Case Law Details
Lexico Ceramics Vs PCIT (ITAT Rajkot)
ITAT Rajkot held that the capital contribution made by the partner of the firm cannot be subject to the addition in the hands of the partnership firm.
Facts- The assessee is a partnership firm and engaged in the business of ceramic tiles. The case of the assessee was selected for scrutiny under CASS. Finally, the AO assessed the income vide order dated 28th December 2017.
Subsequently, the learned Pr. CIT from the assessment records found that during the year the assessee firm received an amount of Rs. 3,22,78,000/- from 11 partners as capital introduction. The AO made addition of Rs. 12,00,000/- as unexplained credit on account of capital contribution from 2 partners only whereas no finding was given regarding remaining amount of Rs. 3,10,78,000/- representing capital received from 9 partners.
Likewise, the ld. PCIT further found that the AO made an addition of 10% of sundry creditor for Rs. 4,29,42,277/- (total) on ad-hoc basis to plug possible revenue leakage. However, as per the ld. PCIT, there is no provision under the Act to allow or disallow sundry creditors on ad-hoc and certain percentage basis. As such, the AO was required to verify the entire sundry creditor and accordingly reached to the logical conclusion.
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