DY COMMISSIONER OF INCOME TAX, MUMBAI, INCOME TAX vs. A A INTERNATIONAL, GHATKOPAR (W)

ORDER Per: Smt. Beena Pillai, J.M.: The present appeal filed by the revenue arises out of order dated 18/03/2025 passed by NAFC, Delhi for assessment year 2017-18 on following grounds of appeal:

1. "Whether on the facts and circumstances of the case and in law, the CIT (NFAC) has erred in accepting the contention of the assessee A.Y. 2017-18 2 A. A. International regarding credit worthiness of the partners without examination of their bank statement, which was not furnished by the assessee during the assessment proceedings nor during the appellate proceedings."

2. The appellant prays that the order of the CIT(A) on the above ground be set aside to the file of the Assessing Officer for necessary verification.” Brief facts of the case are as under: 2. The assessee is a firm and filed its return of income on 13/09/2017, declaring total income at Rs. 27,49,220/-. During the assessment proceedings, the Ld. AO observed that, the assessee introduced fresh capital of Rs. 3,07,76,085/- during the year under consideration. Accordingly, notices u/s. 143(2) and 142(1) were issued to the assessee calling upon to furnish documentary proof in respect of the capital account of the partners with narration. The assessee submitted following statement:

Name of the Amount of Narration Explanation Partner Capital introduced Mr. Riken 7,78,554 By capital Amount Received Ratanlal introduced through Cheque & Agarwal Bank Transfers Mr. Vinit Atul 1,49,14,920 By capital Amount Received Chitalia introduced through Cheque & Bank Transfers Smt. Alka Atul 1,50,82,611 By capital Amount Received Chitalia introduced through Cheque & Bank Transfers Total 3,07,76,085 2.1. The Ld. AO was of the opinion that, assessee could not furnish explanation with supporting evidence regarding A.Y. 2017-18 3 A. A. International introduction of capital and thus, the capital introduced was treated as unexplained u/s. 68 of the Act. Aggrieved by the order of the ld. AO, assessee preferred an appeal before the ld. CIT(A).

6.10. In view of the above judicial precedents, since the appellant has produced proof of the identity, creditworthiness of the partners who have contributed capital, addition u/s 68 in the hands of the firm is not called for. Grounds 2 and 3 are allowed. Alternate ground raised in ground 4 is redundant and is not separately adjudicated. Ground 1 argues that not enough time was allowed to respond to notice issued during assessment. Since during appeal the appellant has been heard, this ground is redundant.

Aggrieved by the order of ld. CIT(A), the revenue is in appeal before this Tribunal.

4. The Ld. DR at the outset submitted that, assessee did not file any representation before the Assessing Officer to explain the capital introduced during the year under consideration by the partners. He submitted that, Ld. AO was thus, right in making additions, as the creditworthiness, identity and genuineness of the transaction remained to be proved. 4.1. On the contrary, the ld. AR submitted that, in the assessment order, the Ld. AO neither disputed the identity of the partners nor genuineness of the capital introduced. It is only the creditworthiness of the partners that was doubted by the Assessing Officer. The Ld. AR submitted that, during the appellate proceedings, assessee submitted capital account, return of A.Y. 2017-18 4 A. A. International income, PAN and details of the capital introduced by each partner along with their bank statements. The assessee also furnished a statement showing how the amounts were transferred by the partners to the account of the firm. 4.2. Based on the above documents, the Ld. CIT(A) called for remand report and the Ld. AO vide its letter dated 12/02/2025. However, the Ld. AO did not submit remand report. Further time was granted to the Ld. AO, however, the same was not complied with. The Ld. AR thus submitted that, based on the evidences furnished by the assessee, the Ld. CIT(A) after necessary verification, allowed the claim of the assessee. 4.3. The ld. AR submitted that, assessee discharged its onus by submitting the details of the partners like bank statements, tax computation and has thus, explained the nature and source, creditworthiness and genuineness of the capital contributed. Once the assessee discharges its onus u/s. 68, it is a requirement under the law that the Assessing Officer has to verify the necessary facts. The Ld. AR thus submitted that, the Assessing Officer in the remand proceedings though did not carry out any verification but the Ld. CIT(A) after verifying the same granted relief. He submitted that, the Ld. CIT(A) has co-terminus powers like that of the Assessing Officer. The Ld. AR thus, heavily relied on the view taken by the Ld. CIT(A).

We have perused the submissions advanced by both sides in the light of record placed before us.