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2024 (5) TMI 90 - ITAT PUNEAddition u/s 68 - capital introduced by five partners, which in turn was out of the loan advanced - Proprietor of loan advancing concern is a non filer of income tax return and does not have the creditworthiness HELD THAT:- We find in the case of Prayag Tendu Leaves Processing Co. [2017 (12) TMI 932 - JHARKHAND HIGH COURT] while deciding an identical issue has held that u/s 68 of the Act, the AO, while assessing a partnership firm, can go behind the source of income of the partnership firm, but he cannot go to the ‘source of source’. We find in the case of PCIT vs. Vaishnodevi Refoils & Solves [2018 (1) TMI 861 - GUJARAT HIGH COURT] under identical circumstances has held that if the AO is not convinced about the creditworthiness of the partners who had made the capital contribution, the inquiry had to be made at the end of the partners and not against the firm. While holding so, the Hon’ble Gujarat High Court followed its earlier decision in CIT vs. Pankaj Dyestuff Industries [2005 (7) TMI 601 - GUJARAT HIGH COURT]. Similar view has been taken in various other decisions relied on by the assessee, wherein it has been held that the addition, if any, can be made in the hands of partners on account of introduction of capital, but no addition can be made in the hands of firm. Thus we hold that the addition made by the AO u/s 68 of the Act in the hands of assessee firm on account of introduction of capital by the partners is not sustainable in the eyes of law. We, therefore, set aside the order of CIT(A) / NFAC and direct the AO to delete the addition - Decided in favour of assessee.
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