M/s Vankhandeshwar Construction Co., Bhind V. J.C.I.T ,Range -2, Gwalior

ITA 245/AGR/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6337 (ITAT-AGRA)
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 10-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: INDRAJEET SINGH
• Keywords: Unexplained cash credit; Rejection of books of accounts; Depreciation; Opportunity of being heard; Source of fund
• Section: 44AD; 68; 6; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI A. D. JAIN JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER ITA NO. 279 /AGRA/201 4 ASSESSMENT YEAR: 2010 - 11 DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 2, GWALIOR (M.P.) VS. SHRI VANKHANDESHWAR CONSTRUCTION COMPANY, 1, USHA COLONY, BHIND. PAN NO. AAWFS 0059B ITA NO. 245/AGRA/2014 ASSESSMENT YEAR: 2010 - 11 SHRI VANKHANDESHWAR CONSTRUCTION COMPANY, 1, USHA COLONY, BHIND. VS. DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 2, GWALIOR (M.P.) APPELLANT RESPONDENT REVENUE BY: SHRI INDRAJEET SINGH , CIT.DR. ASSESSEE BY: SHRI RAJENDRA SHARMA ADV. DATE OF HEARING: 09 /0 5 /2017 DATE OF PRONOUNCEMENT: 29 /0 5 /2017 ORDER PER DR MITHA LAL MEENA, AM. THESE CROSS APPEAL S BY REVENUE AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT (A), GWALIOR, [ HEREIN AFTER REFERRED TO AS THE CIT(A) ] IN RES PECT OF ASSESSMENT ITA NO. 279/AGRA/2014 ITA NO. 245 /AGRA/ 2014 2 YEAR 2010 - 11.T HE MAIN GROUNDS OF APPEAL RAISED AS PER ITA NO S . ARE REPRODUCED HEREUNDER. ITA NO. 279 /AGRA/201 4 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN APPLYING THE NP RATE OF 6% INSTEAD OF 10% OF GROSS CONTRACTUAL RECEIPTS APPLIED BY THE ASSESSING OFFICER, FOR ESTIMATION THE INCOME OF THE ASSESSE AFTER REJECTING THE BOOK RESULTS OF THE ASSESSE U/S 145(3) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.56,65,796/ - MADE BY THE ASSESSING OFFICER TO THE INC OME OF THE ASSESSE U/S 68 OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF UNEXPLAINED CREDITS IN THE CURRENT ACCOUNTS OF THE PARTNERS IN ITS BOOKS OF ACCOUNTS, DESPITE THE FACT THAT THE ASSESSE COULD NOT ESTABLISH THE CREDIT WORTHINESS OF ITS PARTNERS AS WELL AS THE GENUINENESS OF TRANSACTIONS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.56,65,796/ - MADE BY THE ASSESSING OFFICER TO THE INCOME OF THE ASSESSE U/S 68 OF THE INCOME TAX ACT, 1961 BY RELYING UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. METACHEM INDUSTRIES 245 ITR 160 (MP), DESPITE THE FACT THAT THE ITA NO. 279/AGRA/2014 ITA NO. 245 /AGRA/ 2014 3 FACTS AND CIRCUMSTANCES OF THIS CASE OF ARE TOTALLY DIFFERENT FROM THAT OF THE PRESENT CASE AND THE RA TIO OF THIS CASE DOES NOT APPLY TO CASE OF THE ASSESSE. ITA NO. 245/AGRA/2014 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) WAS NOT JUSTIFIED IN ADOPTING A NET PROFIT RATE OF 6% ON THE GROSS CONTRACT RECEIPTS WITHOUT CONSIDERING THE PAST HISTORY OF THE CASE & COMPARABLE CASES OF CONTEMPORANEOUS PERIOD. THE NET PROFIT RATE APP LIED MAY KINDLY BE SUITABLY REDUCED. 2. THAT THE LEARNED CIT(A) WAS NOT FURTHER JUSTIFIED IN NOT ALLOWING INTEREST & SALARY TO PARTNERS & IGNORING CBDT CIRCULAR NO. 29 - D(XIX - 14) DT. 03.08.1961 & NOT ALLOWING DEPRECIATION. INTEREST & SALARY TO PARTNERS & D EPRECIATION MAY KINDLY BE DIRECTED TO BE ALLOWED. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER. MODIFY SUBSTITUTE OR DELETE ANY GROUND AT THE TIME OR BEFORE HEARING OF APPEAL. 2. THERE IS ONLY ONE EFFECTIVE ISSUE IN THE APPEAL OF THE ASSESSEE WHIC H IS COMMON TO THE ISSUE RAISED , IN THE 1 ST GROUND OF APPEAL, BY THE DEPARTMENT, AS REGARDS TO ESTIMATION OF INCOME BY APPLICATION OF THE PROFIT RATE ON GROSS TOTAL RECEIPT AFTER REJECTING BOOKS OF ITA NO. 279/AGRA/2014 ITA NO. 245 /AGRA/ 2014 4 ACCOUNTS , U/S 145(3) OF THE INCOME TAX ACT, 1961 [ IN SHORT THE ACT)] AND THEREFORE, TAKEN UP TOGETHER FOR ADJUDICATION, FOR THE SAKE OF CONVENIENCE. 3 FACTS IN BRIEF , AS STATED BY LOWER AUTHORITIES ARE THAT THE ASSESSING OFFICER (THE AO IN SHORT), ESTIMATED INCOME FROM CONTRACT UAL RECEIPTS @ 10 % OF GROSS RECE IPTS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION ON CONTRACT BASIS. HE REJECTED BOOKS RESULTS U/S 145(3), MAINLY ON THE GROUND THAT THE EXPENSES CLAIMED BY THE ASSESSEE HAVE REMAINED UNVERIFIED ; ANDTHE BOOKS OF ACCOUNT S MAINTAINED BY THE ASSESSEE ARE NEITHER PRONE TO VERIFICATION OR RELIABLE; AND THAT THE INCOME CHARGEABLE UNDER THE ACT CANNOT BE PROPERLY DEDUCED FROM THE BOOMS OF ACCOUNTS. ACCORDINGLY, THE AO HAS APPLIED NET PROFIT RATE OF 10 % ON THE GROSS RECEIPTS AFTE R REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. 4 IN THE APPEAL , PREFERRED BY THE RESPONDENT ASSESSEE BEFORE THE LD. CIT (A) , THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS IS UPHELD .AS REGARDS, THE ESTIMATION OF INCOME BY APPLICATION OF NET PROFIT RATE IS CONCERNED; HE HAS REDUCED THE SAID NET PROFIT RATE TO 6% ON THE GROSS RECEIPT WITHOUT FURTHER DEDUCTION OF SALARY AND INTEREST TO PARTNERS; PLACING RELIANCE ON THE DECISION OF ITAT, AGRA IN THE CASES OF JAGDISH PRASAD BANSALAND NARESH KATARE. 5 . THE RESPONDENT LD. DR FOR REVENUE SUBMITTED THAT ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN APPLYING NP RATE OF 6% INSTEAD OF 10% OF GROSS CONTRACTUAL RECEIPTS APPLIED BY THE ASSESSING OFFICER, FOR ESTIMATION OF THE ITA NO. 279/AGRA/2014 ITA NO. 245 /AGRA/ 2014 5 INCOME OF THE ASSESSEE AFTER REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE ACT. THE LD DR RELIED ON THE DECISION OF ITAT , AGRA, IN THE CASE OF SHRI MAHES H CHANDRA CONTRACTOR, ITA NO. 138/AGRA/ 2012, DATED 14/09/2012 WHEREIN PROFIT RATE OF 8 % IS CONFIRMED ON REJECTION OF BOOKS OF ACCOUNT WITH THE SUPPOR T OF PROVISIONS OF SECTION 44AD . 6 . THE DEFENDANT COUNCIL FOR THE ASSESSEE H AS CHALLENGED THE ORDER OF CIT A PPEAL S AGAINST APPLYING THE NET PROFIT RATE OF 6% ON THE TOTAL RECEIPTS, WITHOUT ALLOWING OF THE REMUNERATION, INTEREST PAYABLE TO PARTNERS AND ALSO NOT ALLOWING OF D EPRECIATION CLAIMED BY ASSESSEE.HE HAS SUBMITTED THAT THE AO, WHILE REJECTING THE BOOKS OF ACCOUNTS AND INVOKING THE PROVISIONS OF SECTION 145(3) HAS NOT POINTED OUT SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS . T HE AO BY INVOKING THE PROVISIONS OF SEC 145(3) AND REJECTING THE BOOKS OF ACCOUNT HAS APPLIED GROSS PROFIT RATE OF 10% AS AGAINST 5.5 % DISCLOSED BY THE APPELLANT SUBJECT TO DEDUCTION OF EXPENSES CLAIMED UNDER THE HEAD DEPRECIATION; INTEREST AND SALARY PAYABLE TO THE PARTNERS WHICH THE CIT (APPEALS) HAS REDUCED TO 6% WITHOUT ALLOWING OF THE SAID DEDUCTION . 6 .1 IT IS FURTHER SUBMITTED THAT T HE LD. CIT APPEALS WHILE SUSTAINING THE ADDITION BY APPLYING, THE NET PROFIT RATE OF 6%, HAS IGNORED THE PROCEDURE PRESCRIBED IN THE SEC 145(3] OF THE INCOME TAX ACT FOR COMPLETING OF THE ASSESSMENT BY WHICH, IF THE BOOKS OF ACCOUNTS ARE BEING REJECTED, THE ASSESSMENT IS TO BE COMPLETED AS PER THE PROVISIONS OF SECTION 144 OF THE INCOME TAX ACT, BY WHICH, THE AO HAS TO COMPLETE THE ASSESSMENT ON THE BASIS OF EITHER THE MATERIAL IF ANY GATHERED BY HIM OR AVAILABLE ON RECORD AFTER ITA NO. 279/AGRA/2014 ITA NO. 245 /AGRA/ 2014 6 ALLOWING A PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN T HE CASE OF THE ASSESSEE, THE AO HAS NOT FOLLOWED THE PROCEDURE AS PRESCRIBED IN THE PROVISIONS OF SECTION 145(3)/144 OF THE INCOME TAX ACT BY WHICH THE ASSES SMENT WAS TO BE COMPLETED BASED ON THE MATERIAL IS IN THE POSSE SSION OF THE AO OR GATHERED BY HIM, WHICH WERE NEITHER GATHERED NOR HAS BEEN BROUGHT ON RECORD BY THE AO. 6 . 2 IN SUPPORT , THE ASSESSEE PLACED RELIANCE ON THE DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH IN THE CASE OF 'DINANATH DUBEY VS. CIT, 160 ITR 1', DECISION OF HON'BLE RAJASTHAN HIGH COURT, HON'BLE CALCUTTA HIGH COURT, HON'BLE KARNATAKA HIGH COURT AND ALSO THE DECISION OF HON'BLE ITAT, AGRA BENCH, AGRA, OF WHICH THE DECISIONS ARE ALSO FILED AS PER SEPARATE PAPER BOOK. IN THESE DECISIONS, THE HON'BLE HIGH COURTS AS WELL AS ITAT, AGRA BENCH AGRA IN THE CASES OF OM CONSTRUCTION CO. VS JCIT, RANGE - 1, ITA NO. 368/AGRA/2013 DATED 02/05/2014 AN D NARESH KATARE VS ACIT, CIRCLE - 3 , ITA NO. 567 /AGRA/201 2 DATED 15/03/ 2013 WHEREIN IT IS HELD THAT WHERE THE ASSESSMENT IS COMPLETED BY INVOKING THE PROVISIONS OF SECTION 145(3) THEN THE ASSESSMENT IS TO BE COMPLETED IN THE MANNER PRESCRIBED UNDER THE EXPEN DITURES SECTION 144 OF THE INCOME TAX ACT BY WHICH, THE ASSESSMENT IS TO BE FRAMED ON THE BASIS OF PAST RESULTS OF THE APPELLANT IN HIS OWN CASE WHICH ARE THE BEST COMPARABLE CASE WHICH THE LEARNED AUTHORITIES BELOW HAVE IGNORED. 6 .3 THAT THE CIT (APPEALS) IGNORING THE PROVISIONS OF SECTION 145(3)/144 HAS ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING THE NET RATE 6% ON THE GROSS TOTAL RECEIPTS DISCLOSED BY THE ASSESSEE AND ALSO HAS NOT ALLOWED THE DEDUCTION OF DEPRECIATION; SALARY AND INTEREST PAYABLE TO PARTNERS, WITHOUT ANY BASIS. THE INCOME OF THE ASSESSEE IS TO BE DETERMINED OR ESTIMATED TAKING INTO CONSIDERATION THE PAST RESULTS IN THE CASE OF ASSESSEE. WHILE CONSIDERING THE PAST HISTORY OF THE ASSESSEE , THE NET PROFIT RATE APPLIED BY THE CIT APPEALS IS HIGHLY EXCESSIVE AND IS WITHOUT ANY BASIS AND ALSO ITA NO. 279/AGRA/2014 ITA NO. 245 /AGRA/ 2014 7 AGAINST THE PROVISIONS OF SEC 145(3]/144 OF THE INCOME TAX ACT, AND THUS THE NET PROFIT RATE APPLIED IS NOT JUSTIFIED. 6 .4 THE ASSESSEESUBMITTED THAT WHERE THE BOOKS OF ACCOUNTS ARE REJECTED U/S 145(3) AND THE INCOME IS ESTIMATED ON THE BASIS OF MATERIALS GATHERED BY THE AO AND IF THERE IS NO MATERIAL IN POSSESSION OF THE DEPARTMENT, IN THAT CASE , AS BEING REFERRED IN PAPER BOOK, INCOME IS TO BE ESTIMATED ON THE BASIS OF EARLIER YEAR RESULTS OF THE ASSESSEE WHICH IS OUGHT TO BE THE BEST COMPARABLE CASE . IN THIS REGARD, THE ASSESSEE HAS FURNISHED THE COMPARATIVE TRADING RESULTS TO SUPPORT HIS CASE AS DETAILED BELOW : ASSESSMENT YEAR GROSS RECEIPTS NET PROFIT BEFORE SALARY & INTT. PAID TO PARTNERS NET PROFIT RATE BEFORE SALARY & INTT. PAID TO PARTNERS NET PROFIT AFTER SALARY & INTT. PAID TO PARTNERS NET PROFIT RATE AFTER SALARY & INTT. PAID TO PARTNERS 2008 - 09 20529089 / - 1044931/ - 5% 458612 / - 2.2 % 2009 - 10 39419772/ - 1255051 / - 3.18 % 560932 / - 2.2 % 2010 - 11 55638855 / - 3076216 / - 5. 5 % 1455914 / - 2.6 % . 7 . IT IS ADMITTED FACT THAT BOOKS OF ACCOUNTS ARE REJECTED BYINVOKING PROVISIONS OF SECTION 145(3) OF THE ACT, POINTINGOUT THAT THE BOOKS OF ACCOUNTS WERE NOT VERIFIABLE . THE LD. AR FOR THE ASSESSEE SUBMITTED THATTHE AO HAS NEITHER BROUGHT ANY MATERIAL EVIDENCE ON RECORD NOR ANY COMPARABLE CASE,IN SUPPORT, FOR APPLICATION OF HIGH PROFIT RATE ON GROSS TOTAL RECEIPT. HE CONTENDED THAT EITHER THE AO OR THE 1 ST APPELLATE AUTHORITY OUGHT TO HAVE DISTINGUISHED THE FINDING OF THE JURISDICTIONAL BENCH GIVEN IN THE ITA NO. 279/AGRA/2014 ITA NO. 245 /AGRA/ 2014 8 CASE OF JAGDISH P RASAD SHARMA , ITA NO. 613/A GR A /2008 . HE FURTHER CONTENDED THAT AS PER THE DECISION OF HONBLE MADHYA PRADESH (JURISDICTIONAL HIGH COURT ) IN THE CASE OF DINANATH DUBEY V S. CIT,160 ITR 1 AND DECISION OF ALLAHABAD IN THE CASE OF DELTA ENGINEERING CO. (P) LTD, VS. CIT 186 ITR 383, IN CASE OF REJECTION OF BOOKS OF ACCOUNTS , THE NET PROFIT IS TO BE ESTIMATED BY APPLYING THE RATE O F PROFIT IN ACCORDANCE WITH RATES, APPLIED IN THE CASE OF THE ASSESSEE FOR THE EARLIER YEARS. HE CONTENDED THAT THE AO AND LD CIT(A) HAS NOT ONLY IGNORED THE PROVISIONS OF SEC. 145(3)/144 OF THE ACT BUT ALSO NOT APPRECIATED THE RESULTS OF THE ASSESSEE DECLARED IN THE EARLIER YEARS AND HAS ESTIMATED T HE INCOME BY APPLYING THE NET PROFIT RATE OF 6% ON THE GROSS TOTAL RECEIPTS WHICH IS WITHOUT ANY BASIS AND IGNORING THE PAST RESULTS AS DISCLOSED BY THE ASSESSEE WHICH WERE BEFORE THE AUTHORITIES BELOW. THE ITAT, AGRA BENCH AGRA IN THE CASES OF OM CONSTRUCT ION CO. VS JCIT, RANGE - 1, ITA NO. 368/AGRA/2013 DATED 02/05/2014 ; AND THAT NARESH KATARE VS ACIT, CIRCLE - 3, ITA NO. 567/AGRA/2012 DATED 15/03/2013 APPLIED 4% AND 3% PROFIT RATE ON THE GROSS TOTAL RECEIPTS RE SPECTIVELY ON THE SIMILAR FACTS. 8 . FOLLOWING THEDECISION OF ITAT, AGRA, IN THE VARIOUS CASE CITED (SUPRA)AND THE HONBLE MADHYA PRADESH (JURISDICTIONAL HIGH COURT) , ON SIMILAR FACTS, IT IS JUST FAIR AND REASONABLE TO ESTIMATE INCOME OF THE ASSESSEE AT THE NET PROFIT RATE OF 4.0 % OF THE GROSS TOTAL RECEIPTS FOR THE YEAR UNDER APPEAL. WHILE ESTIMATING NET PROFIT AT4.0 % ON THE GROSS TOTAL RECEIPT; THE ASSESSEE SHALL NOT BE ELIGIBLE FOR DEDUCTION OF EXPENSES UNDER THE ITA NO. 279/AGRA/2014 ITA NO. 245 /AGRA/ 2014 9 HEAD DEPRECIATION, PAYMENT OF SALARY AND INTEREST ON CAPITAL TO TH E PARTNERS. THUS, THE ASSESSEE GETS RELIEF OF 2.0 %, IN ESTIMATION OF NET PROFIT RATE ON THE GROSS TOTAL RECEIPTS AS AGAINST THE 6% NET PROFIT RATE ESTIMATED BY THE LD. CIT (A). ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. 9 . IN THE NEXT TWO GROUNDS , DEPARTMENT CHALLENGED ORDER OF T HE CIT (A) REGARDING DELETION OF THE ADDITIONS OF RS. 56,65,796/ - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CREDITS UNDER SECTION 68 OF THE INCOME TAX ACT , 1961. 10 . THE LD . CIT (A) INTER ALIA OBSERVED THAT THE DEPOSITS MADE BY THE PARTNER S IN THEIR CURRENT ACCOUNT AS EXPLAINED AFTER TAKING INTO CONS IDERATION THE FACTS OF THE CASE THAT CONFIRMATORY LETTERS OF THE PARTNERS IN RESPECT OF CAPITAL, INTRODUCED BY THEM IN THE FIRM HAVE BEEN FILED; AND THEY ARE ASSESSED TO TAX AS EVIDENT FROM THE COPY OF INCOME TAX RETURN HAVE BEEN FILED ; AND BEING SATISFIED THAT THE SOURCE OF CREDIT INTRODUCED IN THE FORM OF CAPITAL FROM PARTNERS AND NO ADDITION U/S 68 CAN BE MADE IN THE CASE OF THE FIRM IN RESPECT OF SUCH CREDITS.ACCORDINGLY, HE HAS DELETED ENTIRE ADDITION RELYING ON THE DECISIONS OF HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF'CIT VS. ME TACH EM INDUSTRIE S, 245 ITR 160 AND DECISION AND HON'BLE ALLAHA BAD HIGH COURT IN THE CA SE OF 'C IT VS. JAISWAL MOTORS FINANCE, 141 ITR 706. 11 . THE LD. DR SUPPORTED THE ASSESSMENT ORDER AND SUBMITTED THAT THE SOURCE OF FUNDS IN CAPITAL A/C OF THE PARTNERS AND FUND S FLOW REMAINED UNEXPLAINED. HE HAS ALSO CONTENDED THAT THOUGH THE AMOUNT DEPOSITED IN THE CAPITAL A/C BUT WHAT IS THE SOURCE OF ITA NO. 279/AGRA/2014 ITA NO. 245 /AGRA/ 2014 10 SUCH FUND AND FOR THAT PURPOSE FUND FLOW NEED TO BE ESTABLISHED AND MUST BE PROVED BY THE ASSESSEE. SHE FURTHER CONTENDED THAT THE LD. CIT(A) ORDER IS NOT JUS TIFIED ON THE BASIC PREMISE OF SOURCE OF DEPOSITS AND FUND FLOW. THUS, THE GENUINENESS AND CREDITWORTHINESS REMAINED UNEXPLAINED. AND GENUINENESS OF TRANSACTIONS WRONGLY RELIED ON THE CASE OF CIT VS. METACHEM INDUSTRIES 245 ITR 160(MP), DESPITE THE FACTS A ND CIRCUMSTANCES OF THIS CASE ARE TOTALLY DIFFERENT FROM THAT OF THE PRESENT CASE AND THE RATIO OF THIS CASE DOES NOT APPLY TO THE CASE OF THE ASSESSEE. 12 . PER CONTRA, THE LD. AR SUBMITTED T HAT THE PROVISION OF SEC 68 OF INCOME TAX ACT, ARE NOT ATTRACTED IN ASSESSEES CASE, BECAUSE THE DEPOSITS ARE BEING MADE BY THE PARTNERS IN THEIR CURRENT ACCOUNT WITH THE FIRM AND THE PARTNERS HAVE MORE OPENING BALANCE THAN THAT OF CLOSING BALANCE . EV EN OTHERWISE,PARTNERS DEPOSITED SAID AMOUNT WITH THE FIRM, WHICH THEY HAVE WITHDRAWN AFTER SOME TIME FROM THE FIRM, IN THAT CASE ALSO THEGENUINEN ESS OF THE TRANSACTIONS IS FULLY PROVED AS THE PARTNERS ARE ASSESSED TO TAX AS EVIDENT FROM THE COPY OF INCOME TAX RETURNS FILED BEFORE THE AUTHORITIES BELOW ; AND THAT THEIR IDENTITY AND CREDIT WORTHINESS IS ALSO PROVED THEREOF. HE RELIED ON THE JUDGEMENT OF JU RI DICTIONAL MADHYA PRADESH HIGH COURT IN THE CASE OF'CIT VS. ME TACH EM INDUSTRIE S, 245 ITR 160 (MP) WHEREIN IT IS HELD THAT IF THE DEPOSITOR A PARTNER OR ANY OTHER INDIVIDUAL OWNS THE ENTRY THEN THE BURDEN OF THE ASSESSEE FIRM IS DISCHAR GED. I T IS IMMATERIAL WHETHER CREDIT S IN THE NAME OF PARTNERS ARE REFLECTED IN THE PARTNERS CAPITAL ACCOUNT OR CURRENT CAPITAL ACCOUNT. THE MADHYA PRADESH HIGH COURT IN THE CASE OF ITA NO. 279/AGRA/2014 ITA NO. 245 /AGRA/ 2014 11 ME TACH EM INDUSTR IE S IS FULLY APPLICABLE & RATHER BINDING THE AO . DISTINCTION MADE BY AO ABOUT CREDITS IN CAPITAL ACCOUNT & CURRENT ACCOUNT IS NOT MAINTAINABLE IN LAW & ON FACTS. 13 . WE FIND THAT THE ADDITION OF UNEXPLAINED CREDITS MADE BY THE AO UNDER SECTION 68, REPRESENTS THE CAPITAL INTRODUCED BY THE PARTNERS IN TO THE FIRM AND THEY HAVE ADMITTED IT TO BE THEIR OWN CAPITAL AND WAS DELETED BY THE LD. CIT (A). THUS, THE ISSUE IN QUESTION, BEFORE US, IS TO DECIDE THE GENUINENESS OF SOURCE OF SOURCE OF CREDITS (PART NERS CAPITAL) BEING TREATED UNEXPLAINED BY THE AO, IN THE HANDS OF THE PARTNERSHIP FIRM. IT IS CONTENDED BY THE LD. AR THAT ONCE THE BOOKS OF ACCOUNTS ARE REJECTED AND THE PROFIT OF THE FIRM IS DETERMINED BY THE WAY OF ESTIMATION OF PROFIT, THE BOOKS ARE TO BE REJECTED AS A WHOLE, THE METHOD OF PICK AND CHOOSE IS NOT TO BE APPLIED, FOR MAKING T HE ASSESSMENT .THE LD. AR FURTHER SUBMITTED THAT WHERE THE DEPOSITS ARE MADE BY THE PARTNERS IN THEIR CURRENT ACCOUNTS WITH THE FIRM, CAN NOT TO BE CONSIDERED IN THE CASE OF THE FIRM FOR THE PURPOSE OF S ECTION 68 OF THE ACT. I N THIS CONNECTION , ATTENTION OF THE BENCH IS ALSO INVITED TOWARDS THE LATEST DECISION OF HON'BLE TELANGANA AND ANDHRA PRADESH ( HIGH COURT ) 370 ITR 212 WHEREIN IT IS HELD THAT IF THERE IS A DEPOSI T IN THE PARTNERS' ACCOUNT WITH THE FIRM, SAME HAS TO BE CONSIDERED IN THE HANDS OF THE PARTNERS. THE JURIDICTIONAL MADHYA PRADESH HIGH COURT IN THE CASE OF'CIT VS. ME TACH EM INDUSTRIE S, 245 ITR 160(MP) HELD IF THE DEPOSITOR A PARTNER OR ANY OTHER INDIVIDUAL OWNS THE ENTRY THEN THE BURDEN OF THE ASSESSEE FIRM IS DISCHARGED. IT IS IMMATERIAL ITA NO. 279/AGRA/2014 ITA NO. 245 /AGRA/ 2014 12 WHETHER CREDITS IN THE NAME OF PARTNERS ARE REFLECTED IN THE PARTNERS CAPITAL ACCOUNT OR CURRENT CAPITAL ACCOUNT. 14 . IN VIEW OF THE FACTS AND CIRCUMSTANCES DISCUSSED AS ABOVE AND THAT THE VARIOUS JUDGMENTS RELIED UPON BY LD AR, PARTICULARLY JURISDICTIONAL HONBLE MADHYA PRADESH HIGH COURT, IN SUPPORT OF HIS ARGUMENT, WE ARE OF THE VIEW THAT SAME HAS TO BE CONSIDERED IN THE HANDS OF PARTNERS AND THEREFORE, WE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) ON THIS ISSUE AND THUS THE GROUND NO. 2 AND 3 OF DEPARTMENTAL APPEAL ARE ALSO DISMISSED. 15 . IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. 16 . ORDER PRONOUNCED IN THE OPEN COURT ON 29 /0 5 /2017. SD/ - SD/ - (A. D. JA IN) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 /0 5 /2017 V. K. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR