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TMI Blog2017 (12) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... g heard together and disposed of by a common order which is being passed in Income Tax Appeal No.9 of 2015, treating as a leading case. This appeal under Section 260A of the Income Tax Act, (hereinafter referred to as the 'Act') has been filed by the department against the order of the Income Tax Appellate Tribunal, Lucknow Bench, Lucknow dated 21.08.2014 for the assessment year 2001-02. The appeal has been admitted on the following questions of law:- 1. Whether members of AOP have distinct identity vis-a-vis as its constituent firm as in the case of partners & firm u/s 184. 2. Whether the unexplained capital introduced by member of AOP can be assessed as unexplained capital of the constituent firm. 3. Whether AOP by merely p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll give adequate opportunity of hearing to the assessee and pass fresh order accordingly. It appears that in the proceedings thus remanded to the Assessing Authority, the assessee produced its books of account wherein the aforesaid cash credit entries were found recorded. The assessee further filed copies of confirmation of accounts issued by the constituent members of the AOP, their PAN numbers, copies of the assessment orders of such constituents, copies of Income Tax return of such constituents and also copies of withdrawal made by such constituents from earlier firms to explain the source of money deposited by them with the assessee. Affidavits of respective constituents are also stated to have been filed confirming the fact of their h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he first day of the accounting period. The CIT (Appeals) therefore, on one hand accepted the contentions of the assessee as to the identity of the depositors, genuineness of the transactions and also the creditworthiness of the depositors and on the other hand he also took note of the fact that the entries had arisen on the first day of business of the assessee and therefore, the same could not have been an unaccounted money of the assessee itself. On such finding the CIT (Appeals) allowed the assessee's appeal and deleted the addition of Rs. 92,32,000/- made by the Assessing Officer under Section 68 of the Act. The revenue carried out the matter in appeal to the Tribunal wherein it raised three grounds of appeal that have also been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Patna High court reported in 142 ITR 133." Then in paragraph 4 of the order, the Tribunal noted that the revenue supported the assessment order on the strength of two judgments; one of this Court in the case of Commissioner of Income Tax Vs. Kapur Bros. [1979] 118 ITR 74(All) and also on a decision of Hon'ble Patna High Court rendered in the case of Commissioner of Income Tax Vs. Anupam Udyog reported in [1983] 142 ITR 133(Pat.). No other argument had been noted by the Tribunal as having been made by the revenue in the appeal before the Tribunal and there is no dispute raised in the present appeal in that regard. In the aforesaid factual background, learned counsel for the revenue submits that the assessee had failed to establish t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit entries are based on material and evidence; both documentary and oral, which exist on record. No material or evidence has been brought on record by the revenue to rebut or disbelieve the evidence relied upon by the CIT (Appeals). Therefore, the findings recorded by the CIT (Appeals) were in any case concluded findings of fact warranting no interference by this Court. As to the argument raised by the revenue in the appeal before the Tribunal relying on the judgment of this Court in the case of Kapur Bros. (Supra), the learned senior counsel submits that the judgment in the case of Kapur Bros. (supra) is wholly distinguishable inasmuch as in that case the deposits had been received by the assessee at the fag end of the accounting per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra) also, this Court has held that the Tribunal had fallen into a serious error in making the addition under Section 68 of the Act in the hands of the firm with reference to an amount that was found credited in its account before commencement of the business. In view of the aforesaid discussions, it cannot be disputed that no addition can be made under Section 68 of the Act in the hands of the firm or any artificial person in the first year of business that too on a day which is the first day of its business. The underlying reason for such conclusion is self apparent that no undisclosed investment can arise in absence of any activity or business which may provide the source to generate such income. The judgment in the case of Kapur Bro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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