Cash Deposit of Firm cannot be added to Personal Income of Partner: ITAT [Read Order]

The Amritsar bench of the Income Tax Appellate Tribunal (ITAT) has held that the cash deposit of the Firm cannot be added to the personal income of the Partner without investigating the same from the hands of the Firm.

The grievance of the assessee, Sh. Srijal Gupta was that the ld. AO added back the deposit of cash of firm, M/s. Real Estate with the assessee’s total income. The assessee contended that the deposit of cash of the firm should not be added with the total income of the assessee, who is partner of the firm. The separate assessment should be done in the firm account and accordingly the addition should be called for, the assessee argued.

After hearing arguments from both sides, a bench consisting of Dr. M. L. Meena (Accountant Member) and Sh. Anikesh Banerjee (Judicial Member) has observed that the reopening was made u/s. 148 related to purchase of property amount to Rs.9,53,750/-.

“But after completion of assessment, the ld. AO had accepted the assessee’s investment and had not added any amount related to source of funds for purchase of property. Suddenly the ld. AO found that assessee is co-owner of M/s. Real Estate. As per the ld. AO, in the account opening form of the firm in the bank the PAN which was mentioned by firm, was not verified from AST Module (IT data base). The ld. AO came in conclusion that PAN of the firm was fake, so the entire deposit in the bank account of the firm is added back as per the profit-sharing ratio of the partners and added back in the partner’s hand. The ld. AO made gross violation of natural justice in this case. Without the assessment of the firm how the amount deposited in account of the firm was added back in the partner’s hand,” the Tribunal said.

To Read the full text of the Order CLICK HERE

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