2026 (6) TMI 217

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....f facts of the case as mentioned in the order of the Ld. CIT(A) are as under:- "1. The case was selected for Limited Scrutiny assessment under the E assessment Scheme, 2019 on the following issues: - i. Details of Assets and Liabilities ii. Share Capital/Other Capital Accordingly, a notice u/s-143(2) was issued and served through e-filing account of the assessee on 28/09/2019 as well as an intimation of issue of notice was served through SMS alert on the registered mobile number on the assessee on 28/9/2019. Thereafter, notices u/s-142(1) of Income Tax Act., 1961 alongwith questionnaires were issued time to time and the assessee filed replies accordingly. As on 09/03/2021, a show cause notice (SC....

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....eived in the his books as liability, but when the assessee filed balance sheet before the department, then the liability was shown as own money. Thus, the liability was ceased during the year itself. Hence, the increase capital which was claimed to have received from M/s Shiv Shakti Traders and then the amount was converted into own capital, the provision of Sec.41(1) is applicable. The capital account of the assessee was increased by Rs. 6,45,87,137/- [capital balance as per the capital a/c Rs. 8,31,69,988/- Minus Rs. 1,85,82,851/- (=disclosed Net Profit as per the P&L A/c Rs. 1,77,15,897/- for A.Y. 2018-19, & the telescoping effect of the addition of Rs. 8,66,954/- u/s.56(2)(x) stated in earlier Para)] and so the cessation of liability u/....

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....the parties and perused the material available on record. It is observed that during the year under consideration total capital of the Assessee was increased by a sum of Rs. 6,45,87,137/- after reducing Rs. 1,85,82,851/-. The Ld. A.O. made the addition under Section 41(1) of the Act by observing that it is a cessation of liability. The claim of the Assessee that during the year he has received funds from the an AOP, M/s Shiv Shkati Traders of which he is one of the Member and the funds were received by him which were directly credited to his personal bank account and since the said bank account is not part of the books of the firm, the credits were not recorded in the books of the proprietorship of the Assessee and were treated as introduct....