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[2008] 303 ITR 318 (ALL.) HIGH COURT OF ALLAHABAD U. P. Steels Ltd. v. Commissioner of Income-tax SUSHIL HARKAULI AND RAKESH SHARMA, JJ. IT REFERENCE NO. 29 OF 1988 OCTOBER 24, 2007 Section 41(1) of the Income-tax Act, 1961 - Remission or cassation of trading liability Merely because certain amount was shifted in profit and loss account of assessee from debit to credit side, Assessing Officer could not treat same to be income of assessee under section 41(1) [A.Y. 1980-81]. Where certain amount was shifted in the profit and loss account of the assessee from the debit to the credit side and the Assessing Officer treat the same to be the income of the assessee under section 41(1): Held that no finding was recorded in any of the orders up to the Tribunal that there was anything else other than aforesaid alteration in the profit and loss account which could lead to inference about cessation or remission of the liability without any possibility of revival. Therefore, it could not be held for the purposes of section 41(1) that actual income up to that extent had accrued so as to entitle the Income-tax Department to tax the same. Shubham Agrawal for the Applicant. A N. Mahajan for the Respondent. JUDGMENT We have heard Sri Shubham Agrawal, learned counsel, for the assessee, and Sri A. N. Mahajan for the Department. The following three questions have been referred in this case : "1.Whether, on the facts and in the circumstances of the case, the Tribunal was legally right in holding that the sum of Rs. 9,38,575 was to be included in the total income of the assessee under section 41(1) of the Income-tax Act, 1961 ? 2.Whether, on the facts and in the circumstances of the case, the Tribunal was legally right in holding that the conduct of the assessee in crediting the liabilities to the profit and loss account showed that the liabilities of Rs. 9,38,575 had ceased to exist ? 3.Whether, on the facts and in the circumstances of the case, the Tribunal was legally right in holding that the liabilities of Rs. 9,38,575 had ceased to exist in the assessment year under reference and there was no possibility of reviving them ?" The detailed facts have been mentioned in the statement…

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