1985 (1) TMI 81

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..... d by the firm till the period relevant to the asst. yr. 1974-75 and as such it was assessed till that period without books of account. The assessee firm maintained the account books for the first time in the previous year ending on Diwali of 1974 relevant to the asst. yr. 1975-76 with which we are concerned in this appeal. While framing the assessment, the ITO made addition of Rs. 36,000 to the income of the firm in respect of the following items: Amount Description Rs. .. 29,264 Credit entry in the name of Ram Prasad 1200 Interest paid to Ram Prasad 2,333 Credit entry in the name of Aditya Kumar S/o Om Prakash 2,594 Credit entry in the name of Omwat .....

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..... ue was obliviously vitiated. But what we find is that the AAC though did not take into consideration that it was first year of the business of the assessee firm, yet his reasoning for deciding the matter afresh proceed on the same lines. He observed as under: "It was claimed that the account of Shri Ram Prasad did not contain any fresh credits and that amount of Rs. 29,264 comprised of opening balance and interest thereon. This claim of the assessee is, however, not acceptable as in previous years no books of accounts were maintained. An amount of credit can by accepted as opening balance only if there is corroborating evidence that there was an identical closing balance in the preceding year. As no books of accounts were maintained in th .....

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..... eing assessed in the past and, therefore, the assessee must have had some capital and that might be consisting of borrowings. Thus in such a situation unless it is shown by the Department that the assessee did not have sufficient capital in the past so as to include therein the cash credit of Rs. 29,264 the Department cannot find out a short cut method of strength way treating the said amount of Rs. 29,264 as cash credit in the previous year. 7. And even if it is so taken that it was a cash credit in the previous year there was evidence on record to show credit worthiness of Ram Prasad. In the appeal order of the assessment of Ram Prasad for this very year it has been held by the AAC of IT that Ram Prasad had enough funds to advance to th .....

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