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TMI Blog2022 (5) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... -rule (4) of Rule 46A of the Income Tax Rules to adjudicate the ground raised in the appeal based on the materials available on records. We find no infirmity in the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the Revenue is dismissed. Addition u/s 68 on unexplained capital - HELD THAT:- Figures of Balance Sheet reported by the assessee firm while filing its return of income for the impugned assessment year are erroneous and is a result of mistake committed by the assessee firm. The only basis for making the addition by the Assessing Officer was purely on the basis of amounts reflected in the return of income and not with reference to any other documentary evidence. Thus, the addition made by the Assessing Officer is erroneous for the reason that the basis for making the addition itself is erroneous and liable to be deleted. Whether the unexplained partners capital is assessable in the hands of the assessee or not in terms of section 68? - Whether the partners capital is assessable in the hands of the assessee firm has been adjudicated by various Benches of the Tribunal as well as various courts and held that there cannot be any ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70 crores and the onus of providing the source of the said capital introduction entirely vests with the assessee. The assessee has explained the capital introduction to the tune of ₹.7.30 crores only leaving a difference of ₹.2.40 crores as unexplained. Since the assessee could not explain the capital introduction to the tune of ₹.2.40 crores, the Assessing Officer treated the same as unexplained income of the firm and brought to tax. On appeal, the ld. CIT(A) deleted the addition made under section 68 of the Act. 3. Aggrieved, the Revenue is in appeal before the Tribunal challenging the condonation of delay in filing the appeals against quantum addition as well as penalty order before the ld. CIT(A) as well as deleting the disallowance of unexplained capital. 4. On the other hand, the ld. Counsel for the assessee strongly supported the orders passed by the ld. CIT(A). 5. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The Department has challenged condonation of delay of 300 days in filing the appeal before the ld. CIT(A). The assessment order under section 143(3) of the Act was se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly condoned the delay in filing the appeal. 5.2 The two case law relied on in the grounds of appeal have application to the facts of the present case for the reason that the assessee has explained the reasons with adequate evidences for the delay in filing the appeal, which were duly considered by the ld. CIT(A) while condoning the delay in filing the appeal. Thus, the ground raised by the Revenue is dismissed. 6. The next ground raised in the ground Nos. 5 to 9 relates to violation of Rule 46A of the Income Tax Rules, 1962 by stating that Income-tax Non Statutory Form-51 [ITNS-51] is not sufficient. 6.1 We have considered the rival contentions. On perusal of the appellate order, we find that the appeal before the ld. CIT(A) against the assessment order passed under section 143(3) of the Act dated 29.12.2017 was filed by the assessee on 24.11.2018 and the appellate order was concluded on 16.12.2019. The ld. CIT(A) has issued Income-tax Non Statutory Form-51 to the Assessing Officer for confirmation in respect of which, there was no response from the Assessing Officer. In the absence of confirmation from the Assessing Officer, the ld. CIT(A) has presumed that the facts sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t clear to restrict to the power of the assessing authority to entertain a claim for deduction otherwise by a revised return and further held that the decision did not impinge on the power of the Appellate Tribunal. 6.4 By referring to the various case law including the decisions of the Hon ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (supra), National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC), decision of the Hon ble Jurisdictional High Court in the case of Ramco Cements Ltd. v. DCIT [2015] 373 ITR 146 (Mad), in the case of CIT v. Abhinitha Foundation Pvt. Ltd. [2017] 396 ITR 251 (Mad), the Hon ble Jurisdictional High Court has not only made it clear that the power of the appellate authorities to consider claims made based on the materials already available on record is co-terminus with the power of the Assessing Officer and the failure to advert to the claim in the original return or the revised return cannot denude the appellate authorities of their power to consider the claim, if, the relevant material is available on record and is otherwise tenable in law, but also, it was held that even if, the claim made by the assessee company does not form par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) It is noticed from the assessment records that it is not the case of the AO that the appellant firm has purchased assets or owning any assets during the impugned assessment year. Further, during the course of assessment proceedings, it was submitted by the partners that the funds were transferred between them in respect of the land as stated in the above Agreement of sale. From the perusal of the above agreement of sale, it is noted that the transaction was between third parties and spouse of Mr. Gurumurthy Ragupathy and was in no way connected with the appellant firm. Further, nowhere in the above agreement, is it stated that the appellant firm is involved in the transaction and no whisper is made about the appellant firm. Therefore, reporting of Rs.9,50,00,000/- against the gross block of fixed assets without actually owning any asset in its return of income filed for the impugned assessment year is an error committed by the appellant firm. Moreover, the same Rs.9,50,00,000/- was reported by Mrs. Nithyalakshmi in her return of income under assets side while filing the return of income for the impugned assessment year. Therefore, beyond any doubt, it is clear that the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not enter into any transactions during the year under consideration necessitating it to report the items of Balance Sheet. Therefore, the facts of the case relied upon supra are squarely applicable to the facts of the appellant firm and accordingly am of the considered opinion that the AO erred in making an addition of Rs.2,40,00,000/in the hands of the appellant firm. 7.1 From the above observations of the ld. CIT(A), it is very clear that the figures of Balance Sheet reported by the assessee firm while filing its return of income for the impugned assessment year are erroneous and is a result of mistake committed by the assessee firm. The only basis for making the addition by the Assessing Officer was purely on the basis of amounts reflected in the return of income and not with reference to any other documentary evidence. Thus, the addition made by the Assessing Officer is erroneous for the reason that the basis for making the addition itself is erroneous and liable to be deleted. 7.2 The next point for consideration is whether the unexplained partners capital is assessable in the hands of the assessee or not in terms of section 68 of the Act. For ready reference, prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced in the assessee firm, the observations of the ld. CIT(A) are reproduced as under: ii. In the return of income, the appellant firm erroneously reported Rs.9,70,00,000/- against partner's capital. Thus, the AO was of the view that the partner's source for the capital introduction is to be explained by the appellant firm. During the course of assessment proceedings, Mrs. Nithyalakshmi has stated that she had received an advance of Rs.9,70,00,000/- Mr. Gurumoorthy Ragupathy. The AO found from the bank statements of Mr. Gurumoorthy Ragupathy and Mrs.Nithyalakshmi that she had received only the sum of Rs.7,30,00,000/- till 31.03.2015 in her bank account. Hence, the AO concluded that there was a shortfall to the extent of Rs.2,40,00,000/- and treated the same as source of capital of the appellant firm which remained unexplained. Accordingly, the Ao made an addition of Rs.2,40,00,000/- in the hands of the appellant as unexplained income because Mrs. Nithyalakshmi failed to explain the source for the differential sum of Rs.2,40,00,000/-. I am of the considered opinion that the question of explaining the source for the capital contribution is not warranted because the partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deposits. On a reference: Held, that all the deposits came to be made during the accounting year in the books of the assessee-firm before it started its business and the deposits represented the capital contribution of the partners. It was the partners to explain the source of deposits and if they failed to discharge the onus then such deposits could be added in the hands of the partners only. These deposits could in no case be the income of the assessee-firm because the firm started its business after the credits had been made its books. 7.7 Similarly, by following the decision in the case of CIT v. M. Venkateswara Rao and others [2015] 370 ITR 212 (T AP), In the case of ITO v. Gowthami Builders in ITA Nos. 314/Viz/2016 392/Viz/2017 ors dated 14.03.2018, the Visakhapatnam Bench of ITAT has decided the issue against the Revenue. The relevant portion of the order of the Hon ble Telangana Andhra Pradesh High Court is reproduced as under: Held, dismissing the appeal, (i) that the amount that was sought to be treated as income of the firm was the contribution made by the partners to the capital. In a way, the amount so contributed constitutes the very substratu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully justified in deleting the addition of ₹.2,40,00,000/- made under section 68 of the Act. Thus, the appeal filed by the Revenue is dismissed. 8. The Revenue has also preferred an appeal against deletion of penalty levied under section 271(1)(c) of the Act. 8.1 After passing the assessment order under section 143(3) of the Act dated 29.12.2017, the Assessing Officer has passed the penalty order under section 271(1)(c) of the Act dated 29.06.2018 by simply reproducing the assessment order. First of all, what was concealed the particulars of income and furnished inaccurate particulars by the assessee warranting levy of penalty has not been discussed in the penalty order. On appeal against penalty order, the ld. CIT(A) has held that having adjudicated the quantum appeal in favour of the assessee by deleting the additions made by the Assessing Officer, there remains no raison d tre for sustaining the penalty imposed and allowed the appeal of the assessee. 8.2 Aggrieved, the Revenue is in appeal before the Tribunal. By relying upon the grounds of appeal, the ld. DR pleaded for confirmation of penalty levied under section 271(1)(c) of the Act. 8.3 Having heard both s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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