2022 (11) TMI 326 - AT - Income Tax

Addition being loss from commodity trading when the assessee failed to bring any supporting evidence on record - HELD THAT - We have given a thoughtful consideration to the aforesaid observation of the CIT(Appeals) and except for the fact, that the CIT(Appeals) though inadvertently had referred the date of the remand report of the A.O had however, rightly concluded that there was no justification on the part of the A.O to have declined the assessee's claim of loss from commodity trading. We, thus, finding no infirmity in the view taken by the CIT(Appeals), uphold his order to the said extent. Thus, the Ground of appeal No. 1 and Grounds of appeal No. (s) 4 5 (to the extent relevant to the issue) raised by the revenue are dismissed in terms of our aforesaid observation. Whether CIT(Appeals) had erred in vacating the treating by the A.O of the respective additions/credits in the partners capital account as the undisclosed investment of the assessee firm? - As the A.O in the course of the original assessment proceedings had not raised any query as regards the additions/credits in the respective capital accounts of the partners, therefore, as stated by the Ld. AR and, rightly so, the assessee remained under a bona-fide belief that no doubts were there in the mind of the A.O in respect of the same. We, thus, finding no infirmity in admission of the aforesaid documentary evidence as additional evidence U/rule 46A of the Income Tax Rules, 1962 by the CIT(Appeals), uphold his action to the said extent. For addition in hand which had been vacated by the CIT(Appeals), we find that the assessee had duly substantiated the respective sources from where both the partners had made addition/credits in their respective capital accounts - we not only principally concur with the view taken by the CIT(Appeals) that no adverse inferences as regards the additions/credits in the capital account of the partners was liable to be drawn in the hands of the assessee firm, but also even otherwise, are of a strong conviction that as the source of the respective addition/credits had duly been confirmed by the respective partners out of their duly explained sources, therefore, on the said count also, no addition was called for in its hand. On the basis of our aforesaid observation, we uphold the order of the CIT(Appeals) who had rightly vacated the respective additions that was made by the A.O as regards the additions/credits in the partners capital accounts - Decided against revenue.

Issues Involved:
1. Deletion of addition of Rs. 2,35,09,276/- being loss from commodity trading.
2. Deletion of addition of Rs. 65,16,985/- made to partners' capital account.
3. Deletion of addition of Rs. 5,25,000/- made to partners' capital account.
4. Acceptance of fresh evidence by CIT(A) without allowing AO proper opportunity to examine the same.
5. Allegation that CIT(A)'s findings were contrary to the evidence on record.
6. General errors in law and facts in the order of CIT(A).

Issue-Wise Detailed Analysis:

1. Deletion of Addition of Rs. 2,35,09,276/- Being Loss from Commodity Trading:
The A.O initially accepted the assessee's returned income but later contradicted herself by disallowing the loss from commodity trading due to lack of supporting evidence. The assessee provided contract notes, account copies, and transaction details to substantiate the loss. The CIT(A) admitted these as additional evidence and found them credible, noting that the A.O did not rebut these documents. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the allowance of the loss claim.

2. Deletion of Addition of Rs. 65,16,985/- Made to Partners' Capital Account:
The A.O treated the addition to the partners' capital account as unexplained investments. The assessee provided confirmations and bank statements during remand proceedings to substantiate the sources of these additions. The CIT(A) accepted these explanations, stating that any doubts should be addressed in the partners' hands, not the firm's. The Tribunal agreed, citing relevant judicial precedents, and upheld the deletion of the addition.

3. Deletion of Addition of Rs. 5,25,000/- Made to Partners' Capital Account:
Similar to the previous issue, the A.O treated the addition to the partners' capital account as unexplained. The assessee provided necessary documentation during remand proceedings. The CIT(A) found the explanations satisfactory and concluded that the onus was discharged. The Tribunal concurred, finding no reason to sustain the addition.

4. Acceptance of Fresh Evidence by CIT(A) Without Allowing AO Proper Opportunity to Examine the Same:
The A.O objected to the admission of additional evidence under Rule 46A. However, the CIT(A) had called for a remand report and provided the A.O an opportunity to examine the evidence. The Tribunal found that the CIT(A) followed due process and upheld the admission of the additional evidence.

5. Allegation that CIT(A)'s Findings Were Contrary to the Evidence on Record:
The A.O claimed that the CIT(A)'s findings were perverse and contrary to the evidence. However, the Tribunal noted that the CIT(A) had thoroughly examined the evidence and found it credible. The Tribunal upheld the CIT(A)'s findings, dismissing the A.O's claims.

6. General Errors in Law and Facts in the Order of CIT(A):
The Tribunal reviewed the CIT(A)'s order and found it to be well-reasoned and based on substantial evidence. The general grounds raised by the revenue were dismissed as not pressed.

Conclusion:
The Tribunal dismissed the revenue's appeal and the assessee's cross-objection, upholding the CIT(A)'s order in its entirety. The Tribunal found that the CIT(A) had correctly evaluated the evidence and provided proper opportunities for examination, leading to a fair and justified decision.

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