TMI Blog2019 (4) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... ls & Solvex reported in [2018 (1) TMI 861 - GUJARAT HIGH COURT] assessee has furnished the details with regard to the source of the capital introduced in the firm and the concerned partner had confirmed such contribution, the assessee had duly discharged the onus cast upon it. Thereafter, if the Assessing Officer was not convinced about the creditworthiness of the partner who had made the capital contribution, the inquiry had to be made at the end of the partner and not against the firm. No addition made in the hands of the partnership firm on account of the capital contributed by the partner of the firm to the firm. In case any justification is required for the source of fund in the hands of the partner, then partner in his individual capacity is liable to explain. There is no liability fastened on the assessee (firm) for the explanation about the source of funds in the hands of the partner. Hence we disagree with the order of the CIT (A) and accordingly direct to the AO to delete the addition made by him. - Decided in favour of assessee. - ITA No.2226/AHD/2016 - - - Dated:- 29-3-2019 - Shri Waseem Ahmed, Accountant Member And Ms Madhumita Roy, Judicial Member For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artner of your Appellant Mr. Vasoolal Melaram. (b) Your Appellant submits that Sec. 68 does not apply for credit in account of Partner of the Firm as held by various Judicial Authorities. 2. Without prejudice to above, it is submitted by your Appellant that on facts of the case and as per provisions of Law all the Depositors are known persons, identity and creditworthiness is proved and transaction being genuine, CIT(A) ought to have deleted the entire addition of ₹ 38,23,0007-. 3. In the alternatively and again without prejudice and if any addition u/s.68 is called for the same ought to have been worked out on Peak Credit basis as per accepted principals of accounting and various judicial authorities. It is therefore submitted that relief claimed above be allowed and the order of the Assessing Officer be modified accordingly. Your Appellant reserves right to add, alter, amend to withdraw any or all Ground of Appeal. 3. At the outset it was noticed that the appeal filed by the assessee was barred by limitation by 57 days. The Ld. AR for the assessee before us submitted that the delay has occurred in filing the appeal due to the death of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. 9. The Ld. AR before us at the outset conceded the fact that the aforesaid issue has been decided by the Hon ble ITAT in ITA No. 1171/AHD/2011 against the assessee in its own case. 9.1 However, the Ld. AR further submitted that the Ld. CIT (A) has enhanced the annual rental value as determined by the ITAT in the immediate preceding A.Y. 2006-07 by ₹ 4,01,400/- without issuing the notice as mandated under section 251(2) of the Act. 10. On the other hand the Ld. DR vehemently supported the order of the authorities below. 11. We have heard the rival contentions and perused the materials available on record. At the outset we note that the issue stands covered against the assessee in its own case (supra). The relevant extract stands as under: 5. We have considered rival submissions regarding first issue of assessing the rental value of the said property under the head Income from House Property . We find that the assessee has not brought any material on record to show that it has provided any common facility like air-condition plant, power back-up, lift, watchmen j etc. to VCPL or its partner to whom the upper floors were let out by [ the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, there is a clear disparity in this case between the rent charged from related parties and from an unrelated parties for two portions of the property in question. The case law of relied upon by the learned counsel for the assessee were distinguishable on facts. In these facts, we hold that the rent figure shown by the assessee at Rs.l lakh per annum for second floor to fifth floor of the property let out to Sudarshan Palace is low and has to be substituted for the amount for which the property might reasonably expect to let for the relevant year. This leaves us to the only issue of determination of reasonable amount of rent for which the property might be expected to let from year to year. Considering totality of the facts and circumstances of the case, and the fact that the allowance of deduction at 10% per higher floor from the bottom ground and first floor of the property, was on the lower side, and that upper second floor to fifth floor not having any hall type construction to suit for commercial use for any departmental stores etc., and construction of building consisted of small rooms only and the claim of the assessee that covered area on the higher floors were less as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in confirming the order of the AO by sustaining the addition of ₹ 38,23,000/- as unexplained cash credit under section 68 of the Income Tax Act. 15. The assessee during the year has received a sum of ₹ 38,23,000/- from its partner as capital contribution. However the AO found that the assessee has failed to furnish the source of money in the hands of the partner on the basis of documentary evidence. Therefore the AO made the addition to the total income of the assessee for ₹ 38,283,000/- only as unexplained cash credit under section 68 of the Act. 16. Aggrieved assessee preferred an appeal to Ld. CIT (A) who has confirmed the order of the AO. 17. Being aggrieved by the order of the Ld. CIT (A), the assessee is in appeal before us. 18. The Ld. AR before us submitted that there is no ambiguity that the money was contributed by the partner of the firm which was suitably explained to the lower authorities. Thus if any addition is to be made on account of unexplained cash credit, then it can be made in the hands of the partner of the firm. 19. On the other hand the Ld. DR vehemently supported the order of the authorities below. 20. We have heard th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hands of the partner. Regarding this the law is settled that the partnership firm is not liable to justify the source of fund in the hands of the partner. In this connection we find support and guidance from the judgement of Hon ble High Court of Gujarat in the case PCIT vs Vaishnodevi Refoils Solvex reported in [2018] 89 taxmann.com 80 (Gujrat ) wherein it was held as under: In the facts of the present case, when the assessee has furnished the details with regard to the source of the capital introduced in the firm and the concerned partner had confirmed such contribution, the assessee had duly discharged the onus cast upon it. Thereafter, if the Assessing Officer was not convinced about the creditworthiness of the partner who had made the capital contribution, the inquiry had to be made at the end of the partner and not against the firm. The controversy involved in the present case, therefore, stands squarely covered by the decision of this court in the case of CIT v. Pankaj Dyestuff Industries in Income Tax Reference No. 241 of 1993. 20.3 The above view was also subsequently confirmed by the Hon ble Apex Court in the SLP filed before it reported in 96 taxman ..... X X X X Extracts X X X X X X X X Extracts X X X X
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