M/S. NEW MATHA JEWELLERS,KARAIKUDI vs. ITO, KARAIKUDI

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ITA 3097/CHNY/2016Status: DisposedITAT Chennai17 February 2017AY 2012-133 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the partnership firm came into existence after a portion of the expenditure was incurred, the addition could not be made in the hands of the firm. The addition was deleted.

What were the facts?

The assessee incurred expenditure on interior decoration of a jewellery showroom. The Assessing Officer and CIT(Appeals) made an addition of ₹2,50,000/- towards unexplained expenditure.

What were the issues?

Whether an addition for unexplained expenditure can be made in the hands of a partnership firm for expenses incurred before its formation.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ SMC BENCH, CHENNAI [CAMP: MADURAI]

Before: SHRI N.R.S. GANESAN

For Respondent: Shri Shiva Srinivas, JCIT
Hearing: 17.02.2017Pronounced: 17.02.2017

आदेश /O R D E R

1.

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -3, Madurai, dated 29.08.2016 and pertains to assessment year 2012-13.

2.

The only issue arises for consideration is with regard to addition of 2,50,000/- towards unexplained expenditure.

3.

No one appeared for the assessee inspite of service of notice. However, the Ld.counsel for the assessee filed written submission which is on record.

4.

Shri Shiva Srinivas, the Ld. Departmental Representative, submitted that the assessee incurred an expenditure of `12,73,372/- towards interior decoration of the jewellery show room from 01.04.2011 to 31.03.2012. The assessee could not explain the source of expenditure to the extent of `2,50,000/-. Therefore, the CIT(Appeals) confirmed the addition made by the Assessing Officer.

5.

I have considered the submission of the Ld. Departmental Representative and perused the relevant material available on record including the written submission filed by the assessee.

Admittedly, the expenditure was incurred from 01.04.2011 to 31.03.2012. The fact remains that the partnership firm came into existence only on 12.05.2011. Therefore, it is obvious that some of the expenditure was incurred by the partners of the firm before the partnership firm came into existence. Therefore, this Tribunal is of the considered opinion that at the best, the addition can be made only in the hands of the individuals and definitely not in the hands of the partnership firm. Therefore, this Tribunal is unable to uphold the order of the lower authority. Therefore, the addition made by the lower authorities to the extent of `2,50,000/- is deleted.

6.

In the result, the appeal filed by the assessee is allowed.

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