The AO invoked section 41(1) and treated outstanding trade liabilities of ₹75.38 crore as ceased liabilities on the ground that they had remained unpaid for several years and had become time-barred under the Limitation Act. The Tribunal held that the mere expiry of the limitation period does not result in remission or cessation of liability so as to attract section 41(1). Where the liabilities continued to be reflected in the books, and there was no evidence of remission or cessation, no addition could be made under section 41(1). Accordingly, the Tribunal deleted the additions in respect of most of the creditors. However, in respect of one liability, where the assessee claimed that the liability had been taken over by the bank and recovery proceedings were pending before the DRT, the matter was restored to the CIT(A) for verification of the supporting evidence. The appeal was partly allowed for statistical purposes. [AY.  2007-08]