HRISHIKA LOGISTICS,MIRA ROAD EAST vs. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 24(1), PIRAMAL CHAMBER, MUMBAI

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ITA 4731/MUM/2026Status: DisposedITAT Mumbai02 September 2026AY 2012-137 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that capital introduced by partners, when explained with regard to identity, genuineness, and creditworthiness, cannot be treated as unexplained income. The proviso to Section 68 was not applicable for the assessment year in question.

What were the facts?

The assessee, a logistics firm, introduced capital from its partners. The Assessing Officer made additions under Section 68 for unexplained income. The CIT(A) partially confirmed the addition, accepting some capital as explained but sustaining the rest.

What were the issues?

Whether capital introduced by partners can be treated as unexplained income of the firm when the identity, genuineness, and creditworthiness of the partners are established. Applicability of the proviso to Section 68 for the assessment year 2012-13.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “E”,

Before: SHRI SANDEEP GOSAIN & SHRI BIJAYANANDA PRUSETH

For Appellant: Shri Nimesh Chothani, CA
For Respondent: Smt. Sujatha Iyyanger, SR
Hearing: 20/08/2026Pronounced: 02/09/2026

आदेश / O R D E R PER SANDEEP GOSAIN (JM): The present appeal has been filed by the assessee challenging the impugned order dt. 06.03.2026 passed under section 250 of the Income Tax Act, 1961 ('the Act'), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2012-13. The assessee has raised the following grounds of appeal: -

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“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 7,98,700/- being capital introduced by the partners as unexplained income of the Appellant firm, without appreciating the facts and circumstances of the case. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition in the hands of the Firm without appreciating that amount was received from the partners of the firm. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition without appreciating that the Appellant had satisfactorily explained the nature and source of the amounts credited in the books of account.”

2.

All the grounds raised by the assessee are inter-related and interconnected and relates to challenging the order of ld. CIT(A) upholding the additions of Rs.7,98,700/- made by the Assessing Officer on account of capital reduction by the partners by considering the same as ‘unexplained income’ of the assessee. Therefore, we have decided to adjudicate this ground through the present consolidated order.

We have heard the learned Counsels for both the parties 3. and perused the material placed on record. It was submitted before us, and the same is also borne out from the orders of the Revenue authorities, from the records we noticed that the assessee is a partnership firm engaged in the business of logistics, clearing services and freight forwarding. The said firm was incorporated on 06/05/2011, and the year under

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consideration was the first year of business of the assessee. However, during the year under consideration, partners Mr. Manish Vaswani and Ms. Deepti Vaswani introduced capital into the firms are Rs.37,91,744 and Rs.5,00,000/- respectively. During the course of assessment proceedings, the Assessing Officer made an addition under section 68 of the Act in respect of the entire amount of capital introduced by the partners. However, during the appellate proceedings, the learned CIT(A), being satisfied with the explanation furnished by the assessee, accepted the capital introduced by Mr. Manish Vaswani to the extent of Rs.34,93,044/- as explained. Accordingly, the learned CIT(A) sustained the addition only to the extent of the balance amount of Rs.2,98,700/-, holding that the assessee had failed to furnish supporting documents and evidence in respect thereof during the course of assessment proceedings. Moreover, other addition of Rs.5,00,000/- on account of capital introduced by the second partner i.e. Smt. Deepti Vaswani and before us both while rebutting the same arguments as raised by the assessee before the Revenue had submitted that the capital introduced in the form of personal furniture and fixtures amounting to Rs.2,98,700/- was introduced by Mr. Manish Vaswani and the same was used solely for the purpose of business of the assessee. It was further submitted that the said furniture and fixtures brought in by the Partner was duly recorded in the books of the assessee firm. It had also claimed depreciation of such assets. In order to support its

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contention, the assessee has relied upon copy of Financial Statement along with all schedules and notes forming part of accounts. We after having considered the said documents and the submissions of the parties, we noticed that Assessing Officer has duly accepted such furniture and fixtures as part of block of asset of the assessee and also allowed the depreciation claimed on such asset, therefore, once the Assessing Officer had himself accepted the assets introduced as genuine and allowed the claim of depreciation, the same cannot be regarded as ‘unexplained’ for the purpose of addition u/s.68 of the Income Tax Act.

4.

Now coming to the capital introduced by the second partner Mrs. Deepti Vaswani to Rs.5,00,000/- is concerned in this regard, we noticed that assessee has duly established the source of such credit in its books, moreover, assessee has submitted copy of ITR and computation of income for A.Y.2011-12 and 2012-13. Cash summary reflecting the inflow and outflow of cash for A.Y.2011-12 and 2012-13 were also placed on record which is reproduced as under:-

Sr. Particulars AY 2011-12 2012-13 No. Opening Balance of 1,06,500 3,95,485 Cash Salary Income 3,19,585 1,69,811 Gift received from 30,000 50,000 Father and brother A) Total Cash Available 4,56,085 6,15,296 B) Capital Introduced in - 5,00,000 Hrishika Logistics

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Drawings 60,600 76,500 C) Closing Cash Balance 3,95,485 38,796 [A-B]

5.

We further noticed that ld. AO had acknowledged in remand report that cash introduced by the partner is duly substantiated by ITR filed for A.Y.2011-12 and A.Y.2012-13 thereby declaring total income of Rs.2,70,849/- and Rs. 2,58,879/- respectively which consequently establishes that Mrs. Deepti Vasvani had sufficient financial capacity to introduce capital of Rs.5,00,000/- in the assessee firm. Even otherwise, we noticed that since the source of such credit in its books being capital introduced by its partners and once the assessee had explained and established the three essential test of section 68 of the Act namely genuineness of the transaction, identity and creditworthiness of the Partners, the assessee was not required to prove the source of capital introduced by the Partners. The Proviso to section 68 to prove source of source was introduced by Finance Act 2022 with effect from 01.04.2013. Thus, it would be effective only from AY 2013-14 onwards and not for the subject Assessment Year 2012-13. In this regard, reliance was being placed on the decision of Hon'ble Bombay High Court in case of Gagandeep Infrastructure (P.) Ltd vs. CIT [2017] 80taxmann.com 272 (Bombay); order dated 20.03.2017. We also noticed that the year under consideration i.e. 2012- 13 is the first year of business of the year of the assessee

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therefore, there could be no presumption that there were profits of the firm which were routed through capital introduced by partners. Accordingly, capital introduced by the partners cannot be added in the hands of the assessee. In this regard reliance has also been placed on the decision in the following cases: -

 Pestkill Pesticides Industries vs. PCIT [2026] 188 taxmann.com 740 (Gujarat); order dated 16.07.2026  Kesharwani Sheetalaya Sahsaon v. CIT [2020] 116 taxmann.com 382 (Allahabad); order dated 24.04.2020  PCIT v. Vaishnodevi Refoils & Solvex [2018] 89 taxmann.com 80 (Gujarat); order dated 28.11.2017  CIT v. Metachem Industries [2001] 116 Taxman 572 (Madhya Pradesh); Order dated 01.09.1999  Nova Medicare v. ITO [2023] 150 taxmann.com 363 (Telangana); Order dated 15.02.2023  Galaxy Buildcon v. ITO [2026] 189 taxmann.com 531 (Raipur - Trib.); Order dated 06.08.2026  Ramesh Industries vs. ITO [ITA No. 3131/Ahd/2008; Order dated 21.01.2011]  ITO vs. Jaikishan Textile Traders LLP, [ITA. No. 803/PUN/2023; Order dated 15.10.2024  M/s. Radiant Embroideries vs. ITO [ITA No. 3428/Ahd/2008; order dated 11.09.2009] 6. Therefore, considering the totality of facts and circumstances and also keeping in view the decision of ITAT and also following the orders of Hon’ble High Court, we are of the view that the additions made by the Assessing Officer and upheld by the ld. CIT(A) are not sustainable in the eyes of law. Accordingly, we direct Assessing Officer to delete the addition.

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7.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on this 02/09/2026

Sd/- Sd/- (BIJAYANANDA PRUSETH) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 02/09/2026 Karuna Sr.PS

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//

BY ORDER,

(Asstt. Registrar) ITAT, Mumbai

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