TMI Blog1990 (7) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... firm at a total income of Rs. 3,22,601 after making certain additions/disallowances. The learned CIT(A) allowed the assessee's appeal in part only, thus giving thereby raise to these cross-appeals. 3. Assessee's appeal (ITA No. 1394/Ahd/87) : The assessee has raised the following effective ground in its appeal: "The CIT(A) has erred in not allowing claim under ss. 80HH and 80-I of IT Act though claim is fully explained. The same may be allowed". 4. At the hearing it had to be agreed between the parties that the point in the above ground was considered by the Tribunal on identical facts in the case of a sister concern M/s Dhorajia Brothers for asst. yrs. 1982-83 and 1983-84 (ITA Nos. 1064/Ahd/87 and 2539/Ahd/86) and was decided on favour of the assessee. On a perusal of the said order, which was produced before us, we find that almost on identical facts, the Tribunal had accepted the assessee's claim under s. 80HH and 80J on the basis of the Orissa High Court decision in the case of CIT vs. N. C. Budhiraja Co. (1980) 121 ITR 212 (Ori) in preference to Bombay High Court decision in the case of CIT vs. Shah Construction co. Ltd. (1982) 30 CTR (Bom) 245 : (1983) 142 ITR 696 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 29.11.80 " " . . 5,000 19.12.80 " " . . 10,000 28.5.81 " " . . 15,000 28.5.80 DD/Agri 4. Manubhai R. Dhorajia (HUF) 11,000 25.8.80 cheque/Agri. 10,000 30.8.80 By cash " 5. Maganbhai R. Dhorajia (HUF) 15,000 12.8.80 " 6. Somabhai R. Dhorajia (HUF) 10,000 25.8.80 By DD . . 10,000 30.8.80 Cash/Agri . . 10,000 8.9.80 " 7. C.J. Patel 45,000 . From Sub contract 8. S.M.J. Patel 10,000 . By cash (Rs. 5,000 from Agri.) 9. G.D. Dhorajia 10,000 10.7.80 By cash (Agri. loan from father) . Total 3,31,000 . . The ITO found that partners at Sl. Nos. 1 to 3 came from one and the same family and they had brought in credits amounting to Rs. 2,00,000. The case of those partners was that the credits in their names represented their agricultural income. The ITO accepted their explanation to the extent of Rs. 30,000 and trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source of that credit, yet he took the view that the amount represented by that credit was required to be considered as income from undisclosed sources of the partner himself and not of the assessee-firm. He directed the ITO to do accordingly. That part of the order of the CIT(A) which deals with the credits appearing in the names of partners at Sl. Nos. 4 to 6 and 9 make the subject-matter of ground No. 1 above. 11. Mr. V.S. Shah, the learned Sr. Deptl. Representative, vehemently urged that once the learned CIT(A) had come to the conclusion that the credits appearing in the names of partners at S. Nos. 4 to 6 and of partner at S. No. 9 had not been satisfactorily explained by the assessee, the CIT(A) should have treated those credits amounting to Rs. 30,000 [Rs. 20,000 + Rs. 10,000—as mentioned in ground No. 1) as the income of the assessee-firm from undisclosed sources and should not have directed the ITO to treat the same as the income of the concerned partners from their undisclosed sources. In this behalf Mr. Shah heavily relied upon the Allahabad High Court decision in the case of CIT vs. Kapur Brothers (1979) 10 CTR (All) 280 : (1979) 118 ITR 741 (All). He further conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-firm, have not been challenged by the assessee by way of cross-appeal or cross-objection. The limited issue for our consideration in respect of those credits, which make the subject-matter of ground No. 1 above, would be whether the CIT(A), after having agreed with the ITO that the said credits had not been satisfactorily explained by the assessee-firm, though appearing in its books in the names of its partners, was justified in coming to the conclusion that the said credits did not represent assessee's income or profits and that they were required to be added as income of the concerned partners from their undisclosed sources. 15. It may be recalled that there was no provision in the 1922 Act corresponding to s. 68 of the 1961 Act. It appears that the dispute whether a cash credit appearing in the books of account of the assessee should be regarded as assessee's income of the year of account and if so can it be so regarded where such cash credit was made in the books in the beginning of the accounting year, had led to the enactment of s. 68. Sec. 68 set at rest such disputes as it unequivocally provides that where any sum is found credited in the books of an assessee, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion that the credits represented undisclosed profits of the firm. In that case Chagla, CJ, observed that if the Department was not satisfied with the explanation given by the partners then it was legitimate for the Department to draw an inference that the amounts represented undisclosed profits of the partners and to assess them in their own individual assessments. 16. A similar case appear to have fallen for the consideration of the Allahabad High Court in the case of Balbhadra Chand Munnalal vs. CIT (1958) 33 ITR 781 (All) wherein it was held that where once the Tribunal accepts that the money represented by cash credits in the account books of a partnership was brought into the firm by the financing partner no part of that amount can be held to be the Revenue income of the partnership and in the assessment proceedings of the partnership the incorrectness of the explanation offered as regards the source from which the partner obtained the money is of no effect. 17. The Supreme Court also appears to have considered a similar question in the case of A. Govindarajulu Mudaliar vs. CIT (1958) 34 ITR 807 (SC). In that case the assessee was a partner in a firm and the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpolations relating to the number of high denomination notes and the Tribunal having accepted the books of account as genuine, and having worked up its theory on the basis of the entries, obtained in the books of account, it was not open to the Tribunal to have accepted the genuineness of the books of accounts and at the same time to have accepted the explanation of the assessee in part only and rejected the same in one part. 19. A similar question arose before the Patna High Court in the case of Hardwarmal Onkarmal vs. CIT (1976) 102 ITR 779 (Pat). In that case credit entries in the names of partners, proportionate to the shares of each of the partners, were found in the books of the firm and the explanation offered was also found unsatisfactory. The Patna High Court opined that the credit entries represented undisclosed income of the firm and were required to be added as such in firm's total income. 20. The above decision of the Patna High Court was relied upon by the Allahabad High Court in the case of CIT vs. Kapur Brothers where deposits in the books of the firm were found existing in the names of the partners and the explanation offered for those deposits had been disbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould, ordinarily, be read and accepted as a whole, particularly in those cases where his explanation relates to one and the same item of addition. If the explanation offered on a particular item of addition is inseparable then it should be accepted for or against the assessee as a whole. 24. Now coming to the facts of the instant case, we find that the cash credit of Rs.10,000 as existing in the name of partner at S. No. 9 above and cash credits amounting to Rs. 20,000 in the names of partners at Sl. Nos. 4 to 6 above have not been appreciated in right perspective. In so far as the credit of Rs. 10,000 appearing in the name of partner at Sl. No. 9 is concerned the case of the assessee was that the said partner had brought in the amount represented by the cash credit from loan obtained from his father. That case was neither accepted by the ITO nor by the CIT(A). We find that the IT authorities have rejected the case of the assessee in that behalf on sound grounds. No confirmation from the father was ever filed. No promissory note was alleged to have been executed by the son in favour of the father, the loan was not admittedly returned to the father. No interest on the loan advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concerned partners he should not have rejected the explanation of the assessee in respect of the cash credits amounting to Rs. 20,000. In this behalf we rely upon the Supreme Court decision in the case of Lalchand Bhagat Ambika Prasad vs. CIT. That being so the order of the learned CIT(A) in that behalf is sustained. Consequently ground No. 1 is partly accepted. 26. On the subject-matter of ground No. 2, the ITO had himself accepted the position that the partners at Sl. Nos. 1 to 3 had agricultural income. The controversy was whether they could have earned Rs. 2 lakhs from agriculture or not. In the opinion of the ITO those partners could have brought in only Rs.30,000 out of their agricultural income. That means that the ITO had accepted (1) that amounts had been brought in by the partners to the assessee-firm and (2) that the partners had agricultural income. Once the nature of the cash credits and the sources had been accepted by the ITO he should not have entered upon the task of examining as to what could be the income to the concerned partners from agriculture. That question should have been left to be considered in detail in their individual assessments. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
