This article provides an in-depth analysis of the tax appeal case filed by the Deputy Commissioner of Income Tax (DCIT), Central Circle-29, New Delhi against Surya Kiran Finance Corporation, New Delhi. The case pertains to the alleged cessation of liability under Section 41(1) of the Income Tax Act for the assessment year 2017-18. The appeal was filed on May 27, 2021, and the final order was pronounced on June 19, 2023.
The appeal was filed by the DCIT challenging the order of the Commissioner of Income Tax (Appeals) [CIT(A)] -30, New Delhi dated February 5, 2021, which deleted the disallowance of Rs. 15,695,780 made by the Assessing Officer (AO) under Section 41(1) of the Income Tax Act.
The primary issue in this case was whether the repayment of loans by Surya Kiran Finance Corporation could be considered as cessation of liability under Section 41(1) of the Income Tax Act.
The DCIT’s representative argued the following key points:
The respondent, represented by their counsel, countered with the following points:
The tribunal, comprising Shri Saktijit Dey, Judicial Member, and Shri N.K. Billaiya, Accountant Member, analyzed the arguments and facts presented by both parties. The key observations and conclusions of the tribunal were:
Based on these observations, the tribunal concluded that the CIT(A) was right in deleting the addition made by the AO. The tribunal upheld the CIT(A)’s order and dismissed the appeal filed by the DCIT.
As recorded in the final judgment:
“We fail to understand once the liability has been repaid by the assessee how could it be a case of cessation of liability u/s. 41 (1) of the Act. The CIT(A) has rightly deleted the addition which calls for no interference. The appeal of the revenue is dismissed.”
Signed,
(SAKTIJIT DEY)
Judicial Member
(N.K. BILLAIYA)
Accountant MemberDated: 19th June, 2023
The judgment in favor of Surya Kiran Finance Corporation emphasizes the importance of proper evidence and adherence to legal provisions when making additions under Section 41(1) of the Income Tax Act. It reinforces the principle that repayments of loans cannot be considered as cessation of liability, thereby providing relief to taxpayers in similar situations.
DCIT vs. Surya Kiran Finance Corporation: Cessation of Liability Case for Assessment Year 2017-18
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