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TMI Blog2024 (2) TMI 1331X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Thus the addition made by the Ld. AO and affirmed by the Ld. CIT(A) w.r.t. capital contribution in cash by the partners cannot be sustained in the hands of assessee firm. Our decision is supported by various judgments relied upon by. Ground no. 1 of the present appeal is decided in favor of the assessee. - SHRI RAVISH SOOD, JM SHRI ARUN KHODPIA, AM For the Appellant : Shri Sunil Kumar Agrawal, CA For the Respondent : Shri Satya Prakash Sharma, Sr. DR ORDER Per Arun Khodpia, AM: The Captioned appeal is filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi (herein after referred to as CIT(A)) dated 15.09.2023 for the assessment year 2017-18, which in turn arose from the order u/s 143(3) Income Tax Act, 1961 (herein after referred to as Act ) by the Deputy Commissioner of Income Tax, Circle 3(1) (herein after referred as Ld. AO ), Raipur, dated 29.12.2019. 2. The Grounds of Appeal raised by the assessee are as under: 1. On the facts and in the circumstances of the case and in law, the ld. CIT has erred in sustaining the addition of Rs. 25,50,000/- u/s68 on the count of unexplained cash credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lac and Rs. 10 lac, respectively. Ld. AO observed that the assessee has not furnished any supporting document like bank statement of the partners from where the cash amount have been withdrawn or any corroborative evidence to explain the source and nature of the cash so deposited. Before Ld. CIT(A) also the assessee was not appeared on 29.03.2021, 27.07.2003 25.08.2023, therefore, the observations of the Ld. AO were considered as conclusive in absence of any submission by the assessee and, accordingly, the appeal of the assessee was dismissed. 8. At the outset, Ld. AR of the assessee submitted that the notice for fixing the hearing by the Ld. CIT(A) were not received by the assessee, therefore, the hearings and response thereto could not be submitted by the assessee. It is further submitted by the Ld. AR that the assessment year under consideration is the first year of the business of the assessee firm, that all the necessary documents pertaining to the partners, who have introduced the capital by way of depositing cash were furnished before the Ld. AO. Such documents includes partners capital account, deed of partnership, bank statement of the assessee-firm, Income Tax retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the creditors is established and the entries are shown to be not fictitious, the burden would shift on the Revenue. 32. In the case at hand, the partners have shown the agricultural income in their personal returns of the past years which had been accepted by the Department as such. The partners are all identifiable and separately assessed to tax. The source of investment having been explained, in the event the AO was not satisfied the addition could have been considered in the hands of the partners and not in the hands of the firm. The burden of proving the source of the credits having been sufficiently explained the addition could not have been made in the hands of the firm in the facts of the present case. 10. Ld. AR further placed his reliance on the following judgments, having identical findings: M/s Durga Granites vs The Assistant Commissioner of Income Tax in ITTA NO. 30/2023 dated 4 September 2023: 16. In the instant case also the appellant having said that the capital investment is that made by the partners. Applying the aforesaid judicial precedents, the burden now shifts upon the respondent-Department to get it counter verified from the partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are the profits of the firm, they cannot be assessed in the hands of the firm, though they may be assessed in the hands of the individual partners, Cash credits in the individual accounts of members of a joint family with third party cannot be assessed as the income of the family unless the Department discharges the burden of proof to the contrary.' 10. Therefore, the view taken by the AO that the partnership firm must explain the source of income for the partners regarding the amount contributed by them towards capital of the firm cannot be sustained in law. 11. As regards the other amount i.e., unexplained credit entries, the Tribunal took the view that the amount represented the security deposits made by the retail dealers, and the source thereof was properly explained. Nowhere in the order of assessment, the AO recorded any finding to the effect that he verified the matter from the respective retail dealers and that such dealers have denied of making deposits. In the field of Arrack business, it is not uncommon that the retail dealers are required to keep security deposits with the supplier. At any rate, it is a pure question of fact. 12. Therefore, the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Jaiswal Motor Finance (supra). Respectfully following the same, we are compelled to hold that the conclusions arrived at by the CIT(A) does not carry any ambiguity, perversity and inferiority. Thus, we uphold the same. 11. With the aforesaid submission, Ld. AR argued that the addition made by the Ld. AO was in contradiction to the settled principle of law and therefore, the same is liable to be struck down. 12. Per contra, Ld. Sr. DR on behalf of the revenue has strongly supported and placed his reliance on the order of Ld. AO and Ld. CIT(A). 13. We have considered the rival submissions, perused the material available on record and case laws cited before us to substantiate the contentions raised by the Ld. AR. In the present case, admittedly the partners of the assessee firm have introduced capital contribution by way of depositing of cash. Certain documents to substantiate that such payments were made by the partners were submitted before the Ld. AO, which were not doubted by the Ld. AO, however regarding the nature and source of the amounts so deposited by the partners was treated as unexplained by the Ld. AO in absence of furnishing of documents lik ..... X X X X Extracts X X X X X X X X Extracts X X X X
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