2012 (4) TMI 840

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....ade on account of initial capital introduced by the partners treated as unexplained cash credit by the AO." 2. Briefly, the facts of the case are that the assessee firm has come into existence vide partnership deed dated 29.09.2006 relevant to the assessment year under appeal for carrying out the business of construction of roads and other government contracts etc. The firm has four partners, namely, Shri Manoj Shashtri, Shri Ballabh Pandey, Shri Sadik Khan and Shri Narain Prakash Vijaywargiya. Smt. Kusum Lata Shashtri W/o Shri Manoj Shastri has been introduced to the firm vide amended deed dated 25.01.2007 whereas Shri Narain Prakash Vijaywargiya has retired from the firm. The AO found that the partners have introduced initial capitals w....

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....under : "3.2 Appellant's submissions alongwith assessment order have been considered carefully. Assessment records have also been perused. The appellant has submitted vide letters dtd. 10.12.09, 11.12.09, 18.12.09 and 22.12.09, all the details as asked for by the A.O. in support of its submissions made regarding capital contribution. All the partners are found to be regular income tax payers and have submitted copy of last two returns filed by each alongwith PAN card, computation, bank statement etc. In respect of Mr. Manoj Shastri, his audited accounts alongwith balance sheet and audit report have also been produced. On the last date of hearing, i.e. 22.12.09, the appellant has submitted cash flow statement of its partners. Vide orde....

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....on offered by the assessee is treated as unsatisfactory by the A.O. Thus, the same should be found credited in the books of the appellant firm to be treated as unexplained income of the firm itself Bank account of partner cannot said be to be part of books of accounts of the appellant firm. It has been held by Hon 'ble Supreme Court in case of CIT Vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78(SC) that where an assessee gives names and addresses of the alleged creditors, who are income tax assessees and the A.O. apart from issuing summons u/s. 131 to creditors does not pursue the matter further, then the addition of cash credit u/s. 68 to the assessee's income cannot be made, as the assessee has discharged the burden u/s 68. In the ....

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....ve made deposits in their respective capital accounts, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of the firm for the purpose of income tax. By relying on decision of Hon 'ble Allahabad High Court in case of Sundar Lal Jain Vs. CIT (1979) 117 ITR 316, it has been held the credit in the account of a partner is not a loan to the firm and is not assessable in the hands of the firm. It is open to the A.O. to undertake further investigation with regard to that individual who has deposited this amount. So far as the responsibility of the appellant firm is concerned, it is satisfactorily discharged Respectfully following these decisions, addition of Rs.26,50,575/- made in the....