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Facts
The assessee, Tiru Complex LLP, filed a return of loss for AY 2018-19. The Assessing Officer (AO) made an ex-parte addition of ₹7,01,00,000 as unexplained expenditure under Section 69C, citing large capital introduction and non-compliance. The CIT(A) subsequently deleted this addition after the assessee presented evidence that the capital was introduced by a partner through banking channels, with funds borrowed from LIC Housing Finance Co. Ltd.
Held
The ITAT upheld the CIT(A)'s decision, confirming that the capital introduced by the partner via banking channels constituted a capital receipt and not unexplained expenditure under Section 69C, as the transaction did not involve an 'expenditure' by the assessee firm. The tribunal found no dispute regarding the source of money and dismissed the Revenue's appeal.
Key Issues
1. Whether capital introduced by a partner through banking channels can be treated as unexplained expenditure under Section 69C of the Income Tax Act. 2. Whether the CIT(A) erred in admitting fresh evidence without affording the AO a reasonable opportunity under Rule 46A.
Sections Cited
144, 144B, 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 09.03.2023 for the AY 2018-19.
The ld. CIT DR filed the revised grounds of appeal at the beginning of the hearing which are extracted below:-
“(1) For that, the Ld. CIT(A), NFAC, New Delhi erred in deleting the addition of Rs. 7,01,00,000/- in the form of fresh capital introduction without giving due weightage to the unjustified receipt of high fresh capital to carry on of a seemingly unprospective firm and without examining the creditworthiness of the capital introducer. (2) For that, the Ld. CIT(A), NFAC, New Delhi erred in admitting fresh evidence/ documents without allowing a reasonable opportunity to the AO in violation of Rule 46A.
The facts in brief are that the assessee filed the return of loss of ₹2,735/- on 30.08.2018 and the case of the assessee was selected for scrutiny for the reason of large capital or share capital in the year of incorporation and low income in comparison to high loss/ investments. Accordingly, the statutory notices along with questionnaires were issued and duly served upon the assessee. the case of the assessee was fixed from time to time from 07.10.2019 to 12.03.2021. However, there was no compliance on the part of the assessee and finally, a show cause notice was issued by the ld. AO to the assessee given show cause as to why the capital introduced of ₹7,01,00,000/- during the year should not be treated as unexplained investment u/s 69C of the Act. Finally, the ld. AO framed the assessment u/s 144 of the Act by treating the said amount as unexplained expenditure u/s 69C of the Act when the assessee failed to comply to the said notice by framing the assessment u/s 144 read with section 144B of the Act dated 21.04.2021.
In the appellate proceeding, the ld. CIT (A) allowed the appeal of the assessee after taking into consideration the contention and submission of the assessee by observing and holding as under:-
“5. DECISION 5.1 I have carefully considered the facts of this case, grounds of appeal
, written submissions filed during appeal proceedings. All the grounds raised in the appeal point to the addition made invoking the provisions of section 69C of the Act. Therefore, for “3.5 Brief details of capital as on 31.03.2018 was as follows: Opening balance as an 01.04.2017 Rs 1,00,000/- Introduction of capital by Mr. Govind Garg, Designated Partner during the financial year 2017
18. Balance as on 31.03.2018 Rs 7,01,00,000/-”
We note that all these introductions in capital account were made by Mr. Govind Garg through banking channels and out of the money borrowed from LIC Housing Finance Co. Ltd, the copy of statement of the assessee as well as the partner are available in the paper book. Therefore, there is no dispute as to the source of money. Therefore, the order passed by the ld. CIT (A) is very reason and speaking order dealing with each and every aspect of the matter and therefore, we
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 14.05.2025.