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TMI Blog2016 (9) TMI 1069X X X X Extracts X X X X X X X X Extracts X X X X ..... firm against the acts of the firm. This restriction on the implied authority of the partner is subject to the usage or custom of the trade, therefore, in absence of evidences of usage or custom of the trade, we cannot say that there was any violation of section 19(2) of the Indian partnership Act, 1932. In our opinion, what is important is that in deposit of trading receipts of the firm in the bank account of the partner, the assessee has not violated any of the provisions of the Income Tax Act, even if it may be a violation of the section 19(2) of the Indian Partnership Act, 1932, and further, there is no dispute that the money belonged to the partnership firm and after deposit, the money was transferred to the partnership firm, in such circumstances, no addition is called for in the case of partner of the firm. - Decided in favour of assessee - ITA No. 6709/Del/2013, C.O. No. 219/Del/2014 - - - Dated:- 13-7-2016 - SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER For The Department : Sh. Amit Jain, Sr.DR For The Assessee : Sh. Naresh Chandra Agarwal, CA ORDER PER O.P. KANT, A.M.: This appeal by the Revenue and the cross objection b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the Income Tax Act. 3. The facts in brief of the case are that for the year under consideration, the assessee filed return of income on 26/11/2009 declaring total income of the ₹ 3,82,960/-. According to the Annual Information Return (AIR), it was found that the assessee made cash deposits of ₹ 30,87,200/- in saving account. In reply to the notice sent for verification of financial transaction, the assessee accepted the cash as belonging to his partnership firm, namely, Moti Mahal Restaurant . The claim of the assessee was not verified in absence of any supporting evidence and the Assessing Officer after recording reasons that the income had escaped assessment, issued notice under section 148 of the Income Tax Act, 1961 (in short the Act ). In the counsel s letter dated 09/09/2012, the assessee requested for the reasons for issuance of notice under section 148 of the Act, which according to the Assessing Officer, were provided to the assessee, as recorded in the order sheet entry dated 14/09/2012. According to the Assessing Officer, the assessee did not file objection to the issuance of notice under section 148 of Act and reassessment proceedings were com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash deposits were the sales of the partnership firm and duly explained with the help of the sales receipts recorded in the books of accounts of the partnership firm and in view of these facts no addition was warranted in the case of the assessee. 6. We have heard the rival submission and perused the material on record. The Ld. Commissioner of Income-tax (Appeals) has comprehensively dealt the issue in dispute and decided as under: On a concatenation of the aforesaid facts it was abundantly clear that the amounts deposited in the personal savings bank account Nos. 0824010001772 08240100014118 amounting to ₹ 63.47.405/- stood reflected in the books of account and the balance sheets of the audited return of income filed by the appellant s firm M/s Moti Mahal Restaurant. Simply put, the deposits in the SB accounts of the appellant individual Sh. Vinod Chadha did not represent the deposits of his concealed/undisclosed income. During the course of appellate proceedings, it was successfully established that the said deposits were duly accounted for by the appellant's firm. The periodicity pertaining to the filing of the returns of income of the appellant's f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partnership continues, no part of the assets of the partnership could be regarded as belonging to any individual partner. No individual partner can predicate his share in a particular property belong to the firm. No doubt, since a firm has no legal existence, the partnership, property will vest in all the partners and in that sense every partner has an legal existence, the partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership. During the subsistence of the partnership however no partner can deal with any portion of the property as his own. Nor can he assign his interest in a specific item of the partnership property to anyone. His right is to obtain such profits, if any, as fall to his share from time to time and upon the dissolution of the firm to a share in the assets of the firm which remain after satisfying the liabilities set out in clause (a) and sub-clauses (i), (ii) and (Hi) of clause (b) of Section 48. In other words as held by a full bench of the Lahore High Court in Ajudhia Pershad Ram Pershad vs. Sham Sunder, AIR 1947 Lah. 13 at p. 20 (FB) while a partnership is in existence, no partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue is, however, that the section 19(2) of the Partnership Act, 1932 prohibits opening of an account by a partner in his own name on behalf of the firm. It is also objected by the Revenue that opening of the account in the name of partner was not in accordance to the terms of the partnership deed of M/s Moti Mahal Restaurant. According to the section 19(2)(b) of the Indian Partnership Act, 1932, in absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to open a bank account on behalf of the firm in his own name. The implied authority of the partner binds the firm against the acts of the firm. This restriction on the implied authority of the partner is subject to the usage or custom of the trade, therefore, in absence of evidences of usage or custom of the trade, we cannot say that there was any violation of section 19(2) of the Indian partnership Act, 1932. In our opinion, what is important is that in deposit of trading receipts of the firm in the bank account of the partner, the assessee has not violated any of the provisions of the Income Tax Act, even if it may be a violation of the section 19(2) of the Indian Partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction to correctly invoke the provisions of s. 147 of the Act in that were these two letters provided material for him to initiate the reassessment proceedings and did these constitute information to give him a reason to believe that income chargeable to tax had escaped assessment. We have seen above that these two letters have been issued under the provisions of FERA and deal with remittance of foreign exchange outside India. Any contravention of these letters would entail prosecution under s. 56 of 1973 Act and under s. 23 of 1947 Act. The FERA contains stringent provisions for conservation of the foreign exchange resources of the country and the proper utilization thereof in the interests of the economic development of the country and for that purpose regulation of certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange, etc. Reference in this connection be made to the preamble of the 1973 Act or even to 1947 Act. The embargo so placed by these two letters on the ground of foreign remittance to be made abroad by the appellant has nothing to do with the amount of disallowances under the IT Act. As already seen above, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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