ITAT allows appeal on Section 68 capital addition. Evidence supports income sources, savings.

The ITAT partly allowed the appeal regarding the addition of capital under Section 68. The addition of Rs. 13,00,000 for one member was sustained, while the additions for other members were deleted based on evidence provided, confirming their sources of income and savings. The order was pronounced on 01/10/2019.

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Issues Involved:
1. Addition of Rs. 32 lacs under Section 68 by treating the capital introduced by certain members of AOP as unexplained.

Issue-wise Detailed Analysis:

1. Addition of Rs. 32 lacs under Section 68:

Background:
The assessee, an association of persons (AOP), filed its return of income declaring a total income of Rs. 29,22,560/-. During the assessment, the AO observed that members introduced capital aggregating to Rs. 76,45,000/- and treated it as unexplained capital introduction. The assessee appealed, and the CIT(A) deleted Rs. 44,45,000/- but confirmed Rs. 32 lacs as unexplained. The assessee further appealed to the ITAT.

Arguments by Assessee:
The assessee argued that the capital contributions were made by members who were part of the AOP since its inception. The members had entered into a partnership deed and were jointly and severally liable for tax payments. Due to disputes, some members did not cooperate during the assessment. The assessee provided affidavits, confirmations, bank statements, and ITRs of the members. Specific explanations for each member’s contribution were provided as follows:

- Yogendra Singh Chouhan: Contributed Rs. 13,00,000/-. The member had withdrawn the entire amount, resulting in a debit balance. The assessee requested the AO to call him for verification, which was not enforced.
- Bhanwar Singh Makori: Contributed Rs. 15,00,000/-. The source was old savings, contract receipts, income from property dealing, and family agricultural income. He was assessed to tax and had a capital of Rs. 1,08,19,601/- as of 31-03-2011.
- Mota Ram Saini: Contributed Rs. 2,00,000/-. He was an agriculturist with 20 bighas of land, earning from agriculture, onion dealing, and dairy. He filed an affidavit confirming the contribution.
- Iqbal: Contributed Rs. 1,00,000/-. He was a tractor mechanic earning about Rs. 13,000/- per month. He invested from his income and savings. He filed an affidavit confirming the contribution.
- Iqram: Contributed Rs. 1,00,000/-. Similar to Iqbal, he was a tractor mechanic earning about Rs. 13,000/- per month. He invested from his income and savings. He filed an affidavit confirming the contribution.

Arguments by Revenue:
The Revenue supported the CIT(A)’s order, highlighting the following findings:
- Yogendra Singh Chouhan: The genuineness of the cash transaction of Rs. 13,00,000/- remained unexplained. The submission of a driving license and bank account statement did not prove the transaction's genuineness.
- Bhanwar Singh Makori: The source of Rs. 15,00,000/- was claimed to be business savings and family agricultural income, but no agricultural income was declared in the ITR. The contention that the amount was kept at home was not accepted.
- Mota Ram Saini: The assessee neither produced the person nor filed any confirmation. The source and genuineness of Rs. 2,00,000/- remained unexplained.
- Iqbal and Iqram: Both claimed to have given Rs. 1,00,000/- each from their income and savings. However, no supporting documents were provided to substantiate their ability to save such amounts.

ITAT’s Findings:
- Yogendra Singh Chouhan: The ITAT found that the assessee failed to substantiate the source of the Rs. 13,00,000/- capital introduction. The addition was sustained.
- Bhanwar Singh Makori: The ITAT found that the assessee provided sufficient evidence of his creditworthiness, including a financial statement showing over Rs. 1 crore in capital. The addition of Rs. 15,00,000/- was deleted.
- Mota Ram Saini: The affidavit confirmed his income and savings, which were not disputed by the Revenue. The addition of Rs. 2,00,000/- was deleted.
- Iqbal and Iqram: Both were produced for verification and confirmed their contributions. The additions of Rs. 1,00,000/- each were deleted.

Conclusion:
The appeal was partly allowed. The addition of Rs. 13,00,000/- for Yogendra Singh Chouhan was sustained, while the additions for Bhanwar Singh Makori, Mota Ram Saini, Iqbal, and Iqram were deleted.

Order Pronouncement:
The order was pronounced in the Open Court on 01/10/2019.

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