ltd. 481414 2 Shri Ramkrishna Energy Industries 400000 3 Chandramukhi Cotton Pvt. Ltd. 295152 4 Dhanduka Rampura Cotton Processors Pvt. Ltd. 265490 5 MPM Textiles Pvt. Ltd. 765857 6 Seshankdev Cotton Co. 1942055 7 Balaji Industries 301830 8 Uma Industries 2056996 9 Rajvi Cotton 386496 10 J.G. Pujara & Sons 3586478 3 ITA No. 1443/Ahd/2013 . A.Y. 2009-10 6. Out of above parties, only two parties confirmed balance namely Balaji Industries and Uma Industries and in respect of other parties, on receiving no confirmation, A.O. proceeded to make additions u/s. 41(1) of Act. additions were made in respect of following parties:- Total loss as per return of Income (-) Rs. 21,675/- Add: On account of non genuine sundry creditors 1) Rajvi Cotton Rs. 3,86,496/- 2) M/s. J.G. Pujara & Co. Rs. 9,18,796/- 3) Sai Krupa Freight Forwarders Pvt. Ltd. Rs. 4,81,414/- 4) Shri Ramkrishna Energy Industries Rs. 4,00,000/- 5) Chandramauli Cotton Pvt. Ltd. & Rs. 22,37,217/- Seshankdev Cotton Co. 6) Dhanduka Rampura Cotton Processors Rs. 10,31,347/- Pvt. Ltd. & MPM Textiles Pvt. Ltd. 7) M/s. Dridich cemenplus & China National Rs. 15,67,495/- Cotton Group 7. Aggrieved by assessment, assessee carried matter before ld. CIT(A). 8. After considering facts and submissions and drawing support from decision of Co-ordinate Bench in case of Bhavesh Prints 142 TTJ 128, ld. CIT(A) observed that section 41(1) clearly stipulates of having obtained any benefit by cash or in any other manner. Therefore, Assessing Officer had to show that assessee had obtained such benefit in cash or otherwise only during current year. Therefore, merely because certain creditors were not traceable or they had denied any liability against assessee would not show that liability ceased to exist or it was remitted by 4 ITA No. 1443/Ahd/2013 . A.Y. 2009-10 creditor. ld. CIT(A) further found that A.O. failed to bring on record cessation or remission of liability. 9. Having given thoughtful consideration to findings of ld. CIT(A), Hon ble Supreme Court in case of Sugali Sugar Works Pvt. Ltd. 236 ITR 518 has decided that cessation of liability may occur either by reason of operation of law, that is, on liability becoming unenforceable at law by creditor and debtor declaring unequivocally his intention not to honour his liability when payment is demanded by creditor or contract between parties, or by discharge of debt debtor making payment thereof to his creditor. Hon ble Apex Court has opined that question whether liability is actually barred by limitation is not matter which could be decided by considering assessee s case alone but it is matter which has to be decided only if creditor is before concerned authority. In absence of creditor, it is not possible for authority to come to conclusion that debt was barred and had become unenforceable. 10. Notwithstanding our observations hereinabove, ground of revenue says that creditors were non-genuine/non-existent whereas assessment order shows that creditors were outstanding and are brought forward balances from earlier years. If creditors are not genuine/non-existent, then in our understanding of law, provisions of section 41(1) are not at all applicable and there is specific provision in Act to deal with such situation, i.e. section 68. Be that as it may, considering facts in totality, in light of ratio laid down by Hon ble Supreme Court and factual matrix elaborately discussed by First 5 ITA No. 1443/Ahd/2013 . A.Y. 2009-10 Appellate Authority, we do not find any error or infirmity in findings of ld. CIT(A). Appeal filed by Revenue is accordingly dismissed. Order pronounced in Open Court on 21 - 09- 2016. Sd/- Sd/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: True Copy Rajesh Copy of Order forwarded to:- 1. Appellant. 2. Respondent. 3. CIT (Appeals) 4. CIT concerned. 5. DR., ITAT, Ahmedabad. 6. Guard File. By ORDER Deputy Asstt.Registrar ITAT, Ahmedabad Income-tax Officer, Ward- 4, Gandhinagar v. M/s. Uma Cotton Co-Opp