VINEET KOTHARI, J.

(Prayer: Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Chennai "C" Bench, dated 19.12.2007 in ITA No.2486/Mds/2006, for the Assessment Year 2003-04.)

1. The Assessee has filed this appeal under Section 260A of the Act raising the following substantial questions of law arising from the order of the Income Tax Appellate Tribunal dated 19th December 2007. The appeal was admitted by a Coordinate Bench of this Court on the following substantial questions of law on 17.6.2008:

"1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in confirming the assessment of Rs.58,60,105/- as income of the appellant, invoking Section 41(1) of the Income Tax Act? and

2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in holding that in the absence of confirmation of balances and in the absence of evidence of claim for repayment during the previous year, the liability balances should be deemed to have ceased warranting the invocation of Section 41(1) of the Income Tax Act?"

2. The fact