AI Drafter 
TaxTMI 
TaxTMI 
2024 (5) TMI 90
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....sing Officer (AO) noted that the assessee firm has introduced the capital through its partners as well as through loan from the banks. From the various details furnished by the assessee, the AO noted that the firm has taken the loan through partner from one M/s. M.M. Traders, Proprietor Shri Harish Kantilal Shah amounting to Rs. 1,10,00,000/-. He observed that enquiry in the case of Shri Harish Kantilal Shah showed that the above person is a non filer, therefore, the source of loan given to the firm remained unexplained. Therefore, in order to verify the identity, creditworthiness and genuineness of the transaction, a Commission u/s 131(1)(d) of the Act was issued to the Pr. Director of Income Tax (Inv)-2, Mumbai through proper channel. The DDIT (Investigation), Mumbai carried out the investigation and the statement of Shri Harish Kantilal Shah was recorded u/s 131 of the Income Tax Act, 1961. Shri Harish Kantilal Shah in his statement denied to have maintained any Ledger of the same. He also could not explain the source of the loan given to the partners of the firm. To verify the creditworthiness of Shri Harish Kantilal Shah, notice u/s 133(6) of the Act was issued on Jalgaon Peop....
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....s nothing but the channel to route the firms/partners own money into the firm. 7.4 Further, the bank account statement of the Entity MM traders was perused. On perusal of the same it was found that, the person has either received the amount from the firm or the partners of the firm and then transferred to the account of the partners. Apart from the above there are instances of the cash deposits and then transfer to the accounts of the partners. During the year total cash deposit is Rs. 36,30,000/- in the bank account of MM traders which is immediately transferred to the accounts of the partners of the firm. This whole arrangement only points to the fact that the entity MM traders is nothing but a front to route the money of the firm through it. 7.5 The assessee in his submission has stated that in earlier submission, it was mentioned that the loan of Rs. 1,10,00,000/- was taken from MM traders ( Harish Shah), Now, in the submission in response to show cause, the assessee has stated that out of Rs. 1,10,00,000/- Rs. 1,00,00,000/- was given by Shri Harish Shah and Rs. 10,00,000/- was given by Shri Mihir Harish Shah (Son of Harish Shah. The creditworthiness and ident....
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....ly identity has been proved as Mr Harish Kantilal Shah in a statement before the investigation wing Mumbai and on the overall perspective of evidence furnished by the appellant do not seem to have much creditworthiness. As regards as genuineness of the transaction the same is highly doubtful and seems to be a circular way in which appellant's own unaccounted income has been routed back to the firm as capital. While promotion of business and creation of employment may be laudable goals the same cannot be said to be on account of unaccounted money as has been apparently sought to be done by the appellant." 5. Aggrieved with such order of the ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: 1. The learned CIT(A) erred in confirming the addition u/s 68 of Rs. 1,10,00,000/- by holding that the capital introduced by five partners in the appellant firm through banking channel was to be treated as income from unexplained sources without appreciating that the said addition was not justified in law and on facts. 2. The learned CIT(A) failed to appreciate that the source of capital of Rs. 1,10,00,000/- introduced by partne....
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....s on 12.09.2016 through bank to the partner 1,10,00,000 7. He submitted that during the course of assessment proceedings, the assessee has filed the Ledger extract of capital account of partners in the books of the assessee firm, bank accounts, statement of assessee firm, confirmation issued by the partners and bank statements of partners reflecting the payments made to the assessee towards capital introduced. Referring on the following decisions, he submitted that once the partner introduces capital in partnership firm, the addition, if any, can be made in the hands of the partners only and not in the hands of assessee firm: 1. ACIT v. Ambika Enterprises (ITA No.31/Del/2020) dated 21.07.2023 2. Nova Medicare v. ITO (150 taxmann.com 363 (Telangana) dated 15.02.2023 3. Keshwarwani Sheetalaya v. CIT [(2020) 315 CTR 815 (All)] 4. PCIT v. Vaishnodevi Refoils & Solvex [(2018) 253 Taxman 135 (Guj)] 5. Prayag Tendu Leaves Processing Co. v. CIT [(2018) 400 ITR 120 (Jharkhand)] 6. CIT v. Metachem Industries [(2000) 245 ITR 160 (MP)] 8. He accordingly, submitted that the addition made by th....
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....bunal confirming the order of CIT(A) deleting similar addition by observing as under: "5. On appeal, the Commissioner of Income-tax (Appeals) examined the matter in detail and found that Shri S. K. Gupta was the real owner of the business. The explanation given by the assessee was found to be satisfactory and he deleted the aforesaid three entries. The same finding of fact has been affirmed by the Tribunal. Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee-firm is over. The assessee-firm cannot ask that person who makes investment whether the money invested is properly taxed or not. The assessee is only to explain that this investment has been made by the particular individual and it is the responsibility of that individual to account for the investment made by him. If that person owns that entry, then the burden of the assessee-firm is discharged. It is open to the Assessing Officer to undertake further investigation with regard to that individual who has deposited this amount. 6. So far as the responsibility of the assessee is concerned, it is satisfactorily ....