Balaji Associates Vs ITO (ITAT Chennai)
Summary: The Chennai Bench of the Income Tax Appellate Tribunal allowed the appeal filed by Balaji Associates against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, dated 11.02.2026 for AY 2016-17, arising from an assessment framed under section 147 read with section 144B of the Income Tax Act, 1961. The assessee was a registered partnership firm consisting of eight partners engaged in real estate development and had filed its return declaring Nil income, which was processed under section 143(1). During scrutiny proceedings in the case of one partner, certain immovable properties were noticed as having been purchased in the name of the firm. Although the Assessing Officer initially treated the investment as unexplained in the partner’s hands, the CIT(A) in the partner’s appeal deleted the addition after holding that the property belonged to the partnership firm. Thereafter, the assessee-firm’s assessment was reopened under section 147.
During reassessment, the Assessing Officer noticed an increase in fixed assets of Rs.3,18,50,000/- and treated it as unexplained investment under section 69. The assessee explained that the investment represented capital contributions made by the partners, duly recorded in the firm’s books and reflected in their respective capital accounts. The books were produced and no defects were pointed out or rejected. The assessee also submitted that the partners were identifiable, their returns of income, balance sheets and capital accounts had been furnished, and that any enquiry concerning the source or financial capacity of individual partners should be undertaken in their assessments.
