2015 (3) TMI 153

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....93-94 was picked up for verification and it was processed under Section 143(1)(a) of the Income Tax Act, 1961 (for short the Act) through order, dated 31.03.1995. Later on, steps were taken for necessary rectification and notices under the relevant provisions of the Act were issued. Though several aspects were dealt with, the principal controversy was about the contributions made by as many as 10 partners aggregating to Rs. 76,57,263/-; and the alleged undisclosed credit entries amounting to Rs. 31,06,000/-. The explanation of the respondent that the partners have paid various amounts towards contribution of their share in the capital was not accepted. Similarly, the explanation offered in respect of the undisclosed credit entries was rejec....

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....ined credit entries. It is a matter of record that the respondent-firm comprises of ten partners and each of them made contributions, be it in the form of cash or bank guarantees to be furnished to the Government, at the commencement of business. The returns submitted by the respondent-firm were processed, and the facts and figures furnished by it were accepted. However, the matter was reopened at a later point of time. The Assessing Officer treated the capital raised by the firm in the form of contributions made by the partners as income. This conclusion was arrived at on the ground that source of income for the partners was not explained. Learned counsel for the appellant placed reliance upon the judgment of the Patna High Court in Com....

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....an require him to explain the source of the money contributed by him to the firm. If on the other hand, the partner is not an assessee, he can be required to file a return and explain the source. Undertaking of such an exercise, vis-a-vis the partnership firm itself, is impermissible in law. In the judgment relied upon by the appellant itself, the Patna High court held as under: If there are cash credits in the books of a firm in the accounts of the individual partners and it is found as a fact that cash was received by the firm from its partners, then in the absence of any material to indicate that they are the profits of the firm, they cannot be assessed in the hands of the firm, though they may be assessed in the hands of the individu....