TaxTMI 
TaxTMI 
2025 (4) TMI 210
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....ereby the CIT(A) deleted the addition of Rs. 8,00,00,000/- made by the Assessing Officer [hereinafter referred to as "AO"] under section 68 of the Income-tax Act, 1961 [hereinafter referred to as "the Act"] vide order dated 17.05.2021 passed under section 143(3) read with section 144B of the Act. Facts of the Case: 2. The assessee is a partnership firm engaged in the business of cattle/poultry/aqua/livestock and dairy farms. It was constituted on 31.10.2017 with two partners namely Goodfarms Calfcare LLP and Rellonge Traders LLP. The firm filed its return of income for A.Y. 2018-19 on 24.12.2018 declaring nil income. The case was selected for complete scrutiny under the e-Assessment Scheme, 2019, specifically on the issue of "Share Ca....
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....irmations, - Ledger accounts and proof of credit through banking channels, and - Audited financial statements demonstrating the capital position of the partners. 4.1. The assessee submitted that the non-response of Goodfarms Calfcare LLP to the AO's notice under section 133(6) of the Act was never communicated to the assessee and that it could not be held liable for such third-party non-compliance. Moreover, the AO did not identify any defect, inconsistency, or insufficiency in the documents filed by the assessee. 4.2. The CIT(A) agreed with the assessee and held that the addition was based merely on suspicion and non-compliance under section 133(6) of the Act, without bringing any adverse material on record to rebut....
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....or supporting material was placed to demonstrate the source of such capital in the hands of the LLP. Therefore, the addition made by the AO under section 68 was justified and should be sustained. The DR placed strong reliance on the decision of the Hon'ble Rajasthan High Court in the case of Kailash Chand Agarwal v. ITO [(2017) 394 ITR 771], wherein it was held that the burden of proving the identity of the creditor, their creditworthiness and the genuineness of the transaction rests on the assessee. 8. The Learned Authorized Representative (AR) appearing on behalf of the assessee submitted that the impugned addition made under section 68 of the Act in respect of capital introduced by the partner, is wholly misconceived. The AR submi....
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....e assessee also placed on records the audited financial statements of Goodfarms Calfcare LLP which clearly indicated that funds invested in the assessee firm was borrowed from the holding company of the said lender. The AR pointed out that the Orbitol Investment Private Ltd. is the holding company and the said facts in duly disclosed in Note 4 to audited financial statements of Goodfarms Calfcare LLP. 9. We have carefully considered the rival submissions of both the parties and perused the orders of the lower authorities, along with the supporting materials placed before us. The issue in dispute relates to the addition of Rs. 8,00,00,000/- made under section 68 of the Income-tax Act, 1961, being capital contribution by one of the partner....
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....e and, even otherwise, does not ipso facto establish that the capital is unexplained. We agree with the CIT(A)'s finding that in absence of any adverse material brought on record by the AO, the burden shifts on the Revenue to rebut the evidence furnished by the assessee, which has not been done in the present case. 9.4. The Learned AR also demonstrated that the source of funds invested by Goodfarms Calfcare LLP was traceable to its holding company-Orbitol Investment Pvt. Ltd.-as disclosed in Note 4 of the audited financial statements. This factual claim was not refuted by the Revenue. 9.5. The assessee's legal position is fortified by several judicial precedents including CIT v. Pankaj Dyestuff Industries (supra) where it was held....