TaxTMI 
TaxTMI 
2018 (5) TMI 136
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..... There are 14 partners in the firm and partners have introduced fresh capital and the partner-wise introduction of capital during the year is Rs. 68,10,000/- as under : S.No. Name of the partner S/Shri Contribution to capital (Rs) Income returned for the A.Y. (Rs) Agricultural (Rs.) 1. Vallabhu Narayana Murthy 6,00,000 1,60,574 2,50,040 2. V NS Srinivasa Rao 8,20,000 93,500 4,08,169 3. Smt.Vallabhu Satyavathi 6,70,000 No return No return 4. Nelakurthi Janardhan 5,90,000 67,211 1,93,550 5. Nelakurthi Chenchaih 5,50,000 1,22,298 1,80,210 6. Guntupalli Subbarayudu 5,00,000 89,970 1,51,420 7. Patapalla NDV Prasad 4,80,000 1,59,309 Nil 8. Smt.Patapalla Rajani Kumari 5,10,000 No return No return 9. Smt.Mandela Padma 5,10,000 No return No return 10. Mandela Narayanarao 3,40,000 1,64,503 1,76,530 11. Patapalla Durga Ramesh 3,20,000 No return No return 12. Smt.Patapalli Sita Mahalakshmi 2,80,000 No return No return 13. Smt.Ravilla Narayanamma 2,80,000 No return No return 14. Sm....
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....t the partners did not respond to the summons issued by the AO. The AO observed that there was unusual influx of agricultural income and unusual influx of funds said to have been received by way of gifts. Since the partners failed to respond to the summons issued and explain the source for introduction of capital, the AO treated the difference in increase of capital (87,89,819-23,25,382) as unexplained cash credit in the hands of the firm and accordingly made the addition of Rs. 64,64,437/-. 2.2. The AO also made the addition of Rs. 1,24,687/- relating to the interest on partners capital account, a sum of Rs. 14,37,600/- relating to trailor maintenance, vans and lorries and the depreciation in respect of trailor bearing No.NLO 2D 6699 of Rs. 42,910/-. 3. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) has partly allowed the appeal of the assessee. In respect of introduction of partners capital account, the CIT(A) allowed the relief of Rs. 28,70,000/- and confirmed the balance. In respect of interest on partners capital account of Rs. 1,24,687/-, the Ld.CIT(A) confirmed the addition and with regard to the maintenance of trailor....
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.... sources. The Ld.CIT(A) called for the remand report and the AO submitted the remand report to the Ld.CIT(A), after carrying out detailed enquiries and analyzing the evidence submitted by the individual partners. The Ld.CIT(A) given the copy of the remand report to the assessee and considered the submissions of the Ld.AR and allowed the relief of Rs. 28,70,000/- and confirmed the remaining amount. The Ld.DR argued that while analyzing the individual credits in the accounts of the partners, the Ld.CIT(A) accepted the gifts and agricultural income merely on submissions made by the partners without furnishing any additional evidence. Therefore argued that the Ld.CIT(A) ought to have confirmed the entire addition made by the AO and should not have allowed partial relief. 9. We have heard both the parties and perused the material placed on record. The issue involved in this appeal is the addition made by the AO relating to the cash credits introduced by the partners in the respective partners' capital accounts. There are 14 partners in this case. All the 14 partners have introduced the capital to the extent of Rs. 68.10 lakhs in the year under consideration and out of which the AO ma....
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....rd to the source of capital, In the absence of any evidence to substantiate the unsecured loans from various creditors, we are unable to accept the genuineness of the loans. Neither the loan was accepted by cheque nor the same was repaid by cheque. As per the submissions made by the Ld.AR, even the interest to creditors was paid in cash. Therefore, we hold that the assessee failed to establish the genuineness and credit worthiness and capacity of the unsecured loans accepted by the partner. Accordingly, we uphold the order of the Ld.CIT(A) with regard to addition of Rs. 2,20,000/-in respect of Mr.P.Durga Ramesh. 2. Shri PND Vara Prasad (Partner). In this case, the partner has introduced additional capital of Rs. 4,80,000/-. This amount was introduced in multiples of Rs. 20,000/- each in cash during the month of March, 2009. It includes gift of Rs. 1,30,000/- and balance was agricultural income. In the remand report, the AO stated that Mr.Prasad filed return of income showing interest received from the firm as well as interest payment and gift of Rs. 1,30,000/- which was offered as income from other sources. The remaining amount of Rs. 3,50,000/- from Mr.Prasad is stated be....
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....urnished by the assessee, the Ld.CIT(A) allowed the credit of Rs. 2,00,000/-relating to agricultural income income and confirmed the balance amount of Rs. 3,50,000/-. During the appeal hearing, Ld.AR submitted the paper book and submitted the list of 6 names of unsecured creditors and argued that Mr.Chenchaih has accepted loans of Rs. 2,06,000/- during the year under consideration and explained the source as unsecured loans. We have gone through the submissions made by the assessee, assessment order and the information furnished by the Ld.AR. In this case also, the assessee had introduced capital @ Rs. 20,000/- from 1st March to 31st March. In the capital account, it was written as other receipt. During the assessment proceedings, the assessee did not produce any evidence with regard to the source of capital. During the appeal proceedings also the assessee did not submit any evidence in the form of confirmation letter before the CIT(A) and this is fresh claim made by the assessee before the tribunal. The payment was received in cash and the assessee has neither repaid the interest nor repaid the loan by cheque. In the absence of confirmation letter and evidence to....
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....e interest received in the hands of the partners, merely because the AO has allowed the interest, the loan cannot be accepted as genuine, unless the assessee establishes the identity, capacity and credit worthiness of the creditor. In this case, during the appeal hearing, the Ld.AR submitted that the loan was taken in cash and the interest was paid in cash. During the appeal hearing also, the Ld.AR did not submit any evidence to establish the genuineness. Therefore, we hold that the loans stated to have taken as not substantiated and the source for introduction of capital is unexplained. Accordingly we up hold the order of the Ld.CIT(A). 5. Smt.R.Narayanamma (Partner) She has introduced additional capital of Rs. 2,80,000/-. She has not filed the return of income for the assessment year 2009-10. As per the capital account she has also introduced capital at Rs. 20,000/- per day from 1st March to 31st March. Before the CIT(A) and the AO, no evidence was produced to establish the source of the capital. During the appeal hearing, the Ld.AR filed paper book with capital account and loans of Rs. 3,99,000/- @ Rs. 19,000/- per day. All the loans are stated to have been taken in cas....
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.... Ld.CIT(A) he has claimed the agricultural land holding of 15.96 acres and 23 acres belonging to his wife. The Ld.CIT(A) considered the explanation of the assessee, the remand report, the return of income and the gifts received by the partner during the year and allowed the credit of Rs. 7,50,000/- and confirmed the balance amount of Rs. 70,000/-. During the appeal hearing, the Ld.AR filed paper book and has furnished the list of new loans of Rs. 2,24,000/- @ Rs. 19,000/- each, however, the assessee failed to furnish the evidence with regard to the genuineness of the loans. No confirmations were filed before the AO/CIT(A) and made a fresh claim before the tribunal. Though the Ld.AR claimed the balance amount was sourced through loans, no evidence was furnished by the Ld.AR to establish genuineness of loans. Therefore, we hold that the order of the Ld.CIT(A) is reasonable and sustain the addition of Rs. 70,000/- as unexplained cash credit . 8. Sri Mandela Narayana Rao (Partner). The partner has introduced Rs. 3,40,000/- as additional capital during the year. He has filed return of income admitting total income of Rs. 1,64,503/- and agricultural income of Rs. 1,76,5....
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....filed paper book with return of income in page No.193 to 197. The only source claimed by the assessee was Rs. 1,75,890/- for sale of agricultural land but no evidence is furnished. During the appeal hearing also, the Ld.AR failed to explain the source of introduction of capital of Rs. 5,10,000/- which include a sum of Rs. 2,80,000/- received @ Rs. 20,000/- per day from 1.3.2009 to 31.3.2009. No evidence whatsoever is produced by the assessee to substantiate the source of capital introduced. The only source of income as per the Ld.CIT(A) order was agricultural income on 1.83 acres and gift amount of Rs. 95,000/- and interest income less than Rs. 1,00,000/-. Considering the sources explained by the assessee before the Ld.CIT(A) and the expenditure involved for the assessee towards drawings, the surplus estimated by the CIT(A) at Rs. 1,00,000/- is reasonable. Accordingly, we uphold the order of the CIT(A) and sustain the addition of Rs. 4,10,000/- as unexplained cash credit. 10. Smt.P.Rajani Kumari. The partner has introduced capital of Rs. 5,10,000/- which include the cash in multiples of Rs. 20,000/- per day from 1stMarch to 31st March of Rs. 2,80,000/-. Before the CIT(A) s....
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.... introduction of capital claimed by the assessee is bogus and accordingly we uphold the order of the Ld.CIT(A) and treat the sum of Rs. 3,20,000/- as unexplained cash credit. 12. Sri.N.Janardhan (Partner). The partner has introduced additional capital of Rs. 5,90,000/- and claimed before the CIT(A) that he holds 11 acres of agricultural land and agricultural income of Rs. 1,90,000/-.He has also claimed to have received Rs. 1,00,000/- as gifts from friends and relatives and admitted the same as income for the assessment year 2009-10. The CIT(A) considering the agricultural income, and the gifts received and the expenditure involved by the assessee allowed the relief of Rs. 1,90,000/- and confirmed the addition of Rs. 4,00,000/- as unexplained cash credit in the hands of the partner. During the appeal hearing, the assessee filed the list of names from whom the assessee had taken loans during the year under consideration. The loans stated to have taken were Rs. 2,41,500 and the loans stated to have taken from State Bank of India was Rs. 1,63,208/-. The assessee has not furnished any evidence with regard to the new loans taken during the year and also produced the ban....
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....*(A). Therefore, Ground No.2 is dismissed as infructuous. 12. Ground No.3, 4 and 5 are related to the introduction of capital by the Partners in their capital accounts. During the year under consideration the partners have introduced the fresh capital of Rs. 68,10,000/-. The Ld.CIT(A) allowed the relief of Rs. 28,70,000/- and confirmed the balance addition. In assessee's appeal ITA No.617 we have discussed in detail with regard source for introduction of capital by the partners independently and held that the order of the Ld.CIT(A) is reasonable upheld the same. Hence we dismiss the appeal of the revenue on this ground. In the result, both the appeals of the revenue as well as the assessee are dismissed on these grounds. 13. The second issue in assessee's appeal is addition of Rs. 1,24,687/- towards interest on capital. During the assessment proceedings, the AO found that the assessee has claimed deduction of Rs. 15,30,252/- as interest paid to partners on capital accounts. Since the credits in the capital account was found to be not genuine, the AO allowed the interest on opening capital of the partners and disallowed the difference amounting to Rs. 1,24,687/-. The Ld.CIT....