TMI Blog2024 (5) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... I 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. - Shri R. K. Panda, Vice President And Shri S.S. Godara, Judicial Member For the Assessee : Shri Sanket M Joshi For the Department : Shri Ramnath P Murkunde ORDER PER R. K. PANDA, VP : This appeal filed by the assessee is directed against the order dated 22.02.2023 of the CIT(A)/NFAC, Delhi relating to assessment year 2017-18. 2. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of running of raw cotton ginning pressing unit. It filed its return of income on 31.10.2017 declaring total income of Rs. 42,32,160/-. The case was selected for limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of manufacturing activity is of raw cotton ginning and pressing, extracting the cotton, Cotton Sees YP dust from Raw Cotton and cotton seed oil mill, extracting the cotton seed oil, cotton seed cake and gad. During the year under consideration, the capital has been introduced in the firm through the partners and it has been found that the assessee firm has received loan from an entity M/s MM Traders, Borivali, Mumbai to the tune of Rs. 1,10,00,000/-. The person Shri Harish K Shah (prop. of MM Traders) is a non-filer. Therefore, the identity, creditworthiness and genuineness of the transactions remains unsatisfactorily explained. 7.2 During the investigation by the DDIT, Unit 5(4), Mumbai, in the statement recorded, the person has confirmed that he is non-filer. Further, he has stated that he has no records of the concern M/s MM traders. Thus, it is astonishing that the person has no documents of his own proprietary concern. He also stated that he has no records of his income ledger. 7.3 On perusal of the bank account statement of the person, it was found that the account was maintained in Pachora Branch. It is illogical for a person who is residing in Borivali, Mumbai doing no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted. 7.7 The provision of section 68 is attracted when any sum is found credited in the books of accounts of the assessee. The word any sum are wide enough to cover the transactions appearing in the books of accounts of an assessee and, therefore, if the assessee offers no explanation about the nature and sources of the capital, then such increase in capital is nothing but the deemed income of the assessee as per the provisions of the section 68 of the Act. 4. In appeal, the Ld. CIT(A) / NFAC sustained the addition made by the AO by observing as under: 4.5 It is a well established principle of taxation that a person who shows credit in his books has to show the validity thereof failing which it might be reasonably be presumed that this amount is the recipient's own income. From the details filed it would appear that appellant has slowly built up sundry creditors in his books and that Mr Harish Kantilal Shah the so-called creditor to whom the payment has also been made by the firm is a dummy and a bogus entity. Not only this the further credits appearing as a source of capital for Mr Harish Kantilal Shah to advance loans of Rs. 20,00,000 each to each of the 5 partners of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant and once the onus lying upon the appellant u/s 68 was duly discharged by filing documentary evidences, no addition could have been made merely on the basis of suspicion, surmises and vague reasons without appreciating the relevant facts of the case. 6. The Ld. Counsel for the assessee submitted that the impugned capital of Rs. 1,10,00,000/- was introduced by five partners, the details of which are as under: Sr. Name of Partner Amount introduced Date of introduction Sources of capital introduced in the hands of the partners 1 Bhagwan T. More 20,00,000 12.09.2016 Loan advanced by Mr. Harish Shah, Prop., M.M. Traders on 12.09.2016 through bank to the partner 2 Pandurang J. More 20,00,000 15.09.2016 Loan advanced by Mr. Harish Shah, Prop., M.M. Traders on 12.09.2016 through bank to the partner 3 Ravindra S. Marathe 20,00,000 10,00,000 14.09.2016 02.02.2017 Loan advanced by Mr. Harish Shah, Prop., M.M. Traders on 12.09.2016 through bank to the partner. Loan advanced by Mr. Mihir Harish Shah, Prop., M.M. Traders (same firm name) on 27.01.2017 through bank to the partner 4 Samadhan D. Patil 20,00,000 12.09.2016 Loan advanced by Mr. Harish Shah, Prop., M.M. Traders on 12.09.2016 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. Further, the bank statement of M.M. Traders shows that the person has either received the amount from the firm or the partners of the firm and then transferred the amount to the account of the partners. Further, there are cash deposits immediately before transferring the money to the partners. We find the CIT(A) / NFAC sustained the addition made by the AO, the reasons of which are already reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that since the partners have introduced capital in the partnership firm out of funds available in their bank accounts and have produced the necessary evidences before the AO such as ledger extract, capital account of partners in the books of assessee, bank statement of assessee s firm, confirmation issued by the partners, bank statement of the partners, etc, therefore, the addition, if any, can be made, in the hands of the partners and not in the hands of firm. 11. We find sufficient force in the above arguments of Ld. Counsel for the assessee. We find the Hon ble Madhya Pradesh High Court in the case of CIT v. Metachem Industries (supra) has decided an identical issue and upheld the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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