Capital introduction explained by past savings accepted where taxpayer showed financial capacity and supporting facts.

Capital introduction in a firm was accepted as explained where the assessee showed regular tax assessment, salary and interest income from the firm, ownership of agricultural land, and family circumstances supporting financial capacity. On these facts, the explanation that the credited amount represented past savings was found credible, so the remaining addition of Rs. 3,00,000 was directed to be deleted.

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Issues: Whether the addition of Rs. 3,00,000 made on account of capital introduction in the books of the firm was liable to be deleted on the footing that the amount came out of the assessee's past savings.

Analysis: The assessee had credited Rs. 6,00,000 in his personal account in the books of the firm. The Assessing Officer had accepted Rs. 3,00,000 as explained and added the balance Rs. 3,00,000. On the record, the assessee was regularly assessed to tax, earned income from the firm by way of salary and interest, owned agricultural land, and had family circumstances supporting financial capacity. In the specific facts and circumstances, the explanation that the capital introduction represented past savings was found acceptable.

Conclusion: The addition of Rs. 3,00,000 was directed to be deleted, and this issue was decided in favour of the assessee.

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