TaxTMI 
TaxTMI 
2011 (5) TMI 680
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....out appreciating the fact the assessee had credited Rs.7,15,000/- in the accounts of the partners and in such circumstances, the A.O. was free to make inquiries with regard to the sources and genuineness of such credits. [3] On the fact and circumstances of the case and in law, the learned CIT(A)-I, Surat has erred in not appreciating the facts that all the four partners were salaried persons and looking to their salary payments, it was not possible for them to save such a huge amount as credited in the capital accounts and if they had such huge savings, they have failed to furnish any evidences which may substantiate the claim of their savings. [4] On the fact and circumstances of the case and in law, the learned CIT(A)-I, Surat has erred in deleting the additions of Rs. 7,15,000/-made by the A.O. on the account of unexplained credits introduced in the capital accounts of the partners. [5] On the facts and in the circumstances of the case, the learned CIT (A) ought to have upheld the order of the Assessing Officer on this issue. [6] It is, therefore, prayed that the order of the CIT (A) be set aside and that the Order of the Assessing Officer be restored." 2. Adverting to gro....
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.... withdrawn on 26.08.2004 and 15.01.2005 was again reintroduced on 15.01.2005 and 28.03.2005. The said amount of Rs. 2,72,500/- is brought in by him as a capital out of past savings and regular Income. 2.3 Shri Viral Ashvinbhai Patel is an electrical engineer, working with Torrent Power Ltd., Surat for last few years. His gross salary is Rs. 61,658/- for F.Y. 2004 2005 (A.Y. 2005-206). The said amount of Rs. 75,000/ is brought in by him as a capital out of past savings and regular income. 2.4 Bhagwati B. Khalasi HUF has been doing business of construction for last several years. It has also been filing its Income lax Return for last several years. HUF'S income from business operation is Rs. 1,05,200/- (for F.Y. 2002-2003 (A.Y. 2003-2004), Rs. 42,400/- for F.Y. 2003-2004 (A.Y. 2004-2005) and Rs,54,811/ for F.Y. 2004-2005 (A,Y. 2005-206). The said amount of Rs. 40,000/- is brought in by HUF as a capital out of past savings and regular income. We have already endowed the financial statements and acknowledgment slip of return of income filed by all the partners (para 3) of earlier submission dated 18.09.2007 and also the copies of cash book and bank hook along with Bank passbooks/....
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....the AR, I find that more than sufficient evidence find been furnished to explain the source of the funds introduced by the four partners into the Assessee firm during the year under consideration. Copies of their capital accounts, their individual cash books, bank pass books/bank statements, their balance-sheets, computation of Income and acknowledgments of the returns of income filed by them for different assessment years, Including the year under consideration, had all been filed. Therefore, the AO was not justified in simply dismissing such evidence and treating the funds introduced by the partners as unexplained cash credits in the hands of the Assessee firm. 5.1 Most importantly, even though this ground has not been strongly argued by the AR yet, it has to be accepted and understood that no addition could be made in the hands of the firm, of the sums introduced by the partners, as unexplained cash credits. If at all any addition was to be made, it could only be made in the hands of the individual partners, where they could be called upon to explain the source of such funds, and action could be taken accordingly, under the Ad. In the case of the Assessee, the AO observed that ....
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....ers' accounts in the books of the firm was on the firm itself. Referring to the decisions in A. Govindarajula Mudaliar v. CIT [1958] 34 ITR 807 (SC), Hardwarmal Onkarmal v. CIT [1976] 102 ITR 779 (Pat.), M. M. A. K. Mohideen Thamby & Co. v. CIT [1959] 36 ITR 481(AP) and P. V. Raghavan Reddi v. CIT [1956] 29 ITR 942 (AP), the Hon'ble High Court held that (a) there was no distinction between the cash credit entries existing in the books of the firm whether it was of a partner or of a third party ; (b) the burden of proof regarding the identity, capacity and genuineness of transactions was on the firm ; (c) if the cash credits were not satisfactorily explained, the Assessing Officer was justified to treat it as income of the firm from undisclosed sources ; (d) the firm had to establish that the amount was actually given by the lender ; (e) the genuineness and regularity in the maintenance of accounts had to be taken into consideration by the Assessing Officer and (f) if the explanation was not supported by any documentary or other evidence, then the deeming fiction created by section 68 of the Act could be invoked. In the case of P. V. Raghava Reddi (supra), it was observed by the Hon....
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....nd have admitted the amount of money brought in by them in cash. There is nothing to suggest that the aforesaid amounts brought in by the partners were actually the income of the firm. When the assessee has explained the amounts as capital contributions by the partners, the AO is not justified in holding that the assessee has not explained the source. In case the Assessing Officer doubted the genuineness of the source, he should have considered the same in the hands of the partners only and not in the case of the firm. This view of ours is supported by the decisions of the Hon'ble Allahabad High Court in the cases reported in CIT v. Jaiswal Motor Finance [1983] 141 ITR 706 and Surendra Mahan Seth v. CIT [1996] 221 ITR 239 (All.). 5.3 The Hon'ble jurisdictional High Court in the case of Pankaj Dyestuff Industries (supra) while deciding a similar issue concluded as under: "13. Applying the aforesaid principles to the facts of the present case, it is apparent that the assessee had furnished the details which would discharge the onus which lay on the assessee. It is not the case of the revenue that the partners of the assessee firm are fictitious. The Income Tax Officer has not dispu....