Write-back of old loan credited to partner's capital account not taxable under section 68; addition reversed for partner.

Assessee challenged addition of an unexplained credit in her capital account on account of write-back of an old partnership loan; ITAT held section 68 cannot be invoked because the entry reflected prior-period balances rather than a fresh credit in the relevant year, and the loan had been recorded and accepted in earlier scrutiny assessments. The court found Revenue offered no material to displace the factual finding that the capital credit was consequential to firm books or to show applicability of alternative provisions. Result: the addition under section 68 was unsustainable and the assessee prevailed.

---

---

Issues: Whether the addition of Rs. 8,38,44,023/- made under section 68 read with section 115BBE in the hands of the assessee-partner, arising from write-back of an old loan in the books of the partnership firm, is sustainable.

Analysis: The Tribunal examined the undisputed facts that the loan was taken in FY 2006-07, was reflected in the partnership firm's books for years, and was written back in FY 2016-17 with corresponding consequential entries in the partners' capital accounts. It noted that under the Income-tax Act a firm is a distinct taxable entity and that credits attributable to earlier years or opening balances cannot be taxed as fresh credits under section 68 in a subsequent assessment year. The Tribunal observed that the partnership firm had undergone scrutiny assessments in earlier years where the loan's existence was accepted and that the Revenue produced no tangible material to show the loan was fictitious. The Tribunal further considered that write-back of a time-barred loan is a capital receipt and that mere non-availability of certain lender particulars after a decade, absence of interest payments, or lack of partner remuneration, without corroborative evidence, did not establish sham transactions or warrant invocation of section 68 against the partner.

Conclusion: The appeal is dismissed and the deletion of the addition of Rs. 8,38,44,023/- by the CIT(A) is upheld; the addition under section 68 read with section 115BBE in the hands of the assessee-partner is not sustainable (decision in favour of the assessee).

---