The Surat Bench of Income Tax Appellate Tribunal ( ITAT ) remanded the case of the assessee to the Assessing Officer ( AO ) for verification of a Rs. 15.71 lakh liability under Section 41(1) of the Income Tax Act,1961, citing lack of sufficient evidence regarding the discharge of the liability and non-compliance with Tax Deducted at Source ( TDS ) provisions.
Sarjan Synthetics P. Ltd.,appellant-assessee,appealed against an order by the Commissioner of Income Tax (Appeals) [CIT(A)], dated 29.03.2024, concerning the Assessment Year 2015-16. The central issue involved the AO’s addition of Rs. 15,71,698 to the assessee’s income under Section 41(1) of the Act, treating the outstanding liability as having ceased. This addition was confirmed ex parte by the CIT(A), leading the assessee to seek appellate relief.
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The assessee contended that the CIT(A) erred in confirming the addition without adequately considering its submissions. According to the assessee, the liability comprised unpaid amounts toward the director’s salary, commission, and service contract payments, all of which were subsequently discharged.
The Authorized Representative ( AR ) of the assessee argued that these liabilities were indeed settled in subsequent assessment years and submitted ledger accounts to support this. The assessee requested that the case be remanded to the AO for a detailed verification of these claims.
On behalf of the revenue, the Senior Departmental Representative ( DR ) supported the AO’s action, pointing out that the assessee failed to produce conclusive evidence proving the discharge of liabilities. The DR also noted that no TDS was deducted on these payments, and a large portion related to an ex-director’s salary, implying that the liability had likely ceased to exist.
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A single member bench comprising Pawan Singh ( Judicial Member ) reviewed the submissions and found that the AO had made the addition due to insufficient evidence of the outstanding liability and issues with TDS non-compliance. However, recognizing the ledger evidence presented by the assessee indicating partial discharge of the liability, the tribunal concluded that further verification was necessary.
Accordingly, it remanded the matter to the AO, instructing that if the liabilities were discharged as claimed, the assessee should be granted appropriate relief.
In summary, the tribunal allowed the appeal for statistical purposes
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