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2012 (5) TMI 819

..... i Mahesh Agarwal, C.A. ORDER Per Bhavnesh Saini, J.M.: This appeal by the Revenue is directed against the order of the ld. CIT(A), Gwalior dated 07.02.2011 for the assessment year 2007-08, challenging the deletion of addition of ₹ 17,75,000/- made by the AO on account of unexplained cash credit u/s. 68 of the IT Act. 2. Briefly, the facts of the case are that the assessee is a firm having three partners, namely, Sri Naresh Agarwal, Shri Harsh Agarwal and Shri S.B. Patel. During the year under consideration, Shri Naresh Agarwal, one of the partners, has introduced fresh capital of ₹ 45,45,000/- in the assessee firm, out of which a sum of ₹ 17,75,000/- has been deposited by him in cash on various dates. The AO treated the sa .....

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..... that the appellant has been able to explain the source of capital introduced by one of its partners mainly Shri Naresh Agarwal except for an amount of ₹ 1,25,000/- which has been deposited in cash on 06.12.2006. The source of this deposit is stated to be out of bank withdrawals and cash in hand available with him. The appellant has submitted cash flow statement of Mr. Naresh Agarwal for the month of Nov. and Dec. 2006 alongwith his bank statement in support of its submissions. The bank account of Mr. Naresh Agarwal in UTI Bank, Gwalior shows that upto 05/12/2006 he was having credit balance of ₹ 3,412/- only. Deposits of ₹ 60,000/- and ₹ 40,000/- made on 6/12/2006 have been withdrawn on the same day itself vide chequ .....

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..... idual, then the responsibility of the assessee is over. Whether that person is an income tax payer or not and where he had brought this money from, is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of the firm for the purpose of income tax. By relying on decision of Hon ble Allahabad High Court in case of Sundar Lal Jain vs. CIT (1979) 117 ITR 316, it has been held that the credit in the account of a partner is not a loan to the firm and is not assessable in the hands of the firm. It is open to the AO to undertake further investigation .....

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..... Finance (supra) and Sunder Lal Jain (supra). In this case, one of the partners introduced capital in the assessee firm in a sum of ₹ 45,45,000/- which was accepted by the AO except the capital introduced in cash. The partner affirmed the introduction of the capital in the assessee firm in statement recorded u/s. 131 of the IT Act and is also assessed to tax. He has also filed affidavit in support of the same contention before the ld. CIT(A), which has not been disputed by the Revenue in the grounds of appeal. Therefore, the assessee is able to explain that the capital has been introduced by the partner through his own sources. Therefore the initial burden on the assessee firm explaining the capital contribution by one of the partners .....

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