TaxTMI 
TaxTMI 
2026 (9) TMI 1457
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....B of the Income Tax Act, 1961 ("the Act"). 2. The assessee has filed the following grounds of appeal as mentioned below: - 1. The Ld. CIT(A) erred in confirming the reopening of assessment under section 147. 2. The reopening was based on borrowed satisfaction from the assessment of one of the partners without independent application of mind by the Assessing Officer of the appellant firm. 3. The reasons recorded do not demonstrate any tangible material establishing a live link between the information received and alleged escapement of income. 4. The reopening is therefore bad in law and liable to be quashed. 5. The Ld. CIT(A) erred in confirming the addition of Rs. 3,18,50,000/- as unexplained ....
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.... partner. However, the ld.CIT(A), in the partner's appeal, deleted the addition by holding that the property belonged to the partnership firm and not to the individual partner. Thereafter, based upon the observations made in the assessment proceedings of the partner, the AO reopened the assessment of the assessee-firm u/s.147 of the Act under the erstwhile reassessment provisions. 3.1 During reassessment proceedings, the AO noticed an increase in fixed assets amounting to Rs. 3,18,50,000/- and treated the same as unexplained investment u/s.69 of the Act. The assessee explained that the investment represented capital contributions made by the partners, duly recorded in the books of account and reflected in their respective capital acc....
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.... has accepted the books of account and has not rejected the same nor pointed out any defect therein; * the source of investment has been fully explained as partners' capital contribution duly credited in the respective capital accounts; * the identity of the partners is not in dispute. They are regular assessees and copies of their returns of income, balance sheets and capital accounts were furnished; * once the partners own the capital contributions, no addition can be made in the hands of the firm and, if at all, further enquiry regarding the source of funds has to be made in the assessments of the respective partners; * the law does not require the assessee to establish the "source of source"; ....
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....ing assessment proceedings in the case of one of the partners. The material available on record indicates that in the partner's own appellate proceedings, the ld.CIT(A) categorically held that the property belonged to the partnership firm and not to the partner. It is only thereafter that the AO proceeded to reopen the assessment of the assessee-firm. 7.1 Even assuming that such information constituted tangible material for initiating reassessment, the addition ultimately made u/s. 69 cannot be sustained on merits. Section 69 of the Act applies only where an assessee has made investments which are not recorded in the books of account, if any, maintained by him. Thus, existence of an investment outside the books is the very foundation....
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....ertains any doubt regarding the financial capacity or source of funds available with any individual partner, the appropriate course is to examine such issue in the assessments of the concerned partners. Such doubt, by itself, cannot justify treating the recorded investment of the firm as unexplained u/s. 69 of the Act. 7.3 We also find considerable force in the contention of the assessee that the Revenue cannot simultaneously accept that the property belongs to the partnership firm, as held in the appellate proceedings of the partner, and yet invoke section 69 in the firm's case without first disproving the entries appearing in the firm's books of account. The reliance placed by the Revenue on the decision of the Hon'ble Supr....