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TMI Blog2017 (8) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to prove the source of source and addition which could be made on this account, could be made in the hands of the respective partners only. - additions shall stand deleted - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... m the partners during the impugned AY which is nowhere disputed by the revenue. The source of funds received by the assessee firm is capital contribution and not gifts. The assessee has been asked to substantiate the source of source, against which the assessee had already produced two donors with their bank statements. The gifts are received by the partners who are separate income tax entities as distinct from the assessee firm and therefore, the addition for unaccounted / unexplained money, if any, which was to be made, could be made in the hands of the respective partners only and not in the hands of the assessee firm, since the assessee firm, at the relevant time, was not required to do so in view of the statutory provisions as contained in Section 68. 7. Our above view is fortified by the cited judgments of Hon'ble Allahabad High Court. The relevant findings in the case of Zafa Ahmad & Co. Vs. CIT [30 taxmann.com 267] are extracted below:- 8. We have given our thoughtful consideration to the various pleas raised by the learned counsel for the parties. We find that it is not in dispute that the aforesaid two amounts have been deposited by the two partners in their capital ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a new provision in the sense that there was no such provision under the Old Act i.e. the Income Tax Act, 1922. Even then the underlying principle of section 68 was given judicial recognition by Courts. In other words, the principle has been developed on the basis of judicial decisions which has been given statutory recognition by section 68. 12. CIT v. Jaiswal Motor Finance [1983] 141 ITR 706 (All.) is a Division Bench authority of this Court wherein it has been laid down that if there are cash credit entries in the books of the assessee firm in which accounts of an individual partner exists, and it is found as a fact that the cash was received by the Firm from its partners then in the absence of any material to indicate that they were profits of the Firm, it could not be assessed in the hands of the Firm. The learned counsel for the appellant submits that the aforesaid decision applies with full force to the facts of the case on hand. Noticeably, this was also a case where it was the first year of assessment of the Firm. The observations made therein if read in the context of the facts of the present case, the submission of the appellant's counsel is well founded. The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enerally. But it is not appropriate when the Assessee Firm is earning income from its business and in that situation the Assessee Firm has to explain the cash credit standing in its account. If the above line of distinction is kept in mind, we find that both the decisions are standing on a different factual background. 15. It is interesting to note that the aforesaid two decisions one given in the case of Jaiswal Motor Finance (supra) and another in the case of Kapur Brothers (supra) were again up for consideration before a Division Bench of this Court in the case of India Rice Mills v. CIT [1996] 218 ITR 508/85 Taxman 227 (All.). The relevant extract is reproduced below:- "However, the Tribunal relying on CIT v. Kapur Brothers [1979] 118 ITR 741 (All.), held that since the amount was credited in the books of the assessee-firm, it is for the assessee to explain the source of the deposits and as the assessee-firm failed to discharge that onus, the deposits were rightly taken to be the income of the assessee-firm from undisclosed sources by the assessing authority." ** ** ** "Reliance on Kapur Brothers' case [1979] 118 ITR 741 (All.) is misplaced, inasmuch as in that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce can be made to Surendra Mohan v. CIT [1996] 221 ITR 239 (All.) 19. The Rajasthan High Court in CIT v. Kewal Krishna & Partners [2009] 18 DTR 121 has also taken similar view. 20. In view of the above, we are of the considered opinion that on the facts of the present case, the Tribunal was not justified in holding that the unexplained cash credit recorded in the assessee's book be added in the hands of the assessee. We, therefore, hold that there was no material before the Tribunal in holding that ₹ 1,90,000/- introduced by Master Shishir Garg at the time of starting of the business, as income of the assessee Firm. The Tribunal erroneously came to the conclusion that the deposits represented undisclosed income of the assessee firm. All the three authorities below committed the same mistake and in this regard their orders cannot be allowed to stand. Similar view has been taken by the Hon'ble Patna High Court in CIT Vs. Anurag Rice Mills [282 CTR (Patna) 200]. 8. After careful consideration of the ratio of above decisions vis-à-vis facts of the present case, we find that revenue is unable to establish the fact that the capital contribution received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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