GUJTRON ELECTRONICS PRIVATE LIMITED Vs. INCOME-TAX OFFICER

JUDGEMENT

(1.) Appellant is aggrieved by the judgment of the Income-Tax Appellate tribunal dated 10.01.2017. Following questions are presented for our consideration.

(2.) Though multiple questions are presented, the issue pertains to cessation of the assessee's liability. We are concerned with the assessment year 2012-13. While framing the assessment for the said year, the Assessing Officer noticed that assessee company had shown outstanding trade liability under the head 'customer advances', which included a sum of Rs. 7.87 crores (rounded off). Such advances were brought forward from the earlier years. The Assessing Officer therefore issued a show cause notice requiring the assessee to file details of such advances. In response to the queries, the assessee explained that the same were in the nature of the advances received from the retail customer under the Sales Promotion Scheme launched by the assessee in the financial year 1986-87. It was a scheme for sales promotion of the company's black and white TV sets. As per the scheme, the assessee had collected a sum of Rs. 500.00 from each customer by sale of coupons. Upon such customer enrolling four members who would purchase such coupons, he would be entitled to receive a TV set free of cost. Such newly enrolled members would also be eligible to such benefit on them in turn enrolling four new members each.

(3.) The Assessing Officer called upon the assessee to show cause why such amount of Rs. 7.87 crores be not added back as cessation of liability. The assessee opposed the proposal contending that the principles of section 41(1) of the Income-Tax Act, 1961 ('the Act' for short) are not applicable. The liability has not seized and the assessee continues to show the same as a liability.