TMI Blog2021 (1) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Ld.CIT(A). Therefore, we do not see any reason to interfere with the order of the Ld.CIT(A). Capital was introduced by the partners in the firm and the AO made the addition in the hands of the firm instead of partners - In the instant case the the partners have accepted that they have brought the capital and there is no dispute in this regard. The source of the partners also was explained, thus the source of introduction of capital stands explained and there is no case for making the addition in the hands of the firm as held by Hon ble High court of Andhra Pradesh in M/s M.Venkateswara Rao Others( 2015 (3) TMI 153 - ANDHRA PRADESH HIGH COURT ). Thus addition made by the AO in the hands of the firm in respect of capital contributed by the partners cannot be sustained in law. Hence, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue. - I.T.A.No.436/Viz/2019 - - - Dated:- 23-12-2020 - Shri N.K. Choudhry, Judicial Member And Shri D.S. Sunder Singh, Accountant Member For the Appellant : Smt.Suman Malik, DR For the Respondent : Shri G.V.N.Hari, AR ORDER PER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : This appeal is fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinu 2,95,000 19,60,000 22,55,000 Ch.Kameswara 3,10,000 19,45,000 22,55,000 M.Suryaprakash 29,31,500 29,31,500 M.RajaVarahalu 27,06,000 27,06,000 N.Kondababu 4,00,000 7,24,000 11,27,500 77,96,000 1,47,54,000 2,25,50,000 3.1. The AO viewed that the investment made by the partners from own sources to the extent of ₹ 77,96,000/- was not acceptable since no evidence was produced for investment. In respect of sources explained from unsecured loans to the extent of ₹ 1,47,54,000/-, the AO stated that though the loan creditors appeared and explained the sources, all of them have given stereo typed answers, hence the AO did not believe the genuineness of the source. Further the AO also found that the creditors were mostly from fisherman and agriculturist having white ration car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culturists with white ration card thus argued that they have no means to give such large sums as loans and hence, argued that the AO rightly made the addition in the hands of the firm and requested to set aside the order of the Ld.CIT(A) and restore the order of the AO. 6. On the other hand, the Ld.AR relied on the order of the Ld.CIT(A) and argued that in the instant case, the AO has made the addition in the hands of the firm, though the capital was introduced by the partners. He argued that the partners have explained the source and if the AO suspects the source of source , AO ought to have made the addition in the hands of the individuals partners , but not in the hands of the firm. He relied on the decision of Hon ble High Court of Andhra Pradesh in M/s M.Venkateswara Rao Others in I.T.T.A. No.29 of 2003 dated 27.08.2014 and the decision of this Tribunal in the case of m/S Gowthami Builders in I.T.A.No.247/Viz/2016 and I.T.A. No.323/Viz/2017 dated 14.03.2018. 7. We have heard both the parties and perused the material placed on record. In the instant case, the assessee has filed the return of income admitting total income of Rs.nil. The AO found that the partners have in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the order of this Tribunal in para No.9 and 10 which reads as under : 9. In this case, the Assessing Officer has noted from the balance sheet that a sum of ₹ 56,55,000/- was introduced by the partners towards capital contribution, and ₹ 16,75,000/- towards current account contribution. The Assessing Officer has called for identify, creditworthiness of the partners and also genuineness of the transactions. The partners have filed their affidavits before the Assessing Officer that the contributions are made by them. However the Assessing Officer has not accepted the explanation given by the partners and came to a conclusion that the partners did not have sufficient source for introducing the amounts into the business towards their capital contribution and current account contribution and the investments made by the partners are added in the name of the firm as unsubstantiated cash credits under section 68 of the Act. On appeal before the ld.CIT(A), it was submitted that all the partners filed their affidavit and having PAN numbers and also their return of incomes, and therefore, if at all addition has to be made, it is to be made in the hands of the partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conducted against the individual partners. If the partner is an assessee the concerned Assessing Officer can require him to explain the source of the money contributed by him to the firm. If on the other hand, the partner is not an assessee, he can be required to file a return and explain the source. Undertaking of such an exercise, vis-a-vis the partnership firm itself, is impermissible in law. 7.3.1. Thus the capital contribution made by the partners and confirmed by them cannot be assessed in the hands of the firm Respectfully following the decision of the Hon'ble Jurisdictional High Court, the AO is directed to delete the addition of ₹ 73.30,000/-. However, the AO is at liberty to examine and consider these amounts (contribution to capital accounts and current accounts) in the hands of the respective partners. 10. We find that ld. CIT(A) by flowing the decision of the Hon'ble Jurisdictional High Court in the case of M. Venkateswara Rao (supra) deleted the addition made in the hands of the firm. Therefore, respectfully following the above referred to judgment of the Hon'ble Jurisdictional High Court, we find no infirmity in the order of the ld. CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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