Cessation of liability requires cessation in the relevant year; later write-off and tax disclosure supported deletion of addition.

Addition for cessation of liability cannot be sustained unless the assessment record establishes that the liability had actually ceased in the relevant assessment year. The notes state that the outstanding liability, previously claimed as revenue expenditure, was written off only in a subsequent year and was then disclosed as taxable income. On that basis, deletion of the addition was upheld in favour of the assessee.

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Issues: Whether an addition for cessation of liability could be sustained where the liability had not ceased in the relevant assessment year and was subsequently written off and offered to tax.

Analysis: The assessment record did not establish that the outstanding liability, earlier claimed as revenue expenditure, had actually ceased during the relevant year. The liability was written off in the subsequent assessment year and the amount was disclosed as taxable income in that year.

Conclusion: The deletion of the addition for cessation of liability was upheld in favour of the assessee.

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