TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 1133
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..... During assessment proceedings, it was noticed that the two partners of the firm introduced capital aggregating Rs. 12.20 Lacs in the firm, which was stated to be made out of gifts received by the partners from four persons. However after perusal of gift deeds and statements made by two donors, Ld. AO came to a conclusion that an amount of Rs. 7.20 Lacs remained unexplained which called for addition as unexplained capital introduced by the partners and accordingly, the income of the assessee was determined after making the impugned addition. The same, upon confirmation by Ld. CIT(A) was contested before this Tribunal vide ITA No. 2813/Mum/2011 order dated 18/07/2012 where the matter was restored back to Ld. CIT(A) for fresh adjudication. 4. Before Ld. CIT(A), in the second round, the assessee contended that the primary onus of proving the source of capital was discharged by the assessee firm and even two donors were produced before Ld. AO with their bank statement and therefore, the additions were not justified. However, not convinced with the explanation, Ld. CIT(A) confirmed the addition, against which the assessee is in further appeal before us. 5. The Ld. Representative for ....
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....e. They have explained the source as having received gift from various persons, who have also filed their Income Tax Returns and have been assessed accordingly. Merely because, the donors are weavers and they own only one loom would not make any difference. They have filed their Income Tax Returns and have also filed the return under the Gift Tax Act. They have paid the gift tax also. Assessment under the Gift Tax Act has also been made, though the assessments made were summary in nature. In the case of Anil Rice Mills (supra), this Court has held that the assessee cannot be asked to prove the source of source or the origin of origin. 9. Taking the various facts enumerated above, we are of the considered opinion that the Tribunal had erred in holding that the amount deposited by the two partners is liable to be added under section 68 of the Act on the ground that the gifts received by the respective partners from the various persons could not be explained as the creditworthiness of the donors had not been established. The Tribunal had wrongly drawn an adverse inference upon the fact that the donors had filed their Income Tax Return for the Assessment Years 1988-89 to 1991-92 on ....
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.... "It appears to be well settled that if there are cash credit entries in the books of the firm in which the accounts of the individual partners exist 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 were profits of the firm, it could not be assessed in the hands of the firm. We are, therefore, of the opinion that the Tribunal did not commit any error of law and rightly held that the deposits shown in its accounts were satisfactorily explained." 13. At this stage, the learned standing 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 en....
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....sp; ** ** "Reliance on Kapur Brothers' case [1979] 118 ITR 741 (All.) is misplaced, inasmuch as in that case deposits were entered in the books of the firm when it was already carrying on its business. The firm was called upon to explain the source of the deposits. The explanation of the firm was that the deposits represented the sale proceeds of certain assets belonging to the partners. When no evidence was adduced to substantiate that explanation, the assessing authority added the amount as income of the partnership-firm. These facts are materially different from the fact of the instant case. Most striking feature of the case on hand 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 sourc....