PAZHAYANGADI G GOLD,KANNUR V. ITO, WARD 1 & TPS, KANNUR

ITA 284/COCH/2025

AI Insights

The case involves Pazhayangadi G Gold, a partnership firm engaged in the purchase and manufacturing of gold jewelry, which filed an appeal against the order of the CIT(A) for the assessment year 2018-19. The firm had declared nil income and was subjected to scrutiny, during which the Assessing Officer (AO) questioned the source of Rs.3,31,24,523 credited as capital contributions from the partners. The firm explained that these were inherited assets. The AO was not satisfied and made an addition under section 68 of the Act, which was upheld by the CIT(A). The Tribunal, however, found that the source of the capital was adequately explained and ruled in favor of the assessee, allowing the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 668794 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNDARASAN S.
• Assessee Lawyers: ARUN RAJ S.
• Section: 142(1); 68

Judgement Text

"ITA No.284/Coch/2025 Pazhayangadi G Gold, Kannur IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH:COCHIN BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER ITA No.284/Coch/2025 AssessmentYear:2018-19 Pazhayangadi G Gold EazhomePazhayangadi Kannur 670 303 Kerala PAN NO : AAUFP9485G Vs. ITO Ward-1 & TPS Kannur APPELLANT RESPONDENT Appellant by : Shri Arun Raj S., A.R. Respondent by : Shri Sundarasan S., D.R. Date of Hearing : 29.05.2025 Date of Pronouncement : 23.06.2025 O R D E R PERPRAKASH CHAND YADAV, JUDICIAL MEMBER: Present appeal of the assessee is arising from the order of ld. CIT(A) dated 21.3.2025 having DIN & Order No.ITBA/NFAC/S/250/2024-25/1074830671(1) and relates to the AY 2018-19. 2. Brief facts of the case as coming out from the orders of authorities below are that the assessee is a partnership firm and engaged in purchase and manufacturing of gold jewellery. The assessee has commenced its business during the year under consideration itself. It has filed its return of income declaring nil income on 30.1.2019. The same was processed u/s 143(1) of the Income Tax Act, 1961 (in short “The Act”) and thereafter selected for complete scrutiny. Accordingly, notices u/s 143(2)& 142(1) of the Act were issued to the assessee. During the course of assessment ITA No.284/Coch/2025 Pazhayangadi G Gold, Kannur Page 2 of 3 proceedings, the AO asked to explain the source of Rs.3,31,24,523/- In response to the query of AO, the assessee explained that the amount is contributions of the partners as their capital by way of gold ornaments and foreign savings, which they have inherited from their parents. However, dissatisfied with the explanation of the assessee, the AO made the addition of the entire amount u/s 68 of the Act. Aggrieved with the order of AO, assessee preferred appeal before the ld. CIT(A), however, remained unsuccessful and hence the assessee has come up in appeal before us. 3. Ld. Counsel for the assessee at out set pointed out that it is an undisputed fact that the assessee firm has received this amount as capital contribution from its partners and hence no addition is warranted in the hands of firm, in case the source of the capital remained unexplained then appropriate action can be taken in the hands of partners and not in the hands of firm. 4. Ld. D.R. relied upon the orders of authorities below. 5. We have heard the rival submissions and perused the materials available on record. Perusal of para 7 of the ld. CIT(A)’s order would prove beyond doubt that the assessee firm has credited this amount towards the capital account of partners as their capital in the shape of gold ornaments and other self-inherited foreign savings. Therefore, we are of the firm opinion that so far as the assessee firm is concerned, the source of the money remained explained and hence no addition can be made in the hands of the firm. It is settled position of law that source of source cannot be doubted in the hands of an assessee who has proved the credits appearing in his books of accounts. If any further enquiry/investigation is required with respect to the source of the ITA No.284/Coch/2025 Pazhayangadi G Gold, Kannur Page 3 of 3 source, then the department is free to have take action in the hands of the partners. With these observations, we decide this appeal in favour of the assessee. 6. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 23rd Jun, 2025 Sd/- (Inturi Rama Rao) Accountant Member Sd/- (Prakash Chand Yadav) JudicialMember Bangalore, Dated 23rd June, 2025. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Cochin. 5 Guard file By order Asst. Registrar, ITAT, Cochin. "