In absence of declaration by assessee that it does not intend to honour its liabilities, provisions of S. 41(1) cannot be invoked

In the present case, there is no unilateral act of the assessee of making any entry in respect of the trading liabilities in its books of account. Therefore, a sine qua non for attracting section 41 in the present case, is that the assessee should have obtained a benefit by way of remission or cessation of a particular amount in the previous year corresponding to the assessment year in question. As noted by the Tribunal, there was no positive act on the part of either the assessee or the creditors which would amount to the assessee having gained the benefit of remission or cessation of the lia...