TMI Blog2018 (5) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... n his hands. If the sources of unsecured loans are unexplained, the addition should be made in the hands of the partnership firm but not in the hands of the assessee. The assessing officer has not established that the unsecured loans were introduced by the assessee in the partnership firm his unexplained source of income. Making addition of unsecured loans relating to the partnership firm in the hands of the assessee is bad in law and unsustainable. Hence we up hold the order of the Ld.CIT(A) and dismiss the appeal of the revenue on this ground. Addition made by the AO on account of gifts received by the assessee from the family members - Held that:- Since all of them are assessed to tax and the CIT(A) has discussed the sources of accumulation of income, we do not see any reason to suspect the genuineness of the gifts received by the assessee. In case the A.O. is of the opinion that the sources of gifts are unexplained the same should be brought to tax in the hands of the donors but not in the hands of the assessee. Once the source is explained by the assessee, the burden shifts on revenue to disprove the evidence furnished by the assessee. In the instant case, though the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans shown in the case of partnership firm M/s. Nagothu Innaiah function plaza amounting to ₹ 38,40,123/-. The assessee filed explanation with regard to the source of unsecured loans but the A.O. not being satisfied with the explanation brought to tax the entire unsecured loans in the hands of the assessee amounting to ₹ 38,40,123/-. Thus the aggregate addition made by the A.O. was ₹ 1,23,13,672/-. 4. Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A). The Ld. CIT(A) observed that all the partners of the firm are assessed to taxes and their net income for the period from 2006-7 to 2013-14 was as under: N. Balasowraiah ₹ 39,21,705/- Nagothu Kishore Babu ₹ 47,16,427/- Nagothu Mariya Dasu ₹ 27,17,751/- Nagothu Kiran Sundar Raju ₹ 23,51,489/- Similarly, the CIT(A) examined the year wise capital details of each partner from the financial year ending 31.3.2006 to 31.3.2013 in the case of all the partners and observed that the partners are having su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the investments in Plaza are total investments and source for purchase of function plaza is total ₹ 2,06,17,423/- out of that the assessee has taken loan from Indian Bank to the extent of ₹ 1,07,00,000/and the advance given by the partners of the firm namely N. Balasowraiah, N. Mariya Kishore Babu, N. Mariay Dasu and M. Kiran Sundar Raju to the extent of ₹ 40,00,000/and all the partners are contributed ₹ 10,00,000/- to the firm namely Nagothu Innah Function Plaza. The abstract of income and expenditure of N. Balasowraiah and his family members has given in Page No.24 of the second paper book. So the main source is income from agriculture, sale of agricultural lands, interest received from debtors and interest received from bank. Hence, the addition made by the A.O on account of non-furnish of the complete details CAPITAL Rs.84,73,15/- N. Bala Showraiah Rs.44,80,878 N. Kiran Sundar Raj ₹ 13,05,878 N. Kishore Babu ₹ 13,05,878 N. Maria Das ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N. Kishore Babu 20.18 Rs.12,33,350 15,00,000/- N. Mariyadas 19.60 ₹ 13,14,800 10,00,000/- N. Kiran Sundraju 15.82 ₹ 10,79,350 27,50,000/- N. Mounika --- --- 41,800/- Total 66.35 Rs.51,60,356/- 52,91,800/- The Nagothu Innah Function Plaza is a partnership firm consists of four partners namely N. Balashowraiah , N. Kishore Babu, N. Mariyadas, N. Kiran Sundraju, with equal sharing ratio and that plaza has purchased by the firm for total consideration of ₹ 2,06,17,423/- dt. 29.10.2012, source has follows. 1. Loan from Indian Bank at ₹ 1,07,00,000/-, 2. Partners Capital total at Rs .84,73,515/- N. Balashowraiah at Rs.44,80,878/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all made very soon after company commenced its activities of construction business - Revenue's reference application were rejected by Tribunal as well as High Court - Whether what inference should be drawn from facts proved, was a question of fact and Tribunal's finding on that question was final - Held, yes - Whether, therefore, High Court was justified in rejecting revenue's reference application - Held, yes. Hon'ble Gujarath High Court in the case of Rupchand Manoj Kumar Vs. CIT 235 ITR 461 it was held that considering the facts and circumstance of the case, in our view, the assessee satisfactorily discharged the primary onus which lay on him to prove the nature and sources of the credit. There cannot be any inference under the law that the confirmatory letter given by the assessee are bogus. Learned Counsel for the Revenue has relied on a decision of the Calcutta High Court in the case of CIT Vs. Precision Finance Pvt., Ltd., (1994) 208 ITR 465. The facts of the case were altogether different as in that case the A.O had conducted enquiries through the inspector; but in the instant case, no enquires were made by the revenue. In view of the detailed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O. has rightly made the addition in the hands of the assessee, hence, requested to confirm the order of the A.O. Similarly, the Ld. D.R. argued that the assessee did not produce the creditor and debtor for verification and even full details like name and address, etc. were neither furnished by the assessee nor by the A.R. Since sufficient opportunities were given and the assessee failed to produce the requisite evidence, the Ld. D.R. of the opinion that the A.O. has rightly made the addition, which required to be confirmed. 8. On the other hand, the Ld. A.R. submitted that M/s. Nagothu Innaiah function plaza is a partnership firm which is assessed separately under the Income Tax Act. The assessee is Managing Partner of the firm along with 3 of his sons Mr. N. Kiran Sundar Raj, N.Kishore Babu and N. Maria Das. The outstanding in the partnership firm under the head capital accounts is as follows: N. Bala Showraiah ₹ 44,80,878.75 N. Kiran Sundar Raj ₹ 13,05,878.75 N. Kishore Babu ₹ 13,05,878.75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of any common man, hence required to be deleted. With regard to the unsecured loans, the ld. AR argued that unsecured loans are pertaining to the partnership firm of M/s. Nagothu Innaiah function plaza, the same are recorded in the books of the partnership firm but not in the books of the assessee. The assessee has furnished the necessary evidence, such as confirmation letter, aadhar card, PAN No., etc. and the loans were obtained through bank cheques. Since the partnership firm is separately assessed to tax and the assessee is separately assessed to tax by any stretch of imagination, the unsecured loans appearing in the firm s balance sheet cannot be considered as an income in one of the partners which is shared by all the partners of the firm. It can be observed from the order of the CIT(A) that the assessee has furnished the confirmation letters explaining the sources of unsecured loans, establishing identity and creditworthiness. Therefore, the Ld. A.R. argued that the addition made by the assessing officer in the hands of the assessee is highly unreasonable and illogical. Hence, requested to delete the same. 11. We have heard both the parties, perused the materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm are different entities and separately assessed to tax. Both the partners and the partnership firm have accordingly filed their returns and paid taxes. The credits are appearing in the books of the partnership firm and the partners have made the investments in the partnership firm. The A.O. has not made out a case that the assessee has made the investments on behalf of 3 sons from the unexplained sources of the assessee. As per the cash flow statement compiled by the Ld. CIT(A) in his order, all the partners are having sufficient sources and generating the substantial income. Since the assessee s capital investment is in the partnership firm is properly explained, the A.O. is not permitted to make the investment made by the other partners in the partnership firm as income in the hands of the assessee. If the source for capital is not explained by any of the partner , the same required to be taxed either in the hands of the partnership firm or in the hands of the respective partner but not in the hands of the assessee. Accordingly, addition made by the A.O. in the hands of the assessee with regard to the investment in capital of the firm is bad in law and the same is unsustaina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Nagothu Mariya Das 10,00,000/- 05.05.2012 Cash 3 Nagothu Kiran Sundara Raju 27,50,000/- 05.05.2012 Cash 4 Nagothu Mounika 41,800/- 07.09.2012 Cash TOTAL 52,91,800/- 16. The A.O. further observed that cash was said to be received immediately before the gifts were given by sons to the assessee. The sons of the assessee have received the cash from the debtors as realization on 1.5.2012 in the case of Maria Das and N.M.K. Babu and in the case of N.K.S. Raju on 4.4.2012 and the same was given as a gift on 5.5.2012. The dates of realization of debts is as under: S.No. Name of the Debtor Date of credit Amount (in Rs.) 1. N. Jan Babu, Ravipadu 01.05.2012 2,50,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. G. Subba Reddy 04.04.2012 3,00,000/- 6. SK. Subani 04.04.2012 3,00,000/- 7. P. Pratap 04.04.2012 3,00,000/- 8. P. Anthone Souri Babu 04.04.2012 5,20,000/- TOTAL 31,20,000/- Gift given to father on 05.05.2012 - ₹ 27,50,000/- 17. Since the donors have received the cash as realization from the debtors before giving the gift to his father the AO suspected the sources of gifts and brought to tax in the hands of the assessee. According to the assessing officer, realization of debtors is an afterthought and the gifts received by the assessee was from his own sources. 18. Aggrieved by the order of the A.O. the assessee went on appeal before the CIT(A) and the Ld. CIT(A) observed that the gifts received by the assessee from his three sons and daughter in law Nagabothu Mounika were p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A). The CIT(A) having satisfied the sources for investment in the partnership firm has deleted the addition. In any case, since the gifts were given by the donors, who are assessed to tax, the same should not be assessed in the hands of the assessee. The A.O. without making any verification of the donors and sources simply made the addition which is highly illogical and argued that the same should be deleted. 22. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. In this case, the assessee has received the gifts of ₹ 52,50,000/- as under: Sl. No. Name of the Donor Amount of Gift (in Rs.) Dt. Of Gift Mode of receipt 1 Nagothu Mariya Kishore Babu 15,00,000/- 05.05.2012 Cash 2 Nagothu Mariya Das 10,00,000/- 05.05.2012 Cash 3 Nagothu Kiran Sundara Raju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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