Source of capital introduced in previous years , Income Tax

[Ashok Goyal]

Capital introduced by partners in firm in the year 2007 and 2006, my case under scrutiny is A.Y 2008-09, query is regarding the source of capital introduced in the previous years which is opening capital in the current year under scrutiny. Whether AO can ask the source of opening capital when asseessee has filed audited statements along with ITR submitted on due dates.

Posts / Replies

[GOPALJI AGRAWAL]

Just make a polite reply in writing that no fresh capital has been introduced by the partners in the previous year inter-alia.

[B L Bhojwani]

Your kind attention is invited to the proviso to  section 142(1), which places two fold restrictions on the powers of assessing officer under section 142(1). These are :-

(a)  The previous approval of the Joint Commissioner  shall be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts;

(b)  The assessing officer shall not require the production of any accounts relating to a period more than three years prior to the previous year.

Therefore, the assessing officer is well within his powers in calling for the details with regard to the opening capital, since it is covered under clause (b) above.