CIT Vs Gurkirat BPO Services LLP (ITAT Delhi)
Delhi ITAT Upholds Deletion of ₹13.16 Cr u/s 68: Capital & Loans from Partner / Relative Cannot Be Taxed in Firm’s Hands
Partner’s Capital & Relative’s Loan: Add in Their Hands, Not LLP’s- Once Partner Owns Up, Firm Walks Free: Delhi ITAT Reiterates Metachem Rule- Source of Source Explained—Section 68 Can’t Be Invoked in Firm’s Hands-
Delhi ITAT ‘C’ Bench in ACIT Vs. Gurkirat BPO Services LLP [ITA No. 697/Del/2025, AY 2017-18, order dated 31.12.2025] dismissed Revenue’s appeal and upheld deletion of additions aggregating to ₹13,16,97,653 made u/s 68 towards introduction of capital of ₹11,15,35,773 and unsecured loans of ₹2,01,61,880. Assessee-LLP had no business activity during the year and earned only interest on FDRs. AO treated capital introduced by major partner, an NRI holding 95% profit share, and unsecured loans received from his close relative as unexplained cash credits alleging failure to prove identity, creditworthiness & genuineness. Tribunal noted that before CIT(A) detailed affidavits, bank statements, balance sheets and complete source-of-source were furnished showing that funds flowed from maturity of FCNR/FDR deposits of partner and relative. Relying on settled law that once partner/creditor admits the transaction and explains source, firm’s burden ends, Tribunal held that any doubt on source must be examined in hands of partner or creditor and not in hands of firm. Tribunal further observed that firm having no business activity could not logically generate undisclosed income. Accordingly, deletion of additions u/s 68 was affirmed and Revenue appeal was dismissed.
