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TMI Blog2022 (5) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of Rs.. Nil. The return was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny and after following due procedure, the Assessing Officer has completed the assessment under section 143(3) of the Act dated 29.12.2017. 2.1 On verification of the details furnished by the assessee, the Assessing Officer has noted that the assessee firm had filed the first return of income for the assessment year 2015-16 with a capital introduction of Rs..9.70 crores and the onus of providing the source of the said capital introduction entirely vests with the assessee. The assessee has explained the capital introduction to the tune of Rs..7.30 crores only leaving a difference of Rs..2.40 crores as unexplained. Since the assessee could not explain the capital introduction to the tune of Rs..2.40 crores, the Assessing Officer treated the same as unexplained income of the firm and brought to tax. On appeal, the ld. CIT(A) deleted the addition made under section 68 of the Act. 3. Aggrieved, the Revenue is in appeal before the Tribunal challenging the condonation of delay in filing the appeals against quantum addition as well as penalty order before the ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudication on merits." 5.1 From the above detailed observations of the ld. CIT(A), it is clear that the assessee was prevented by reasonable cause for the delay in filing the appeal before the ld. CIT(A), in fact, the ld. CIT(A) has considered the petition for condonation of delay with authentic evidences in support of the reasons stated in the petition. Under the above facts and circumstances, we are of the considered opinion that the ld. CIT(A) has rightly condoned the delay in filing the appeal. 5.2 The two case law relied on in the grounds of appeal have application to the facts of the present case for the reason that the assessee has explained the reasons with adequate evidences for the delay in filing the appeal, which were duly considered by the ld. CIT(A) while condoning the delay in filing the appeal. Thus, the ground raised by the Revenue is dismissed. 6. The next ground raised in the ground Nos. 5 to 9 relates to violation of Rule 46A of the Income Tax Rules, 1962 by stating that Income-tax Non Statutory Form-51 [ITNS-51] is not sufficient. 6.1 We have considered the rival contentions. On perusal of the appellate order, we find that the appeal before the ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m for hearing of the issue raised before the appellate authority. 6.3 Moreover, in the grounds of appeal at ground No. 7, the Revenue has relied on the decision of the Hon'ble Supreme Court judgement in the case of Goetze (India) Ltd. v. CIT 284 ITR 323 (SC) for the preposition that the assessee cannot amend a return filed by him for making a claim for deduction other than by filing a revised return. Further, the Hon'ble Supreme Court makes it clear to restrict to the power of the assessing authority to entertain a claim for deduction otherwise by a revised return and further held that the decision did not impinge on the power of the Appellate Tribunal. 6.4 By referring to the various case law including the decisions of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT (supra), National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC), decision of the Hon'ble Jurisdictional High Court in the case of Ramco Cements Ltd. v. DCIT [2015] 373 ITR 146 (Mad), in the case of CIT v. Abhinitha Foundation Pvt. Ltd. [2017] 396 ITR 251 (Mad), the Hon'ble Jurisdictional High Court has not only made it clear that the power of the appellate authorities to consider claims ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income filed for the first time and the next point for consideration is whether the unexplained partners' capital is assessable in the hands of the assessee or not in terms of section 68 of the Act. With regard to the first point for consideration, the ld. CIT(A) has elaborately clarified the error committed by the assessee firm in para (e) & (f) at page 28 & 29 of the appellate order and the same are reproduced as under: "e) It is noticed from the assessment records that it is not the case of the AO that the appellant firm has purchased assets or owning any assets during the impugned assessment year. Further, during the course of assessment proceedings, it was submitted by the partners that the funds were transferred between them in respect of the land as stated in the above Agreement of sale. From the perusal of the above agreement of sale, it is noted that the transaction was between third parties and spouse of Mr. Gurumurthy Ragupathy and was in no way connected with the appellant firm. Further, nowhere in the above agreement, is it stated that the appellant firm is involved in the transaction and no whisper is made about the appellant firm. Therefore, reporting of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the AO. In the instant case of the appellant firm, the AO on the basis of return filed by the appellant firm has made an addition. The appellant firm has filed its return of income as if capital was contributed by its partner's, whereas it is noticed from the bank statements and other documents that the appellant firm has not received any capital during the impugned assessment year. Moreover, the appellant firm did not enter into any transactions during the year under consideration necessitating it to report the items of Balance Sheet. Therefore, the facts of the case relied upon supra are squarely applicable to the facts of the appellant firm and accordingly am of the considered opinion that the AO erred in making an addition of Rs.2,40,00,000/in the hands of the appellant firm. 7.1 From the above observations of the ld. CIT(A), it is very clear that the figures of Balance Sheet reported by the assessee firm while filing its return of income for the impugned assessment year are erroneous and is a result of mistake committed by the assessee firm. The only basis for making the addition by the Assessing Officer was purely on the basis of amounts reflected in the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions during the year under consideration warranting recording the same in its books of account. The return of income filed by the assessee is not its books of accounts. Under the above facts and circumstances no addition could be made under section 68 of the Act and thus, the addition of Rs..2,40,00,000/- made by the Assessing Officer is liable to deleted. 7.4 With regard to the capital introduced in the assessee firm, the observations of the ld. CIT(A) are reproduced as under: "ii. In the return of income, the appellant firm erroneously reported Rs.9,70,00,000/- against partner's capital. Thus, the AO was of the view that the partner's source for the capital introduction is to be explained by the appellant firm. During the course of assessment proceedings, Mrs. Nithyalakshmi has stated that she had received an advance of Rs.9,70,00,000/- Mr. Gurumoorthy Ragupathy. The AO found from the bank statements of Mr. Gurumoorthy Ragupathy and Mrs.Nithyalakshmi that she had received only the sum of Rs.7,30,00,000/- till 31.03.2015 in her bank account. Hence, the AO concluded that there was a shortfall to the extent of Rs.2,40,00,000/- and treated the same as source of capital o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm from undisclosed sources. On appeal, the Commissioner of Income-tax (Appeals) held that as the deposits were made by the partners before the firm started its business, the same could not be taken to be the income of the firm from undisclosed sources. The Tribunal held that as the amount was credited in the books of the assessee-firm, it was for the assessee-firm to explain the sources of deposits. On a reference: Held, that all the deposits came to be made during the accounting year in the books of the assessee-firm before it started its business and the deposits represented the capital contribution of the partners. It was the partners to explain the source of deposits and if they failed to discharge the onus then such deposits could be added in the hands of the partners only. These deposits could in no case be the income of the assessee-firm because the firm started its business after the credits had been made its books." 7.7 Similarly, by following the decision in the case of CIT v. M. Venkateswara Rao and others [2015] 370 ITR 212 (T&AP), In the case of ITO v. Gowthami Builders in ITA Nos. 314/Viz/2016 & 392/Viz/2017 & ors dated 14.03.2018, the Visakhapatnam Bench of ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NOT ASSESSABLE IN HANDS OF FIRM UNDER SECTION 68 - INCOME-TAX ACT, 1961, s. 68." 7.9 From the above, it is clear that the capital introduced by the partners cannot be taxed in the hands of the assessee-firm under section 68 of the Act. Under the above facts and circumstances as well as considering various case law, we are of the considered opinion that the ld. CIT(A) has fully justified in deleting the addition of Rs..2,40,00,000/- made under section 68 of the Act. Thus, the appeal filed by the Revenue is dismissed. 8. The Revenue has also preferred an appeal against deletion of penalty levied under section 271(1)(c) of the Act. 8.1 After passing the assessment order under section 143(3) of the Act dated 29.12.2017, the Assessing Officer has passed the penalty order under section 271(1)(c) of the Act dated 29.06.2018 by simply reproducing the assessment order. First of all, what was concealed the particulars of income and furnished inaccurate particulars by the assessee warranting levy of penalty has not been discussed in the penalty order. On appeal against penalty order, the ld. CIT(A) has held that having adjudicated the quantum appeal in favour of the assessee by deleting t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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