New Surroad Ginning And Pressing Factory Vs ITO (ITAT Ahmedabad)
The Ahmedabad “C” Bench of the Income Tax Appellate Tribunal allowed the assessee’s appeal and dismissed the Revenue’s cross-appeal for AY 2017-18.
On cash deposits during the demonetisation period, the Tribunal held that the assessee–a cotton ginning and pressing partnership firm–had satisfactorily explained the source as business cash sales (cotton oil and cotton cake) in the normal course of trade. Given the sizeable turnover and the business practice of cash purchases/sales, the explanation was found credible. The ad-hoc approach of sustaining only a portion of deposits was rejected, and the entire addition u/s 68 on demonetisation cash deposits was deleted.
On accretion to partners’ capital, the Tribunal affirmed that capital introduced by partners cannot be taxed in the hands of the firm u/s 68. Any enquiry regarding source lies in the partners’ individual assessments, not the firm’s. Consequently, deletion of the addition relating to partners’ capital accretion was upheld.
Resultantly, the assessee’s appeal was allowed and the Revenue’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned are cross-appeals; one by the assessee and the other by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 06/03/2024 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2017-18.
