SHAILENDRA YADAV,,HALDWANI vs. ITO-2(1)(1)-HALDWANI, HALDWANI

1 ITA No. 244/Del/2025 Shailendra Yadav Vs. ITO

IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN BENCH, DEHRADUN BEFORE SHRI YOGESH KUMAR U.S, JUDICIAL MEMBER AND SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER ITA No.244/DDN/2025 ( A.Y 2018-19) Shailendra Yadav, Vs ITO-2(1)(1)-Haldwani, Income Tax 128, Nayota Niwas, Nainital Officer, Haldwani, Road, Haldwani-263139 Uttarakhand PAN: ABAPY2157R (RESPONDENT) (APPLICANT) Appellant by Sh. Abhinav Vijh, CA & Sh. Sumit Lalchandani, Adv Respondent by Sh. Amar Pal Singh, Sr DR Date of Hearing 08.04.2026 Date of Pronouncement 15 .05.2026

ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of

Ld. Commissioner of Income Tax (Appeals/ National Faceless Appeal

Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 26/09/2025 for

the Assessment Year 2018-19.

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.

2 ITA No. 244/Del/2025 Shailendra Yadav Vs. ITO

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 (SCN) was issued and after receiving the SCN, the assessee furnished reply on 12/03/021. The assessee filed his return ITR-3 on 31/10/2018, and as per the ITR, the assessee declared total income of Rs.2,86,23,330/-. The computation of total income of ITR disclosed salary income at Rs. 5,63,526, Profit and Gain from Business or Profession at Rs.2,81,45,175, and Income from other source at Rs.29,664/- The P&L of ITR shows that total turnover was Rs. 16,00,64,700/-, and the net profit was shown at Rs.2,81,45,175/- For the business income the assessee maintained books of account and audited and filed audit report in Form 3CB and Form 3CD. During the year, the assessee had taken contract for extraction of river sand and for which the assessee was contract by the state government. Apart from the above, it is also found that during the year under consideration the assessee was the partner in two partnership firms and which are: M/s. Shah (AACAS2768Q) & M/s. Shiv Shakti Traders (AADAS8917Q). And the Schedule IF which is for information of partnership firms, there were shown zero capital in the two partnership firms. The AO concluded the assessment- Now the ITR for A.Y.17-18 is perused and found that the total own capital of the assessee in the his balance sheet was Rs.7,24,828/-, and if it is compared to the transactions in A.Y. 18-19, then it is noncomparable. In the course of assessment proceedings, the assessee changed his version that the capital received 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/s-41(1) is invoked on the amount of Rs.6,45,87,137/- Therefore, the amount of Rs.6,45,87,137/- was added u/s-41(1) of IT Act., 1961 to the total income of the assessee."

3 ITA No. 244/Del/2025 Shailendra Yadav Vs. ITO

preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order

dated 26/09/2025, dismissed the Appeal filed by the Assessee. As

against the order of the Ld. CIT(A) dated 26/09/2025, assessee

preferred the present Appeal.

erred in law and in-fact in not appreciating the accounting concept

that funds received in business of the Assessee from his saving bank

account, which is not forming part of booksof business and can only

be recorded through capital account of the business. Further

contended that the Ld. CIT(A) erred in confirming the applicability of

provision of Section 41(1) of the Act with total disregard to the facts

and circumstances. Apart from the same, the Ld. Assessee's

Representative Assessee has also contended that the entire

outstanding balance of capital of M/s Shiv Shakti Traders has been

repaid through banking channels in subsequent financial years,

therefore, submitted that the Ld. CIT(A) committed error in confirming

the addition made by the A.O. Thus, sought for allowing the Appeal.

orders of the Lower Authorities sought for dismissal of the Appeal.

4 ITA No. 244/Del/2025 Shailendra Yadav Vs. ITO

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 introduction of fresh capital. By making this

journal entry, Assessee claimedit as capital introduction in the books

of account. Actually, the said capital introduction was out of the fund

withdrawnfrom AOP, of whichAssessee is one of the Member. Since in

the books of proprietary concerns of the assessee,this amount was not

shown in the name of AOP firm, therefore, the AO has treated the

amount of Rs. 6,45,87,137/- claimed as receipt from Shiv Shakti

Traders, as cessation of liability under Section 41(1) of the Act.

confirmation of account of the Assessee in the books of M/s Shiv

Shakti Traders along with copy of bank statement of the

5 ITA No. 244/Del/2025 Shailendra Yadav Vs. ITO

Assessee,which is already produced along with the Paper Book, as per

which during the year under Appeal, Assessee has received total funds

of Rs. 9,54,00,000/- from M/s Shiv Shakti Traders and after reducing

the amount returned back of Rs. 1,89,00,000/- and as increased by

the Assessee’s share in profit in AOPs business of Rs. 53,570/-, the

closing balance was shown at 8,67,63,204/-. From the perusal of

these facts, it is established that the Assessee was having debit

balance with the AOP firm M/s Shiv Shakti Traders and all the funds

received from the AOP stood credited in the saving bank account of

the Assessee, therefore, they were not recorded in the books of

accounts of the proprietary firm of the assessee which has wrongly

been understood by the AO as NIL balance. It is relevant to state that

all these documents were filed before the Lower Authorities. A perusal

of which the A.O. alleged that there was a difference in the balance

shown in the books of Shiv Shakti Traders vis a viz corresponding

balance in the books of the Assessee. As observed above, the Assessee

has treated the said amount of Rs. 6,45,87,137/- as loan is in his

personal capacity from the AOP firm, therefore, question of any

cessationof liability does not arise and accordingly no addition can be

made under Section 41(1)of the Act. In view of the above, the addition

made by the Ld. A.O. which has been confirmed by ld. CIT(A) is hereby

deleted.

6 ITA No. 244/Del/2025 Shailendra Yadav Vs. ITO

Order pronounced in the Open Court on this 15th Day of May, 2026

Sd/- Sd/- (SANJAY AWASTHI) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 15/05/2026 R. Naheed * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT NEW DELHI