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2020 (1) TMI 395 - AT - Income TaxAddition u/s 68 - unexplained cash credit - HELD THAT:- There was no credit on account of loan or any sum as contemplated under the provisions of section 68 of the Act in the year under consideration in the books of account of the assessee, therefore, we are of the view that no such addition is warranted under section 68 of the Act. As such, the amount was credited in the account of the partner, thus even if it is assumed that the provisions of section 68 are attracted then it would be applied in the hands of the partner of the assessee. It is because the amount was credited in the account of the partner by way of adjustment entry. As such, the assessee is outside the purview of the provisions of section 68 of the Act. - Decided in favour of assessee. Addition u/s 41 - Cessation of liability - HELD THAT:- A plain reading of the provisions reveals that it is applicable with respect to the trading liabilities and there is no information available on record suggesting that the impugned liabilities were representing the trading liabilities. As such, it was noticed that the assessee out of such loan and liabilities has advanced a sum of ₹ 1,39,35,033/- to its group concerned and this fact has not been doubted by the authorities below. Therefore, in the absence of documentary evidence it cannot be assumed that there was trading liability which has ceased to exist in the books of accounts. Indeed the liabilities in the books of accounts of the firm have ceased to exist as the same was transferred to the account of the partner. But, it does not mean that the trade creditors have waived their rights for the amount receivable from the assessee. As such, now the partner was liable for the payment of such amount as it was transferred to his individual account by the assessee. It is also a fact on records that, the partners are liable for the liabilities of the partnership firm. Thus, the liability of the partnership firm is not limited unlike the body corporate. Thus, we are of the view that the liability has not ceased to exist in true sense in the given facts and circumstances as it has shifted to the partner of the firm who was always otherwise liable for such liability in his personal capacity being partner. We hold that the provisions of section 41(1) of the Act cannot be invoked in the given facts and circumstances. Accordingly we reverse the order of the authorities below. - Decided in favour of assessee. Penalty u/s 271(1)(c) - HELD THAT:- The quantum addition made by the AO has already been deleted by us in the appeal filed by the assessee. Once the quantum addition has been deleted, there is no question of claiming the penalty under section 271(1)(c) of the Act. Accordingly, we delete the penalty levied by the authorities below.
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