TMI Blog2017 (8) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... de in the hands of the respective partners only. - additions shall stand deleted - Decided in favor of assessee. - I.T.A. No. 5250/Mum/2016 - - - Dated:- 23-8-2017 - SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM For The Assessee : Keyuri Desai, Ld. AR For The Revenue : Suman Kumar, Ld. DR ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by Assessee for Assessment Year [AY] 2004-05 assails the order of Ld. Commissioner of Income Tax (Appeals)-1 [CIT(A)], Mumbai dated 23/05/2016 qua confirmation of certain addition of ₹ 7.20 Lacs on account of alleged unaccounted capital introduced by the partners of the firm. The assessee is in second round of appeal before us. 2. Facts leading to the same are that the assessee being resident firm was assessed u/s 143(3) for impugned AY on 29/12/2016 where the income of the assessee was determined at ₹ 15,37,450/- after certain additions / disallowances as against returned income of ₹ 6,17,450/- filed by the assessee on 30/10/2004. The subject matter of the appeal is addition of ₹ 7.20 Lacs, being alleged unaccounted capital introduced by the partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion from the partners during the impugned AY which is nowhere disputed by the revenue. The source of funds received by the assessee firm is capital contribution and not gifts. The assessee has been asked to substantiate the source of source, against which the assessee had already produced two donors with their bank statements. The gifts are received by the partners who are separate income tax entities as distinct from the assessee firm and therefore, the addition for unaccounted / unexplained money, if any, which was to be made, could be made in the hands of the respective partners only and not in the hands of the assessee firm, since the assessee firm, at the relevant time, was not required to do so in view of the statutory provisions as contained in Section 68. 7. Our above view is fortified by the cited judgments of Hon ble Allahabad High Court. The relevant findings in the case of Zafa Ahmad Co. Vs. CIT [30 taxmann.com 267] are extracted below:- 8. We have given our thoughtful consideration to the various pleas raised by the learned counsel for the parties. We find that it is not in dispute that the aforesaid two amounts have been deposited by the two partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be noted that section 68 of the Income Tax Act, 1971 is a new provision in the sense that there was no such provision under the Old Act i.e. the Income Tax Act, 1922. Even then the underlying principle of section 68 was given judicial recognition by Courts. In other words, the principle has been developed on the basis of judicial decisions which has been given statutory recognition by section 68. 12. CIT v. Jaiswal Motor Finance [1983] 141 ITR 706 (All.) is a Division Bench authority of this Court wherein it has been laid down that if there are cash credit entries in the books of the assessee firm in which accounts of an individual partner exists, and it is found as a fact that the cash was received by the Firm from its partners then in the absence of any material to indicate that they were profits of the Firm, it could not be assessed in the hands of the Firm. The learned counsel for the appellant submits that the aforesaid decision applies with full force to the facts of the case on hand. Noticeably, this was also a case where it was the first year of assessment of the Firm. The observations made therein if read in the context of the facts of the present case, the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case the question of presumption of income of the Assessee Firm would not arise generally. But it is not appropriate when the Assessee Firm is earning income from its business and in that situation the Assessee Firm has to explain the cash credit standing in its account. If the above line of distinction is kept in mind, we find that both the decisions are standing on a different factual background. 15. It is interesting to note that the aforesaid two decisions one given in the case of Jaiswal Motor Finance (supra) and another in the case of Kapur Brothers (supra) were again up for consideration before a Division Bench of this Court in the case of India Rice Mills v. CIT [1996] 218 ITR 508/85 Taxman 227 (All.). The relevant extract is reproduced below:- However, the Tribunal relying on CIT v. Kapur Brothers [1979] 118 ITR 741 (All.), held that since the amount was credited in the books of the assessee-firm, it is for the assessee to explain the source of the deposits and as the assessee-firm failed to discharge that onus, the deposits were rightly taken to be the income of the assessee-firm from undisclosed sources by the assessing authority. ** ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be prosecuted, has no substance. 18. It may be noted that the decision given in the case of Jaiswal Motor Finance (supra) is being constantly followed by this Court in the subsequent decisions. Reference can be made to Surendra Mohan v. CIT [1996] 221 ITR 239 (All.) 19. The Rajasthan High Court in CIT v. Kewal Krishna Partners [2009] 18 DTR 121 has also taken similar view. 20. In view of the above, we are of the considered opinion that on the facts of the present case, the Tribunal was not justified in holding that the unexplained cash credit recorded in the assessee's book be added in the hands of the assessee. We, therefore, hold that there was no material before the Tribunal in holding that ₹ 1,90,000/- introduced by Master Shishir Garg at the time of starting of the business, as income of the assessee Firm. The Tribunal erroneously came to the conclusion that the deposits represented undisclosed income of the assessee firm. All the three authorities below committed the same mistake and in this regard their orders cannot be allowed to stand. Similar view has been taken by the Hon ble Patna High Court in CIT Vs. Anurag Rice Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X
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