Partner's identity established means Section 68 addition should be in individual assessment not firm's books

ITAT DELHI dismissed Revenue's appeal regarding bogus share capital under Section 68. The assessee firm introduced capital through a partner whose identity was established. The tribunal held that if the AO doubted the genuineness of funds, the addition should be made in the partner's individual assessment rather than the firm's hands. The decision was supported by precedent from MP HC in Metachem Industries case.

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Issues:
The issues involved in the judgment are:
1. Deletion of addition on account of bogus share capital u/s 68 of the Act.
2. Failure to prove the genuineness of funds introduced as capital by partners.
3. Discharge of statutory onus of proving genuineness and creditworthiness of share capital.

Issue 1: Deletion of addition on account of bogus share capital u/s 68 of the Act
- The Revenue appealed against the deletion of an addition amounting to Rs. 2,68,50,000/- on account of bogus share capital u/s 68 of the Act.
- The AO observed that funds were routed through various persons to create share capital of the assessee firm.
- The AO held that the appellant failed to discharge its statutory onus of proving genuineness and creditworthiness of the source of share capital.
- The AO added Rs. 2,68,50,000/- to the taxable income of the appellant on account of capital introduced by the partners in the firm.

Issue 2: Failure to prove the genuineness of funds introduced as capital by partners
- The Ld. CIT(A) noted that the appellant had explained that the amount was brought in by the partners through banking channels.
- The identity of the partners and the sources of income were placed on record.
- The AO could not examine the source of funds in the case of the non-corporate assessee.
- The Ld. CIT(A) held that if the genuineness of the sources was doubted, it should have been considered in the hands of the partners and not the firm.
- Various case laws were cited to support the position that the burden of proof was on the assessee to explain credit entries in the books of account.

Issue 3: Discharge of statutory onus of proving genuineness and creditworthiness of share capital
- The appellant established that funds were received from the partners, thereby discharging its onus.
- The appellant provided confirmations from all persons who advanced money to the partners, along with relevant documents.
- The AO's addition of Rs. 2,68,50,000/- in the hands of the appellant firm was deemed unjustified.
- The source of source had to be proved in the case of a corporate assessee, not a non-corporate one.
- The well-reasoned order of the Ld. CIT(A) was upheld, and the appeal by the Revenue was dismissed.

This judgment highlights the importance of proving the genuineness and creditworthiness of funds introduced as capital, the burden of proof on the assessee, and the distinction between individual and firm liabilities in such cases.

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