Case Law Details
Kanav Metals Vs ITO (ITAT Delhi)
In the case of Kanav Metals vs. ITO (Income Tax Appellate Tribunal, Delhi), the central issue revolves around a protective addition made by the Income Tax Officer (ITO) and the subsequent dispute over the time-barred substantive addition. Here is a detailed analysis of this matter:
1. Background: Kanav Metals, the appellant, filed its income tax return for the assessment year 2014-15, declaring an income of Rs. 12,220. The company was involved in wholesale scrap business.
2. Protective Addition: During the assessment process, the ITO noticed an addition of Rs. 67,50,000 to the firm’s capital. Specifically, Rs. 35,00,000 in Sh. Dhiraj Harjai’s account and Rs. 32,50,000 in Sh. Neeraj Harjai’s account. The ITO issued a show cause notice asking why this addition should not be included in the firm’s income.
3. Assessee’s Response: The appellant responded by arguing that the partners and the partnership firm are separate taxable entities. Partners and the firm are individually assessed for income tax. They also stated that the partners had declared this capital infusion in their individual income tax returns and that this capital addition should not be attributed to the firm.
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