TMI Blog2008 (5) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... entative. The estimate of agricultural income made by the AO is without any basis. In S. Sarabhaiah Shetty Sons v. CIT [1967] 64 ITR 175 (AP), the Andhra Pradesh High Court has held that where the ITO did not state the basis of his estimate, the estimate is not tenable. In view of this and in view of the facts and circumstances of the case, I am of the opinion that the estimate of agricultural income made by the AO is not justified. The addition of Rs. 75,000 is accordingly deleted." 3. We have heard the learned Departmental Representative and carefully considered his submission. We do not find any infirmity or illegality in the order of the CIT(A) in deleting the addition of Rs. 75,000 specially when the assessee has shown the agricultural income for the asst. yrs. 1999-2000 and 2000-01 at Rs. 2,71,770 and Rs. 2,98,200. We, therefore, dismiss the ground No. 1. 4. The second (ground) relates to the deletion of addition of Rs. 1.50 lacs. The AO made the addition of Rs. 1.50 lacs which the assessee has shown as credit from one Shri Bhagwandas. The AO noted that the assessee has shown credit from Shri Bhagwandas who was a creditor of Satbhaiya Agro Industries. Tikamgarh in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly we confirm the order of the CIT(A) and thus this ground is also dismissed. 7. In the result the appeal of the Revenue stands dismissed. U.B.S. Bedi, J.M. : Despite having repeated discussion with learned AM and best persuasion of myself, I have not been able to agree with the finding and conclusion as arrived at by my learned Brother, the AM, with respect to ground No. (ii) of Revenue's appeal and my reasons for being so are given as under. 2. The facts relating to this ground indicate that the assessee had shown Rs. 3,02,038 as credit from Shri Bhagwan Das. In assessment proceeding, it was submitted that Shri Bhagwan Das of Tikamgarh was a creditor to Satbhaiya Agro Industries, Tikamgarh in which the assessee is also a partner. As per assessee, Shri Bhagwan Das wanted to buy a Maruti car from Patel Motors, Indore. He, therefore, took out Rs. 1,50,000 from Satbhaiya Agro Industries and deposited with Patel Motors, Indore. He also deposited another amount of Rs. 1,50,000 with Patel Motors and this amount was claimed as his own savings. However, due to the ultimately demise of daughter of Shri Bhagwan Das, he changed his mood and wanted to cancel the booking. In the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no reason of making any addition in the hands of the assessee. The Court further held that in case the Department is not satisfied, it is for the Department to initiate proceedings under s. 69 of the Act in the hands of the creditor. In view of this and in the facts and circumstances of the case, I am of the opinion that the addition of Rs. 1,50,000 is not sustainable and is, accordingly deleted." 4. Aggrieved by this order of the learned CIT(A), Department is in appeal and while relying upon AO's order it was pleaded for setting aside the order of CIT(A) and restoring that of the AO in this regard. It was further submitted by learned Departmental Representative that the assessee has not been able to substantiate claim of the assessee about entire amount taken on credit from Shri Bhagwan Das because he could only establish availability of amount to the extent of Rs. 1,50,000 and balance amount of Rs. 1,50,000 could not be explained by him. Therefore, the AO has correctly made the addition and CIT(A)'s action in deleting the same is not proper and justified. So far as jurisdictional High Court decision in the case of Metachem Industries is concerned, in that case it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed as his own saving. The AO accepted first amount of Rs. 1,50,000 which was withdrawn from Satbhaiya Agro Industries and documentary evidence to that effect was furnished but for balance amount of Rs. 1,50,000, according to the AO, the assessee had not been able to satisfactorily explain the said amount in the absence of documentary evidence or material having been placed on record by Shri Bhagwan Das or the assessee. Now it is to be seen whether such credit of Rs. 1,50,000 which was not accepted by the AO can be added in the income of the assessee or not. Mainly reliance is on the decision of Madhya Pradesh High Court in the case of CIT v. Metachem Industries. Similar issue with regard to introduction of capital by partner in the firm's account came up for consideration before Jabalpur Bench in the case of Dy. CIT v. Top Up Centre in the cross- appeals in ITA Nos. 203 and 278/Jab/1999 for asst. yrs. 1992-93 and 1993-94 and relevant portion of the order as contained in paras 38 to 44. which dealt with the similar issue, is reproduced as under : "38. As regards second issue, same relates to deletion of addition of Rs. 1,55,000 made by the AO under s. 68 of the IT Act. When conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in the books of the firm, therefore, addition could rightly be made in the hands of the firm and learned CIT(A) is not justified in deleting the same. Whereas learned counsel for the assessee relied on the order of the CIT(A) and pleaded for confirmation of the same. It was next submitted that case of the assessee is covered by Madhya Pradesh High Court decision relied upon by learned CIT(A) and further case of Madhya Pradesh High Court reported in CIT v. Metachem Industries [2000] 161 CTR (MP) 444 : [2000] 245 ITR 160 (MP), CIT v. Jaiswal Motor Finance [1983] 37 CTR (All) 217 : [1983] 141 ITR 706 (All), Swendra Mahan Seth v. CIT [1996] 221 ITR 239 (All), CIT v. Shiva Sales Corporation [2001] 170 CTR (P H) 269 : [2001] 251 ITR 430 (P H) to plead that the addition in the hands of the firm cannot be made when credit entries are there in the capital account of the partner's in the books of the firm. 41. After having heard both the sides and considering the material on record in the light of precedents relied upon, I find it appropriate to deal with the legal contention raised by learned counsel for the assessee that no addition could be made in the hands of the firm under s. 68 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pparent insofar as the provisions of s. 68 are concerned that the partners do not stand in any different position vis a-vis other unsecured loans and if the plea advanced on behalf of the assessee is accepted then it would mean that the onus under s. 68 stands discharged only on establishing the identity of the depositors and the other two conditions, namely, the capacity of the depositor and the genuineness of the transactions have become meaningless. I am afraid that this is not the purport and intention of the legislation behind s. 68. Learned Authorised Representative mainly relied on Madhya Pradesh High Court decision in the case of CIT v. Metachem Industries in which it was held that the cash credits in the names of the partners in the books of account were not assessable under s. 68 in the hands of the firm. It is also found that the said decision is based on the case of Sundar Lal Jain v. CIT [1979] 117 ITR 316 (All). On perusal of the decision of the Hon'ble Allahabad High Court it is noted that the same was delivered in the context of an addition made in the hands of the partner in his individual status. The issue was whether in the hands of the partner the addition was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the present case, it is noted that an amount of Rs. 1,55,000 was found credited in partner's capital account appearing in the books of account of the assessee firm and when assessee was confronted to explain the source of deposits, it was submitted that the same is out of withdrawals from M/s Bahar Enterprises and partly from repayment received from LIC but no supporting evidence was filed despite opportunity given and AO made the addition. However, CIT(A) deleted the impugned addition by holding that addition could not be made under s. 68 even if it is unexplained deposit which could be considered under s. 69 in the case of the partner. Keeping in view the detailed discussion as held in foregoing para and in the light of the decision cited, I am of the considered view that such action of learned CIT(A) is unwarranted and uncalled for, as such is unsustainable. My view is further fortified by Jabalpur Bench decision in the case of ITO v. Nand Builders in ITA No. 319/Jab/1997 dt. 25th Jan., 2002. So far as Punjab Haryana High Court decision as relied by learned Authorised Representative is concerned, there are distinguishable features as the assessee, in the case in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business has also stopped from 1990 and his only source of income is agriculture but still he has to take something from his sons in order to make both the ends meet. So far as creditor's bank account is concerned, Hie AO has noted that this was opened by the assessee on 14th Feb., 1996 and from the date of opening of the bank account till 9th Dec, 2000, there are equal number of deposits and withdrawals (23 transactions each) and except for one transaction of Rs. 50,000, other transactions range from Rs. 100 to Rs. 500 and on 12th Dec, 2000, said creditor deposited Rs. 1,00,000 and on 14th Dec, 2000, he further deposited Rs. 50,300 and issued cheque on 5th Feb., 2000 for Rs. 1,50,000 and prior to these transactions Rs. 2,500 was deposited on 5th Oct., 2000. Since the assessee was having bank account and was depositing certain amount regularly so there was no point of not depositing the agricultural income in the bank account and why same was kept in the home chest especially when he is 81 years old and to keep such an amount at home is not secure. Said creditor was issued notices in this regard to explain his position not only once but on two occasions but he did not respond, nei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeding, it was submitted that Shri Bhagwan Das of Tikamgarh was a creditor of Satbhaiya Agro Industries, Tikamgarh, in which the assessee is also a partner. As per assessee, Shri Bhagwan Das wanted to buy a Maruti car from Patel Motors, Indore. He, therefore, took out Rs. 1.50 lacs from Satbhaiya Agro Industries and deposited with Patel Motors, Indore. He also deposited another amount of Rs. 1.50 lacs with Patel Motors and this amount was claimed as his own savings. However, due to the untimely demise of daughter of Shri Bhagwandas, he changed his mood and wanted to cancel the booking. In the meantime Shri Babulal Jain was negotiating for purchase of house property at Indore. He, therefore, needed money and approached Shri Bhagwan Das. Shri Bhagwan Das instructed Patel Motors to pay his booking amount of Rs. 3 lacs to Shri Babulal Jain (assessee). M/s Patel Motors, Indore, accordingly, issued a cheque of Rs. 3,02,038 (including interest) to one Shri Brajesh Kumar Kasliwal, the seller of the house property to the assessee. This amount was given vide cheque No. 717621 dt. 27th Jan., 2001 of Bank of Maharashtra. The AO accepted the loan amount of Rs. 1.50 lacs because it was taken ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial placed before me. I find that learned AM has recorded the following finding : "We have carefully considered the rival submission and perused the materials on record. We find that the amount has been advanced to the assessee by Shri Bhagwan Das through Patel Mortors, Indore. The payment has been received through account payee cheque. Shri Bhagwandas has confirmed it through affidavit. The immediate source of the money advanced to the assessee is covered by the withdrawal of the amount from M/s Patel Motors. The assessee is not required to prove the source of the sources. We, therefore, did not find any illegality or infirmity in the order of the CIT(A) in deleting the addition of Rs. 1.50 lacs and accordingly we confirm the order of the CIT(A) and thus this ground is also dismissed." 9. After considering the arguments of both the sides, facts of the case and legal position, I entirely agree with the above finding of learned AM. The creditor, namely, Shri Bhagwan Das had deposited a sum of Rs. 3 lacs with M/s Patel Motors for purchase of Maruti car. The source of such deposit was Rs. 1.50 lacs withdrawn by him from M/s Satbhaiya Agro Industries and remaining Rs. 1.50 lacs w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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