The assessment of Ridhi Associates, a partnership firm, for the Assessment Year 2022-23 was made under section 143(3) on 28 th March, 2024. The…

The assessment of Ridhi Associates, a partnership firm, for the Assessment Year 2022-23 was made under section 143(3) on 28 th March, 2024. The Assessing Officer made two additions to the income of the assessee viz. (i) addition of 5,00,000 under section 40(a)(ia), and (ii) addition of 6,50,000 on account of unexplained cash credit. The assessee contested the addition on account of unexplained cash credit in appeal to the Commissioner (Appeals). The appeal was decided in February, 2025, against the assessee. On 12 th April, 2024, the Assessing Officer issued a notice under section 142(1) calling upon Ridhi Associates to file its return of income for Assessment Year 2023-24. In response to the said notice, Ridhi Associates furnished a return of loss comprising of business loss and unabsorbed depreciation. Ridhi Associates pays interest on loan @14% to its partners Rahul & Rajesh from 1.4.2024, being the date of loan, which amounts to 8,00,000 in total in the Previous Year 2024-25. The same was approved by modification of the partnership deed on 1.6.2024 w.r.e.f. 1.4.2024. Rahul, a non-resident, is a working partner, whereas Rajesh, who is resident in India, is not a working partner. Both of them share profits and losses of the firm equally. Further, Ridhi Associates furnished the following information pertaining to installments paid to an NBFC during the previous year 2024-25 towards loan borrowed for the business: Month Amount Mode of Payment 30 th April 1,20,000 Cash 31 st May 1,50,000 Account payee cheque 30 th June 1,50,000 BHIM 31 st July 1,20,000 Cash 31 st August 50,000 Cash 30 th September 3,50,000 Cash