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TMI Blog2022 (12) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 861 - GUJARAT HIGH COURT] High Court held that when assessee had furnished details with regard to source of capital introduced in firm and concerned partner had also confirmed such contribution, it could be concluded that assessee had duly discharged onus cast upon it. Therefore, if Assessing Officer was not convinced about creditworthiness of partner who had made capital contribution, inquiry had to be made at end of partner and not against firm. Notable, the SLP filed by the Department against the above order has also been dismissed by Hon ble Supreme Court [ 2018 (7) TMI 651 - SC ORDER] Again the High Court in the case of CIT v. M. Venkateswara Rao [ 2015 (3) TMI 153 - ANDHRA PRADESH HIGH COURT] held that contribution made by partners to capital of assessee-firm would constitute very substratum for business of firm and it is difficult to treat pooling of such capital, as credit. The High Court held that it is only when entries are made during course of business that can be subjected to scrutiny under section 68. Therefore, partnership firm is not required to explain source of income for partners regarding amount contributed by them towards capital of firm. Thus, in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7(1) r.w.s. 36(1)(iii) of the Act. The Assessing Officer therefore disallowed an amount of Rs. 20,46,990/- out of the above interest expenditure. While making the additions, the Assessing Officer made the following observations:- "9.1 In view of the-above, it is proven that it is the onus of the assessee to provide identity, genuineness of the transaction and creditworthiness of the amount credited as capital through its partners. The recent amendment in provision of 68 enhances the onus on the promoters of the companies regarding directors capital and share premium introduced. Though the instant case is of Partnership Firm, the spirit of the amendment and the intent of legislature is equally applicable to the firm. The partners are jointly and severely liable for all the affairs of the firm. If the partners are not providing confirmations and bank statements means such partners are dummy partners and all the capital reflected in their name are either being paid outside the books or the undisclosed income of the firm is introduced in the name of dummy partners. 9.2 In view of the above, the following capital introduced by the partners is treated as unexplained cash credit repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a dispute between the partners and owing to the same the assessee could not place on record details asked for by the Assessing Officer during the course of appellate proceedings. During the course of appellate proceedings before ld. CIT(A), the assessee furnished copy of the ledger accounts of the Partners, copy of the acknowledgment of return filed by the Partners and copy of bank statement reflecting the payment made by the respective partners as capital contribution. 4.1 The CIT(A) granted relief to the assessee on the ground that the ledger account of each of the partners have been filed and on perusal of the bank accounts of such partners, it was observed that no cash was deposited before cheque/transfer of funds by the partners to the appellant. The assessee firm submitted name/PAN/copy of bank statement/acknowledgement of ITR and confirmation of the ledger accounts of the partners introducing capital in the firm. Accordingly, the CIT(A) held that the onus cast upon him has been discharged by the assessee. The assessee firm has filed confirmations of the creditors along-with their PAN Numbers and in case, the Assessing Officer has any doubt about the creditworthiness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest Rs.20,46,990/- The ledger account for each of the partner has been filed at page number 8-9/Pravin,16-17/Umesh and 22-23/Dharmendra of the paper book and contents therein have been examined vis-a-vis bank account copy for each of such partner filed and on record. There is no cash deposit before the cheque/transfer of funds by the partner to the appellant. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx The onus has been discharged by the appellant. The confirmations have been filed giving PAN No. of the creditors. The creditworthiness of the creditor(s) cannot be decided by the AO of the appellant. In fact, the AO of appellant can get the matter investigated through the AO of the creditors. The AO of appellant cannot become AO of the creditors. It is not the case of AO that the impugned amount is appellant's own money generated out of books of account and the same is introduced in its books of accounts through bogus creditors. If that is so, what evidences AO has collected to place it on record. Once confirmations have been filed, further action, if any, is required to be taken in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e counsel for the assessee submitted that in the appeal proceedings all necessary documents were furnished and hence primary onus was discharged. Accordingly, the CIT(A) after due consideration to the details field by the assessee, gave relief to the assessee. The counsel for the assessee placed relied upon the finding of the CIT(A) in the appeal order. 6. We have heard the rival contentions and perused the material on record. In our view, the assessee has filed all requisite details at the time of hearing before ld. CIT(A). The assessee has filed copies of return of the partners who introduced capital, their respective bank statements were furnished and the confirmations of the three partners were also furnished before CIT(A). The CIT(A) made a specific noting that on examination of the bank account for each of the three partners, it is apparent that there was no cash deposit before the cheque/transfer of funds by the respective partners to the assessee firm. The CIT(A) has also made a nothing that the assessee firm has submitted name/address/bank statement/acknowledgement of ITR and also confirmation of ledger accounts of the respective partners. In the case of Principal Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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