TaxTMI 
TaxTMI 
2025 (12) TMI 722
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....Rao Rs. 1,10,05,965 and Sri M. Subbaiah Rs. 1,16,71,952) and that, therefore, the learned CIT (A) ought to have held that no addition on this account should have been made; 4) The learned CIT (A) ought to have considered the fact that during the year under consideration no business was carried on by the appellant and that, therefore, no such addition can be made by the Assessing Officer. 5) The learned CIT (A) ought to have considered the various submissions and evidences submitted and held that no such addition can be made for the year under consideration and ought to have deleted the addition made by the Assessing Officer. 6) The learned CIT(A) ought to have seen that capital introduced by partners cannot be added when the introduction is confirmed by the partners 7) Any other ground/grounds that may be urged at the time of hearing". 3. The brief facts of the case are that the assessee is a partnership firm engaged in the real estate business. The assessee filed its return of income for the assessment year 2017-18 on 09.01.2018 declaring total income at Rs. Nil. The case of the assessee was selected for scrutiny and notice under sectio....
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....r capital accounts through journal entries. Thus, the finding of the Ld. AO that only a portion of the capital introduced has been come to the account of the firm is factually incorrect. The Ld. AR then referred to para nos. 5.1 to 5.3 of the assessment order wherein the Ld. AO alleged that the partners lacked creditworthiness on the basis of low income declared in their income-tax returns for AYs 2016-17 and AY 2017-18. In this regard, the Ld. AR invited our attention to the details submitted by the partners containing the date wise payments made by the partners along with the sources of such payments place at page nos. 61 to 62, 105 to 107 and 144 to 145 of the paper book related to Shri Y. Ananda Rao, Shri K.V. Prasad Rao and Shri M. Subbhaiah respectively, explaining the source of such payment. The Ld. AR further submitted that capital contribution may be made from accumulated savings, borrowings, gifts, advances or sale of personal assets and need not emanate only from current year income. He submitted that the Ld. AO did not point out any discrepancy in the bank statements or other supporting documents filed by the partners. Further, regarding the allegation of cash deposit o....
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....offered total income of Rs. 6,02,940/- and Rs. 19,21,280/- and introduced the capital of Rs. 1,00,13,222/-. In view of the above the source of the capital introduction by Sri. Y. Anand Rao has no creditworthiness and his introduced capital of Rs. 1,00,13,222/- is not established. 5.2 Further, it is noticed that another partner Sri. K.V. Prasad Rao has transferred Rs. 20,00,000/- into the firm account on 19.03.2017 from his individual account vide account No.10742010021420 maintained with Oriental Bank of Commerce. On verification of the return of income of Sri K.V.Prasad Rao for the AY. 2016-17 & 2017-18, he has offered total income of Rs. 7,63,120/- and Rs. 6,21,700/- and introduced the capital of Rs. 1,10,05,965/-. In view of the above the source of the capital introduction by Sri. K.V. Prasad Rao has no creditworthiness and his introduced capital of Rs. 1,10,05,965/- is not established 5.3 Further, it is noticed that the third parter Sri. Y Muppi Subbaiah has transferred Rs. 5,00,000/- into the firm account on 07.03.2017 from his individual account vide account No.20144461516 maintained with Bank of India. On verification of the return of income of Sri M.....
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.... relevant aspects, we are of the view that issue raised in this appeal is squarely covered by the decision of this Court in M. Venkateswara Rao (supra) which is binding on us. That was also a case where certain cash credits were advanced by the partners, which according to the revenue authorities remained unexplained and accordingly were added to the income of the firm. In the facts of that case, this Court held as follows: "7. It is a matter of record that the respondent-firm comprises of ten partners and each of them made contributions, be it in the form of cash or bank guarantees to be furnished to the Government, at the commencement of business. The returns submitted by the respondent- firm were processed, and the facts and figures furnished by it were accepted. However, the matter was reopened at a later point of time. The Assessing Officer treated the capital raised by the firm in the form of contributions made by the partners as income. This conclusion was arrived at on the ground that source of income for the partners was not explained. Learned counsel for the appellant placed reliance upon the judgment of the Patna High Court in CIT v. Anupam Udyog [1983] 142 ITR ....