2023 (7) TMI 28 - HC - Income Tax

Addition u/s 68 - cash capital introduced by partners out of the loan taken by partner from the Bajaj Finserv Ltd. - as submitted that all the partners had bank account, therefore capital could have been introduced through cheque in favour of the firm and assessee did not explain as to when the loan from Bajaj Finserv Ltd. was taken as claimed - ITAT confirmed the finding of the Commissioner observing that the assessee had explained the partners source - HELD THAT - The cash component in which form the capital was introduced in the firm was small compared to the total capital introduced. Secondly, there is no bar against introducing the capital by way of cash. Thirdly, it was shown that the partners had taken loan of Bajaj Finserv Ltd. to the tune of Rs. 4.5 crores, out of which Rs. 4 crores was introduced in the firm by way of capital. ITAT further endorsed the findings of the Appellate Commissioner to note that the partners were assessed to tax and therefore accounts were audited. All these particulars were not doubted even by AO at the time of assessment proceedings, it was observed. The concurrent findings are reasonable and properly arrived at. They are in the nature of findings of facts required to be upheld. No substantial question of law.

Summary

Issues involved:
Challenge to the order of the Income Tax Appellate Tribunal under section 260A of the Income Tax Act, 1961 regarding addition of capital by partners in cash and interest on capital for the assessment year 2014-15.

Summary:
The appellant, engaged in the business of manufacturing ornaments, filed a return of income for the assessment year 2014-2015, showing business income and income from other sources. The Assessing Officer made additions towards introduction of capital by partners in cash and interest on capital. The Commissioner of Income Tax (Appeals) allowed the appeal of the assessee, deleting the entire addition. The revenue appealed to the Income Tax Appellate Tribunal, which dismissed the appeal. The appellant challenged this decision, questioning the deletion of the addition made under section 68 of the Income Tax Act.

The learned advocate for the appellant contended that the Tribunal's decision was against the law and facts on record. The source of cash capital introduced by partners was claimed to be a loan from Bajaj Finserv Ltd., which was disputed. The appellant failed to justify the claimed capital introduction and did not provide evidence of when the loan was taken.

The Appellate Commissioner set aside the addition made by the Assessing Officer, noting that only a small portion of the capital was introduced in cash, while the rest was through a loan from Bajaj Finserv Ltd. The Tribunal confirmed this finding, stating that the partners' sources of cash were explained and verified. The Tribunal emphasized that the partners' accounts were audited and their tax assessments were in order, which the Assessing Officer did not dispute during the assessment proceedings.

The findings of the Appellate Commissioner and the Income Tax Appellate Tribunal were deemed reasonable and based on facts, warranting no interference. It was concluded that no substantial question of law arose, and the appeal was dismissed as meritless.