TaxTMI 
TaxTMI 
2026 (9) TMI 1529
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....e condonation application filed by the assessee along with the affidavit and heard the Ld. Sr. DR. The Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors. reported in 167 ITR 471 (SC), has held that when substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. 4. We find recently the Hon'ble Supreme Court in the case of Inder Singh Vs. The State of Madhya Pradesh reported in 2025 LiveLaw (SC) 339 has held as under: "14. There can be no quarrel on the settled principle of law that delay cannot be condoned without sufficient cause, but a major aspect which has to be kept in mind is that, if in a particular case, the merits have to be examined, it should not be scuttled merely on the....
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....e, the proprietarily concerns of the partner, for F.Y. 2013-14 and 2014-15, his creditworthiness is not found explained. 2. Liyakat Baig 2.17 crore Out of the total amount of Rs. 2.17 crore, a land whose value is taken at Rs. 1.47 crore. Further, an amount of Rs. 25 lakh have been introduced in cash and rest are transfer. On perusal of relevant return of Liyakat Baig, it is seen that he has not shown any amount under capital gain on account of the said introduction of land in the capital of the firm. No personal capital and balance sheet of the assessee has been furnished therefore the cash introduction of Rs. 25 lakh and transfer of Rs. 45 lakh are also remained unexplained especially when his last two years return were perused wherein one return of negative total income and other return of Rs. 2.84 lakh approx. 9. He, therefore, again asked the assessee to explain as to why the capital introduced by the above two partners should not be treated as unexplained cash credit under section 68 of the Act and accordingly be added to the total income of the assessee. After considering the explanation given by the assessee, the AO accepted the creditworthiness of Mr. Khushi ....
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....ws lack of financial capacity. The balance sheet and P&L account were unaudited, inconsistent, and internally contradictory. Large investments and loans were shown without any details or supporting schedules. Unsecured loans of Rs. 10 lakh Rs. 3 lakh, and Rs. 10 lakh were not supported by ITRs of lenders, Bank statements of lenders, Proper confirmations, some confirmations were self-signed, without PAN, which makes them unreliable. The lenders had nil or insignificant income, clearly failing the test of creditworthiness and genuineness. Cash deposits of Rs. 21.50 lakh were claimed from business receipts (R.S. Automobile), but Cash book was produced only for November month only. No evidence of real business activity was found. Sales shown were minimal and disproportionate. Even in the statement u/s 131, Shri Khushi Kundnani failed to satisfactorily explain the complete source despite sufficient time. Thus, the explanation is not supported by credible evidences. Assessee's argument that capital was introduced before commencement of business is not acceptable because section 68 of the Act applies to any sum credited in the books, irrespective of commencement of business. The firm ....
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.... made addition of Rs. 1,14,50,000/- under section 68 of the Act on the ground that the source of capital introduced to the extent of Rs. 44,50,000/- by Mr. Khushi Kundani and Rs. 70,00,000/- by Mr. Liyakat Baig could not be explained properly and therefore it is the income of the firm. We find the Ld. CIT(A) upheld the addition made by the AO the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that when the partners introduce any capital in the partnership firm, even if the AO is not satisfied regarding the creditworthiness of the partners for introduction of such capital in the partnership firm, addition if any, can be made only in the hands of the partners and not in the hands of the partnership firm. 15. We find some force in the above argument of the Ld. Counsel for the assessee. We find, the Hon'ble Telangana High Court in the case of Durga Granite (supra), has held under: "9. Having heard the contentions put forth on either side and on perusal of records, admittedly the appellant herein is a partnership firm. The return was filed by the appellant for the assessment year 2014-15. On....
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....s to be explained by the partners themselves and not by the firm. In the case of M.Venkateshwar Rao, supra, the Division Bench of this Court in paragraph No.7 held as under: "7. It is a matter of record that the respondent-firm comprises 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 133 (Pat). The Tribunal rested its conclusions upon the judgment of the Bombay High Court in Narayandas Kedarnath v. CIT [1952] 22 ITR 18 (Bom) and that of the Allahabad High Court in CIT v. Jaiswal Motor Finance [1983]141 ITR 706(AII)." 13. Recentl....
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....om the partners by the respondent-Department, the order of the Assessing Officer, as also the stand taken by the Hon'ble ITAT would not be sustainable and the same deserves to be and is accordingly set aside/quashed. The order passed by the CIT (Appeals) dated 30.06.2017 stands affirmed." 16. We find the Hon'ble Telangana High Court in the case of Nova Medicare (Supra), has held as under: "14. After thorough consideration of all relevant aspects, we are of the view that issue raised in this appeal is squarely covered by M Venkateswara Rao (2015) (AP) 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: "6. It is a matter of record that the firm comprises of 10 partners and each of them made contributions, be it in the form of cash or bank guarantees to be furnished to the Govt, at the commencement of business. The returns submitted by the firm were processed, and the facts and figures furnished by it were accepted. However, the matter was....
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....be assessed as the income of the family unless the Department discharges the burden of proof to the contrary." 9. Therefore, the view taken by the AO that the Part-firm must explain the source of income for the partners regarding the amount contributed by them towards capital of the firm cannot be sustained in law." 15. Following and applying the aforesaid decision of this Court, Patna HC in Anurag Rice Mills (2016) (Pat HC) held that in such circumstances the unexplained cash credits would have to be assessed at the hands of the partners of the firm and not the firm itself. Such amounts could not have been treated as income of the firm by relying 16. In view of the above position, we answer the substantial questions of law in favour of the assessee and against the Revenue insofar the cash credits pertaining to the 2 partners of the appellant firm i.e, Smt. K. Sujatha and Sri K.Prabhakar Reddy only are concerned." 17. We find the Hon'ble Telangana High Court in the case of Vaishnodevi Refoils and Solvex (supra), has held as under: "6. The assessee carried the matter in appeal before the CIT(A), who noted that from the audited balance-sheet of ....