Income from a Partnership Firm having Separate Identity from Partner can't be added together u/s 69A of Income Tax Act: ITAT deletes Addition [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that the income from the partnership firm having a separate identity from the partner cannot be added together under Section 69A of the Income Tax Act, 1961.

The assessee is a partner in a partnership firm, Champahati C.S. Shop, which holds a liquor license and is engaged in the business of trading in liquor. The assessee had filed a return of income under Section 139(1) of the Income Tax Act declaring a total income of Rs.6,80,020.

The case was selected for scrutiny through CASS for verification of cash deposited during the demonetization period followed by issuance of notice under Section 143(2) & 142(1) of the Income Tax Act.

According to the Assessing Officer, the cash deposits in these bank accounts did not form part of the books of accounts of the assessee and therefore required the assessee to explain the same.

The Assessing Officer held that the cash deposits of Rs.78,809/- appearing in SBI and cash deposits of Rs.66,93,728/- & Rs.3,51,84,160/- appearing in the two bank accounts held with Boral Union Cooperative Bank were found not recorded in the books of the assessee and therefore treated the aggregate sum of Rs.4,19,56,697/- as unexplained cash credit under Section 69A of the Income Tax Act in the hands of the assessee.

The counsel for the assessee brought to our notice the synopsis of the cash deposits in the bank accounts held with SBI Bank & Boral Union Cooperative Bank wherein it was explained that only the savings bank account held with SBI beneficially belonged to and was owned by the assessee and that the cash deposits of Rs.78,809/- therein formed part of her books of accounts and was duly considered while calculating the income of Rs.6,80,020/- earned by her during the year.

The Authorized Representative brought to our notice the copy of the partnership deed between the assessee and her sister, Smt. Oishi Chakraborty which was formed pursuant to the joint inheritance of the liquor license and the Champahati CS Shop upon the demise of their mother.

It was further submitted that the impugned addition made in the hands of the assessee was unjustified as the Bank accounts held with Boral Union Cooperative Bank did not belong to her.

Further, as the cash deposited therein had already been credited and formed part of the regular books of her partnership firm, M/s Champahati CS Shop, it was claimed that the impugned addition was tantamount to the assessment of the same amount twice.

The two-bench member comprising of Manish Borad (Accountant member) and Sonjoy Sarma (Judicial member) held that the addition of Rs. 4,19,56,697/- made by the Assessing Officer under Section 69A of the Income Tax Act in relation to the cash deposited in Boral Union Cooperative Bank was unjustified as the same did not relate to her but belonged to her partnership firm M/s Champahati CS Shop in which both the bank accounts and the cash deposits from cash sales had been duly accounted in the regular books of accounts. Therefore, directed the Assessing Officer to delete the same.

The aforesaid addition was also held to be untenable and the Assessing Officer was directed to delete this addition made under Section 69A of the Income Tax Act as well.

Thus, the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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