TMI Blog2004 (8) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Act, assessment of the income at the hands of different assessees under different provisions of the Act is permissible - Tribunal was justified in upholding the addition - - - - - Dated:- 25-8-2004 - Judge(s) : R. K. AGARWAL., K. N. OJHA. JUDGMENT The judgment of the court was delivered by R.K. Agarwal J- In Income Tax Reference No. 325 of 1982, the Income-tax Appellate Tribunal, Allahabad, has referred the following question of law under section 256(1) of the Income-tax Act, 1961, hereinafter referred to as the Act, for opinion to this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the addition of Rs. 17,500 in the total income of the assessee even though the said amount was also assessed in the hands of the two partners, viz., S/Shri Udai Narain and Girish Narain?" The Income Tax Reference No. 327 of 1982 which is at the instance of the assessee, the Income-tax Appellate Tribunal, Allahabad, has referred the following question of law under section 256(1) of the Act for opinion to this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Rs. 7,500. Feeling aggrieved, the Revenue preferred an appeal before the Tribunal. The Tribunal had reversed the order of the Appellate Assistant Commissioner on the ground that the assessee could not have any grievance against the inclusion of an amount, which has been voluntarily surrendered by him. Since the assessee and the firm in which he is a partner are two separate and distinct entities, the Tribunal was of the view that similar amount having been included in the total income of the firm would not automatically justify the action of the Appellate Assistant Commissioner deleting Rs. 7,500 from the total income of the partner. We have heard Sri Vikram Gulati, learned counsel for the applicant, and Sri A. N. Mahajan, learned counsel appearing for the Revenue. Learned counsel for the applicant submitted that the cash credit amount appearing in the name of the partner having been surrendered by the partners in their individual assessments, therefore, it could not have been taxed in the hands of the firm. In the alternative, he submitted that if it was to be treated as income of the partnership firm, the same amount could not have been taxed at the hands of the partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and source thereof is not found to be satisfactory or no explanation is offered, the sum so credited is charged to income-tax as the income of that assessee for the relevant previous years. Since in the present case, the explanation offered by the firm has been disbelieved, the provisions of section 68 of the Act are fully attracted and, therefore, the amount of Rs. 17,500 had rightly been added. This court in the case of Kapur Brothers [1979] 118 ITR 741 has held that if the explanation offered by the firm had been proved or believed then alone the question would arise that the deposit should be considered as belonging to the partners. The firm was required to establish the sources of these deposits. To establish this, the firm offered explanations and if they were disbelieved, the result would be that the firm had failed to prove that the money belonged to the partners. It would be a case of failure to establish the bona fides of the ostensible lender or depositor. If the assessee failed to prove even the identity, the Revenue is entitled to draw the inference that the amount deposited constituted the income of the assessee-firm. This court referred to the observation of Untwalia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would be necessary not only to show that the source of money has not been explained but also to show the existence of some material to indicate that the acquisition of money by the assessee had resulted from transactions liable to sales-tax and not from other sources. Further, where, as in a case like the present, a credit entry in respect of Rs. 10,000 stands in the name of the wife of the partner, no presumption arises that the said amount represents the income of the firm and not of the partner or his wife. The fact that neither the assessee-firm nor its partner or his wife adduced satisfactory material to show the source of that money would not, in the absence of anything more, lead to the inference that the said sum represents the income of the firm accruing from undisclosed sale transactions. It was, in our opinion, necessary to produce more material in order to connect the amount of Rs. 10,000 with the income of the assessee-firm as a result of sales. In the absence of such material, the mere absence of explanation regarding the source of Rs. 10,000 would not justify the conclusion that the sum in dispute represents profits of the firm derived from undisclosed sales." T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessment of the partners had resulted in the sum being charged to tax in their hands and it did not make any difference whether the sum was taxed in the hands of the partners or in the hands of the firm. In the case of India Rice Mills [1996] 218 ITR 508, this court has held that, if the deposits came to be made during the accounting year in the books of the assessee-firm before it started its business and the deposits represented the capital contribution of the partners, it was for the partners to explain the source of deposits and if they failed to discharge the onus, then such deposits could be added in the hands of the partners only. These deposits could in no case be the income of the assessee-firm because the firm started its business after the credits had been made in its books. In the case of Surendra Mahan Seth [1996] 221 ITR 239, this court has held that the deposits made by the partners on the very first day when the partnership firm came into existence, cannot be added in the hands of the assessee-firm if the explanation regarding source of the deposits is disbelieved and at best it could be added in the hands of the partners individually. In the case of J ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
