9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (1) TMI 401 - AT - Income TaxAddition u/s 68 - AO viewed that the investment made by the partners from own sources was not acceptable since no evidence was produced for investment - As per AO loan creditors appeared and explained the sources, all of them have given stereo typed answers, hence the AO did not believe the genuineness of the source - HELD THAT - Without having specific defect or without specifying that the partners does not have source, the finding of the AO cannot be upheld. Similarly, the AO has examined 79 unsecured creditors who appeared before the AO and given statements on oath. All of them have accepted that they have given the loans to the partners, however, as observed by the AO, all the statements were stereotyped answers, hence, the AO viewed that the creditors were tutored and the source is unbelievable. No specific defect with regard to source, credit worthiness and genuineness of the creditors was brought by the AO in his finding in the order. Thus, we find from the order of the AO that the creditors and the partners have explained the sources to the satisfaction of the AO and the Ld.CIT(A). Therefore, we do not see any reason to interfere with the order of the Ld.CIT(A). Capital was introduced by the partners in the firm and the AO made the addition in the hands of the firm instead of partners - In the instant case the the partners have accepted that they have brought the capital and there is no dispute in this regard. The source of the partners also was explained, thus the source of introduction of capital stands explained and there is no case for making the addition in the hands of the firm as held by Hon ble High court of Andhra Pradesh in M/s M.Venkateswara Rao Others ( 2015 (3) TMI 153 - ANDHRA PRADESH HIGH COURT ). Thus addition made by the AO in the hands of the firm in respect of capital contributed by the partners cannot be sustained in law. Hence, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Addition of ?2,12,50,000/- under Section 68 of the Income Tax Act, 1961. 3. Genuineness and creditworthiness of the unsecured loans. 4. Correctness of the addition made in the hands of the firm instead of the partners. Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The revenue filed the appeal with a delay of 17 days, attributing the delay to administrative reasons. The respondent expressed no objection to condoning the delay. Consequently, the delay was condoned, and the appeal was admitted. 2. Addition of ?2,12,50,000/- under Section 68 of the Income Tax Act, 1961: During the assessment proceedings, the Assessing Officer (AO) found that the assessee, a partnership firm with eight partners, had a total capital contribution of ?2,25,50,000/- during the assessment year 2015-16. The AO questioned the sources of these investments. The partners explained that ?77,96,000/- was sourced from their savings, and ?1,47,54,000/- was sourced from unsecured loans. The AO did not accept the explanation for the savings due to lack of evidence and disbelieved the unsecured loans due to stereotyped answers from the creditors, leading to an addition of ?2,12,50,000/- to the returned income. 3. Genuineness and Creditworthiness of the Unsecured Loans: The CIT(A) found that the assessee produced the unsecured creditors, who were examined by the AO. The AO did not find any specific defect in the submissions made by the creditors, except stating that the answers were stereotyped. The CIT(A) observed that the AO did not question the financial capability of the creditors and failed to elicit the truth regarding their creditworthiness. The CIT(A) held that the assessee had explained the source and discharged its burden regarding the identity, creditworthiness of creditors, and genuineness of the transaction. Therefore, the CIT(A) deleted the addition made by the AO. 4. Correctness of the Addition Made in the Hands of the Firm Instead of the Partners: The CIT(A) opined that since the partners introduced the capital from their own sources and borrowings, the AO should have made the addition in the hands of the partners if the genuineness of the creditors was disbelieved. The CIT(A) referenced the decision of the Hon’ble High Court of Andhra Pradesh in M/s M.Venkateswara Rao & Others, which held that the introduction of capital by the partners should be taxed in the hands of the partners, not the firm. The Tribunal upheld this view, stating that the AO's addition in the hands of the firm was impermissible in law. The Tribunal affirmed the CIT(A)'s order, dismissing the revenue's appeal. Conclusion: The Tribunal concluded that the addition made by the AO in the hands of the firm regarding the capital contributed by the partners could not be sustained in law. The appeal by the revenue was dismissed, and the order of the CIT(A) was upheld. The Tribunal emphasized that any addition should be made in the hands of the individual partners, not the firm, following the precedent set by the Hon’ble High Court of Andhra Pradesh. The order was pronounced in the open court on 23rd December 2020.
|
