Unless cessation of liability, No sec. 41(1) addition

Section 41(1) of the Income-tax Act, 1961 - Remission or cessation of trading liability (Cessation of liability) - Assessment year 2007-08 - In return of income for assessment year 2007-08, assessee had shown a certain amount by way of his debts - He supplied details of 27 different creditors - Assessing Officer undertook exercise to verify records of so called creditors and found that creditors had no dealing with assessee - Assessing Officer further having found that debts were outstanding since several years applied section 41(1) and added above amount in income of assessee as deemed income - There was nothing on record to suggest that there was remission or cessation of liability that too during previous year relevant to assessment year 2007-08 - Whether in peculiar facts of case amount in question could not be added back in income of assessee as deemed income under section 41(1) - Held, yes [Para 8] [In favour of assessee]

Refer:[2014] 43 taxmann.com 55 (Gujarat)
HIGH COURT OF GUJARAT
Commissioner of Income-tax -III
v.
Bhogilal Ramjibhai Atara