TMI Blog2017 (1) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... In that view of the matter, the Tribunal has seriously committed an error in reversing the finding of the CIT(A) and the appeal deserves to be allowed. - Decided in favour of assessee - D.B. Income Tax Appeal No. 75 / 2006 - - - Dated:- 17-1-2017 - K. S. Jhaveri And Vinit Kumar Mathur, JJ. For the Appellant : Mr. Naresh Gupta For the Respondent : Mrs. Parinitoo Jain JUDGMENT Per Hon ble Jhaveri, J. 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has reversed the finding of the CIT(A). 2. This Court while admitting the appeal on 23.08.2012, has framed the following substantial questions of law: (i) Whether the findings of the Tribunal are p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, simply because the amount is credited in the books of the firm in the partners capital account it cannot be said that it is not the undisclosed income of the firms and in all cases it has to be assessed as an undisclosed income of the partner alone. The AO is therefore, justified in examining the sources of the credits in the capital accounts of the partners appearing in the books of the firm. The decisions of the Hon ble Allahabad High Court in the cases of India Rice Mills Vs. CIT and Surendra Mohan Seth vs. CIT cited by the appellant are not applicable on the facts of the case because the capital contributions made by the partners have not been made prior to the commencement of the business by the appellant firm. However, if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or these capital contributions, in the shape of confirmations from the creditor who have given the money to the partners and in the shape of the copies of the returns of income/ statements of computation of income/ capital accounts of all the creditors for AY 92-93, 93-94 94-95, to support the explanation. The onus cast upon the appellant firm in regard to the capital contributions made by the partners as per section 68 of the IT Act has therefore been duly discharged. This fact has even been admitted by the present AO in his remand report dated 11.3.2003 wherein he has suggested that action should have been taken in the hands of the partners. But in this case even the sources in the hands of the creditors to the partners have also been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in its para 9 has observed as under: We heard the rival submissions and perused the materials available on record since the partners do not have any source of income and the expenses have to be met out of the withdrawals from the firm. No details of expenses have been provided by the assessee firm regarding expenses of each partners on withdrawals. The withdrawals of each partner appear to be very low and the additions made by the AO appear to be on higher side. Therefore, we restrict the addition on account of law withdrawal at ₹ 25,000/- thus giving a relief to the assessee by ₹ 47,000/- from the order of the AO. Thus, both the grounds of the Department are partly allowed. 6. Counsel for the respondent Mrs. Jain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital. Therefore, the sum invested by the partners does not prove the creditworthiness and availability of funds with the partners and also does not the genuineness of the transactions. When the availability of funds with the partners and genuineness of the amount invested by the partners is not established and the explanation offered by the assessee firm is not satisfactory, then it cannot be said that the partners have made the investment in the firm of their own capital and the argument of the Id. AR that it should be taxed in the hands of the partners does not have nay merit since the amount has been found credited in the books of the firm and the cash credit has been routed through the ladies and the partners in the firm. The sum so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not supported by any documentary or other evidence then the deeming fiction credited by section 68 can be invoked. In these circumstances, we are of the view that simply because the amount is credited in the books of the firm in the partner s capital account it cannot be said that it is not the undisclosed income of the firm and in all case it has to be assessed as an undisclosed income of the partner alone. In these circumstances, we are of the view that the Tribunal was not justified in holding that the cash credits of ₹ 11,502/- in the account of Shri Kishorilal, one of the partners could not be assessed in the hands of the firm and in deleting the same . Also, we rely upon the decision in the case of CIT Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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