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TMI Blog2010 (8) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, the hon'ble Income-tax Appellate Tribunal was right in law in upholding the order of the learned Commissioner of Income-tax (Appeals) deleting the addition of Rs. 22,01,000 made by the Assessing Officer on account of unexplained NRI gifts allegedly received by the partners and brought into the books of account of the firm through capital accounts of partners ?" 2. The assessee is a manufacturer having eight partners. During assessment, it was noticed that there were deposits in the capital accounts of the partners out of gifts received from NRIs. The said gifts were treated to be unexplained income of the assessee, rejecting the plea that the gifts were genuine and were received through banking transactions. On appeal, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the accounts. It was submitted that after recording this finding, the Commissioner of Incometax (Appeals) was not justified in holding that the gifts were received by partners and then brought into accounts in the books of the firm and in such a situation, the amount represented income of the partners only. 5. On the other hand, learned counsel for the assessee submitted that the question before the court was not whether the gifts were genuine but the only question was whether the gifts represented unexplained income of the partners or of the firm and a finding has been rightly recorded that the amount represented unexplained income of the partners which was taxable in the hands of the partners only and not in the hands of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons that the donors have not been examined it cannot be concluded whether the donors are men of means. However, from the statements of the three partners it appears that the donors are persons carrying out petty jobs and have gone to foreign countries mainly for earning their livelihood. Thus, they may not be men of means even. In the present case also there was no occasion for making such huge gifts. Thus, all the conditions in the cited case are satisfied in the present case. Though the assessee has received all the gifts through bank drafts but this is only a self-serving evidence in possession of the assessee. In the cited case also the assessee had received the gifts through bank drafts which were rejected by the hon'ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the gifts to the partners were not genuine, no addition in the hands of the firm could be made. We are of the opinion that the orders passed by the Commissioner of Income-tax (Appeals) and the Tribunal cannot be sustained. 10. The question whether the addition on account of unexplained credit entry in the books of account of the assessee could be made to the income of the firm or the partner, depends on the facts and circumstances of each case. No doubt, a partner under the Act is a separate entity and where there is separate income, the same may not be liable to be taxed in the hands of the firm merely because the credit entry is made in the accounts of the firm. There is no rigid rule that whenever a credit entry is in the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , rejected and the addition of Rs. 22,01,000 was treated as undisclosed income of the assessee. The said finding has not been set aside by the Commissioner of Income-tax (Appeals) or the Tribunal. In view thereof, we are of the opinion that the alleged gifts received from NRIs by the partners were the undisclosed income of the assessee-firm in the facts and circum- stances of the present case. The finding to the contrary by the Commissioner of Income-tax (Appeals) and the Tribunal is legally unsustainable and is accordingly set aside. 12. Suffice it to notice, the judgments relied upon by learned counsel for the assessee are not helpful to it and do not advance its case as those were cases which were decided on the individual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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