The liability under section 41(1) of the Income Tax Act remains alive if the pending decision of the court has no bearing on the cessation of liability.

R. S. Mongia, C. J. (Acting)-

The facts leading to the filing of the present income tax appeal may be noticed.

2. The respondent, M/s Kedia & Co, Raha, District Nagaon, Assam, is a registered firm and an income tax assessee. The relevant .assessment year in the present case is 1979-80. The respondent firm got an import licence to import 500.905 MT of palm oil from Malaysia. The Malaysia party duly despatched the goods and presented the bill of lading for collection of the value of goods to the United Asian Bank in Malaysia. That Bank in Malaysia on its turn sent the bill of lading to the United Bank of India, Foreign Branch, Bombay, for realisation of the amount of US Dollars 3,64,658.84, equivalent to Rs.32,38,133. The United Bank of India asked the respondent firm to clear the bill of lading by making payment of the above amount and the date of maturity was mentioned by the Bank as 24.11.77. The respondent firm, however, paid Rs. 17,87,859 in installments and could not pay the balance of Rs. 14,26,116. In the meantime, the respondent firm approached the shipping agent, M/s JN Baxi & Co, Bombay, and manage to get release of the goods by giving an indemnity bond dated 28.9.77, without releasing the bill of lading from the Bank. Thereafter, the Foreign Branch of the United Bank of India having failed to realise the aforesaid balance amount of Rs. 14,26,116 from the respondent firm, returned the bill of lading to the Malaysian Bank. The aforesaid Malaysian Bank on receipt of the bill of lading from the United B)ank of India, got an order of arrest from Admiralty Suit on the ship SS Texotis, owned by Texotis Shipping Co, Necosia, Cyprus, which had chartered the vessel, SS Texotis, which carried the palm oil from Malaysia to Bombay Port. The aforesaid Shipping Co, however, got release the ship by making the payment of the aforesaid siim to me Malaysian Bank and took over the liability of realisation of the amount from the respondent firm. After taking over the liability for realisation and having failed to realise the amount from the respondent firm in the normal course, the shipping company filed a Summary Suit No. 1994 of 1981 before the High Court of Bombay for realising the aforesaid amount of Rs. 14,26,116 from the respondent firm. The assessee in its return for the year 1979-80 did not include the aforesaid amount, as it was shown to be the liability which had neither been remitted, nor the respondent considered the liability to the tune of the aforesaid amount as having been remitted by the creditors. The original creditors, i.e., the Malaysian Bank, or the firm which had supplied the material, stood substituted by the shipping agent, because the shipping agent had the amount to the Malaysian Bank by taking over the liability to realise that amount from the respondent firm. It was the case of the respondent that the very fact that the shipping company had filed a suit for realisation against the respondent firm, would go to show that the liability was kept alive and the same had not been remitted. According to the respondent, even if the suit is time barred, even then the liability would not stand remitted.

3. The Assessing Officer, however, did not agree with the respondent firm and ordered the addition of the aforesaid amount in the total income of the respondent under section 41 (1) of the Income Tax Act, 1961 (herein after referred to as the Act).

4. The respondent firm filed an appeal against the order of the Assessing Officer, dated 25.5.83 before the Commissioner of Income Tax. The Commissioner of Income Tax (Appeals), vide his order dated 22.10.83, allowed the appeal and held that the aforesaid amount could not be charged to tax under section 41 (1) of the Act as the liability had not been remitted The Revenue, ie the present appellant, filed an appeal before the Income Tax Appellate Tribunal. The said appeal was registered as ITA No.539 (Gau) of 1990. However, the appeal was dismissed and the appellate order of the Com

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