Borrower cannot retain Liability in Subsequent FYs After Lender Writes Off amount in his Accounts: ITAT upholds Addition u/s 41(1)

The Income Tax Appellate Tribunal (ITAT) upheld the addition of income under section 41(1) of the Income Tax Act, where the borrower retained liability even after the lender wrote off the amount in their books. The case involved a situation where the borrower had not paid the debt, but the lender had written off the loan in their financial accounts. The ITAT ruled that under section 41(1), the borrower is deemed to have received income equivalent to the amount written off, thus making it subject to tax. This decision reaffirms that liabilities written off by lenders are considered income for the borrower, requiring the borrower to report it. It is a significant ruling in understanding the taxation of debts and loans written off by lenders.