Source of capital introduced in previous years

[Ashok Goyal]

Capital introduced by partners in firm in the year 2007 and 2006, my case under scrutiny is A.Y 2008-09, query is regarding the source of capital introduced in the previous years which is opening capital in the current year under scrutiny. Whether AO can ask the source of opening capital when asseessee has filed audited statements along with ITR submitted on due dates.

[CAGOPALJI AGRAWAL]

Just make a polite reply in writing that no fresh capital has been introduced by the partners in the previous year inter-alia.

[B L Bhojwani]

Your kind attention is invited to the proviso to  section 142(1), which places two fold restrictions on the powers of assessing officer under section 142(1). These are :-

(a)  The previous approval of the Joint Commissioner  shall be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts;

(b)  The assessing officer shall not require the production of any accounts relating to a period more than three years prior to the previous year.

Therefore, the assessing officer is well within his powers in calling for the details with regard to the opening capital, since it is covered under clause (b) above.

AI Summary

Assessing Officer Can Inquire About Partners' Opening Capital Under Section 142(1) with Joint Commissioner's Approval. A query was raised regarding whether an assessing officer (AO) can inquire about the source of opening capital introduced by partners in a firm for the assessment year 2008-09, when audited statements and income tax returns were filed on time. One response suggested politely stating that no new capital was introduced in the previous year. Another response highlighted that under section 142(1), the AO can request details about opening capital, as it falls within the permissible period of inquiry, provided prior approval from the Joint Commissioner is obtained.