Cash deposit of the firm cannot be clubbed with the personal income of the Partner: ITAT

Cash deposit of the firm cannot be clubbed with the personal income of the Partner: ITAT

It held the assessing officer responsible for the violation of natural justice

The Amritsar bench of the Income Tax Appellate Tribunal (ITAT) has held that the cash deposit of the firm cannot be added to the personal income of the partner without investigating it from the firm's end.

The grievance of the assessee, Srijal Gupta was that the assessing officer (AO) added back the cash deposit of his firm Real Estate with his total income.

The assessee contended that the deposit of cash of the firm should not be added to the total income of the assessee, who is a partner of the firm. A separate assessment should be done regarding the firm's account.

The bench comprising Anikesh Banerjee (Judicial Member) and Dr. M. L. Meena (Accountant Member) observed that the re-opening was made under the Income Tax Act on the purchase of the property amount of Rs.9,53,750.

The bench stated, "After completion of the assessment, the AO accepted the assessee's investment and did not add any amount related to the source of funds for the purchase of the property. But he suddenly realized that the assessee was the co-owner of Real Estate.

"According to the AO, in the bank account opening form of the firm, the PAN was not verified from the AST Module (IT database). So, he concluded that the PAN was fake and the entire deposit in the bank account of the firm was added back as per the profit-sharing ratio of the partners."

The tribunal further stated, "The AO made gross violation of natural justice in this case. Without the assessment of the firm, how could the amount deposited in the firm's account be added back to the partner's account."