2024 (9) TMI 1518 - AT - Income Tax

Unexplained investment - assessee could not bring anything on record to establish that this unexplained investment was from known source of income - CIT(A) deleted addition - HELD THAT - We are inclined to agree with the decision of the CIT(A). We also find force in the contention of assessee that where the assessee furnishes a valid explanation for the investment made, the onus cast upon it is discharged. We are of the considered opinion that the decision of the co-ordinate bench in the case of M/s Ambika Enterprises 2023 (7) TMI 1401 - ITAT DELHI relied upon by the assessee, squarely applies. It was held, on the issue of addition of share capital u/s 68 of the Act, that where there is no ambiguity about the identity of the partner and capital introduced from him, in such circumstances, if the AO was of the opinion that the amount is not proved in the hands of the partner, he should have considered it in his individual hands and not in the hands of the firm. We also find that this view is supported by the decision of Metachem Industries 1999 (9) TMI 21 - MADHYA PRADESH HIGH COURT . We notice that the Tribunal while coming to the conclusion in the case of Ambika Enterprises supra , has cited the decisions relied upon by the ld. counsel for the assessee as above. No infirmity in the order of the ld. CIT(A). Accordingly, we dismiss the appeal of Revenue.

Summary

Issues:
Appeal against deletion of addition of unexplained investment in LLP partnership firm for A.Y 2018-19.

Analysis:
1. The Revenue appealed against the deletion of an addition of Rs. 2,92,82,500 on account of unexplained investment in a LLP partnership firm. The Revenue contended that the assessee failed to establish the known source of income for the investment.

2. The CIT(A) allowed the appeal and deleted the addition, stating that the funds were sourced through secured/unsecured loans. The Revenue argued that the explanation provided for the funds from certain partners did not match the balance sheet details, questioning the creditworthiness of the partners.

3. The Tribunal examined the creditworthiness of the partners and upheld the CIT(A)'s decision. It noted that the loans were sourced through banking channels and that the partners had substantial surplus funds and sources to advance loans. The Tribunal emphasized that if the payer's identity is established and transactions are genuine, the amount should not be added to the firm's income.

4. The Tribunal referenced various court decisions to support its decision, including cases like Kesharwani Sheetalya Sahson Vs. DCIT and CIT Vs. Metachem Industries. It highlighted that the Assessing Officer should have considered discrepancies in personal affairs separately and not added the amount to the firm's income without valid reasoning.

5. Ultimately, the Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal, emphasizing that the onus on the assessee to explain the investment was discharged. The Tribunal's decision was based on the principles of valid explanations for investments and distinguishing between individual and firm income.

6. The judgment was pronounced on 11.09.2024, dismissing the Revenue's appeal in ITA No. 3543/DEL/2023.