Capital contribution reflected in partner’s account cannot be added under section 68 absent rebuttal of documentary evidence

5-Second Takeaway

The assessee discharged its burden under section 68 for the Rs. 6,40,000 credited to the capital account of a newly inducted partner’s HUF, because the amount was reflected in the books and supported by demand draft pay-in slips. The addition was deleted after the Tribunal was found to have ignored the documentary evidence and relied only on the absence of confirmation.

The case concerned a cash credit addition made under section 68 in respect of Rs. 6,40,000 standing in the capital account of S. B. Jariwala HUF after its induction as a partner in the assessee-firm. The amount was shown in the balance-sheet and partner’s account, and the assessee also produced pay-in slips indicating receipt through demand drafts.

The authorities had rejected the explanation mainly because there was no confirmation from S. B. Jariwala for the amount received. The published material records that this approach overlooked the documentary evidence already on record.

The court held that the assessee had explained the nature and source of the credit entry and had discharged the onus required by section 68. It found that the Tribunal committed a grave error in failing to consider the documents and in reaching a perverse conclusion.

The addition of Rs. 6,40,000 under section 68 was therefore ordered to be deleted.