TaxTMI 
TaxTMI 
2012 (5) TMI 135
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.... Master Shishir Kumar Garg (minor) was admitted to the benefits of the partnership firm as partner who contributed his capital account in the shape of two demand drafts of Rs.1,90,000/- and Rs.72,000/-. These demand drafts were credited on 7th of July, 1990 by the bank in the account books of the Firm (assessee). In the assessment proceedings, the Assessing Officer required the assessee firm to explain the source of aforesaid contribution made by Master Shishir Kumar Garg. Explanation was offered which was not found satisfactory and the Assessing Officer has added a sum of Rs.1,90,000/- in the hands of the assessee, after rejecting the explanation furnished by Master Shishir Kumar Garg in respect of the said amount. The assessment order was unsuccessfully challenged before the CIT (A) as well as before the Income Tax Appellate Tribunal. Hence the present appeal. The appeal has been admitted on the following two substantial questions of law:- 1. Whether on the facts and in the circumstances of the case, there was any material before the Appellate Tribunal and it's order was perverse in upholding the Rs.1,90,000/- introduced by the partner, in the assessee f....
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....the assessee firm as it was its first year of business and it could at the most be added at the hands of the minor partner. In reply, Shri Dhananjai Awasthi, learned counsel for the department, submits that so far as the first submission is concerned, the findings returned by all the authorities below with regard to it are essentially findings of fact. It can not be said that the inference drawn by the authorities below is perverse or not plausible. At any rate, he submits that no substantial question of law is involved. So far as the second limb of the argument is concerned, he submits that in view of the Division Bench judgement of this Court in the case of Commissioner of Income-tax, Lucknow Vs. Kapur Brothers (1979) 118 ITR 741, the view taken by the Tribunal is based on correct import of section 68 of the Act. Considered the respective submissions of the learned counsel for the parties. So far as the first limb of the argument of the appellant is concerned, we will deal with that part of the argument while deciding the question no.2. So far as the second limb of the argument that at whose hands the addition should be made is concerned, it is apt t....
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....anding counsel for the department places reliance upon another Division Bench decision of this Court in the case of Kapur Brothers (supra). It is apt to examine the facts of the case of Kapur Brothers (supra). The Assessing Officer found a deposit of certain amount while making assessment of M/s. Kapoor Brothers. The amount was deposited in the name of its partners. The deposits were entered as on 20th October, 1966. The accounting period for the assessment year 1967-68 ended on 11th November, 1968. The explanation offered by the assessee was not found satisfactory. In this factual background, it was noticed that the entries were made about three weeks prior to the end of the accounting period. In this factual background the High Court held that cash credit entries standing in the name of partners in the account books of the Firm would validly be treated as income of Firm from undisclosed source. On a first flash, it appears that the ratio of the aforesaid decisions given in the case of Kapur Brothers (supra) and Jaiswal Motor Finance (supra) is conflicting, but on a meaningful reading thereof, would show that they were rendered in different factual matrix. The ratio laid....
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....nd is that all the deposits came to be made during the accounting year in the books of the assessee-firm before it started its business. Therefore, the onus was on the partners to explain the source in the case on hand and if they failed, the amount could have been added in their hands only and not in the hands of the assessee-firm." On the facts and circumstances of this case, we are of the considered opinion that the authorities below have committed error as they have failed to take into account that this was the first year of the business of the assessee firm. The partnership firm was formed on 5.7.1990 and on 7.7.1990 Master Shishir Garg deposited Rs.1,90,000/- and Rs.72,000/- as capital money with the Firm through bank clearance of two bank drafts. The accounting period being financial year i.e. ending on 31st of March, 1991, the Firm could not have any income at the time of its formation. The identity of the depositor i.e. Master Shishir Garg was not in issue at any point of time before the Income Tax Authorities. They treated the said deposit by Master Shishir Garg. This being so, if for one reason or the other, they were not satisfied with the financial capability....