The ITO, Ward-2, Vizianagaram V. Sri K Venkateswara Rao,

ITA 123/VIZ/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0731 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 25-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Keywords: Unexplained cash credit; Unexplained investment; Salary income; Source of fund
• Section: 69A; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.123/VIZAG/2007 ASSESSMENT YEAR : 2005-06 ITO WARD-2, VIZIANAGARAM K. VENKATESWARA RAO LKOTA (APPELLANT) VS. (RESPONDENT) PAN NO.ADLPK 4310B APPELLANT BY: SHRI G.S.S. GOPINATH, DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) ON VARIOUS GROUNDS WHICH ARE AS UNDER:- 1) THE ORDER OF THE CIT(A), VISAKHAPATNAM IS ERRONEOUS TO THE FACTS OF THE CASE; 2) THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF T HE ASSESSING OFFICER IN MAKING ADDITION TOWARDS UNEXPLAINED INVE STMENT IN PURCHASE OF DEMAND DRAFTS IN THE HANDS OF THE ASSES SEE. 3) THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT N O ONE CAN EXECUTE A PARTNERSHIP DEED WITHOUT PREVIOUS APPROVA L OF THE EXCISE AUTHORITIES AS LAID OUT IN THE CASE OF MOTILAL CHUN NILAL (TAK) VS. CIT (SC) 234 ITR 472. 4) THE LD. CIT(A) OUGHT TO HAVE CONSIDERED APPLICABILI TY OF THE PROVISIONS OF SEC. 69A TO THE ASSESSEES CASE, INST EAD OF DELETING THE ADDITION MADE, ON THE GROUND THAT ADDITION CAN BE MADE NEITHER UNDER SEC. 68 NOR UNDER SEC.69. 5) THE LD. FIRST APPELLATE AUTHORITY ERRED IN HOLDING THAT ADDITION TOWARDS UNEXPLAINED CREDITS/INVESTMENT NEEDS TO BE EXAMINED IN THE HANDS OF INDIVIDUAL PARTNERS AND NOT IN THE HAN DS OF THE FIRM. 6) FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT(A) WITH REFERENCE TO THE CITED ISSUE, IS QUITE UNACCEPTABLE. 2. THE BRIEF FACTS BORNE OUT FROM THE RECORD ARE TH AT THE ASSESSEE DERIVES INCOME FROM SALARY AS AN EMPLOYEE OF PUNYAGIRI CHIT S AND FINANCE LTD. AND COMMISSION. IN THE PREVIOUS YEAR RELEVANT TO THE IM PUGNED ASSESSMENT 2 YEAR, THE A.O. RECEIVED AN INFORMATION THAT ASSESSE E HAD PURCHASED DEMAND DRAFTS FOR RS.15 LAKHS FROM THE STATE BANK OF INDIA ON 17.2.2005 FOR ITS SUBMISSION TO STATE EXCISE AUTHORITIES FOR GETTING THE EXCISE LICENSE. ASSESSEE WAS QUESTIONED BY THE A.O. IN THIS REGARD AND IN RE SPONSE THERETO IT WAS STATED THAT THE DRAFTS WERE PURCHASED BY HIM ON BEH ALF OF THE VARIOUS PARTNERS OF THE PARTNERSHIP FIRM M/S. JYOTI ENTERPR ISES. FROM THE COPY OF THE PARTNERSHIP DEED, IT WAS NOTICED BY THE A.O. THAT S AID PARTNERSHIP FIRM WAS CONSTITUTED BY PARTNERSHIP DEED EXECUTED ON 16.2.20 05 BY 15 PARTNERS. EACH PARTNER CONTRIBUTED CERTAIN AMOUNTS TOWARDS THE CAP ITAL CONTRIBUTION OF THE SAID FIRM. IT WAS FURTHER CONTENDED THAT THE CAPITA L CONTRIBUTION RECEIVED FROM THE PARTNERS BY THE FIRM WAS UTILIZED FOR THE PURCHASE OF DRAFTS AND THE ASSESSEE WAS AUTHORIZED BY THE FIRM TO PURCHASE SUC H DRAFTS FROM THE BANK. IN VIEW OF THIS A.O. EXAMINED ALL THE 15 PARTNERS IN ORDER TO FIND OUT THE GENUINENESS OF THE CAPITAL CONTRIBUTION MADE BY THE M. ON THE BASIS OF SUCH SWORN STATEMENT, THE A.O. ACCEPTED THE EXPLANATION OF 7 PARTNERS, WHO HAD CONTRIBUTED IN TOTAL RS.7,90,000/- THE BALANCE RS.7 ,10,000/- CONTRIBUTED BY 8 PARTNERS WERE TREATED AS BOGUS/NOT EXPLAINED SATISF ACTORILY. REGARDING THAT PARTNERSHIP FIRM, THE A.O. OBSERVED THAT THE CREATI ON OF THE SAID FIRM WAS AN AFTER THOUGHT ONLY FOR EXPLAINING THE SOURCE OF INV ESTMENT IN VARIOUS HANDS. RELYING UPON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF MOTILAL CHUNNILAL VS. CIT REPORTED IN 234 ITR 472 THE A.O. OBSERVED T HAT NO ONE CAN EXECUTE A PARTNERSHIP DEED WITHOUT PREVIOUS APPROVAL OF THE E XCISE AUTHORITIES. SINCE NO SUCH APPROVAL WAS TAKEN AND THE FIRM DID NOT FIL E THE RETURN OF INCOME, THE A.O. CONSIDERED ENTIRE AMOUNT OF RS.7,10,000/- IN T HE HANDS OF THE ASSESSEES AS UNEXPLAINED INVESTMENT MADE BY THEM AND ADDED TH E SAME TO HIS RETURNED INCOME. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSIONS THAT ASSESSEE PURCHASED THE IMPUGNED DE MAND DRAFTS ON BEHALF OF M/S. JYOTI ENTERPRISES, A PARTNERSHIP FIRM FOR S UBMISSION TO THE A.P. STATE EXCISE AND PROHIBITION DEPARTMENT FOR PARTICIPATION IN THE OPEN TENDERS FOR OBTAINING THE LICENSE TO RUN RETAIL SHOPS OF LIQUOR . SUBSEQUENTLY, THE TENDERS WERE CANCELLED AND BUSINESS OF THE SAID FIRM COULD NOT BE CARRIED ON. HE HAS ALSO CHALLENGED THE INVOCATION OF PROVISIONS OF SEC TION 68 & 69 OF THE ACT. 3 THE CIT(A) RE-EXAMINED THE ISSUE AND BEING CONVINCE D WITH THE EXPLANATIONS OF THE ASSESSEES DELETED THE ADDITIONS. 4. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE U S WITH THE SUBMISSIONS THAT DRAFTS WERE PURCHASED BY THE ASSES SEE AND HE COULD NOT PROVE WITH EVIDENCE THAT IT WAS PURCHASED ON BEHALF OF THE FIRM AND HE WAS NOT AT ALL CONCERNED ABOUT THIS SOURCE OF FUNDS TO PURCHASE THE DRAFTS. THE LD. D.R. ALSO PLACED A HEAVY RELIANCE UPON THE ORDE R OF THE A.O. 5. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND HAS CONTENDED THAT ASSESSEE HAS PLACED ALL RELEVANT EVIDENCE IN S UPPORT OF HIS CONTENTIONS THAT THE DRAFTS WERE PURCHASED ON BEHALF OF THE FIR M FOR ITS SUBMISSION TO THE A.P. STATE EXCISE AND PROHIBITION DEPARTMENT. THE ASSESSING OFFICER HAS ALSO EXAMINED ALL THE PARTNERS AND THEY HAVE DISCLOSED T HE SOURCE OF THEIR CONTRIBUTION TO THE PARTNERSHIP FIRM. NOBODY HAS S TATED ANYWHERE THAT ASSESSEE HAS PURCHASED THESE DRAFTS ON HIS OWN BEHA LF. HE WAS ACTING AS AN AGENT OF THE FIRM, THEREFORE, WHATEVER ADDITIONS AR E CALLED FOR ON ACCOUNT OF UNEXPLAINED INVESTMENT OR UNEXPLAINED CASH CREDIT, IT CAN ONLY BE DONE IN THE HANDS OF THE FIRM OR THE PARTNERS AND NOT IN THE HA NDS OF THE ASSESSEE. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF RECORD, WE FIND THAT DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, ASSESSING OFFICER HAS EXAMINED THE SO CALLED PARTNERS OF THE FIRM WHO HAS MADE THE CONTRIBUTION TO THE PARTNERSHIP FIRM. NONE OF THE PARTNER HAS STATED THAT THEY HAVE NOT MADE ANY CONTRIBUTION TO THE FIRM AND THE DRAFTS WERE NOT PURCHASED ON BEHALF OF THE FIRM. THE REVENUE HAS N OT BROUGHT ANYTHING ON RECORD CONTRARY TO THE EXPLANATIONS OF THE PARTNERS HIP FIRM OR THE PARTNERS. ASSESSING OFFICER HAS SIMPLY DOUBTED THE SOURCE OF INVESTMENT BY THE PARTNERS BUT IT DOES NOT MEAN THAT THE DRAFTS WERE PURCHASED BY THE ASSESSEE ON HIS OWN BEHALF AND NOT ON BEHALF OF THE FIRM, HE WAS SIMPLY AN EMPLOYEE AND HAS ACTED AS AN AGENT TO PURCHASE THE DRAFTS ON BEHALF OF THE FIRM. 4 7. WE HAVE CAREFULLY EXAMINED THE ORDER OF THE CIT( A) AND WE FIND THAT CIT(A) HAS EXAMINED THIS ISSUE IN DETAIL. FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT PORTION OF THE ORDER OF THE CI T(A) AS UNDER: I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE A S WELL AS THE ARGUMENTS OF THE AUTHORISED REPRESENTATIVE OF THE A PPELLANT. IT IS NOT DISPUTED THAT THE APPELLANT IN FACT PURCHASED DRAFT S WORTH RS.15 LAKHS IN THE NAMES OF 15 DIFFERENT INDIVIDUALS FROM THE STATE BA NK OF INDIA, S. KOTA BRANCH ON 17.2.2005 BY FILLING IN THE NECESSARY DRAFT APPL ICATION FORMS IN HIS OWN HAND WRITING. THE BASIC DISPUTE IN THIS REGARD IS WHETHER THE AMOUNTS UTILIZED FOR THE PURPOSES OF SUCH DRAFTS BELONGS TO THE APPE LLANT OR NOT. THE APPELLANTS CASE IS THAT HE ONLY PURCHASED THOSE DR AFTS ON BEHALF OF THE PARTNERS OF M/S. JYOTHI ENTERPRISES AND HE WAS DULY AUTHORIZED TO DO SO BY BOTH THE FIRM AS WELL AS THE PARTNERS. THE MONEY U TILIZED FOR PURCHASE OF SUCH DRAFTS DOES NOT BELONG TO HIM AND EVEN HIS BAN K ACCOUNT WAS NOT UTILIZED FOR PURCHASE OF SUCH DRAFTS. THE ASSESSIN G OFFICERS ARGUMENT IS THAT SINCE THE FIRMS EXISTENCE IS DOUBTFUL AND AS THE F IRM DIDNT FILE ANY RETURN OF INCOME SUCH MONEY BELONGS TO THE APPELLANT ONLY WHO UTILIZED IT BY PURCHASING DRAFTS IN DIFFERENT NAMES. FROM THE PAPERS AVAILABLE ON RECORD, IT IS SEEN TH AT A PARTNERSHIP FIRM UNDER THE NAME AND STYLE M/S. JYOTHI ENTERPRISES WA S CONSTITUTED VIDE PARTNERSHIP DEED DATED 16.2.2005 BY 15 PERSONS JOIN ING AS PARTNERS. THE SAID PARTNERSHIP FIRM WAS CONSTITUTED WITH A VIEW T O APPLY FOR RETAIL WINE SHOPS BY VARIOUS PARTNERS IN THEIR INDIVIDUAL NAMES AND IN CASE ANY PARTNER/PARTNERS SUCCEED IN GETTING SUCH LICENSE, T HE BUSINESS OF RETAIL WINE TRADING WILL BE CARRIED ON BY THE PARTNERSHIP FIRM. EACH PARTNER CONTRIBUTED CERTAIN AMOUNT TOWARDS THE CAPITAL CONTRIBUTION OF THE SAID FIRM. SUCH CAPITAL CONTRIBUTIONS MADE BY THE PARTNERS WERE UTILIZED FO R PURCHASE OF THE IMPUGNED DRAFTS. AS PER CLAUSE 9 OF THE SAID PARTN ERSHIP DEED THE APPELLANT WAS AUTHORIZED TO PURCHASE THE DEMAND DRAFTS TILL T HE BANK ACCOUNT IS OPENED IN THE NAME OF THE FIRM. THE FIRM CAME INTO EXISTE NCE ON 16.2.2005 AND THE IMPUGNED DRAFTS WERE PURCHASED ON 17.2.2005 THROUGH THE APPELLANT AS THE BANK ACCOUNT OF THE FIRM WAS NOT OPENED TILL THEN. THE ASSESSING OFFICER EXAMINED ON OATH ALL THE 15 PARTNERS IN ORDER TO ENQUIRE INTO THE SOURCES OF INVESTMENT MADE BY THEM FOR MAKING THE CAPITAL CONTRIBUTIONS TO THE SAID FIRM. ON EXAMINATION OF SUCH PARTNERS, HE ACCEPTED IN THE CASE OF 8 PARTNERS THE FACT THAT THEY HAD AD EQUATE SOURCES TO FINANCE SUCH INVESTMENT. HOWEVER, IN 7 CASES WHO HAD CONTR IBUTED IN TOTAL RS.7,10,000/- HE FOUND THAT SUCH PARTNERS DIDNT HA VE ADEQUATE SOURCES. HE TREATED THE SAID AMOUNT OF RS.7,10,000/- AS THE UNE XPLAINED INVESTMENT MADE BY THE APPELLANT AS HE HAD PURCHASED THOSE DRA FTS FROM THE BANK. IN THIS REGARD THE QUESTION ARISES IS WHETHER THE ASSE SSING OFFICER IS JUSTIFIED IN TREATING THE SAID AMOUNT AS UNEXPLAINED INVESTMENT OF THE APPELLANT? SECTION 69 STATES THAT WHERE IN THE FINANCIAL YEAR IMMEDIATE PRECEDING THE ASST. YEAR, THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS, IF ANY, MAINTAINED BY HIM FOR AN Y SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE 5 INVESTMENTS OR THE EXPLANATION OFFERED BY HIM IS NO T, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE VALUE OF THE I NVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. IN THE CASE OF THE APPELLANT IT IS SEEN THAT HE DERIVES INCOME FROM SA LARY AND COMMISSION AND AS SUCH DOES NOT MAINTAIN ANY BOOKS OF ACCOUNTS. T HEREFORE, THE QUESTION OF RECORDING SUCH INVESTMENT IN THE BOOKS OF ACCOUNT D OES NOT ARISE. MORE OVER THOUGH HE IS MAINTAINING TWO BANK ACCOUNTS ONE IN H IS INDIVIDUAL NAME SB A/C NO.01190043229 IN SBI, S. KOTA AND OTHER JOINTLY WITH HIS BROTHER SB A/C NO.01190034448 IN SBI, S. KOTA, THE IMPUGNED DRAFTS HAVE NOT BEEN ROUTED THROUGH HIS BANK ACCOUNTS. OBVIOUSLY, THESE DRAFTS HAVE BEEN PURCHASED BY DEPOSITING CASH. REGARDING THE SOURCE OF SUCH CASH THE APPELLANT STATED THE SAME TO HAVE RECEIVED FROM THE PARTNERS OF THE FIRM FOR PURCHASING THE DRAFTS ON THEIR BEHALF. NOT A SINGLE DRAFT HAVE BEEN PURC HASED IN THE APPELLANTS OWN NAME. IN VIEW OF THESE FACTS, THE PROVISIONS OF SECTION 69 ARE NOT APPLICABLE. COMING TO THE APPLICABILITY OF SECTION 68 OF THE A CT, THE SAID SECTION STATES 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 EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE OF T HAT PREVIOUS YEAR. IF THE FACTS OF THE APPELLANTS CASE IS ANALYSED, AS A LREADY EXPLAINED IN PARA 4.2 OF THIS ORDER, THE APPELLANT DOES NOT MAINTAIN ANY BOOKS OF ACCOUNTS AND HENCE THE QUESTION OF ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE DOES NOT ARISE. EVEN THERE ARE NO CREDIT ENTRIES OF THE AMOUNTS UTILIZED FOR PURCHASE OF DRAFTS IN HIS BANK ACCOUNT . WHEN CONFRONTED THE APPELLANT DISCHARGE HIS ONUS BY SUBMITTING THE LIST OF PERSONS ON WHOSE BEHALF HE PURCHASE THE DRAFTS. SUCH PERSONS WHERE EXAMINED ON OATH BY THE ASSESSING OFFICER AND IN 8 CASES HE FOUND THAT THEY HAD THE CREDITWORTHINESS. HOWEVER, IN 7 CASES HE FOUND THAT THEY DO NOT HAVE THE CREDITWORTHINESS. BUT, THE CREDIT ENTRIES WITH RESPECT TO THESE 15 PE RSONS WERE FOUND IN THE BOOKS OF THE FIRM M/S. JYOTHI ENTERPRISES BY WAY OF THEIR CAPITAL CONTRIBUTIONS. IN FACT IN THE ASSESSMENT ORDER WHILE ANALYZING THE STATEMENT OF EACH SUCH CREDITOR THE ASSESSING OFFICER HAS CONCLU DED THAT EITHER HE HAS THE CAPACITY TO MAKE THE CAPITAL CONTRIBUTIO N OR HE DOESNT HAVE THE CAPACITY. HENCE, THESE CAPITAL CONTRIBUTIONS WHICH REPRESENT CREDIT ENTRIES IN THE BOOKS OF ACCOUNTS OF THE FIRM M/S. JYOTHI ENTERPRISES HAS TO BE EXPLAINED EITHER BY THE FIRM OR THE PARTNERS AS FOR THE PURPOSES OF PURCHASING THE DRAFTS, THE APPELLANT WAS USED ONLY AS AN AGENT. THEREFORE, PROVISIONS OF SECTION 68 WILL NOT BE APPLICABLE IN THE CASE OF THE APPELLANT. ON THE CASH CREDITS APPEARING IN THE ACCOUNTS OF T HE FIRM, THE HONBLE RAJASTHAN HIGH COURT IN THE CASE REPORTED IN 216 IT R 19 HAVE HELD THAT THERE IS NO DISTINCTION BETWEEN THE CASH CREDIT ENTRY IN THE BOOKS OF THE FIRM, WHETHER IT IS OF A PARTNER OR OF A THIRD PARTY AND IF THE EXPLANATION OFFERED REGARDING SUCH CREDIT ENTRIES IS NOT SATISFACTORY T HEN THE DEEMING FICTION CREATED BY SECTION 68 CAN BE INVOKED IN THE CASE OF THE FIRM. SECTION 68 ALSO COVERS CAPITAL CONTRIBUTIONS BY PARTNERS. IN THE IN STANT CASE AS APPEARS FROM THE FACTS OF THE CASE CERTAIN CAPITAL CONTRIBUTIONS WERE MADE BY THE PARTNERS WHICH WAS FOUND CREDITED IN THE BOOKS OF ACCOUNTS O F THE FIRM M/S. JYOTHI 6 ENTERPRISES AND WHICH WERE SUBSEQUENTLY UTILIZED FO R THE PURCHASE OF THE IMPUGNED DRAFTS. THEREFORE, PRIMARILY THE FIRM HAS TO EXPLAIN THE SOURCES OF SUCH CREDIT ENTRIES. THE PECULIAR FACT IN THIS CAS E IS THAT THE FIRM WAS FLOATED ON 16.2.2005 WITH THE INTENTION TO PARTICIPATE IN T HE LIQUOR TRADING AUCTION BY THE INDIVIDUAL PARTNERS AND ON THE CONTINGENCY THAT ANY ONE OR MORE PARTNERS SUCCEED IN GETTING A LICENSE, THE BUSINESS WILL BE CARRIED ON BY THE FIRM. HOWEVER, SINCE THE ENTIRE LICENSING PROCESS WAS CAN CELLED AND AMOUNTS DEPOSITED FOR PARTICIPATION IN LIQUOR TRADING AUCTI ON WERE REFUNDED THE FIRM M/S. JYOTHI ENTERPRISES DID NOT CARRY ON ANY BUSINE SS DURING THE RELEVANT PREVIOUS YEAR. CARRYING ON OF A BUSINESS IS ESSENT IAL FOR THE EXISTENCE OF A PARTNERSHIP. THUS WHERE THE BUSINESS CONTEMPLATED UNDER THE PARTNERSHIP DEED DID NOT COMMENCE DURING THE RELEVANT ACCOUNTIN G PERIOD IT CANNOT BE SAID THAT THERE WAS INEXISTENCE ANY PARTNERSHIP. H ENCE, IN THE CASE OF M/S. JYOTHI ENTERPRISES SINCE NO BUSINESS WAS CARRIED ON IT CAN BE SAFELY CONCLUDED THAT THERE WAS NO EXISTENCE OF ANY PARTNERSHIP IN T HE PREVIOUS YEAR RELEVANT TO ASST. YEAR 2005-06. AS SUCH THE FIRM HAS NOT FI LED THE RETURN OF INCOME AND THEREFORE THE QUESTION OF TREATING ANY AMOUNT A S UNEXPLAINED CASH CREDIT IN THE HANDS OF THE FIRM DOESNT ARISE. THUS THIS IS A CASE WHERE THE BUSINESS OF THE FIRM HAS NOT COMMENCED. THE HONBLE ALLAHABAD HIGH COURT IN THE CASES REPOR TED IN 218 ITR 508 AND 221 ITR 239 AS WELL AS THE HONBLE HIMACHAL PRADESH HIGH COURT IN THE CASE REPORTED IN 229 ITR 496 HAVE HELD THAT WHERE THE PA RTNERS MAKE CAPITAL CONTRIBUTIONS TO THE FIRM BEFORE THE COMMENCEMENT O F THE BUSINESS OF THE FIRM IT IS FOR THE PARTNERS TO EXPLAIN THE SOURCE O F THE SUMS SO CREDITED IN THE BOOKS OF THE FIRM AND IF THEY FAIL TO DISCHARGE THE ONUS THEN SUCH DEPOSITS MAY BE TREATED AS UNEXPLAINED CASH CREDIT IN THE HA NDS OF THE CONCERNED PARTNERS BUT NOT IN THE HANDS OF THE FIRM. THIS VI EW IS REASONABLE IN AS MUCH AS THAT WHEN IN THE CASE OF A FIRM THE BUSINESS HAS NOT COMMENCED THE POSSIBILITY OF EARNING ANY UNDISCLOSED INCOME WHICH IS REQUIRED TO BE ROUTED TO THE BOOKS OF ACCOUNTS THROUGH CASH CREDIT ENTRIE S IS NOT THERE. IN THIS CONTEXT, IT IS ALSO PERTINENT TO NOTE THAT WHERE TH E AMOUNT OF CASH CREDIT IS SOUGHT TO BE TAXED IN THE INDIVIDUAL HANDS OF THE P ARTNERS CONCERNED IT IS SECTION 69 BUT NOT SECTION 68 WHICH IS APPLICABLE. IT IS BECAUSE IN RELATION TO THE EXPRESSION BOOKS THE EMPHASIS IS IN THE WORD ASSESSEE MEANING THEREBY THAT SUCH BOOKS HAVE TO BE THE BOOKS OF THE ASSESSEE HIMSELF AND NOT OF ANY OTHER ASSESSEE AND A PARTNERSHIP FIRM IS AN ASSESSABLE ENTITY DISTINCT FROM THE INDIVIDUAL PARTNERS. SUCH IS THE VIEW EXPRESSED BY HONBLE PUNJAB AND HARYANA HIGH COURT AS REPORTED IN 171 IT R 532, HONBLE GAUHATI HIGH COURT AS REPORTED IN 223 ITR 544 AND HONBLE P ATNA HIGH COURT AS REPORTED IN 124 ITR 94. THEREFORE, THE AMOUNT OF R S.7,10,000/- WHICH HAS BEEN TREATED AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE APPELLANT BY THE ASSESSING OFFICER HAS TO BE EXAMINED IN THE HANDS O F THE PARTNERS AS THESE AMOUNTS ARE NOTHING BUT THE ALLEGED CAPITAL CONTRIB UTIONS MADE BY THE PARTNERS TO THE FIRM WHICH WAS SUBSEQUENTLY USED FO R THE PURCHASE OF THE DRAFTS. IN VIEW OF THE DISCUSSIONS MADE IN PARAS 4.1 TO 4.5 AS ABOVE IT IS CONCLUDED THAT THE AMOUNT OF RS.7,10,000/- CANNOT B E TREATED AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE APPELLANT AND HENCE THE SAME IS DELETED . THE APPEAL IS ALLOWED. 7 8. SINCE NO INFIRMITY IS POINTED OUT BY THE LD. D.R . IN THE ORDER OF THE CIT(A), WE CONFIRM THE SAME. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 2.6.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 2 ND JUNE, 2010 COPY TO 1 ITO WARD-2, VIZIANAGARAM 2 SRI K. VENKATESWARA RAO, VIZIANAGARAM DISTRICT 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A)-I, VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM