Amount Received by Assessee from Firm as a beneficiary can’t be treated as ‘Unexplained’: ITAT [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal (ITAT) has recently held that amounts received by the assessee from the firm as a beneficiary cannot be treated as unexplained for the purpose of section 68 and 69 of the Income tax Act, 1961.

Assessee, an individual has showed a large sum of amount as income in her books of accounts during the assessment year and she also purchased two immovable properties for her residential purpose. When she was asked to show the source of investment, she explained that the main source of fund from the personal properties of her grandparents. Further, her grandfather was one of the partners of a partnership firm and after his demise, she became the beneficiary of the belongings and she was entitled to receive the amount.

Rejecting her contentions, the AO noted that the assessee received money in her bank account from different accounts and no explanation was provided regarding the source of such receipts, purpose for which such amounts were transferred to assessee account and whether due tax had been paid on said amounts. The officer has treated it as unexplained investment u/s. 69 of the Act. He also stated that the grandfather of the assessee is not yet engaged any business activity and it was holding the hereditary property in respect of profit sharing ratio of partners and in the case of the assessee it is not distribution of any income from property held by the firm.

Before the CIT(A), the assessee has submitted all the relevant documents which are specifically showing the sources of fund. Furthermore the share received from the partnership firm out of capital gain or goodwill false under business income and it is exempted u/s. 10(2A) of the Income Tax act. The first appellate authority accepted the plea of the assessee and deleted addition finding that the conditions of section 68 are not satisfied in the instant case.

The ITAT bench comprising of C.N. Prasad (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) has observed that the CIT (A) has concluded the case in the right manner. The assessee has clearly mentioned the source of fund which he acquired and also submitted the sufficient proof documents. The bench held that the Assessing Officer is not justified in making addition u/s. 68 of the Act in respect of the amounts received by her from the Firm as a beneficiary.