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2006 (12) TMI 492 - HC - Income TaxAddition made as Cash credits u/s 68 - Partner introduced a sum of ₹ 40,000 in her capital account, which is unexplained - Addition can be made in the income of the firm? - Deposited a sum of ₹ 30,000 in her account, received by way of gifts and shaguns at the time of her marriage - HELD THAT - It is well-settled that whether explanation of the assessee about nature and source of the amounts credited in the books of account was satisfactory is a question of fact. In our recent order Shiv Rice General Mills v. CIT 2006 (10) TMI 97 - PUNJAB AND HARYANA HIGH COURT , we observed - held that findings recorded on cash credits are findings of facts giving rise to no question of law, much less a substantial question of law being the requirement u/s 260A of the Act, for entertainment of the appeal. We are also in agreement with the view taken by the Tribunal that no case was made out for addition to the income of the firm even if deposits made with the firm by the partners were unexplained income of the partners. This view has been taken by us in our recent order passed in CIT v. Metal Metals of India 2006 (11) TMI 630 - HIGH COURT OF PUNJAB HARYANA . Thus, the question referred is answered against the revenue and in favour of the assessee. The reference is disposed of.
Issues:
Question of law referred by Tribunal regarding deletion of cash credits under section 68 of the Income-tax Act, 1961. Analysis: 1. The case involved a question of law referred by the Tribunal concerning the deletion of an aggregate addition of Rs. 70,000 made by the Assessing Officer and confirmed by the CIT(A) on account of cash credits under section 68 of the Income-tax Act, 1961 for the assessment year 1987-88. 2. The Assessing Officer found that a partner had introduced Rs. 40,000 in her capital account and explained it as income from interest and gifts received at the time of her marriage. However, the Assessing Officer did not accept the explanation and added the amount to the firm's income, a decision upheld by the CIT(A). 3. The Tribunal ruled in favor of the assessee, stating that once the partner admitted making the deposits, no addition could be made to the firm's income. The Tribunal cited relevant case laws to support its decision. 4. The High Court emphasized that the adequacy of the assessee's explanation regarding the nature and source of credited amounts is a factual question. Previous judgments were cited to establish that findings on cash credits are findings of fact, not raising substantial questions of law. 5. The Court agreed with the Tribunal that even if the deposits were unexplained income of the partners, no case was made out for adding to the firm's income. The Court referred to a recent order to support this view. 6. Various judgments cited by the Tribunal were reviewed, emphasizing that unless there is evidence indicating that cash received from partners constitutes firm profits, it cannot be assessed as such. 7. The Court referred to Supreme Court and previous High Court judgments to support the principle that suspicion alone cannot replace evidence or proof regarding the source of funds credited to a firm. 8. Ultimately, the Court answered the question referred against the revenue and in favor of the assessee, disposing of the reference in the process.
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