TMI Blog1996 (5) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of partner only ? 2. Whether, the Tribunal was correct in law to hold that the provisions of section 68 did not apply in the case of firm if the cash credit, even though unexplained or not satisfactorily explained, stood recorded in the name of a partner ?" The brief facts giving rise to this reference are that the assessee is a firm and during the year under consideration, was dealing in timber, fuel, wood and bhusa. Books of account were maintained. The Assessing Officer found Rs. 45,000 recorded in the books in the names of several partners. He required the assessee to explain the genuineness of the credits in terms of the provisions of section 68 of the Income-tax Act, 1961. The Assessing Officer, after taking into consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." Section 69 reads as under: " 69. Where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. " A close reading of both these sections makes it cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfactory and he has only made an addition of Rs. 17,000 to the income of the assessee-firm. But strangely enough, the Tribunal, without going into the matter, has gone to the extent of invoking section 69 of the Act and held that all the income should be assessed in the hands of the partners. With great respect, the view taken by the Tribunal does not appear to be well founded. As a matter of fact, section 69 of the Act has no application to the facts of the present case. The present case is governed by section 68, because section 68 talks about entries in the books of account. In the present case, the names of parties from whom certain amount was received by the firm had been mentioned and the Commissioner of Income-tax (Appeals) has co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. It has been held as under: " Held, that though the Tribunal was not satisfied with regard to the explanation given by the partners that they had invested the so-called capital from out of their agricultural income, yet the Tribunal held that since the partners had owned that the sums had been advanced by them as capital outlay for the formation of the firm, they entered them as cash credits in the relevant previous year. The Tribunal arrived at its finding on the basis of surmises that the explanation of the assessee might be true. It was for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he credits. The assessee can prove the genuineness of the credits from some plausible evidence and his creditworthiness. The same view was taken in the case of CIT v. Kishorilal Santoshilal [1995] 216 ITR 9 (Raj) as under: "In the case of cash credits in the accounts of a firm (i) there is no distinction between the cash credit entry existing in the books of the firm whether it is of a partner or of a third party ; (ii) the burden to prove the identity, capacity and genuineness is on the firm ; (iii) if the cash credit is not satisfactorily explained, the Income-tax Officer is justified to treat it as income from undisclosed sources ; (iv) the firm has to establish that the amount was actually given by the lender ; (v) the genuineness a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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