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TMI Blog2021 (1) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO that the creditors and the partners have explained the sources to the satisfaction of the AO and the Ld.CIT(A). Therefore, we do not see any reason to interfere with the order of the Ld.CIT(A). Capital was introduced by the partners in the firm and the AO made the addition in the hands of the firm instead of partners - In the instant case the the partners have accepted that they have brought the capital and there is no dispute in this regard. The source of the partners also was explained, thus the source of introduction of capital stands explained and there is no case for making the addition in the hands of the firm as held by Hon ble High court of Andhra Pradesh in M/s M.Venkateswara Rao Others ( 2015 (3) TMI 153 - ANDHRA PRADESH HIGH COURT ). Thus addition made by the AO in the hands of the firm in respect of capital contributed by the partners cannot be sustained in law. Hence, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue. - Shri N.K. Choudhry, Judicial Member And Shri D.S. Sunder Singh, Accountant Member For the Appellant : Smt.Suman Malik, DR For the Respondent : Shri G.V.N.Hari, AR ORDER PER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the credit worthiness and made the addition of ₹ 2,12,50,000/- to the returned income. 4. Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) found that the assessee has produced the unsecured creditors who were examined by the AO and did not find any specific defect in the submissions made by the creditors except stating that the persons gave stereotyped answers. The Ld.CIT(A) also observed that though the AO stated that all the creditors are fishermen and engaged in agricultural activities, having no means, the AO did not ask any question with regard to their financial capability and elicited the truth with regard to credit worthiness. The Ld.CIT(A) further observed that the creditors have answered all the questions posed by the AO in sworn deposition and no specific defect was found by the AO with regard to genuineness and credit worthiness of the creditors, hence, viewed that the AO cannot disregard the results of his own enquiry. The Ld.CIT(A) is also of the opinion that since, the partners have introduced the capital from their own sources, as well as sourced from borrowings and explained the source, the AO cannot make addition i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- as per the details given above in this order. Out of which, ₹ 77,96,000/- was introduced by the partners from their own source and ₹ 1,47,54,000/- was sourced by the partners from unsecured loans and brought into the partnership firm. The AO made the addition of ₹ 77,96,000/- representing own savings of the partners stating that no evidence was produced by the partners for investment. What was the exact evidence required by the AO, which was not produced by the partners was not specified. Therefore, without having specific defect or without specifying that the partners does not have source, the finding of the AO cannot be upheld. Similarly, the AO has examined 79 unsecured creditors who appeared before the AO and given statements on oath. All of them have accepted that they have given the loans to the partners, however, as observed by the AO, all the statements were stereotyped answers, hence, the AO viewed that the creditors were tutored and the source is unbelievable. No specific defect with regard to source, credit worthiness and genuineness of the creditors was brought by the AO in his finding in the order. Thus, we find from the order of the AO that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the assessee and also by following the judgment of the Hon'ble Jurisdictional High Court in the case of M. Venkateswara Rao (supra), deleted the addition made by the Assessing Officer and given liberty to the Assessing Officer to examine and consider these amounts in the respective partners. The relevant portion of the order is extracted as under:- 7.3. I have carefully considered the above submissions I have also gone through the assessment order, statement of facts and other details Even though the business is carried out in the name of the firm the entire business is owned, managed and run by the partners When the partners confirm that they contributed to capital account and current account it is not correct to assess these amounts in the hands of the firm. It would be more appropriate to consider these amounts in the hands of the respective partner. On identical facts, the Hon'ble Andhra Pradesh High Court in the case of CIT Vs Venkateswara Rao (232 Taxmann 123) held that the amounts received by the firm from its partners cannot be assessed in the hands of the firm though they may be assessed in the hands of the individual partners. The relevant extract of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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