Mere cessation of liability not results into fit case of sec. 41(1) of Income-tax Act

Issue before tribunal: Whether AO had rightly invoked provision of section 41 (1) of the Income-tax Act when there is no recovery of any loss/expenditure/trading liability. Brief facts: The assessee company is engaged in the business of Finance and Export. However, during the year, there was no business activity except receipt of interest and some hire charges etc. As against gross receipts of Rs. 6,54,900/- the assessee company has claimed expenditure of Rs. 10,83,949/- working out on loss of Rs. 4,29,049/-. During the assessment proceedings the AO observed that the amount of secured and u...