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TMI Blog2025 (1) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... ried forward from the preceding financial years. Hence, we find force in the argument of the Ld.AR that the opening balance cannot be added as income of the current year by invoking section 69A - AO made addition based on the loose sheets seized but without bringing on record any other evidence to support his case that the amount in question was invested by the partner during the year under appeal. We also note that the Ld.DR could not produce any evidence to support the point that the amount in question was invested by the partner into the firm in the impugned assessment year. The amount in question, being opening balance, cannot be added as income of the assessee u/s. 69A of the Act and we find no infirmity in the order of the ld.CIT(A) in so far as his direction to delete the addition made by the AO and hence, we uphold the same. Addition u/s 69A apply to the deposits made by a partner into the firm - Amount of deposit made by the partner into the firm would not fall under the provisions of section 69A of the Act and therefore, we find no infirmity in the order passed by CIT(A) in holding that the addition made u/s. 69A of the Act is invalid. - ITA No.1241/CHNY/2024 C.O.No.39/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olan Auto Finance from 10.08.2017 to 13.08.2017 and in the course of search, a bunch of loose sheets depicting financial position of the group as at 30.06.2017 was found and seized. During the course of search, it was claimed by few partners and accountant of the group of the firms Mr.Sakthivel, in their sworn statements, that the seized document was prepared on the instruction of Mr.K.Murugesan after incorporating the interest accrued (as if fully recoverable) on all the loans given. 5. Based on the loose sheet seized, the AO completed the assessment u/s. 143(3) of the Act, in the hands of the firm, M/s.Cholan Auto Finance, on 28.12.2019 making the following additions: Particulars Section Addition (Rs.) Nature of addition Loans extinguished Part 1 of the loose sheet 69C 2,91,92,500 Substantive Unaccounted deposits Part 2 of the loose sheet 69 22,22,50,000 Protective Business Profit Part 4 of the loose sheet 28 10,14,12,246 Substantive Unaccounted Cash (seized) 69A 84,18,700 Substantive Total additions 36,12,73,446 The addition made protectively of Rs. 22,22,50,000/- in the hands of the above firm, simultaneously the said amount has been assessed in the hands of partners of the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of search vide loose sheet titled as CAF balance sheet-30.06.2017 , contents of which were confirmed by Shri. K.Sakthivel, accountant of firm and Shri. A.Vijayan, Manager cum partner of the firm 2.1. The Ld.CIT(A) relied on his own order in No.CIT(A)- 19/10982/2019-20 dated 27/02/2024 for AY 2018-19 against the order u/s. 143(3) in the case of M/s.Cholan Auto Finance in which protective addition of Rs. 22,50,00,000/- was deleted but the department preferred appeal against the said order. 2.2 The Ld.CIT(A) erred in accepting the submission of the firm in which the assessee is a partner that the movement of available funds from FY 2009- 10 viz., initial contribution of partners in firms, amount of deposit treated as income consequent to first search, deposit accepted in earlier years resulted into availability of balance of Rs. 22,45,47,917/-. The Ld.CIT(A) failed to appreciate that the firm had not furnished such explanation during the course of assessment proceedings., 2.3 The Ld.CIT(A) relied on the reconciliation of movement of deposits and partner's capital account in all firms from the financial year 2009- 10 furnished by the firm in which assessee is a partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee respondent herein, substantive addition of Rs. 2,50,00,000/- was made u/s. 69A of the Act. The contents of the loose sheet, relied on by the AO, is reproduced for the sake of clarity: Partner : P. Sekar 30/06/2017 Sl.No Customer Name Deposit Amount Interest From 1 month interest No of months Interest payable 1 P Sekar 1,40,00,000 01.7.2016 30.6.2017 1,75,000 12 21,00,000 2 P. Subramani 60,00,000 01.7.2016 30.6.2017 75,000 12 9,00,000 3 Kumar Tricy 50,00,000 01.7.2016 30.6.2017 62,500 12 7,50,000 2,50,00,000 3,12,500 12 37,50,000 11. Before the ld.CIT(A) the assessee contented that the addition made by the AO in the hands of the assessee protectively is unsustainable in law for the following reasons: a. The amount in question was opening balance and not introduced in the current year under appeal; b. There were ample evidences available in the seized material itself to demonstrate that the amount was opening balance; c. The addition was made by AO based on the seized material and no other corroborative evidence are available; d. No addition can be made u/s. 69, in respect of opening balance; e. Addition u/s. 69A cannot be in respect of deposits made in the partnership firm. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.4.17 The undersigned in the order passed u/s 250 of the Act in the case of M/s.Cholan Auto Finance for the A.Y. 2018-19, in DIN Order No. ITBA/APL/S/250/2023-24/1061601766(1) dated 27.02.2024 has held that the deposit amount narrated in the loose sheet seized is nothing but the opening balance of the partnership firm M/s. Cholan Auto Finance. Further, the undersigned in the said order has categorically held that the corresponding cumulative amount of Rs. 22,22,50,000/- being the deposit is the opening balance and not introduced during the financial year relevant to the A.Y. 2018-19, and has allowed the relevant Grounds of Appeal. Further, in the said order the A.O. was directed to delete the addition of Rs. 22,22,50,000/- in the hands of the Firm M/s.Cholan Auto Finance. As the amount of Rs. 2,50,00,000/- is subsumed in the amount of Rs. 22,22,50,000/- the undersigned is of the considered view that there exists no need to consider the amount of Rs. 2,50,00,000/- in the hands of the Appellant, either substantively or protectively. In view of this, the addition made by the A.O. in the hands of the Appellant amounting Rs. 2,50,00,000/- as unexplained money as per the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery or valuable article but has come across only the details of deposit amounting to Rs. 2.50 Crores said to be made in the name of the Appellant. In this regard the Appellant has relied upon the decision of the Hon ble Apex court in the case of D.N.Singh [2023 (5) TMI 746; 454 ITR 595], wherein it has been held that fixed deposit receipts seized during search are merely documents evidencing debt due to the assessee and would not carry any inherent market value and hence cannot be brought within the meaning of the term other valuable article . Further the Hon ble Apex Court while delivering the judgement in this case has endorsed the view of the Gujarat High Court in the case of BhagwandasNarayandas [98 ITR 194 (1973)]. The Hon ble Apex Court has brought out that: The Court approves the view taken by the High Court of Gujarat in BhagwandasNarayandas (supra) that a document of title to immovable property or a fixed deposit receipt would not qualify as other valuable article. .. Valuable, therefore, cannot be understood as anything which has any value. The intention of the law-giver in introducing Section 69A was to get at income which has not been reflected in the books of account b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the books of account, which amounts to fresh submissions and fresh evidence which is in violation of Rule 46A of the Income Tax Rules 1962. 15. Per contra, the Ld.AR contended that the contents of the seized material clearly demonstrate that the amount in question was opening balance and the same cannot be added as income of the current year in appeal u/s. 69A of the Act. Further, the ld.AR submitted that the Ld.DR did not bring any other corroborative evidence other than seized material to support the additions made. Further, the Ld. AR, however, contended that during the course of search, the books of account of all 77 firms maintained in foxpro software were seized as per panchanama dated 13.08.2017 read with Annexure ANN/MP/CAF/ED/SPage1 . Further, it was submitted that statements were recorded from Mr.K.Murugesan, few of the other partners of the group and Mr.Sakthivel, Accountant of the group of finance firms. Mr.Sakthivel had also confirmed that the books of account were maintained in FOXPRO server in his sworn statement dated 31.10.2008 in Q.5 and Q6 (pg 91 of the paperbook). The Ld.AR submitted that the summary/abstract of the balance sheet as at 31.03.2017 and 10.08.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Supreme Court in the case of D.N.Singh [2023 (5) TMI 746; 454 ITR 595]. We find force in the submission of the Ld.AR that the amount of deposit made by the partner into the firm would not fall under the provisions of section 69A of the Act and therefore, we find no infirmity in the order passed by the ld.CIT(A) in holding that the addition made u/s. 69A of the Act is invalid. 18. Thus, all the grounds raised by the Revenue, relating to addition of Rs. 2,50,00,000/- made by the AO towards unaccounted deposits in the hands of the assessee, directed to be deleted by the ld.CIT(A), are hereby dismissed. 19. Since, the revenue appeal is dismissed, thereby the CO filed by the assessee in support of the order of ld.CIT(A), is also dismissed as infructuous. Since the facts and circumstances of the case of Mr.Palaniappan Sekar in ITA No.1241/CHNY/2024 C.O.No.39/Chny/2024 for the A.Y.2018-19 (supra), are identical to the facts in the following appeals and corresponding C.O.s, therefore, our decision in the case of Mr.Palaniappan Sekar in ITA No.1241/CHNY/2024 C.O.No.39/Chny/2024 for the A.Y.2018-19 is mutatis mutandis applicable for these cases also. Assessee Appeal No. of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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