Accurate Pressings Vs ITO (ITAT Delhi)
Material Facts: The assessee, M/s Accurate Pressings, is a partnership firm engaged in manufacturing automotive parts. For Assessment Year (AY) 2015-16, the assessee filed its original return of income on September 29, 2015, declaring Nil income. In its audited Profit and Loss Account, the assessee credited an amount of Rs. 72,92,810 under “Other Income” titled “Unsecured Loan Waived Off.” However, while preparing its computation of taxable income, the assessee claimed a deduction of Rs. 54,10,183 under the head “Partners Capital Waived Off not taxable.”
The assessee stated that a partner, Mr. Puneet Ahuja, retired from the firm at the end of Financial Year (FY) 2012-13. His share of post-tax profits was transferred to a payable account, which was converted into an interest-free unsecured loan. Based on a mutual understanding among the partners, the payable amount was not required to be paid and was written off through a transfer entry routed through the Profit and Loss Account.
Procedural History
- Original Assessment: The case was selected for limited scrutiny under CASS. Assessment was completed under Section 143(3) accepting the returned Nil income without additions.
- Reopening: The Assessing Officer (AO) recorded reasons to believe that income had escaped assessment, citing suppressed turnover/contract income and the unexplained deduction of Rs. 54,10,183 claimed on account of waived partner capital.
- Approval & Notice: After obtaining approval from the Principal Commissioner of Income Tax (PCIT) under Section 151, the AO issued a notice under Section 148 dated March 30, 2021.
- Reassessment Proceedings: The assessee did not file a return of income in response to the Section 148 notice, though it participated in the proceedings. The AO issued a Show Cause Notice (SCN) on March 27, 2022, supplying the recorded reasons.
- Reassessment Order: The AO passed an assessment order dated March 29, 2022, under Section 147 read with Sections 144 and 144B, making an addition of Rs. 54,10,183. The AO made no additions regarding suppressed profit/contract income.
- First Appeal: The assessee appealed to the CIT(A). On July 31, 2025, the CIT(A) dismissed the appeal, holding that reopening was valid and sustaining the addition because writing off the payable amount had to be treated as income in accordance with proper accounting standards.
Legal Issues
