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TMI Blog2014 (7) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... sed of with this common order for the sake of convenience. ITA No.1207/Hyd/2011 : Assessment year 2006-07 2. The only effective grievance of the assessee in this appeal relates to an addition of Rs. 85,00,000 made by the Assessing Officer, which has been deleted by the CIT(A). 3. Brief facts of the case are that the assessee is a partnership firm, which came into existence on 11.9.2006 and registered with the Registrar of Firms, Nalgonda on 4.12.2006. There are seven partners in the partnership firm and before forming the partnership, the seven persons jointly purchased 1100 sq. yards of land from one Smt. Kodati Andamma and others. The amount spent in acquisition of the property was Rs. 55,83,600. There was no other activity during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, the amount spent was only on purchase of the property and the same was admitted by the partners. Therefore, I hold that the investment made in acquisition of the property jointly should only be considered in the assessment of the partners and not in the assessment of the partnership firm. I am fortified by the decision of the Supreme Court in the case of CIT V/s. Bharath Engineering and Construction Company reported in 83 ITR 187 wherein it is held that the cash credit in the first year of business of engineering construction should be treated as the capital receipt and cannot be added by applying the provisions of Sec.69 of the I.T. Act. I am also fortified by the decision of the Supreme Court in the case of CIT V/s. Smt.P.K.Noorjehan r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. Since the investment has been made by the partners jointly prior to the formation of the partnership firm, we agree with the CIT(A) that any addition on account of such investment should only be considered in the assessment of the partners and not in the assessment of the partnership firm. The decisions relied upon by the CIT(A) in this behalf clearly support the case of the assessee, and the point of distinction brought out by the learned Departmental Representative is not material for the determination of the point in dispute in this case. Further, the assessment year under consideration, being the first year of existence of the partnership, as held by the Apex Court in the case of P.K.Noorjehan (supra), no addition of the magnitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, making an addition of Rs. 9,83,500 on account of difference in the cost of construction, and completed the assessment on a total income of Rs. 10,09,000, vide order of assessment dated 27.12.2010 passed under S.143(3) of the Act. So also, for assessment year 2008-09 making an addition of Rs. 21,66,975 on account of difference in the cost of construction and a further addition of Rs. 12,95,705 on account of unexplained introduction of capital by the partners, completed the assessment on a total income of Rs. 34,88,180, as against returned income of Rs. 25,500, vide order of assessment dated 27.12.2010 passed under S.143(3) of the Act. 12. On appeal, the CIT(A) found that Shri Girish Kumar confirmed the fact that an amount of Rs. 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported the order of the CIT(A) and submitted that the additions made by the Assessing Officer on this count are wholly unjustified and cannot be sustained. 16. We have considered the rival submissions and perused the orders of the Revenue authorities and other material available on record. It is evident from the impugned order of the CIT(A) that the buyer of the property, Shri Girish Kumar, has confirmed the fact of Rs. 30-lakhs having been spent by him after taking possession of three floors of the building. As such this part of the investment cannot be taken as that of the assessee. If this amount is reduced from the value of cost of construction estimated by the Departmental Valuation Officer of Rs. 1.50 crores, the value remaining of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urces for the same could not be explained properly. We find that the CIT(A) deleted the said addition made by the Assessing Officer, observing that the partners have invested the amounts from out of the existing assets as on 31.3.2007 and out of the income derived by them during the year under consideration. He also noted that the investments were also properly recorded in the books of account of the partners and were also shown in the balance sheets filed by them alongwith their returns of income before the Assessing Officer. In the absence of anything to the contrary brought on record by the Revenue to disprove the above findings of the CIT(A), we find no justification for the addition made by the Assessing Officer on this aspect. We acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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