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TMI Blog2012 (9) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... in confirming the addition made by the Assessing Officer with regard to the capital introduced by Sri A.V. Subba Rao of Rs. 7,01,516/- particularly when he is assessed to tax. 5. The learned CIT(A) ought to have accepted the explanation offered by the appellant herein and directed the Assessing Officer to delete the said addition. 6. The learned CIT(A) erred in confirming the addition made towards unexplained credit of Rs. 4,00,600/-. 7. The learned CIT(A) erred in confirming the disallowance of expenditure of Rs. 85,775/- out of Rs. 2,03,171/- made by the Assessing Officer. 8. Any other ground that may be urged at the time of hearing. 3. Ground Nos. 1 and 8 being general in nature need no adjudication. 4. Ground Nos. 2, 3, 4 and 5 relate to addition of an amount of Rs. 17,53,653 and Rs. 7,01,516 being the capital introduced by the partners u/s. 68 of the Income-tax Act, 1961. 5. Briefly, the facts are that the assessee a partnership firm is engaged in the business of purchase and sale of tractors, tractor spares and service under Mahindra & Mahindra Ltd. The assessee firm came into existence by virtue of a partnership deed executed on 20.9.1994 between two partners Shri P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was also submitted before the CIT(A). It was further contended that the assessee had also sold gold ornaments and received an amount of Rs. 7,59,525 which also formed the source of investment in the capital of the firm. In support of such claim the details of ornaments sold and the details of persons to whom they were sold was also furnished before the CIT(A). The CIT(A) found the explanation submitted by the assessee to be improbable and not worthy of credence. The CIT(A) came to a finding that the claim of the assessee of investing a sum of Rs. 8,40,000 towards capital contribution out of salary income is not believable because of the fact the assessee failed to explain that why the amount was kept with him for all the these years and practically the entire amount was still available with the partner as savings. With regard to sale of gold ornaments amounting to Rs. 7,59,525 the CIT(A) disbelieved the contention of the assessee on the reasoning that there is no evidence to show sale of gold and the purchase of gold is not borne out from the return filed for the relevant year. The CIT(A) also found it difficult to accept that the gold was sold to individual parties. The CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of G.L. Foods vs. ITO, Range-4 in (2012) 134 ITD 159. The learned AR also relied upon the judgement of Hon'ble Supreme Court in the case of CIT vs. Bharat Engineering reported in 83 ITR 187. 10. The learned DR per contra submitted that the Assessing Officer as well as the CIT(A) were justified in disallowing the claim of investment by the assessee since the assessee has failed to prove the source of such investment by sufficient supporting evidence. The learned DR relying upon a decision of ITAT Hyderabad Bench in ITA No. 1648/Hyd/2008 in the case of M/s. Beerelli Damodar vs. ITO dated 9.4.2010 submitted that the ratio decided by the Hon'ble Supreme Court in the case of Bharat Engineering & Construction Co., was in the context of the 1922 Act hence will not apply to the facts of the assessee. 11. We have heard rival contentions and perused the materials on record. We have also gone through the orders of the Revenue authorities. It is seen from the record that Shri P. Sankar Narayana Rao had invested an amount of Rs. Rs. 17,53,653 towards capital contribution in the partnership firm which was made on 14.9.2004, 9.10.2004 and 18.10.2004 by way of demand drafts in favour Mahindra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the parties from whom Shri A. Venkata Subba Rao has collected advances of an amount of Rs. 6,10,000 when the names and addresses of the parties were furnished necessary enquiry could have been made to find out the genuineness of the claim of the assessee. However, we find that no such enquiry has been made either by the Assessing Officer or by the CIT(A). We are of the view that before an addition is made u/s. 69 sufficient material has to be brought on record to prove that the investment is unexplained. We, therefore, think it proper to restore the matter back to the Assessing Officer so far as the investment in capital of the firm by Shri A. Venkata Subba Rao is concerned. The Assessing Officer shall make necessary enquiry to find out the source of investment made by the said partner. If the assessee is able to prove that Shri A. Venkata Subba Rao has sufficient fund to invest in the capital of the firm then no addition could be made u/s. 69 of the Act. The grounds raised by the assessee are partly allowed. 14. Ground No. 6 relates to an addition made towards unexplained credit of Rs. 4,00,600. During the assessment proceedings the Assessing Officer found the loan creditors a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the persons who have given the loan on credit. Excepting the confirmation letter, the assessee has failed to produce any other document to prove the creditworthiness of Shri Tatiparti Venkata Rami Reddy. In such circumstances, the loan of Rs. 4,00,600 cannot be accepted as explained since the assessee has failed to discharge the onus of proving the genuineness of the transaction. We, therefore, uphold the orders of the Revenue authorities in this respect and dismiss the ground raised by the assessee. 18. Ground No. 7 relates to disallowance of an expenditure of Rs. 85,775. 19. Briefly, the facts are that during the assessment proceedings the Assessing Officer found certain expenditure claimed on account of salary, advertisement, commission, inauguration charges, miscellaneous expenses, opening expenses, repairs and maintenance, vehicle maintenance and workshop expenses were supported by self-made vouchers only. The Assessing Officer considering the nature and quantum of the expenditure claimed, disallowed an amount of Rs. 2,03,171. The Assessing Officer also disallowed interest payment of Rs. 22,269. The total expenditure disallowed on these two counts is to the tune ..... X X X X Extracts X X X X X X X X Extracts X X X X
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