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Facts
The assessee, a partnership firm, received Rs. 20,00,000 as capital contribution from a non-resident partner, Shri Manish Modi, who stated it was a gift from his mother, Smt. Usha Modi. The Assessing Officer and CIT(A) treated this amount as unexplained money under Section 69A due to the assessee's inability to provide documentary evidence for the creditworthiness of Smt. Usha Modi or the occasion of the gift. The total income was assessed at Rs. 21,37,917/-.
Held
The tribunal found that the Rs. 20,00,000 was transferred via RTGS from the partner's HSBC account and was duly shown as capital and liability in the firm's balance sheet, supported by the Partnership Deed and P&L Account. The tribunal concluded that it was a genuine capital introduction by the NRI partner and should not be treated as undisclosed income in the hands of the firm.
Key Issues
Whether a capital contribution from an NRI partner, stated to be a gift from his mother, can be treated as unexplained money in the hands of the partnership firm under Section 69A of the Income Tax Act, and the validity of reassessment proceedings under Sections 147 to 151.
Sections Cited
142(1), 271(1)(c), 250, 147, 148, 149, 150, 151, 143(3), 69A
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Income Tax Appellate Tribunal, ‘SMC’ BENCH, KOLKATA
Before: Shri Duvvuru RL Reddy, Vice-(KZ)
Assessment Year: 2012-2013 Bhagwati Developers,………………………..…Appellant Chandandaha Bibirhat, P.O. Charashyamdas P.S. Bishnupur, South 24-Parganas-700162 [PAN:AAKFB2520N] -Vs.- Income Tax Officer,……………………………..Respondent Ward-26(1), Kolkata, Aayakar Bhawan, Dakshin, 2, Gariahat Road, Kolkata-700031 Appearances by: Shri Amit Agarwal, Advocate, appeared on behalf of the assessee Shri Susanta Saha, Sr. D.R., appeared on behalf of the Revenue Date of concluding the hearing: May 21, 2025 Date of pronouncing the order: July 29, 2025 O R D E R
The present appeal is directed at the instance of assessee against the order of Id. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 29.08.2024 passed for Assessment Year 2012-2013.
(A.Y. 2012-2013) Bhagwati Developers 2. Facts in brief are that the assessee is a partnership firm, which filed its return of income showing total income at Rs. NIL. In this case, information was received from the DDIT(Inv.), Kolkata dated 01.03.2019 regarding high value deposit and withdrawal cash transactions in the current account. During the investigation carried out by the Investigating Wing, KYC and Bank statement was taken wherein it was found that the debit of Rs.19,62,843/- and credit of Rs.20,00,000/- for the period from 01.04.2011 to 31.03.2012 were reflected. However, in response to 142(1) of the Act, the assessee submitted that the firm was created to purchase of immovable properties for carrying on the business of undertaking, developing and building housing projects. The assessee failed to provide the explanation of huge cash withdrawal of Rs.10.81 lakhs during the financial year 2011-12 as well as nature and source of such deposit. After query from the ld. Assessing Officer, the assessee clarified that the firm has received Rs.20,00,000/- on 29.07.2011 from Shri Manish Modi, one of the partners, who is non-resident, which was transferred by RTGS from his HSBC Bank account as capital introduction to the firm. The assessee was asked to submit the source from which the partner has deposited the money. The assessee furnished copy of bank statement with HSBC Bank of the NRI Partner from where the sum was transferred. Assessee clarified that the source of the sum was gift from his mother Smt. Usha Modi, but the assessee could not furnish any documentary evidence in support of the creditworthiness of Smt. Usha Modi or the occasion or evidence of gift made by her. The assessee was required to explain as to why the deposited money of Rs.20,00,000/- should not be treated as (A.Y. 2012-2013) Bhagwati Developers unexplained money in the hands of the firm and the same be added to the total income for the AY 2012-13, but the assessee did not submit any explanation in support of its claim. Thus the ld. Assessing Officer assessed the total income of the assessee at Rs.21,37,917/- and penalty proceedings under section 271(1)(c) were initiated.
On being aggrieved, the assessee preferred an appeal before the ld. CIT(Appeals). The ld. CIT(Appeals) in his impugned order confirmed the amount of Rs.20,00,000/- as unexplained money in the hands of firm as made by the ld. Assessing Officer in the assessment order as the assessee did not respond to the SCN in support of its claim issued by the ld. Assessing Officer inspite of several requests to explain as to why the cash deposited money of Rs.20,00,000/- should not be treated as unexplained money.
On being aggrieved, the assessee preferred an appeal before the ITAT and raised the following grounds:- (i) That the Appellate Order dated 29th August, 2024 passed by the Ld. National Faceless Appeal Centre, Delhi under section 250 of the Income Tax Act, 1961 is without jurisdiction, illegal, invalid and bad-in-law and liable to annulled. (ii) That the learned National Faceless Appeal Centre, Delhi erred in dismissing the Appeal of the Appellant Assesse Firm without appreciating that the impugned reassessment proceedings suffers from various infirmities does not confirm with the requirements of section 147 to 151 of the Act and thus the resultant reassessment order dated 31.12.2019 passed by the Assessing Officer under section 143(3) r.w.s 147 of the Income Tax Act, 1961 was also illegal, invalid and without jurisdiction and thus liable to be annulled. (iii) That, in the facts and circumstances of the case, learned National Faceless Appeal Centre, Delhi erred in confirming the (A.Y. 2012-2013) Bhagwati Developers addition of the sum of Rs.20,00,000, which was admittedly the Capital Contribution of one of its NRI Partner viz. Mahesh Modi received from NRE account, as undisclosed money of the Assesse Firm under section 69A of the Act on the basis of wrong and arbitrary allegation of cash deposits made in the bank account of the Assesse Firm although no such cash deposits were made in the case of the Assesse Firm. (iv) That, in the facts and circumstances of the case, learned National Faceless Appeal Centre, Delhi erred in confirming the addition of Rs.20,00,000, being genuine Capital Contribution of one of its NRI Partner viz. Mahesh Modi, as undisclosed money of the Assesse Firm on mere suspicions, surmises and conjectures and on the basis of arbitrary and wrongful allegations. (v) That the impugned Appellate Order dated 29th August, 2024 under section 250 of the Income Tax Act, 1961 passed by learned National Faceless Appeal Centre, Delhi is against law and facts of the case.
5. I have heard both the sides. It was the submission of the ld. Counsel for the assessee that the assessee-firm was created to purchase of immovable properties for the carrying on business of undertaking, developing and building housing projects. The assessee-firm mainly received fund from the non-resident partner by internet transfer from his HSBC Account. He further submitted that one of partners Shri Manish Modi transferred for an amount of Rs.20,00,000/- on 29.07.2011 by RTGS from his HSBC Bank Account as capital introduction to the firm. The assessee was asked to submit the source from where the person deposited the money. The assessee-firm furnished the Bank statement of the NRI partner and also the assessee-firm clarified that the source of the sum was gift from mother Smt. Usha Modi. The ld. Assessing Officer has not considered the submissions made by the assessee and the deposit in the account of the assessee-firm was treated as undisclosed source and the entire deposited amount of 4 (A.Y. 2012-2013) Bhagwati Developers Rs.20,00,000/- was added to the income of the assessee. He further submitted that if at all the ld. Assessing Officer is not having creditworthiness of the partner of the firm, it should be taxed in the hands of the partner but not in the hands of the firm. He further submitted that the assessee-firm has explained the source for the deposit and also explained the source of the partner was gift from her mother but the ld. Assessing Officer asked for the source of source from the mother. Therefore, he pleaded to delete the addition made by the ld. Assessing Officer. He further submitted that the amount of Rs.20,00,000/- as shown in the balance-sheet of the firm as liability of the firm for an amount of Rs.20,00,000/-. Therefore, it is crystal clear that it is a liability of the firm of the assessee.
6. On the other hand, ld. Departmental Representative submitted that the assessee failed to furnish satisfactory evidence before the ld. Assessing Officer and ld. CIT(Appeals). Therefore, they made the addition and he pleaded to uphold the orders passed by the revenue authorities.
7. I have perused the material available on record. It is an admitted fact that the amount of Rs.20,00,000/- was transferred by way of RTGS from HSBC Account and the same was shown as capital in the balance-sheet of the firm. The said amount was shown as liability of the firm as per the balance-sheet of the firm. I have perused the Partnership Deed, Profit & Loss Account of the assessee-firm. All these documents are clearly established that the amount of Rs.20,00,000/- was only capital introduction by the NRI (A.Y. 2012-2013) Bhagwati Developers partner of the firm, therefore, the amount of Rs.20,00,000/- which was transferred by RTGS should not be treated as undisclosed income and the ld. Counsel for the assessee has properly explained the transferred amount of Rs.20,00,000/- through RTGS. Therefore, the Ground No. 3 raised by the assessee is allowed.
8. The other grounds raised by the assessee are academic in nature, therefore, need no adjudication.
9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 29/07/2025.