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2022 (1) TMI 1410 - AT - Income TaxAddition u/s. 68 - unexplained partners investment in the assessee-firm - source for the amount introduced in the firm as capital and loan was not properly explained - since the interest credited to the partners account was in violation of the provisions of section 40(b) AO disallowed the claim of expenditure towards such interest and added the same in the hands of the assessee - HELD THAT:- With respect to unexplained cash brought into the firm as partner’s capital and loan from partners, neither the Ld. AR nor the assessee has established that the amount was accounted in the books of the respective partners of the firm. The amount is credited in the books of the assessee firm during the relevant assessment year without any corresponding entries in the books of the respective partners of the firm and there is no evidence to establish that the source of those funds are genuine and accounted. It is also obvious that the entire amount is appropriated and utilized by the assessee firm and not by the partners of the assessee firm. From the above provisions of section 68 and the facts of the relevant case before us it is crystal clear that the assessee firm is directly hit by the provisions of section 68 of the Act. Needless to mention that if the partners of the assessee-firm had introduced the cash in their respective books and thereafter transferred the same to the books of the assessee firm then probably the onus may be on the partners of the assessee firm to establish the source of the cash brought into their respective books and therefore addition may not be made in the hands of the assessee firm depending on the facts and circumstance of the case. In the case of the assessee it is apparent that the cash was never introduced in the books of the partners of the assessee firm, but it was merely introduced in the books of the assessee firm. Therefore, the onus is on the assessee firm to establish the genuineness of the cash introduced in its books. Since the assessee firm has failed to establish the genuineness of the cash introduced in its books obviously the addition has to be made in the hands of the assessee firm as held by the Ld. AO. Therefore, we hereby set aside the order of the Ld. CIT (A) and confirm the order of the ld. AO on this issue. Further, neither the Ld. AR nor the assessee could establish that the amount debited in the P & L Account of the assessee firm as interest payable / paid to the partners of the assessee firm are not in violation of the provisions of section 40(b) of the Act. CIT (A) has deleted the addition without making a clear finding on the issue. No merit in the order of the Ld. CIT (A) on this issue also. Accordingly, we hereby set-aside the order of theCIT (A) on this issue and the order of the Ld. AO is hereby confirmed. Decided in favour of revenue.
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