2018 (1) TMI 1732 - AT - Income Tax

Addition u/s 68 - unexplained cash credits - capital introduction by assessee s partner - addition made in partner s hands v/s firm s case - HELD THAT - We find no merit in Revenue s instant argument since hon ble jurisdictional high court s judgment in M/s. Odedara Construction 2014 (2) TMI 130 - GUJARAT HIGH COURT as relied upon by the CIT(A) settles the law that such an addition is to be made in partner s hands instead of that in a firm s case. CIT(A) has already issued necessary directions to this effect to the Assessing Officer. We therefore see no reason to accept Revenue s instant sole substantive grievance.

Summary

Issues Involved:
Appeal against CIT(A)'s order deleting Section 68 addition of unexplained cash credits in respect of capital introduction by the assessee's partner.

Analysis:
The Revenue's appeal challenged the CIT(A)'s decision to reverse the Assessing Officer's action of adding Rs.1,26,11,000 as unexplained cash credits related to the capital introduction by the assessee's partner. The AO provided multiple opportunities for the appellant to provide relevant details and evidence supporting the transactions, but the appellant failed to comply adequately. The AO observed discrepancies in the partner's capital account and the lack of supporting evidence, leading to the addition under Section 68 of the Income Tax Act. The appellant's non-compliance and failure to provide satisfactory explanations resulted in the addition of the amount to the total income and initiation of penal proceedings under section 271(1)(c).

The appellant's lack of compliance during the appellate proceedings and failure to produce necessary evidence raised concerns regarding the genuineness of the transactions. The issue of whether the capital introduced by the partner should be assessed as income of the firm under Section 68 was crucial. Reference was made to the decision of the Jurisdictional High Court in a similar case, emphasizing the need to prove the genuineness of transactions. The High Court's decision highlighted the importance of partners' capacity to introduce capital and the necessity of supporting evidence to justify transactions.

The Tribunal found no merit in the Revenue's argument, citing the precedent set by the Jurisdictional High Court's judgment in a similar case. The court's decision clarified that such additions should be made in the partner's hands rather than the firm's. The CIT(A) had already issued directions for the Assessing Officer to proceed accordingly. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of the capital introduced by the partner in the firm's hands.

In conclusion, the Tribunal's judgment upheld the CIT(A)'s decision, emphasizing the importance of providing supporting evidence and complying with the requirements to prove the genuineness of transactions. The case serves as a reminder of the need for transparency and adherence to legal procedures in tax assessments.