TMI Blog2005 (2) TMI 761X X X X Extracts X X X X X X X X Extracts X X X X ..... .) cash credit in the name of partner in the books of account of the firm can be treated as firm s income under section 68 of the IT Act. 3. During the year under consideration the assessee purchased a quarry from Shri Indravadan Haji Sheth of Vatrak for a consideration of Rs. 3,51,000. A sum of Rs. 2,95,000 was paid towards the consideration out of which Rs. 1,50,000 was paid out of loan obtained from People s Bank, Dhansura and Rs. 50,000 was paid from advances received against goods from Laxmi builders and balance of Rs. 95,000 was stated to be paid from personal savings of the partners and their borrowed money from their relatives. However, according to the Assessing Officer, no explanation as to the source of this Rs. 95,000 was furnished at any stage of the assessment proceedings and no evidence was also produced. Thus, the Assessing Officer added the said amount of Rs. 95,000 to the income of assessee being unexplained cash credit. It was further found by the Assessing Officer that for the purpose of obtaining loan from the above- said Peoples Bank, Dhansura, the assessee has submitted a valuation report according to which the quarry was valued at Rs. 7,28,747. Keeping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al introduction of Rs. 95,000 by the partner Smt. Ushaben Rai. It is submitted by the assessee s counsel that the Assessing Officer recorded the statement of Smt. Ushaben Rai and who categorically admitted that she had brought in Rs. 95,000 from her own source. Having said so, there was no scope for any addition in the case of partnership firm. This being the first year of the partnership firm, if at all any amount found to be unexplained, that should have been made in the case of the partner. 5.1 I have perused the above contention of the assessee as well as the reasons given by the Assessing Officer and I inclined to agree with the assessee s counsel that in the facts of the case the addition cannot be made. Partner Smt. Ushaben Rai has categorically admitted that she has given Rs. 95,000 towards her capital. Therefore, as far as the assessee is concerned it has discharged the burden cast upon her under section 68 and no addition was necessary. If it was found that there was unexplained investment by the partner, then legally addition can be made in the case of partner, not in the case of partnership firm. The above view is fully supported by the M.P. High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically admitted that she had given Rs. 95,000 towards her capital in the firm. He contended that this finding of CIT(A) is not controverted by the depart-ment, therefore, the ld. CIT(A) was right in holding that the addition could not be made in the hands of the assessee as the assessee had discharged the burden. He further pleaded that the addition has rightly been deleted. He further contended that it is specifically found by the ld. CIT(A) that the partner, Smt. Ushaben Rai has categorically admitted that she has given Rs. 95,000 towards her capital and this fact alone is sufficient for deletion of the said amount in the hands of firm. For this purpose he placed reliance on the decision of co-ordinate Bench in the case of Dhorajia Construction Co. v. ITO [1992] 42 ITD 450 (Ahd.). Referring to this decision, he contended that once it is accepted that a sum of Rs. 95,000 was brought in by the partner of the assessee firm, the Assessing Officer should not have entered upon examining as to what could be the income of the concerned partner and the said question should have been left to be considered in detail in the individual assessment of the partner. He further placed reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was an obligation of the assessee to prove three ingredients namely - ( i ) identity of the creditor, ( ii ) creditworthiness of the creditor, and ( iii ) genuineness of the transaction. Unless all these three ingredients are proved to be existed with relevant documentary evidence, the cash credit has to be treated as income chargeable to income-tax of the assessee for the relevant year and the assessee cannot be stated to have discharged the initial burden. It is only after all the three ingredients are fulfilled the initial burden of proving cash credit can be said to have discharged. In the present case except for admission by the creditor who is a partner of assessee-firm, no evidence or material has been furnished to support that the amount invested in the name of Smt. Ushaben Rai was actually invested by her. 9. The case law relied upon by the ld. AR is also distinguishable on facts. In the case of Dhorajia Construction Co. ( supra ), the Assessing Officer had accepted that the partners had agricultural income. Thus the source of investment was accepted by the revenue. Here in the present case, there is no material on record to show the source from where said Smt. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of India Rice Mills v. CIT [1996] 218 ITR 508 (All.) is also distinguishable on facts, as the partners had contributed capital to the firm before commencing its business. In the present case, there is nothing on record to suggest that the capital was brought by the partner before commencement of the business. Moreover, according to the decision in the case of Shiv Shakti Timbers ( supra ), the onus is on the person in whose books of account the credit entries stand and in case of unsatisfactory explanation, the amount can be added to the income of said partner. 13. The said view is also supported by the decision of Allahabad High Court in the case of CIT v. Kapur Bros. [1979] 118 ITR 741 (All.), the case mentioned in the grounds of appeal filed by the revenue. 14. In view of above factual position, I find that the Assessing Officer was right in adding a sum of Rs. 95,000 to the income of the assessee as in the present case, the same was found credited in the books of account of assessee-firm and assessee did not offer any explanation about the nature and source of the said credit, therefore, the same was rightly added to the income of assessee under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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