No addition can be made u/s 68 of Income Tax Act in hands of assessee Firm on account of Capital introduced by Partners: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi bench held that no addition could be made under Section 68 of Income Tax Act, 1961 in hands of the assessee firm on account of the capital introduced by partners. Therefore, if the amount is not proved in the hands of the partner, it should have considered it in his  individual hands and not in the hands of the firm.

Assessee Ambika Enterprises is a partnership firm. During the year under consideration, there is capital introduced by the partners in their capital account. AO has obtained the copy of the capital account of the partners and determined the amount  and also verified the transactions carried by the partners with others.

The AO further observed that amount received from M/s Seven Heaven Landcon Pvt. Ltd. and M/s Ambika Buildmart Pvt. Ltd. has been routed through partners through partners to create share capital of assessee firms.

Finally the AO has prepared the list  of the submissions made by the assessee  in respect of the amount received by the partners from different persons and held   that appellant firm has been unable to discharge its statutory onus of proving genuineness and creditworthiness of the source of share capital as per provisions of Section 68 of Income Tax Act, 1961 and added Rs. 2,68,50,000/- in the taxable income of the assessee  on account of capital introduced by the partners in the assessee firm.

Aggrieved by the order, the assessee filed an appeal  before the Commissioner of Income Tax (Appeal){ CIT(A)}, who deleted the addition. Thereafter the revenue  filed a second appeal before the tribunal.

Before the tribunal, Kapil Goel, counsel for the assessee submitted that capital has been introduced by a partner of the firm. Further the assessee firm  has received the whole of the payments towards capital contribution through banking channel from the partners. So The identity of the partners and regarding sources of income has been placed on record.

Kanv Bali, Counsel for the Revenue, supported the decision of lower authorities .

During the proceedings the tribunal observed that the assessee has established that funds have been received from the partners, the onus of the assessee  being discharged. In such circumstances addition could not be made in the hands of the assessee firm .

After reviewing the facts submitted by both parties, the two member bench of Shamim Yahya,(Accountant Member ) and Yogesh Kumar Us,(Judicial Member) held that no addition could be made under Section 68 of Income Tax Act, 1961 in hands of the assessee firm on account of the capital introduced by partners.

Therefore, the bench dismissed the appeal filed by the revenue.

To Read the full text of the Order CLICK HERE

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