Law:

Section:

I. Section 41(1) of the Income-tax Act, 1961 - Remission or cessation of trading liability - Assessment year 1996-97 - Assessing Officer while completing assessment of assessee noticed certain outstanding liability payable to 'A' - On asking assessee had confirmed before Assessing Officer that said liability was still outstanding - In spite of that confirmation, Assessing Officer made an addition of amount on basis that this liability had ceased to exist and same was not payable by assessee, and treated said liability as income by invoking provision of section 41(1) - Commissioner (Appeals) deleted said addition - It was found from records that assessee was still showing amount in question as a liability in its books of account and had not written off same and had also furnished a confirmation certificate from 'A' along with PAN - Whether in view of above facts, aforesaid liability could not be said to have ceased to exist and provision of section 41(1) could not be invoked - Held, yes II. Section 69 of the Income-tax Act, 1961 - Unexplained investments - Assessment year 1996-97 - While framing assessment Assessing Officer found that assessee had made sale of certain shares - Assessee had supplied list of persons to whom shares were sold along with their addresses - Said list contained information such as name, address and number of shares allotted - Assessing Officer had issued an enquiry letter under section 133(6) on random basis to 25 persons, out of whom some of persons confirmed genuineness of transaction, however, some persons did not respond - In view of said fact, out of total share capital of Rs. 54,28,500, Assessing Officer made an addition of Rs. 15 lakhs by treating sources of share capital of those persons as unexplained - Whether merely because some of persons did not respond to notice issued by Assessing Officer under section 133(6) it could not be said that said transaction was ingenuine, especially when Assessing Officer had not doubted identity of persons from whom assessee had shown receipt of application money - Held, yes CASE REFERRED TO CIT v. Lovely Exports (P.) Ltd. [S.L. A. No. 11993 (SC) of 2007, dated 11-1-2008] [Para 3]. Ms. Urvashi…

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