TaxTMI 
TaxTMI 
2026 (5) TMI 896
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.... 29.12.2017 by the Addl. CIT, Special Range- 19, New Delhi (hereinafter referred to as 'ld. AO'). 2. The only issue to be decided in this appeal is as to whether the Learned CITA was justified in deleting the addition made under section 41(1) of the Act in the facts and circumstances of the instant case in respect of additions to capital account. 3. We have heard the rival submissions and perused the materials available on record. The assessee is a dealer in Bajaj Auto two wheelers under the name and style of M/s Rajiv Automobiles. The return of income for the assessment year 2015-16 was filed by the assessee on 30-09- 2015 declaring total income of Rs 24,48,050. There was a substantial increase in capital account of the assessee duri....
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....hereon. The Learned CITA sought for a remand report from the Learned AO. The Learned AO in the remand proceedings noted that the assessee was in receipt of loan from four family members (Sharma Devi Tyagi, Smt Babita Tyagi, Shri Deepanshu Tyagi and Shri R.C Tyagi) which were recorded initially as Sundry Creditors. The remand report highlighted that these amounts were subsequently transferred to the capital account on 01-04-2014 and presented as the assessee's opening capital. The Learned AO's remand report highlighted that these amounts due to family members as Sundry Creditors until 31-03-2014 were purportedly claimed as business expenses in the form of rent and salary in previous financial years. Accordingly, the Learned AO sought to ....
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.... Creditors as on 31-03-2014 was transferred to proprietor's capital account as on 01-04-2014. It was submitted that this reclassification was carried out based on the advice of the auditors as the loan receipts from family members on personal account cannot be categorized as trade creditors and accordingly it was transferred to the personal capital account of the assessee as opening capital and it was purely a journal entry. In any event, this sum was not received at all during the year under consideration and hence neither the provisions of section 68 of the Act could be applied for the same nor the provisions of section 41(1) of the Act could be made applicable for the same as assessee had continued to acknowledge the credit and liability....
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....d by the revenue to prove that the family members had waived their right to demand back the loan amounts from the assessee. Hence, there is no case of cessation of liability that has been proved by the revenue. Without proving the fact of cessation of liability, no addition under section 41(1) of the Act could be made in the hands of the assessee. Hence, the addition made under section 41(1) of the Act for the same is hereby deleted. With regard to TDS and self-assessment tax of Rs 5,99,712, it is not the case of the revenue that this TDS and self-assessment tax has been paid out of undisclosed sources by the assessee. Further, we find that assessee had sought to explain the entire proprietor's capital account by way of the following ta....