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TMI Blog2018 (5) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... rtners have introduced fresh capital and the partner-wise introduction of capital during the year is Rs. 68,10,000/- as under : S.No. Name of the partner S/Shri Contribution to capital (Rs) Income returned for the A.Y. (Rs) Agricultural (Rs.) 1. Vallabhu Narayana Murthy 6,00,000 1,60,574 2,50,040 2. V NS Srinivasa Rao 8,20,000 93,500 4,08,169 3. Smt.Vallabhu Satyavathi 6,70,000 No return No return 4. Nelakurthi Janardhan 5,90,000 67,211 1,93,550 5. Nelakurthi Chenchaih 5,50,000 1,22,298 1,80,210 6. Guntupalli Subbarayudu 5,00,000 89,970 1,51,420 7. Patapalla NDV Prasad 4,80,000 1,59,309 Nil 8. Smt.Patapalla Rajani Kumari 5,10,000 No return No return 9. Smt.Mandela Padma 5,10,000 No return No return 10. Mandela Narayanarao 3,40,000 1,64,503 1,76,530 11. Patapalla Durga Ramesh 3,20,000 No return No return 12. Smt.Patapalli Sita Mahalakshmi 2,80,000 No return No return 13. Smt.Ravilla Narayanamma 2,80,000 No return No return 14. Smt.Mandela Sri Sai Lakshmi 3,20,000 No return No return Total 68,10,000 The AO examined the capital accounts of all the partners a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the difference in increase of capital (87,89,819-23,25,382) as unexplained cash credit in the hands of the firm and accordingly made the addition of Rs. 64,64,437/-. 2.2. The AO also made the addition of Rs. 1,24,687/- relating to the interest on partners capital account, a sum of Rs. 14,37,600/- relating to trailor maintenance, vans and lorries and the depreciation in respect of trailor bearing No.NLO 2D 6699 of Rs. 42,910/-. 3. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) has partly allowed the appeal of the assessee. In respect of introduction of partners capital account, the CIT(A) allowed the relief of Rs. 28,70,000/- and confirmed the balance. In respect of interest on partners capital account of Rs. 1,24,687/-, the Ld.CIT(A) confirmed the addition and with regard to the maintenance of trailors and vans, the Ld.CIT(A) restricted the disallowance of expenditure to the extent of 20% of the total expenditure on trailor maintenance. 4. With respect to the depreciation on trailors, the Ld.CIT(A) dismissed the appeal of the assessee. Aggrieved by the order of the Ld.CIT(A) both the revenue and the assessee is in appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of Rs. 28,70,000/- and confirmed the remaining amount. The Ld.DR argued that while analyzing the individual credits in the accounts of the partners, the Ld.CIT(A) accepted the gifts and agricultural income merely on submissions made by the partners without furnishing any additional evidence. Therefore argued that the Ld.CIT(A) ought to have confirmed the entire addition made by the AO and should not have allowed partial relief. 9. We have heard both the parties and perused the material placed on record. The issue involved in this appeal is the addition made by the AO relating to the cash credits introduced by the partners in the respective partners' capital accounts. There are 14 partners in this case. All the 14 partners have introduced the capital to the extent of Rs. 68.10 lakhs in the year under consideration and out of which the AO made the addition of Rs. 64,64,437/-. The Commissioner of Income Tax while disposing the appeal allowed the relief of Rs. 28,70,000/- and confirmed the balance amounts. The Ld.CIT(A) has examined the sources of the partners individually in respect of 14 partners in detail in para No.8 of the Ld.CIT(A)'s order. He has discussed the sources for int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee failed to establish the genuineness and credit worthiness and capacity of the unsecured loans accepted by the partner. Accordingly, we uphold the order of the Ld.CIT(A) with regard to addition of Rs. 2,20,000/-in respect of Mr.P.Durga Ramesh. 2. Shri PND Vara Prasad (Partner). In this case, the partner has introduced additional capital of Rs. 4,80,000/-. This amount was introduced in multiples of Rs. 20,000/- each in cash during the month of March, 2009. It includes gift of Rs. 1,30,000/- and balance was agricultural income. In the remand report, the AO stated that Mr.Prasad filed return of income showing interest received from the firm as well as interest payment and gift of Rs. 1,30,000/- which was offered as income from other sources. The remaining amount of Rs. 3,50,000/- from Mr.Prasad is stated be out of his books of account without substantiating the sources of funds. In the remand report, the AO has suggested not to give any credit for the gift which appear to be contrived or any other amount claimed by his partner. The CIT(A) allowed the relief of Rs. 1,30,000/- since the same was offered as income and confirmed the addition of Rs. 3,50,000/- which was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and explained the source as unsecured loans. We have gone through the submissions made by the assessee, assessment order and the information furnished by the Ld.AR. In this case also, the assessee had introduced capital @ Rs. 20,000/- from 1st March to 31st March. In the capital account, it was written as other receipt. During the assessment proceedings, the assessee did not produce any evidence with regard to the source of capital. During the appeal proceedings also the assessee did not submit any evidence in the form of confirmation letter before the CIT(A) and this is fresh claim made by the assessee before the tribunal. The payment was received in cash and the assessee has neither repaid the interest nor repaid the loan by cheque. In the absence of confirmation letter and evidence to establish identity, genuineness and credit worthiness of the creditors, we are unable to accept the contention of the assessee that the additional capital was introduced through genuine loans. Therefore, we hold that the additional capital introduced by the assessee is from unexplained sources and accordingly, we confirm the order of the Ld.CIT(A) and dismiss the appeal of the assessee. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submit any evidence to establish the genuineness. Therefore, we hold that the loans stated to have taken as not substantiated and the source for introduction of capital is unexplained. Accordingly we up hold the order of the Ld.CIT(A). 5. Smt.R.Narayanamma (Partner) She has introduced additional capital of Rs. 2,80,000/-. She has not filed the return of income for the assessment year 2009-10. As per the capital account she has also introduced capital at Rs. 20,000/- per day from 1st March to 31st March. Before the CIT(A) and the AO, no evidence was produced to establish the source of the capital. During the appeal hearing, the Ld.AR filed paper book with capital account and loans of Rs. 3,99,000/- @ Rs. 19,000/- per day. All the loans are stated to have been taken in cash. No evidence was produced by the assessee with regard to the identity, capacity and genuineness of the creditors. Therefore, we do not find any infirmity in the order of the Ld.CIT(A), accordingly we uphold the order of the Ld.CIT(A) and confirm the addition of Rs. 2,80,000/-. Smt.V.Satyavathi (Partner). The partner has introduced additional capital of Rs. 6,70,000/- during the year under consideration. She h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew loans of Rs. 2,24,000/- @ Rs. 19,000/- each, however, the assessee failed to furnish the evidence with regard to the genuineness of the loans. No confirmations were filed before the AO/CIT(A) and made a fresh claim before the tribunal. Though the Ld.AR claimed the balance amount was sourced through loans, no evidence was furnished by the Ld.AR to establish genuineness of loans. Therefore, we hold that the order of the Ld.CIT(A) is reasonable and sustain the addition of Rs. 70,000/- as unexplained cash credit . 8. Sri Mandela Narayana Rao (Partner). The partner has introduced Rs. 3,40,000/- as additional capital during the year. He has filed return of income admitting total income of Rs. 1,64,503/- and agricultural income of Rs. 1,76,530/-. He has also introduced capital at Rs. 20,000/- per day on 14 occasions from 1st March to 31st March. Before the Ld.CIT(A), the assessee claimed agricultural holdings of 6.5 acres, interest receipt of Rs. 2,43,786/- and the interest payment of Rs. 1,59,930/- and gifts of Rs. 85,000/-. The Ld.CIT(A) has considered the gifts received, interest received, agricultural income and allowed the relief of Rs. 2,00,000/- and the balance amount of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of capital introduced. The only source of income as per the Ld.CIT(A) order was agricultural income on 1.83 acres and gift amount of Rs. 95,000/- and interest income less than Rs. 1,00,000/-. Considering the sources explained by the assessee before the Ld.CIT(A) and the expenditure involved for the assessee towards drawings, the surplus estimated by the CIT(A) at Rs. 1,00,000/- is reasonable. Accordingly, we uphold the order of the CIT(A) and sustain the addition of Rs. 4,10,000/- as unexplained cash credit. 10. Smt.P.Rajani Kumari. The partner has introduced capital of Rs. 5,10,000/- which include the cash in multiples of Rs. 20,000/- per day from 1stMarch to 31st March of Rs. 2,80,000/-. Before the CIT(A) she has stated that she is holding 2.5 acres of agricultural land and has received agricultural income of Rs. 83,700/-. She has filed return of income for the A.Y.2009-10 and in the return of income she has admitted gifts of Rs. 1,30,000/-. The CIT(A) considered the gifts received, agricultural income and the expenditure of the assessee and allowed the relief of Rs. 1,30,000/- and the balance amount of Rs. 3,80,000/- was sustained as unexplained cash credit. During the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income for the assessment year 2009-10. The CIT(A) considering the agricultural income, and the gifts received and the expenditure involved by the assessee allowed the relief of Rs. 1,90,000/- and confirmed the addition of Rs. 4,00,000/- as unexplained cash credit in the hands of the partner. During the appeal hearing, the assessee filed the list of names from whom the assessee had taken loans during the year under consideration. The loans stated to have taken were Rs. 2,41,500 and the loans stated to have taken from State Bank of India was Rs. 1,63,208/-. The assessee has not furnished any evidence with regard to the new loans taken during the year and also produced the bank account to establish that loan taken from State Bank of India was used for the introduction of capital in the firm. During the appeal hearing also, the assessee did not furnish any evidence and the bank account copy. In the absence of any evidence to establish the genuineness and credit worthiness and capacity of the creditor, we hold that the loans taken by the assessee were not supported and accordingly, the source remained unexplained. With regard to the SBI loan, the Ld.AR did not make any argument duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) is reasonable upheld the same. Hence we dismiss the appeal of the revenue on this ground. In the result, both the appeals of the revenue as well as the assessee are dismissed on these grounds. 13. The second issue in assessee's appeal is addition of Rs. 1,24,687/- towards interest on capital. During the assessment proceedings, the AO found that the assessee has claimed deduction of Rs. 15,30,252/- as interest paid to partners on capital accounts. Since the credits in the capital account was found to be not genuine, the AO allowed the interest on opening capital of the partners and disallowed the difference amounting to Rs. 1,24,687/-. The Ld.CIT dismissed the appeal of the assessee holding that the admission of interest income in the hands of the individual partners shall not determine the allowability of interest expenditure and the relevant factor to allow the interest on capital is whether capital introduced is genuine or not. In this case, in the preceding paragraphs, we have sustained the addition upheld by the Ld.CIT(A) since the assesse failed to establish the sources for introduction of capital by the partners in the hands of the firm. Therefore, the interest payme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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