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2023 (12) TMI 32 - HC - Income TaxAddition u/s 68 - capital introduced by the partners - AO subsequently disallowed the interest paid to the partners on the capital introduced by them - burden of proof - assessment in hands of partners or firm? - As argued by appellant, the Hon’ble ITAT has erroneously mis-interpreted the provisions of Section 68 and have also held taxing the credits by the partners in the hands of the assessee firm - Hon’ble ITAT had reversed the order of the CIT (Appeals) holding that the appellant has not been able to provide sufficient material to establish the source of income of the partners who had invested in the appellant’s partnership firm - HELD THAT:- If in a proceeding u/s 68 of the Act, the assessee has been able to explain the sources of income, which in the instant case, the appellant had been stating that the capital investment made by the partners of the said firm is sufficient to meet the requirement under Section 68 of the Act. Thereafter, if at all, if the respondent-Department was not satisfied with the explanation, it was for them to have got it verified from the partners. Rather than still pursuing the matter before the appellant’s partnership firm, which is otherwise impermissible. In the instant appellant having said that the capital investment is that made by the partners. Applying the aforesaid judicial precedents of M. Venkateshwar Rao [2015 (3) TMI 153 - ANDHRA PRADESH HIGH COURT], M/s. Nova Medicare [2023 (3) TMI 218 - TELANGANA HIGH COURT] and Lovely Exports (P) LTD [2008 (1) TMI 575 - SC ORDER] the burden now shifts upon the respondent-Department to get it counter verified from the partners from their books of accounts ascertaining whether such investments have been made or not. In the absence of such an enquiry/verification from the partners by the respondent-Department, the order of the Assessing Officer, as also the stand taken by the Hon’ble ITAT would not be sustainable and the same deserves to be and is accordingly set aside/quashed. The order passed by the CIT (Appeals) stands affirmed. Decided in favour of assessee.
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