TaxTMI 
TaxTMI 
2024 (3) TMI 420
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.... introduction of fresh capital by the partners and the ld.CIT(A) has also erred in law as well as on facts in confirming the same." 5. The challenge in the above ground is to the addition made to the income of the assessee, which was confirmed by the ld.CIT(A) of Rs. 1,20,00,000/- on account of treating the capital introduced by the partners of the assessee-firm as unexplained cash credit in terms of section 68 of the Act. 6. Assessee is engaged in the business of civil construction work. The amount of Rs. 1.20 crores was introduced by the following partners of the firm: i) Smt.Jayaben N. Sorathia : Rs. 40,00,000/- ii) Shri Naranbhai D. Sorathia : Rs. 25,00,000/- iii) Shri Rameshbhai N. Sorathia : Rs. 26,00,000/- iv) Smt. Jayshreeben R. Sorathia : Rs. 29,00,000/- Total : Rs. 1,20,00,000/- 7. The AO found that the assessee was unable to discharge its onus of proving the genuineness of the amount so received. The ld.CIT(A) also found that the assessee had failed to prove the genuineness and credit worthiness of the transactions, and finding so, he confirmed the addition made by the AO. The order of the ld.CIT(A) reveals tha....
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....ears including the impugned assessment year finding that the AO had not accepted the quantum of agricultural income returned by them. His finding in this regard are at para 6.3.5 of his order as under: 10. Thus, what emanates from the above is that, the ld.CIT(A) confirmed the addition, finding that the credit-worthiness of the partners was not proved for infusing the amount of capital during the year. 11. Before us, during the course of hearing, the ld. Counsel for the assessee contended that the assessee had furnished all possible evidences to prove genuineness of the transactions, and in this regard, he drew our attention to PB Page no.60 listing all the documents filed relating to the partners to prove their genuineness as under: 12. He further contended that the identity of the partners are not doubted and partners have confirmed to have introduced capital in the firm, and that the addition, if any, on account of credit-worthiness of the partners not being proven, could have been made only in the hands of the partners and not the assessee firm. He pointed out that the Hon'ble Gujarat High Court held so in the case of CIT Vs. Pankaj Dyestuff Industries, in Income Tax R....
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....he Tribunal was right in law and on facts in deleting the addition of Rs. 87,250/- being deposits in the accounts of the partners. The question referred to this Court is, accordingly, answered in the affirmative i.e. in favour of the assessee and against the revenue." 13. He further pointed out that even on merits, considering all the documents filed by the assessee, credit-worthiness of the partners could not be stated to be in doubt, and the assessee could be held to have not discharged its onus of proving so. He contended that the partners had returned identical agriculture income in the preceding and succeeding years, and though it was not accepted completely, but the balance was treated as income of the partners from other sources. Therefore, as far as the credit-worthiness of the partners are concerned, whether from agriculture income or from other sources, the same stood accepted by the Department in the assessment of the partners. Therefore, the onus on the assessee to prove credit- worthiness stood completely discharged. The ld.DR in counter, however, relied on the order of the ld.CIT(A). 14. Having carefully considered the contention of both the parties, we find,....
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....me to the extent of Rs. 50,00,000/-." 17. The issue relates to adhoc disallowance of expenditure incurred by the assessee. 18. The facts which emerge from the order of the authorities below is that the assessee had incurred total expenses of Rs. 6,88,73,704/- which was not verifiable by the AO. Therefore, an adhoc disallowance of Rs. 1,00,00,000/- was made out of the same, which was reduced by the Ld.CIT(A) to Rs. 50,00,000/-. 19. The ld.counsel for the assessee contended before us that in the preceding year in the case of the assessee, the disallowance had been restricted to Rs. 1,50,000/-, and he pleaded for relief accordingly in the present case also. The ld.DR was unable to controvert the above contention of the Ld.CIT(A). 20. In view of the same, we direct the AO to restrict the expenditure to Rs. 1,50,000/-. This ground of appeal of the assessee is partly allowed. 21. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 23^rd February, 2024 at Ahmedabad. ============= Document 1 6.3.5. As stated earlier, it is reiterated that each year is an independent assessment year and the action of AOs in prece....