Unilateral book write-off of liabilities does not, by itself, trigger deemed income under section 41(1) absent cessation or remission.

Section 41(1) was held not to apply where outstanding liabilities were written off only by a unilateral entry in the assessee's books during the assessment year. The record did not show any cessation or remission of liability in that year, and mere accounting treatment, without corresponding release of the debt, was insufficient to trigger deemed income under the provision. On that basis, the addition was not sustainable for the year under appeal.

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Issues: Whether the outstanding liabilities written off by a unilateral entry in the books during the relevant assessment year attracted section 41(1) of the Income-tax Act, 1961 on the ground of cessation or remission of liability.

Analysis: The relevant liabilities were found to be old dues and the material on record did not show any cessation or remission during the assessment year under appeal. A unilateral accounting entry by the assessee, without more, was held insufficient to bring about cessation of liability or to trigger section 41(1). The decision was treated as governed by the principle that mere unilateral book entries do not, by themselves, justify taxation under section 41(1).

Conclusion: Section 41(1) was not attracted to the amount in question for the assessment year under appeal, and the addition was not sustainable.

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