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Facts
The appeal was filed by the assessee against the order of the CIT(A) and was barred by 772 days. The assessee is a partnership firm whose partners introduced capital. The Assessing Officer (AO) treated this capital as unexplained income of the firm.
Held
The Tribunal held that if the AO doubted the source of capital introduced by the partners, the addition should have been made in the hands of the partners, not in the hands of the assessee firm. The addition made by the AO and confirmed by the CIT(A) was not sustainable.
Key Issues
Whether the addition of capital introduced by partners as unexplained income in the hands of the assessee firm is sustainable.
Sections Cited
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order dated 16.02.2023 passed by ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2017-2018. 2. The appeal of the assessee is barred by 772 days. In this regard, the assessee has filed an application for condonation of delay supported with an affidavit stating therein sufficient reasons for delay, which are plausible and not found to be false. Accordingly, delay of 772 days in filing the present appeal by the assessee is condoned and the appeal is admitted for hearing.
It was submitted by the ld. AR that the assessee is a partnership firm consisting of two partners, namely, Mr. Hussaini Lokhandwala and Mrs. Tasneem Hussain. It was the submission that one of the partner Shri Hussaini Lokhandwala had introduced capital in cash of Rs.3,19,780/-. It was the submission that Mrs. Tasneem Hussain had introduced capital to an extent of Rs.9 lakhs. It was the submission that on the ground that the partner who are not able to prove the source of the capital introduced the capital introduced by both the partners were treated by the AO as unexplained income of the assessee firm. It was the submission that if at all the AO doubted the source in the hands of partners, the addition should to be made in the hands of partner and not in the hands of the assessee-firm 4. In reply, ld. Sr. DR vehemently supported the order of the ld.AO & ld. CIT(A). 5. We have considered the rival submissions. A perusal of the assessment order shows that the AO has questioned he introduction of capital by the two partners. Both partners for admitted to the introduction of capital. Both the partners have been questioned regarding source for the capital introduced. Both partners have given explanation. The explanations were not accepted and the capital introduced by both the partners have been treated as undisclosed income in the hands of the assessee. When both the partners have categorically admitted to the introduction of the share capital and when the AO is questioning the source for the capital introduced in the partners’ hands if the AO is not