INCOME TAX OFFICER, MEHSANA vs. ATLANTIS ALUMINIUM LLP, MEHSANA

The present appeal has been preferred by the Revenue against the Order, dated 14/03/2026, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had partly allowed the appeal against the Assessment Order, dated 17/03/2021, passed under Section 143(3) read with sections 143(3A) & 143(3B) of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2018- 2019. 2. The Revenue has raised following grounds of appeal:

The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 4,13,21,000/- made by the Assessing Officer on account of Assessment Year2018-2019

The Ld. CIT(A) has erred in law and on facts in accepting the documentary evidences such as confirmations, ITRs and bank statements without properly appreciating the surrounding circumstances and deficiencies pointed out by the Assessing Officer during assessment proceedings. The Ld. CIT(A) failed to consider that mere furnishing of documents does not discharge the onus under section 68, particularly when the transactions involve layering and routing of funds through multiple entities, indicating possible accommodation entries.

The Ld. CIT(A) has erred in law and on facts in not appreciating that the partners had introduced substantial capital disproportionate to their returned income, and the assessee failed to establish the real source of funds and immediate source of investment, thereby failing to discharge the primary onus cast under section 68 of the Act.

The relevant facts in brief are that the Assessee, a partnership firm, filed return of income for the Assessment Year 2018-2019 on 13/09/2018 declaring total loss of INR.79,74,958/-. The case was selected for complete scrutiny on the issue of introduction of large capital during the year of incorporation. During the assessment proceedings, the Assessing Officer observed that capital contributions aggregating to INR.4,13,21,000/- were introduced by the following four partners, (a) Shri Chatarlal Shah (INR.96,50,000/-), (b) Shri Jitendrakumar Chopra (INR.1,48,21,000/-), (c) Shri Suresh Vasdev Patel (INR.35,00,000/-), and (d) Smt. Pravinaben M Patel (INR.1,33,50,000/-). The Assessing Officer was of the view that the creditworthiness of the partners was unverified and the transactions involved rotation of funds. Therefore, the Assessing Officer made an addition of INR.4,13,21,000/- holding the same to be unexplained money under Section 68/69A of the Act and assessed total income of the Assessee-firm at INR.3,33,46,042/- vide Assessment Order, dated 17/03/2021. 4. In appeal, the Learned CIT(A) vide Order, dated 14/03/2026, deleted the addition of INR.4,13,21,000/-. The CIT(A) noted that the Assessee had furnished comprehensive documentary evidence before the Assessing Officer—including partner ledger accounts, confirmations, ITR acknowledgments, bank statements, and details establishing the source of source for each partner. The CIT(A) held that the primary onus under Section 68 of the Act stood discharged. Relying upon the judgment of the Hon'ble Jurisdictional Gujarat High Court in PCIT v. Vaishnodevi Refoils & Solvex 89 taxmann.com 80 (Guj), the Learned CIT(A) concluded that the additions for partner capital contributions cannot be made in the hands of the partnership firm.

Being aggrieved by the above order passed by the CIT(A), the Revenue has preferred the present appeal on the grounds reproduced in paragraph 2 above.

We have heard the rival submissions and perused the material on record.

Ground Nos. 1, 2 and 3 raised by the Revenue pertain to the deletion of the addition of INR.4,13,21,000/- made under Section 68 of the Act on account of partners' capital contribution.

The Learned Departmental Representative relied upon the Assessment Order and submitted that the partners had introduced capital disproportionate to their returned income, involving rotation of funds through multiple entities, and therefore, the CIT(A) erred in deleting the addition.

Per contra, the Learned Authorized Representative for the Assessee supported the order of the CIT(A) and submitted that the Assessee- firm had furnished evidence to establish the creditworthiness of the partners and genuineness of the transactions, as well as the source of source funds introduced by the partners as capital. The Learned Authorised Representative for the Assessee further submitted that the Learned CIT(A) had deleted the addition by following the judgment of the Hon'ble Jurisdictional Gujarat High Court in the case of PCIT v. Vaishnodevi Refoils & Solvex 89 taxmann.com 80 (Guj), [against which the SLP filed by the Revenue was dismissed by the Hon'ble Supreme Court reported in 96 taxmann.com 469].

We have given thoughtful consideration to the rival submissions and perused the materials available on record.

On perusal of the records, it is seen that during the assessment proceedings, the Assessee produced ledgers, partner confirmations, ITR acknowledgments, bank statements, and source of source documents for all four partners. We note that the Assessee-firm has furnished the following evidence:

On the other hand we note that the Assessing Officer made only general observations. Further, no inquiry/verification was carried on by the Assessing Officer to bring on record any material to controvert the documentary evidence furnished by the Assessee. The Assessing Officer has failed to point out any infirmity in the documents furnished by the Assessee.

Further, we note that the Hon'ble Jurisdictional Gujarat High Court in the case of PCIT v. Vaishnodevi Refoils & Solvex 89 taxmann.com 80 (Guj) has held that that where the assessee firm furnishes details regarding the capital introduced by partners and the partners confirm the contribution, the firm discharges its onus. If the Assessing Officer is not convinced regarding the creditworthiness of the partner, any enquiry or addition must be made in the hands of the partner concerned and not in the hands of the partnership firm. We find that the Learned CIT(A) had granted relief to the Assessee by following the said judgment which, in our view, applies to the facts and circumstances of the present case. The Revenue has failed to bring on record any material to controvert the findings returned by the Learned CIT(A).

In view of the above factual and legal position, we find no any infirmity in the findings returned by the Learned CIT(A) and the order passed by the Learned CIT(A) deleting the addition of INR.4,13,21,000/- made by the Assessing Officer. Accordingly, Ground Nos. 1, 2 and 3 raised by the Revenue are dismissed.

In result, the present appeal preferred by the Revenue is dismissed.

""यथ"/ The Respondent. 3. संबंिधतआयकरआयु"/ Concerned CIT 4. आयकरआयु"(अपील) / The CIT(A) 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण/ DR, ITAT, 6. गाड"फाईल /Guard file. आदेशानुसार/BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.