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2007 (4) TMI 203 - MADRAS HIGH COURTDelete the addition made u/s 68 - failure to maintain books of account - Capital invested by the partners unexplained source of income - considered as unaccounted Income of the "firm or partners" - HELD THAT:- In the present case, the explanation offered by the firm was accepted and later, the Assessing Officer examined the partners and not accepted their explanation. The Assessing Officer cannot ask the assessee-firm to prove source of a source. Once the firm had offered an explanation and established that the capital was contributed by the partners, the same could not be assessable in the hands of the firm. Unless there are contradictions and inconsistencies in the statement of the partners, the credit cannot be treated as unexplained and cannot be added u/s 68 of the Act in the hands of the assessee-firm. Also, it is clear from the language employed u/s 68 of the Act that only the assessee alone has to offer an explanation. If the assessee makes an explanation, it is for the Assessing Officer to accept or reject the same. The finding given by the Tribunal is that the assessee-firm had explained the source of the capital and hence the same cannot be assessed as undisclosed income in the hands of the assessee-firm. The most striking features involved in the present case are as follows: (a) Since there are no books of account, there can be no credits in such books. (b) It is the first year of assessment of the assessee. (c) The explanation offered by the assessee-firm was not rejected and only the explanation offered by the partners were rejected. Hence, it is not a fit case for making addition u/s 68 of the Act. Thus, we are of the view that the order of the Tribunal is in conformity with law. The reasons given by the Tribunal are based on valid materials and evidence and we find no error or legal infirmity in the order of the Tribunal so as to warrant interference. Hence we answer all the questions in favour of the assessee and against the Revenue.
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