No cessation of liability merely because amount is outstanding for several years

Amounts shown as liabilities / Outstanding in the Balance Sheet cannot be deemed to be “cessation of liability” under Section 41(1) of Income Tax Act, 1961 merely  because the liabilities are outstanding for several years. Assessing Officer has to bring on record any material evidence to establish that there was cessation of liability in respect of the outstanding creditors balances represented in the assessee’s Balance Sheet. In the case on hand, as observed by the Ld. CIT(A), we find that the Assessing Officer has failed to cause enquiries to be made with or notices issued to...