No addition can be made u/s 41(1) merely because some liabilities are outstanding at the end of the year:

AO made addition u/s 41(1) in respect of liabilities outstanding at the end of the year which was confirmed by CIT(A). On appeal, Hon’ble Tribunal observed that the liabilities were outstanding at the end of the given year and there was no material on record to prove that the said liabilities had ceased to exist. Assessee had not even written off the said liabilities in books of accounts. In light of the above, the Hon’ble Tribunal, following the ratio laid down in the case of “CIT vs. Nitin S. Garg” – 71 DTR (Guj) 73 / 22 taxmann.com 59 (Guj), deleted the said addition.

[Shri Ahmedabad Flexible Tube Mfg. & Yarn Proc. Co. P. Ltd. vs. ITO – ITA No.3133/Ahd/2011]