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TMI Blog2023 (3) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... e income of the firm. Unexplained cash credits would have to be assessed at the hands of the partners of the firm and not the firm itself. Such amounts could not have been treated as income of the firm by relying upon Section 68. We answer the substantial questions of law in favour of the appellant-assessee and against the respondent-revenue insofar the cash credits pertaining to the two partners of the appellant firm i.e., Smt. K.Sujatha and Sri K. Prabhakar Reddy only are concerned. - HON BLE THE CHIEF JUSTICE UJJAL BHUYAN AND HON BLE SRI JUSTICE N. TUKARAMJI For the Appellant : Ms. K. Manasa, Learned Counsel For the Respondent : Mr. J.V. Prasad, Learned Standing Counsel, Income Tax Department JUDGMENT: (PER THE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-2005 is not vitiated for ignoring the relevant submissions/materials while sustaining the impugned addition and disallowance of interest? 4. From the above what is deducible is that the issue before us is whether Tribunal was justified in upholding the addition of Rs.4,70,966.00 to the income of the appellant (also referred to as the assessee hereinafter) under Section 68 of the Act. 5. Section 68 of the Act says that where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the assessing officer, satisfactory, the sum so credited may be charged to income tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to the unsecured loan account by way of a journal entry. Assessing officer examined her and came to the conclusion that she did not have the creditworthiness to advance the cash credit as above and doubted the genuineness of the transaction. Accordingly, Section 68 of the Act was invoked whereafter the aforesaid amount was added to the income of the assessee. Similar additions were made in respect of the other two parties. 8. Aggrieved by the above additions, assessee preferred appeal before the Commissioner of Income Tax (Appeals) IV, Hyderabad (hereinafter referred to as, CIT (A) ). By the appellate order dated 02.08.2002, CIT (A) held that assessing officer was not satisfied with the creditworthiness of the creditors who had fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , learned counsel submits that the substantial questions of law may be answered in favour of the appellant and against the revenue. 11. On the other hand, Mr. J.V.Prasad, learned Standing Counsel referred to the proviso to Section 68 of the Act, though it came into the statute book only with effect from 01.04.2013 post the assessment year under consideration. However, justifying the order of the Tribunal he has placed reliance on a decision of the Rajasthan High Court in Commissioner of Income Tax v. Kishorilal Santoshilal [1995] 216 ITR 9 (RAJ) to contend that Section 68 of the Act makes no distinction between the cash credit entry in the books of the firm whether it is of a partner or of a third party. 12. In her reply submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and accordingly were added to the income of the firm. In the facts of that case, this Court held as follows: 7. It is a matter of record that the respondent-firm comprises of ten partners and each of them made contributions, be it in the form of cash or bank guarantees to be furnished to the Government, at the commencement of business. The returns submitted by the respondent-firm were processed, and the facts and figures furnished by it were accepted. However, the matter was reopened at a later point of time. The Assessing Officer treated the capital raised by the firm in the form of contributions made by the partners as income. This conclusion was arrived at on the ground that source of income for the partners was not explained. Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If the partner is an assessee, the concerned Assessing Officer can require him to explain the source of the money contributed by him to the firm. If on the other hand, the partner is not an assessee, he can be required to file a return and explain the source. Undertaking of such an exercise, vis-a-vis the partnership firm itself, is impermissible in law. In the judgment relied upon by the appellant itself, the Patna High court held as under (page 137 of 142 ITR): If there are cash credits in the books of a firm in the accounts of the individual partners and it is found as a fact that cash was received by the firm from its partners, then in the absence of any material to indicate that they are the profits of the firm, they can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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