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TMI Blog2023 (10) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... ind substance in such arguments made by the Ld. DR. Furthermore, it is a settled principle that the capital cannot be attributable as expenses and in the instant case part of the old capital had been withdrawn by the partners of the firm, which is not liable to be subjected to the provisions of Section 40A(3). Moreso, when the entire materials were placed before the Ld. AO during the course of assessment proceeding and only upon verification of the same, the return of income was accepted, which is also reflecting from the order passed by the Ld. AO mentioned therein, in our considered opinion, assessment cannot be reopened by exercising power conferred u/s 263 of the Act by the Ld. PCIT in the manner it has been done. We find that the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . M. Rindani, A.R. For the Respondent : Shri Shramdeep Sinha, CIT.D.R. ORDER PER Ms. MADHUMITA ROY - JM: The instant appeal at the instance of the assessee is directed against the order dated 21.01.2022 passed by the Principal Commissioner of Income Tax-3, Rajkot (in short 'the PCIT') holding the assessment order dated 10.12.2019 passed by the DC/ACIT, CIR-3(1), RKT under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to 'the Act') erroneous and prejudicial to the interest of Revenue and setting aside the issue to the file of the Ld. AO with a direction upon him to pass a fresh assessment only to the extent of the issues in respect of the provision of Section 40A(3) of the Act with proper enquiry and verification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar D. Jha 25,000.00 Withdrawal by Partner 16 1878 28-02-2017 Rajesh N. Talaviya 50,000.00 Withdrawal by Partner 17 1989 15-03-2017 Animesh Kumar D. Jha 25,000.00 Withdrawal by Partner 18 1990 15-03-2017 Rashmiben A. Jha 50,000.00 Withdrawal by Partner 19 1991 1991 15-03-2017 Varshaben R. Talaviya 50,000.00 20 1992 15-03-2017 Site Supervisor & Engi. Salary 20,000.00 Salary Exp. 7,60,000.00 3. The Ld. PCIT is of the opinion that the Ld. AO failed to enquire the above aspect in the books of accounts including the cash book and vouchers while completing the assessment in the case of the assessee. A show cause notice, therefore, dated 20.07.2021 was issued proposing to subject the assessment order of the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Court, partnership is a relation between certain persons who agree to share the profits of the business. In Income Tax Law, a firm is a unit of assessment by special provisions but is not a full person. Thus, the partners cannot be considered as separate and Distinct from their firm and any money provided by them to the firm cannot be taken as an independent transaction of loan under the purview of Section 269SS of the Act. Despite the position as laid down by the Supreme Court, the legal status of a partnership firm vis-à- vis its partners have always been under debate and so is the applicability of Section 269SS or 269T to money advanced by partner to his firm relying upon this decision, the High Court of Delhi in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he details of partners of the firm including the remuneration paid to them for A.Y. 2017-18, the rate of interest and interest paid for A.Y. 2017-18 were directed to be provided. Needless to mention, the assessee provided the entire details to the Ld. AO during the course of assessment proceeding including the ledger of cash book along with narration for the period 01.04.2016 to 31.03.2017. The same has also been annexed to the paper book. It, therefore, appears that the impugned payment being the withdrawal by the partner from the firm has duly been considered by the Ld. AO during the course of assessment proceeding and only upon due application of mind, the same has been not disputed. 8. On the other hand, Ld. DR relied upon the order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erification of the same, the assessment was finalized. It is relevant to mention that the Ld. PCIT referred Explanation (2) to Section 263(1) of the Act while holding the order of assessment erroneous and prejudicial to the interest of the Revenue and exercising power in passing direction for re-assessment by the Ld. AO which in our considered opinion is not having any manner of application as the examination and/or verification of the issue involved in the PCIT's order were duly been made by the Ld. AO which is also reflected in the order so passed by the Ld. AO at Paragraph Nos. 2 & 3 therein. Thus, after considering the entire gamut of the matter, the prima facie finding made by the Ld. PCIT holding the order passed by the ld. AO dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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