ARMAAN AGRO INDUSTRIES,DHARMAPURI vs. ITO, WARD-1 (1). KRISHNAGIRI, KRISHNGIRI

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ITA 1448/CHNY/2023Status: DisposedITAT Chennai21 February 2024AY 2006-07Bench: SHRI MAHAVIR SINGH (Vice President)3 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found substance in the assessee's arguments that the capital might have been introduced in a prior year and that the addition should be considered in the hands of the partners. The AO was directed to reconsider the issue.

What were the facts?

The assessee firm had capital contributions from partners. While one partner's source was accepted as gift, the other two denied making contributions, leading to an addition of Rs. 15 Lacs. The assessee argued that any addition should be in the hands of the partners.

What were the issues?

Whether the addition of capital contribution was made in the correct assessment year and whether it should be assessed in the hands of the firm or its partners.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ /SMC BENCH, CHENNAI

Before: SHRI MAHAVIR SINGH, VICE-

Hearing: 21.02.2024

आदेश / O R D E R

1.

This appeal filed by the assessee is arising out of order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi vide appeal No. ITBA/APL/S/250/2023-24 / 1056954787(1) dated 10.10.2023.

The assessment was framed by the Income Tax Officer, Ward - 1(1), Krishnagiri for the assessment year 2006-07 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act”) vide order dated 30.12.2008. The sole grievance of the assessee is confirmation of addition of Rs.15 Lacs which represent capital contribution by two partners to the assessee firm.

2.

During assessment proceedings, the assessee was directed to prove the source of capital contribution of Rs.15 Lacs, Rs.13.50 Lacs & Rs.1.50 Lacs as contributed by its three partners viz. M. Ameer Jan, Zafreen Zehra and Mir Athar Ali.

One of the partners M. Ameer Jan submitted that the same was sourced out of gift received. The same was accepted. However, the other two partners denied having made any capital contribution. The same resulted into addition of Rs.15 Lacs in the hands of the assessee.

3.

During appellate proceedings, the assessee submitted that addition, if any, was to be assessed in the hands of the partners. However, this argument was rejected by Ld. CIT(A) and the assessment was confirmed against which the assessee is in further appeal before me.

4.

The Ld. AR, inter-alia, argued that the impugned capital has been introduced in AY 2005-06 and therefore, this addition could not be sustained in this year. The Ld. AR also argued that the source for the firm was capital contribution and the addition, if any, has to be made only in the hands of the partners.

5.

Finding substance in both the pleas of Ld. AR, I direct Ld. AO to reconsider this issue in the light of arguments made before me. If the capital has been introduced in AY 2005-06, no such addition could be made in this year. Secondly, Ld. AO may also consider assessability of the same in the hands of the assessee-firm after affording opportunity of hearing to the assessee. The assessee is expected only to prove the source and not source of source in this year.

6.

The appeal stand allowed for statistical purposes.

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