IN THE INCOME TAX APPELLATE TRIBUNAL,
                              MUMBAI BENCH `A' BENCH

               BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND
                 SHRI SANJAY ARORA (ACCOUNTANT MEMBER)

                                  ITA No.7277/Mum/2011
                                 Assessment Year: 2007-08

ITO 16(2)(2),                                Ankit Software,
Matru Mandir, Tardeo Road,                   15/5, Kailas Nagar, 658, Tardeo Road,
Mumbai.                                      Opp. Bhatia Hospital,
                                         Vs. Mumbai-400 007
                                             PA No.AAAFA 1621 R


(Appellant)                                   (Respondent)


                                Appellant by : Shri Manoj Kumar
                                Respondent by: None

Date of hearing:                    19 .2.2013
Date of pronouncement:              19 .2.2013


                                       ORDER

Per B.R.Mittal, JM:

       The department has filed this appeal for assessment year 2007-08 against order
dated 25.7.2011 of ld CIT(A)-27, Mumbai.


2.     The only effective grievance raised by the department is that ld CIT(A) has erred
in deleting the addition of Rs.15,98,651/- made by the AO u/s.41(1) of the Act on
account of sundry creditors.







3.     The notice of hearing sent to respondent-assessee by RPAD has been returned
back unserved with the postal remarks "returned to sender". The notice was sent at the
given address by the assessee in form No.36. No other address is placed on record to
serve the notice of hearing on assessee. We, therefore, proceed to decide the appeal of
revenue exparte ­qua-respondent assessee after hearing ld D.R. and on the basis of
material available on record.
                                             2


4.     The relevant facts are that assessee is a partnership firm carrying on business as
trader of stationery and media goods. During the year under consideration, assessee
has shown current liabilities of Rs.77,79,290 which includes sundry creditors for goods
of Rs.77,14,047/-. Before the AO, assessee furnished details of sundry creditors and
their confirmations duly signed by the creditors as under:
       1.     Computer Infotect                      -       Rs.10,32,200
       2.     Computer Media Products                -       Rs. 8,45,364
       3.     Datamedia India Pvt Ltd.               -       Rs.42,35,780
       4.     Hardik Electronics                     -       Rs.16,00,703


4.1    The AO noticed that out of these creditors, the liability of Rs.15,98,651/- in the
case of Hardik Electronics is prior to F.Y. 1999-2000 i.e. six years.         Therefore, AO
treated the above amount of Rs.15,98,651/- as income by way of cessation of liability by
invoking the provisions of section 41(1) of I.T.Act and added the same to the total
income of assessee. Aggrieved, assessee filed appeal before ld CIT(A).


 5.    Learned CIT(A) reversed the action of the Assessing officer and deleted the
impugned addition by observing as follows:
       "4. I have carefully considered the appellant's submissions in this regard.
       At the outset, the appellant has furnished all the relevant details and also
       the confirmation from M/s.Hardik Electronics that the appellant owes
       money to them. The liability was not written off by either of the parties in
       their books. Merely because a liability is outstanding for a longer period,
       it cannot be presumed that the said liability has ceased to exist, especially
       in parties have confirmed the existence of the liability. It is not the case
       of the AO that the appellant has obtained any benefit in respect of the
       aforesaid trading liability by way of remission or cessation thereof. That
       apart M/s. Hardik Electronics is also located in Mumbai and assessed to
       tax with the same AO. In case the AO has doubted the transaction she
       could have conducted an enquiry and taken appropriate action in both
       cases. Instead the AO chose to consider the liability as appellant's income
       u/s.41(1) of the Act which is not warranted. Further, at present, the AR
       filed audited accounts of M/s. Hardik Electronics for A.Y.2007-08 wherein
       the liability is reflected. In view of the above, I delete the addition made
       by the AO"

       Aggrieved, department is in appeal before the Tribunal.

6.     We have heard ld D.R. and perused the material on record.            We observe that
assessee has furnished all the relevant details and confirmation from M/s. Hardik
                                            3


Electronics that assessee owes money to them. We also observe that, as learned CIT(A)
rightly held, merely because a liability is outstanding for a longer period, it cannot be
presumed that the said liability has ceased to exist, especially when the party has
confirmed the existence of the liability. It is not the case of the AO that the appellant
has obtained any benefit in respect of the aforesaid trading liability by way of remission
or cessation thereof. Bearing in mind all these facts, as also entirety of the case, we
approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.







7.     In the result, appeal filed by department is dismissed.

       Order pronounced in the open court on       19TH     February, 2013



                  Sd/-                                           Sd/-
            (SANJAY ARORA)                                  (B.R. MITTAL)
           Accountant Member                               Judicial Member

Mumbai, Dated     19th    February, 2013
Parida

Copy to:
1. The appellant
2. The respondent
3. Commissioner of Income Tax (Appeals),27, Mumbai
4. Commissioner of Income Tax, City-16 , Mumbai
5. Departmental Representative, Bench `C' Mumbai

//TRUE COPY//                                              BY ORDER


                                            ASSTT. REGISTRAR, ITAT, MUMBAI