DCIT Vs Royal Developers (ITAT Jaipur)
A search was conducted in the Om Agarwal group. Loose papers were found at the residence of Shri Hemant Garg, showing year-wise figures of principal & interest relating to Royal Developers & Chomu House project. The AO assumed these entries represented unaccounted loans & interest received by the firm, & made a protective addition of ₹3.02 crore in the firm’s hands, stating that substantive additions were made in partners’ cases.
Before the CIT(A), the assessee proved that these seized papers recorded personal transactions between partner Shri Dharmendra Agarwal & Shri Hemant Garg for transfer of 1/3rd share in two projects, not firm-level receipts. It was shown that Dharmendra Agarwal had already offered the corresponding undisclosed investment & interest income in his own return, & Hemant Garg also admitted & was taxed on the same amount. Capital introduced in the firm was through banking channels & recorded in books, & the Chomu House project belonged to another company. Moreover, the firm did not even exist in earlier years for which the AO shifted income into AY 2015-16.
CIT(A) held that taxing the firm again would lead to double taxation, & deleted the entire protective addition. The ITAT upheld this, noting that no substantive addition was made in the firm’s hands, the income was already taxed in the real hands (partners), & the firm was not the recipient of the alleged funds.
