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2015 (11) TMI 389 - PATNA HIGH COURT

2015 (11) TMI 389 - PATNA HIGH COURT - TMI - Addition made in the hands of the firm with regard to the amounts related to capital account of the partners in the books of the firm - Held that:- In the present matter, the partners were also assessees and had been summarily assessed under Section 143 (1) of the Act for several years prior to the assessment year 1991-92. They have brought in the said amount to be included as a capital to the firm. Evidently, it is for the partner to explain the sour .....

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eated as income of the firm by relying upon Section 68 of the Act. - Decided against revenue. - Miscellaneous Appeal No. 433 of 2004 - Dated:- 3-9-2015 - Ramesh Kumar Dutta And Anjana Mishra, JJ. For the Appellant : Mrs. Archana Sinha, Mrs. Vijay Lakshmi Srivastava and Mr. Alok Kumar For the Respondent : Mr. Rohitabh Das and Dr. R. Usha JUDGMENT ( Per Honourable Mr. Justice Ramesh Kumar Datta ) Heard learned counsel for the appellants and learned counsel for the respondent. The appeal has been f .....

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as the first return filed by the partnership firm, by which it claimed the availability of opening capital by three partners aggregating to ₹ 2,67,789/- and additional capital brought in was shown as ₹ 5,55,000/- which was paid through gift/loan. The said gift/loan amounts have been received all in cash for the period 1986- 87 and 1987-88. The partners of the partnership firm had also filed their income-tax returns for the assessment years up to 1991-1992 and those had been assessed .....

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ion of the Madhya Pradesh High Court in the case of CIT vs. Metachem Industries: (2000) 245 ITR 160 and held that the amount should not have been added in the hands of the Firm and the Assessing Officer should have considered adding the amount in the hands of the partners and since that has not been done, the Tribunal has no any hesitation in deleting the addition. Learned counsel for the Revenue-appellant has sought to rely upon a decision of this Court in the case of Commissioner of Income-tax .....

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tion of burden of proof cannot be made to depend exclusively upon the fact of a credit entry in the name of the assessee or in the name of a third party. In either case, the burden lies upon the assessee to explain the credit entry, though the onus might shift to the ITO under certain circumstances. Where, for instance, the assessee shows that entries regarding cash credits in a third party's account are genuine and the sums were in fact received from the third party as loans or deposits, he .....

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ter the insertion of s.68 of the Act. And they are these: If there are cash credits in the books of a firm in the accounts of the individual partners and it is found as a fact that cash was received by the firm from its partners, then in the absence of any material to indicate that they are the profits of the firm, they cannot be assessed in the hands of the firm, though they may be assessed in the hands of the individual partners." This Court while admitting the matter for hearing has fram .....

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h Court, there was nothing wrong in the decision of the Assessing Officer and the CIT appeal, including the aforesaid amount as income of the assessee partnership firm since the partner on enquiry had failed to show the source of such funds. On the other hand, learned counsel for the respondentassessee submits that the decision in the case of Anupam Udyog (supra) supports the stand of the respondent and since admittedly this was a first return filed by the firm and the amounts are shown to have .....

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in I.T.T.A. No.29 of 2003, in which relying upon the aforesaid decision of the Patna High Court in Anupam Udyog's case (supra), it has been held as follows:- "…..It is a matter of record that the respondent-firm comprises of ten partners and each of them made contributions, be it in the form of cash or bank guarantees to be furnished to the Government, at the commencement of business. The returns submitted by the respondent-firm were processed, and the facts and figures furnished .....

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of the Bombay High Court in Narayandas Kedarnath vs. Commissioner of Income Tax and that of Allahabad High Court in Commissioner of Income Tax vs. Jaiswal Motor Finance. Section 68 of the Act no doubt directs that if an assessee fails to explain the nature and source of credit entered in the books of account of any previous year, the same can be treated as income. In this case, the amount, that is sought to be treated as income of the firm, is the contribution made by the partners, to the capita .....

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ger be pressed into service. However, in the name of causing verification under Section 68 of the Act, the Assessing Officer has proceeded to identify the source for the respective partners, to make that contribution. Such an enquiry can, at the most be conducted against the individual partners. If the partner is an assessee, the concerned Assessing Officer can require him to explain the source of the money contributed by him to the firm. If on the other hand, the partner is not an assessee, he .....

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