Mere passage of 3 years will not mean that liabilities are no longer payable – Section 41(1) can not be ivoked for non trading Liabilities

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ACIT Vs. Afghan Crane Crusher (ITAT Delhi)- Upon assessee’s appeal Ld. Commissioner of Income Tax (Appeals) noted that the aforesaid loans were duly recorded in the books of accounts and confirmations of loans were also filed before the Assessing Officer wherein the depositors accepted to have made interest free loans to the assessee. Ld. Commissioner of Income Tax (Appeals) further observed that the unsecured loans have been raised by the assessee from relatives and friends in the financial year 2004- 05 for obtaining credit limit from banks and the impugned sums do not represent trading liability for invoking provisions of section 41(1) of the Act. In view of the above facts Ld. Commissioner of Income Tax (Appeals) held that the Assessing Officer was legally and factually incorrect in invoking provisions of section 41(1) of the Act and made disallowance of Rs. 13,80,000/-.

We have heard the Ld. Departmental Representative. None appeared on behalf of the assessee. Upon careful consideration, we find that the matter can be disposed of by perusing the records and hearing the Ld. Departmental Representative. We find that the addition in this case has been made by the Assessing Officer on the ground that the unsecured loans are more than 3 years old. Mere passage of 3 years will not mean that these liabilities are no longer payable. Moreover, the assessee has not written off these sums. Moreover these loans do not represent trading liability. Hence, section 41(1) cannot be invoked. The parties have also confirmed the same. Under the circumstances, there is no infirmity in the order of the Ld. Commissioner of Income Tax (Appeals). Hence, we affirm the same in this regard.