ITAT: Additions on Partner’s Capital, Purchases, and Excise Duty Payments Deleted After Verification:

ITAT: Additions on Partner’s Capital, Purchases, and Excise Duty Payments Deleted After Verification The assessee, a partnership firm engaged in liquor trading, filed its return of income for AY 2020-21 declaring income of Rs. 1,17,490. The case was selected for scrutiny. The AO noted that one of the partners, Shri Rajnish Panwar, had contributed Rs. 30 lakh to the firm, but doubted his creditworthiness. The AO also treated purchases of Rs. 1,16,12,999 from M/s Shivin Liquor LLP and Shri Sudhir Sharma as bogus on the ground that the parties did not respond to notices under Section 133(6). Additionally, an amount of Rs. 56,95,000 paid to the State Excise Department was treated as unexplained. CIT (A) Held: On appeal, the CIT(A) directed the deletion of all three additions after verification. The AO, in set aside proceedings, verified bank statements, purchase records, and Form 26AS, and confirmed that the transactions were genuine. He accordingly deleted the additions in the rectification order dated 04.04.2024. Main Issue: Whether the CIT(A) was justified in deleting additions made on account of capital introduction by partner, purchases from liquor suppliers, and excise duty payments, which the AO had initially treated as unexplained or bogus. ITAT's Ruling: The Tribunal observed that the AO himself, after verification, accepted that the partner’s capital contribution of Rs. 30 lakh was duly supported by bank statements and deleted the addition. Similarly, purchases from M/s Shivin Liquor LLP and Shri Sudhir Sharma were found to be reflected in Form 26AS with tax collected at source, confirming their genuineness. No cash payments exceeding the prescribed limit were noticed. The excise duty payment was also duly supported. Since the AO had already rectified and deleted the additions in compliance with CIT(A)’s directions, the Tribunal held that the Revenue had no ground to sustain its appeal. Therefore, both the Revenue’s appeal and the assessee’s cross-objection were dismissed. To Read Full Judgment, Download PDF Given Below