TMI Blog2012 (11) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... s health condition and, therefore, we find it reasonable to restrict the addition to Rs. 4,00,000/- as against Rs. 7,00,000/- made by the Assessing Officer and confirmed by the CIT(A). Interest on Capital u/s 40(b) - With respect to the plea of the Counsel that the CIT(A) has not justified confirming the additions reading the interest of above three credits, AO noticed that the assessee had claimed interest of Rs.11,26,527/- on the capital account of the partners computed at the rate of 18% p.a. since the provisions of Sec.40(b)(iv) of Act permits interest on partners’ capital account @ 12%, the AO disallowed the balance excess amount of Rs.3,75,509/. with respect to additions u/s.68 of the Act is restricted and the addition in the case of B. Veeraiah has been deleted,issue is set aside to the AO to rework the interest after taking into consideration the additions sustained in the case of M. Srikant and G. Venkata Rao - In the result the appeal of the assessee is partly allowed for statistical purposes. - ITA No. 219/HYD/2010 - - - Dated:- 27-7-2012 - SHRI CHANDRA POOJARI AND SMT. ASHA VIJAYARAGHAVAN, JJ. Appellant by : Shri K.A. Saiprasad Respondent by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the sum of Rs. 7,00,000/- as unexplained credit u/s 68 of the Act, in the hands of the assessee, namely, M/s Prathipathi Estates. 4. In the case of Sri G Venkata Rao, it was submitted by the authorized representative that he was not an income tax assessee and furnished a copy of pass book of 11.43 acres of land holding and another letter dt.17.11.2008 from his employer Sri Balaji Spinners stating that G. Venkata Rao is working as a Supervisor for Sri Balaji Spinners for last 7 years and drawing a salary of Rs.6,000/- p.m. It was submitted that investment of Rs.7,00,000/- was made out of agricultural income derived from his land situated in Guntur District and the copy of the land pass book was submitted. Since Shri G. Venkat Rao had failed to explain with supporting evidences, the Assessing Officer held that the credit cannot be accepted as genuine and added the sum of Rs. 7,00,000/- as unexplained credit u/s 68 of the Act, in the hands of the assessee, namely, M/s Prathipathi Estates. 5. As regards the capital of Rs.1,00,000/- shown as interest in the capital account of Sri B. Veeraiah in cash on 5.9.2005, Sri Veeraiah filed a confirmation letter stating that the amount is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enkata Rao. As per capital account of the other partner Sri B Veeraiah, cash deposit of Rs.1,00,000/- is shown as made on 5.9.2005. However, in the confirmation letters filed in the names of the above persons, there is no reference to the above cash deposits made in their respective accounts during the previous year. In those three confirmation letters, dt.18.11.08, though it is mentioned that they have invested the amount out of their savings generated through agriculture, in absence of specific mention to such cash deposits, such transactions shown in their accounts cannot be accepted as genuine. Had such cash deposits / investments been genuine, each of those partners would have mentioned the date(s) of such cash deposits/investment, made during the previous year, in the respective confirmation letter. In absence of such details in the said confirmation letters, the said investments made in cash in their accounts, cannot be accepted as genuine. Further, though in his statement recorded before the AO, Sri M Srikanth has submitted that he has made such investments out of his savings from agricultural income, he has failed to produce any evidence in support of such claim. In the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) is also not justified in confirming the addition representing the interest on these above three credits. 5. For the above and for any ground or grounds that may be urged during the course of hearing, the appellate prays that the Hon ble ITAT be pleased to direct the Assessing Officer to delete the additions totaling to Rs. 15,00,000/- representing the cash credits and interest thereon of Rs. 87,321/-. 15. The Ld. Counsel for the assessee Sri Rama Rao submitted that the CIT(A) should not have confirmed Rs.7,00,000/- each in the name of two partners and also the addition of cash credit of Rs.1,00,000 in the name of Veeraiah. The Ld. Counsel further argued that he had explained that Srikanth had income from sale on subabul trees and also leased out his land by way of oral lease to earn agricultural income. Further, Srikanth was also employed and the accumulated income was credited in the capital account of the firm. The Ld. Counsel also contended that the land holding of Venkata Rao was to the extent of 11.43 acres and submitted that he had reasonable agricultural income and also savings in order to source the credit in the capital account. 16. We heard both the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X
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