The ACIT, Circle-3, Surat V. M/s. Megh Malhar Developers, Surat

ITA 4022/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6653 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 12-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: M J SHAH
• Keywords: Unexplained cash credit; Business income; Source of fund; Corroborative evidences; Onus to prove
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.4022/AHD/2008 (ASSESSMENT YEAR:-2005-06) ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-3,ROOM NO. 213,2 ND FLOOR,AAYKAR BHAVAN, MAJURA GATE, SURAT V/S M/S MEGH MALHAR DEVELOPERS, F.P.NO. 45, BLOCK NO. 139, T.P. NO. 44, JAHANGIRABAD, B/H SUBHASH GARDEN, PAL, SURAT PAN: AALFM 4983 H [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI S P TALATI, DR ASSESSEE BY:- SHRI M J SHAH, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 19- 09-2008 OF THE LD. CIT(APPEALS)-II, SURAT FOR THE ASSESSMENT YEAR 2005-06, RAISES THE FOLLOWING GROUNDS:- [1] ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A)-II, SURAT HAS ERRED IN HOLDING THAT THE ASSE SSEE HAD FURNISHED ALL THE DETAILS TO SUBSTANTIATE ITS CLAIM FOR INTRODUCTION OF CAPITAL IN ACCOUNTS OF THE PARTNERS WITHOUT APPRECI ATING THE FACT THAT THE ASSESSEE HAD ONLY FURNISHED COPY OF INCOME-TAX ACKNOWLEDGEMENT AND COPY OF CASH BOOK OF THE PARTNE RS BUT HAS NOT FURNISHED ANY EVIDENCES 'WHICH MAY EXPLAIN THE SOURCES OF CASH INTRODUCED BY THE PARTNERS' [2] ON THE FACT AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED IN HOLDING THAT THE A.O. WAS NOT COMPETENT TO EXAMINE THE CASH BOOK OF THE PARTNERS WITHOUT AP PRECIATING THE FACT THE ASSESSEE HAD CREDITED RS.7,15,000/- IN THE ACCOUNTS OF THE PARTNERS AND IN SUCH CIRCUMSTANCES, THE A.O. WAS FR EE TO MAKE INQUIRIES WITH REGARD TO THE SOURCES AND GENUINENES S OF SUCH CREDITS. [3] ON THE FACT AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED IN NOT APPRECIATING THE F ACTS THAT ALL THE FOUR PARTNERS WERE SALARIED PERSONS AND LOOKING TO THEIR SALARY PAYMENTS, IT WAS NOT POSSIBLE FOR THEM TO SAVE SUCH A HUGE AMOUNT AS CREDITED IN THE CAPITAL ACCOUNTS AND IF THEY HAD SUCH HUGE SAVINGS, THEY HAVE FAILED TO FURNISH ANY EVIDENCES WHICH MAY SUBSTANTIATE THE CLAIM OF THEIR SAVINGS. ITA N O.4022/AHD/2008 2 [4] ON THE FACT AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED IN DELETING THE ADDITIONS OF RS.7,15,000/- MADE BY THE A.O. ON THE ACCOUNT OF UNEXPLAINED CRED ITS INTRODUCED IN THE CAPITAL ACCOUNTS OF THE PARTNERS. [5] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. [6] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) BE SET ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER BE RESTORED . 2. ADVERTING TO GROUND NOS. 1 TO 4 IN THE APPEAL,F ACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING NIL I NCOME FILED ON 31.10.2005 BY THE ASSESSEE, A BUILDER AND DEVELOPE R, AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 [H EREINAFTER REFERRED TO AS THE ACT], WAS SELECTED FOR SCRUTIN Y WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 30-10-2006. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUSAL OF PARTNERS CAP ITAL ACCOUNT, THE ASSESSING OFFICER[AO IN SHORT]NOTICED THAT THE PARTNERS OF THE FIRM INTRODUCED FOLLOWING AMOUNT OF FRESH CAPITAL I N THEIR RESPECTIVE CAPITAL ACCOUNTS MAINTAINED WITH THE FIRM DURING TH E YEAR UNDER CONSIDERATION:- (I) SHRI ASHWIN C PATEL RS.2,00,000 (II) SHRI MAHENDRA C PATEL RS.4,00,000 (III) SHRI BHAGWATI B KALASI HUF RS. 40,000 (IV) SHRI VIRAL A PATEL RS. 75,000 2.1 TO A QUERY BY THE AO, THE ASSESSEE SUBMITTE D COPIES OF RETURNS OF INCOME AS ALSO NAMES AND ADDRESSES OF TH E PARTNERS. SINCE THE AFORESAID PARTNERS BROUGHT IN CAPITAL IN CASH AND SOURCE OF THE RESPECTIVE AMOUNTS WAS NOT FURNISHED, THE AO SHOWCAUSED THE ASSESSEE AS TO WHY THE CAPITAL INTRODUCED IN TH E PARTNERS ACCOUNT SHOULD NOT BE TREATED AS UNEXPLAINED CASH C REDIT. IN RESPONSE, THE ASSESSEE SUBMITTED AS UNDER:- '2. SHRI ASHVINBHAI CHANDUBHAI PATEL HAS BEEN WORKI NG WITH THE SURAT DIST. CO-OP. BANK FOR LAST MANY YEARS. HE HAS ALSO BEEN FILING HIS INCOME ITA N O.4022/AHD/2008 3 TAX RETURN FOR LAST SEVERAL YEARS. HIS GROSS SALARY IS RS.4,17,202/- FOR F Y. 2002-2003 (A.Y. 2003-2004), RS.4,55,639/- FOR F.Y. 2003-2004 (A.Y. 2004-2005) AND RS.4,59,013/- FOR F.Y. 2004 2005 (A. Y. 2005-06). THE SAID AMOUNT OF RS.2.00 LACS IS BROUGHT IN BY HI M AS A CAPITAL FROM SAVINGS MADE OUT OF HIM REGULAR INCOME AND PAST SAV INGS. 2,2 SHRI MAHENDRA PATEL HAS BEEN WORKING WITH DISTR ICT PANCHAYAT OFFICE, SURAT FOR LAST TWENTY YEARS. HE HAS ALSO BE EN FILING HIS INCOME TAX RETURN FOR LAST SEVERAL YEARS. HIS GROSS SALARY IS RS.92,734/- FOR F.Y. 2002 2003 (A.Y. 2003-2004), RS.1,05,546/-FOR F.Y, 2003-2 004 (A.Y. 2004- 2005) AND RS.1,09,392/ FOR F.Y. 2004-2005 (A.Y. 200 5-2006). WE ARE ENCLOSING HEREWITH THE CAPITAL ACCOUNT (ANNE XURE - 1) OF MAHENDRA C. PATEL FROM OUR HOOKS OF ACCOUNTS FOR YOUR READY REFERENCE. ON PERUSAL OF THIS, YOUR HONOUR WILL FIND THAT FRESH / NEW CAP ITAL OF ONLY RS.2,72,500/- IS INTRODUCED IN THE FIRM. AS YOUR HONOUR WILL NOTE TH AT RS.1,27,500/-, WHICH WAS WITHDRAWN ON 26.08.2004 AND 15.01.2005 WAS AGAI N REINTRODUCED ON 15.01.2005 AND 28.03.2005. THE SAID AMOUNT OF RS.2,72,500/- IS BROUGHT IN BY H IM AS A CAPITAL OUT OF PAST SAVINGS AND REGULAR INCOME. 2.3 SHRI VIRAL ASHVINBHAI PATEL IS AN ELECTRICAL EN GINEER, WORKING WITH TORRENT POWER LTD., SURAT FOR LAST FEW YEARS. HIS GROSS SALARY IS RS.61,658/- FOR F.Y. 2004 2005 (A.Y. 2005-206). THE SAID AMOUNT OF RS.75,000/ IS BROUGHT IN BY HIM AS A CAPITAL OUT OF PAST SAVINGS AND REGULAR INCOME. 2.4 BHAGWATI B. KHALASI HUF HAS BEEN DOING BUSINESS OF CONSTRUCTION FOR LAST SEVERAL YEARS. IT HAS ALSO BEEN FILING ITS INCOME LAX RETURN FOR LAST SEVERAL YEARS. HUF'S INCOME FROM BUSINESS OPERATION IS RS.1,05,200/- (FOR F.Y. 2002-2003 (A.Y. 2003-2004), RS.42,400/- FOR F. Y. 2003-2004 (A.Y. 2004-2005) AND RS,54,811/ FOR F.Y. 2004-2005 (A,Y. 2005-206). THE SAID AMOUNT OF RS.40,000/- IS BROUGHT IN BY HUF AS A CAPITAL OUT OF PAST SAVINGS AND REGULAR INCOME. WE HAVE ALREADY ENDOWED THE FINANCIAL STATEMENTS AN D ACKNOWLEDGMENT SLIP OF RETURN OF INCOME FILED BY ALL THE PARTNERS (PARA 3) OF EARLIER SUBMISSION DATED 18.09.2007 AND ALSO THE COPIES OF CASH BOOK AND BANK HOOK ALONG WITH BANK PASSBOOKS/ STATEMENTS VIDE OUR EARLIER SUBMISSION DATED 05.11.2007 (PARA-16), FOR JUSTIFICATION AND V ERIFICATION OF SOURCES OF CAPITAL INTRODUCED BY THE PARTNERS.' 2.2 AFTER CONSIDERING THE AFORESAID SUBMISSIONS OF THE ASSESSEE, THE AO CONCLUDED AS UNDER:- ITA N O.4022/AHD/2008 4 5.2 I HAVE CAREFULLY CONSIDERED THE REPLY OF THE A SSESSEE. HOWEVER, THE ASSESSEE HAS SUBMITTED ONLY COPY OF RETURN OF INCOM E OF THE PARTNERS AND THEIR CASH BOOK ONLY. HOWEVER, NO SOURCES OF CASH C REDITED IN RESPECTIVE CASH BOOK HAVE BEEN FURNISHED TILL DATE. THE ASSESS EE HAS STATED IN ALL FOUR CASES THAT THE CAPITAL WAS BROUGHT IN BY THE R ESPECTIVE PARTNERS FROM THEIR PAST SAVINGS. HOWEVER, THE ASSESSEE COULD NOT FURNISH ANY SUPPORTING EVIDENCE TO SUBSTANTIATE ITS CLAIM. IT I S ALSO NOTICED THAT ALL THE ABOVE MENTIONED PERSONS ARE SALARIED PERSON. LOOKIN G TO THE SALARY AMOUNT AND BUSINESS INCOME IN CASE OF SH BHAGWATI B KHALASI, IT IS NOT POSSIBLE THAT SUCH HUGE AMOUNT COULD BE INTRODUCED AS CAPITAL IN THE FIRM, ACCORDINGLY, CAPITAL INTRODUCED OF RS.7,15,000/- IS TREATED AS UNEXPLAINED CASH CREDIT U/S.68 OF THE IT ACT AND ADDED TO THE T OTAL INCOME OF THE ASSESSEE. 3. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDITI ON IN THE FOLLOWING TERMS:- 4. IN THE WRITTEN SUBMISSIONS, IT HAS BEEN CONTEND ED BY THE AR THAT ALL RELEVANT DOCUMENTS AS ALSO THE BOOKS OF ACCOUNT OF INDIVIDUAL PARTNERS, THEIR CASH BOOKS AND BANK PASS BOOKS HAD BEEN FURNI SHED. THE BALANCE- SHEET OF ALL THE PARTNERS FOR THE FINANCIAL YEAR 20 03-04, AND THE COMPUTATIONS OF INCOME HAD ALSO BEEN SUBMITTED, II IS THE CONTENTION OF THE AR THAT ALL THE PARTNERS HAD SUFFICIENT CASH BA LANCE IN THEIR RESPECTIVE CASH BOOKS FROM WHICH CAPITAL WAS INTRODUCED INTO T HE ASSESSEE FIRM. IN SUPPORT OF HIS CONTENTIONS, THE AR HAS PLACED RELIA NCE ON THE FOLLOWING CASE-LAWS. 1 CIT VS. JAISWAL MOTOR FINANCE - 37 CTR 217 (ALL.) 2 CIT VS. METACHEM INDUSTRIES - 161 CTR 444 (MP) 3 CIT VS. RAMESHWAR DASS SURESH PAL CHEEKA - 208 CT R 459 (P&H) 4 JALAN LIMBERS VS. CIT 117 CTR 649 (GAU.) 5 NARAYANDAS KEDARNATH VS. CIT- 22 ITR 18 (BOM.) 6 CIT VS. ORISSA CORPORATION I'. LTD - 52 CTR 138 7 CIT VS. TAJ BOREWELLS J9.I ITR 232 8 CIT VS. METAL & METALS OF INDIA - 208 CTR 457 (P& H) DECISION: 5. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. FROM THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER AS A LSO THE SUBMISSIONS OF THE AR, I FIND THAT MORE THAN SUFFICIENT EVIDENCE F IND BEEN FURNISHED TO EXPLAIN THE SOURCE OF THE FUNDS INTRODUCED BY THE F OUR PARTNERS INTO THE ASSESSEE FIRM DURING THE YEAR UNDER CONSIDERATION. COPIES OF THEIR CAPITAL ACCOUNTS, THEIR INDIVIDUAL CASH BOOKS, BANK PASS BO OKS/BANK STATEMENTS, THEIR BALANCE-SHEETS, COMPUTATION OF INCOME AND ACK NOWLEDGMENTS OF THE ITA N O.4022/AHD/2008 5 RETURNS OF INCOME FILED BY THEM FOR DIFFERENT ASSES SMENT YEARS, INCLUDING THE YEAR UNDER CONSIDERATION, HAD ALL BEEN FILED. T HEREFORE, THE AO WAS NOT JUSTIFIED IN SIMPLY DISMISSING SUCH EVIDENCE AND TR EATING THE FUNDS INTRODUCED BY THE PARTNERS AS UNEXPLAINED CASH CRED ITS IN THE HANDS OF THE ASSESSEE FIRM. 5.1 MOST IMPORTANTLY, EVEN THOUGH THIS GROUND HAS N OT BEEN STRONGLY ARGUED BY THE AR YET, IT HAS TO BE ACCEPTED AND UND ERSTOOD THAT NO ADDITION COULD BE MADE IN THE HANDS OF THE FIRM, OF THE SUMS INTRODUCED BY THE PARTNERS, AS UNEXPLAINED CASH CREDITS. IF AT AL L ANY ADDITION WAS TO BE MADE, IT COULD ONLY BE MADE IN THE HANDS OF THE IND IVIDUAL PARTNERS, WHERE THEY COULD BE CALLED UPON TO EXPLAIN THE SOURCE OF SUCH FUNDS, AND ACTION COULD BE TAKEN ACCORDINGLY, UNDER THE AD. IN THE CA SE OF THE ASSESSEE, THE AO OBSERVED THAT THE SOURCE OF THE DEPOSITS IN THE RESPECTIVE CASH BOOKS WAS NOT EXPLAINED THE AO WAS DEFINITELY NOT COMPETE NT TO EXAMINE SUCH DEPOSITS / CREDITS IN THEIR CASH BOOKS. IT HAS BEEN DETERMINED BY VARIOUS COURTS AND TRIBUNALS THAT WHEN CASH IS INTRODUCED I NTO A PARTNERSHIP FIRM, AND IF THE PARTNERS ARE UNABLE TO EXPLAIN THE SOURC E OF SUCH FUNDS IN ASSESSMENT PROCEEDINGS OF THE FIRM, NO ADDITION CAN BE MADE OF SUCH SUMS AS UNEXPLAINED CASH CREDITS UNDER THE PROVISIO NS OF SEC. 68 OF THE IT ACT IN THE HANDS OF THE FIRM. THE ADDITION OF THE S UM OF RS.7,15,000/- WILL THEREFORE, STAND DELETED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR RELI ED ON THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE ASSES SEE SUPPORTED THE FINDINGS OF THE LD. CIT(A) IN THE LIGHT OF DEC ISION DATED 06-07- 2005OF THE HONBLE GUJARAT HIGH COURT IN THE CASE O F CIT V PANKAJ DYESTUFF INDUSTRIES ININCOME-TAX REF. NO.241 OF 199 3 . 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE UNDISPUTED FACTS ON RECORD REVEAL THAT T HE AMOUNT OF RS.7,15,000/- TREATED AS UNEXPLAINED BY THE AO WAS AVAILABLE IN T HE CAPITAL ACCOUNT OF THE AFORESAID FOUR PARTNERS IN THE BOOKS OF ACCOUNT OF THE ASSESSEEE. WE FIND THAT THE LD. CIT(A) AFTER ANALYZING THE FACTS OF THE CA SE FOUND THAT IN THIS CASE COPIES OF CAPITAL ACCOUNTS OF THE PARTNERS, THEIR INDIVID UAL CASH BOOKS, BANK PASS BOOKS/BANK STATEMENTS, THEIR BALANCE-SHEETS, COMPUT ATION OF INCOME AND ACKNOWLEDGMENTS OF THE RETURNS OF INCOME FILED BY T HEM FOR DIFFERENT ASSESSMENT YEARS, INCLUDING THE YEAR UNDER CONSIDERATION, HAD ALL BEEN SUBMITTED AND THUS, ALL THE PARTNERS WERE FOUND TO BE ASSESSED TO INCO ME TAX. THE RELEVANT INCOME ITA N O.4022/AHD/2008 6 TAX PARTICULARS OF THESE PARTNERS HAVE BEEN DULY ID ENTIFIED BY THE ASSESSEE AND THE RESPECTIVE PARTNERS HAVE CONFIRMED THE INTRODUC TION OF FUNDS IN THE FIRM TO THE EXTENT INDICATED. ACCORDINGLY, THE LD. CIT(A) CONCL UDED THAT THERE WAS NO JUSTIFICATION TO INVOKE PROVISIONS OF SECTION 68 OF THE ACT. THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL CONTROVERTING THESE F INDINGS OF FACTS RECORDED BY THE LEARNED CIT(A). AS REGARDS ONUS IN RESPECT OF A MOUNTS FOUND CREDITED IN THE BOOKS OF THE FIRM, IN CIT V KISHORILAL SANTHOSHILAL 216 ITR 9(RAJ) ,IT WAS CATEGORICALLY HELD THAT THE BURDEN OF PROOF IN RESP ECT OF CASH CREDITS FOUND IN THE PARTNERS' ACCOUNTS IN THE BOOKS OF THE FIRM WAS ON THE FIRM ITSELF. REFERRING TO THE DECISIONS IN 34 ITR 807(SC) , 102 ITR 779(PAT) , 36 ITR 481(AP) AND 29 ITR 942(AP) , THE HONBLE HIGH COURT HELD THAT (A) THER E WAS NO DISTINCTION BETWEEN THE CASH CREDIT ENTRIES EXISTING IN THE BOOKS OF TH E FIRM WHETHER IT WAS OF A PARTNER OR OF A THIRD PARTY ; (B) THE BURDEN OF PROOF REGAR DING THE IDENTITY, CAPACITY AND GENUINENESS OF TRANSACTIONS WAS ON THE FIRM ; (C) I F THE CASH CREDITS WERE NOT SATISFACTORILY EXPLAINED, THE ASSESSING OFFICER WAS JUSTIFIED TO TREAT IT AS INCOME OF THE FIRM FROM UNDISCLOSED SOURCES ; (D) THE FIRM H AD TO ESTABLISH THAT THE AMOUNT WAS ACTUALLY GIVEN BY THE LENDER ; (E) THE GENUINEN ESS AND REGULARITY IN THE MAINTENANCE OF ACCOUNTS HAD TO BE TAKEN INTO CONSID ERATION BY THE ASSESSING OFFICER AND (F) IF THE EXPLANATION WAS NOT SUPPORTE D BY ANY DOCUMENTARY OR OTHER EVIDENCE, THEN THE DEEMING FICTION CREATED BY SECTI ON 68 OF THE ACT COULD BE INVOKED. IN THE CASE OF P. V. RAGHAVA REDDI V. CI T [1956] 29 ITR 942 , IT WAS OBSERVED BY THE HONBLE ANDHRA PRADESH HIGH COURT T HAT THE BURDEN OF PROOF IS NOT DEPENDENT UPON THE FACT OF A CREDIT ENTRY IN TH E NAME OF THE ASSESSEE OR IN THE NAME OF A THIRD PARTY. IN EITHER CASE, THE BURD EN LIES UPON THE ASSESSEE TO EXPLAIN THE CREDIT ENTRY, THOUGH THE ONUS MIGHT SHI FT TO THE INCOME-TAX OFFICER UNDER CERTAIN CIRCUMSTANCES. OTHERWISE A CLEVER ASS ESSEE CAN ALWAYS THROW THE BURDEN OF PROOF ON THE INCOME-TAX AUTHORITIES BY MA KING A CREDIT ENTRY IN THE NAME OF A THIRD PARTY EITHER REAL OR PSEUDONYMOUS. THE SAME HIGH COURT IN M. M. A. K. MOHINDEEN THAMBY AND CO. V. CIT [1959] 36 ITR 481 , RELYING ON THE AFORESAID DECISION CAME TO THE CONCLUSION THAT THER E IS NO DISTINCTION BETWEEN THE ENTRIES IN THE NAMES OF THE PARTNERS AND THOSE IN T HE NAMES OF THE THIRD PARTIES, AND THE NATURE OF THE ENTRY IS NOT DISTINGUISHABLE. IN THE ABSENCE OF A SATISFACTORY ITA N O.4022/AHD/2008 7 EXPLANATION, IT IS OPEN TO THE DEPARTMENT TO INFER THAT THESE MONIES ALSO BELONG TO THE ASSESSEE AND REPRESENT SUPPRESSED INCOME. 5.1 IN HARDWARMAL ONKARMAL V. CIT [1976] 102 ITR 779 , IT WAS OBSERVED BY THE HONBLE PATNA HIGH COURT THAT IF CASH CREDITS ARE F OUND IN THE ACCOUNT BOOKS OF A PARTNERSHIP FIRM IN THE NAMES OF THE PARTNERS, THE CREDITS ARE SURELY IN THE NAMES OF PERSONS WHO CONSTITUTE THE FIRM ITSELF. IN SUCH A CASE, THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THAT THE PARTNERS HAD ACTUALL Y DEPOSITED THE MONEY AND THAT THE ENTRIES WERE NOT FICTITIOUS. 5.2 IT IS CLEAR THAT UNTIL AND UNLESS THE PARTNE RS OF A FIRM ARE ABLE TO CATEGORICALLY ESTABLISH THE SOURCES OF THE CASH CRE DITS INTRODUCED IN THEIR NAMES IN THE BOOKS OF THE FIRM AND THE MANNER IN WH ICH SUCH CASH HAD BEEN EARNED BY THEM, THE QUESTION OF SHIFTING OF THE BUR DEN ON TO THE DEPARTMENT CANNOT ARISE . HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT VS. ROHINI BUILDERS,256 ITR 360(GUJ) HELD THAT THE UNSATISFACTORINESS OF THE EXPLANATION DOES NOT AUTOMATICALLY RESULTS IN DEEMING THE AMOUN T CREDITED IN THE BOOKS AS INCOME OF THE ASSESSEE. IN THE CASE UNDER CONSID ERATION, THE LD. CIT(A) FOUND THAT THE ASSESSEE HAS DISCHARGED THE INITIAL ONUS LAID DOWN UPON THE FIRM AND HAD FURNISHED AN EXPLANATION THAT THE AMOU NT WAS BROUGHT IN BY THE RESPECTIVE PARTNERS. THE IDENTITY OF THE PARTNERS A ND THE EVIDENCE REGARDING SOURCES OF INCOME HAS BEEN PLACED BEFORE THE LOWER AUTHORITIES. ALL THE FOUR PARTNERS ARE STATED TO BE ASSESSED TO TAX ON THEIR INDEPENDENT INCOME AND HAVE ADMITTED THE AMOUNT OF MONEY BROUGHT IN BY THE M IN CASH. THERE IS NOTHING TO SUGGEST THAT THE AFORESAID AMOUNTS BROUG HT IN BY THE PARTNERS WERE ACTUALLY THE INCOME OF THE FIRM . WHEN THE ASSESSEE HAS EXPLAINED THE AMOUNTS AS CAPITAL CONTRIBUTIONS BY THE PARTNERS, T HE AO IS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS NOT EXPLAINED THE SOU RCE. IN CASE THE ASSESSING OFFICER DOUBTED THE GENUINENESS OF THE SO URCE, HE SHOULD HAVE CONSIDERED THE SAME IN THE HANDS OF THE PARTNERS ON LY AND NOT IN THE CASE OF THE FIRM. THIS VIEW OF OURS IS SUPPORTED BY THE DEC ISIONS OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASES REPORTED IN CIT V . JAISWAL MOTOR FINANCE [1983] 141 ITR 706 AND SURENDRA MAHAN SETH V. CIT [1996] 221 ITR 239 . ITA N O.4022/AHD/2008 8 5.3 THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS PANKAJ DYESTUFF INDUSTRIES IN IT REFERENCE NO. 241 OF 1993 DATED 6- 7-2005 WHILE DECIDING A SIMILAR ISSUE CONCLUDED AS UNDER: 13. APPLYING THE AFORESAID PRINCIPLES TO THE FAC TS OF THE PRESENT CASE, IT IS APPARENT THAT THE ASSESSEE HAD FURNISHE D THE DETAILS WHICH WOULD DISCHARGE THE ONUS WHICH LAY ON THE ASSESSEE. IT IS NOT THE CASE OF THE REVENUE THAT THE PARTNERS OF THE ASSESSEE FIRM ARE FICTITIOUS. THE INCOME TAX OFFICER HAS NOT DISPUTED THAT THE CREDIT S IN THE ACCOUNTS OF THE PARTNERS WERE NOT DEPOSITED FROM THE PARTNERS. MORE OVER, IT IS AN ADMITTED POSITION THAT THIS WAS THE SECOND YEAR OF THE FIRM, AND THAT IT WAS RUNNING IN LOSS. IT IS TRUE THAT THE INCOME TAX OFFICER DID NO T ACCEPT THE EXPLANATION GIVEN ON BEHALF OF THE ASSESSEE IN RESPECT OF THE N EW DEPOSITS OR CASH CREDITS IN THE ACCOUNTS OF THE PARTNERS. THE MERE N ON-ACCEPTANCE OF THAT EXPLANATION DOES NOT, HOWEVER, PROVIDE MATERIAL FOR FINDING THAT THE SAID SUM REPRESENTED INCOME OF THE ASSESSEE FIRM. AS HEL D BY THE ALLAHABAD HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TA X, ALLAHABAD V. JAISWAL MOTOR FINANCE,141 ITR 706(ALL), IN THE ABSE NCE OF ANY MATERIAL TO INDICATE THAT THERE WERE PROFITS OF THE FIRM, THE A MOUNT CREDITED TO THE PARTNERS ACCOUNT COULD NOT BE ASSESSED IN THE HAND S OF THE FIRM. ONCE THE PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED IN TH EIR ACCOUNTS AS ARE THEIR OWN, THE INCOME TAX OFFICER IS ENTITLED TO AN D MAY PROCEED AGAINST THE PARTNERS AND ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATION IS NOT FOUND SATISFACTORY. 14. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, BOTH THE DEPUTY CIT(APPEALS) AND THE TRIBUNAL HAVE FOUND THA T THE ASSESSEE HAD DISCHARGED THE PRIMARY ONUS WHICH WAS ON IT BY OFFE RING EXPLANATION, WHICH HAS NOT BEEN FOUND TO BE INCORRECT OR FALSE IN ANY MANNER. THE INTEREST OF THE REVENUE IS ALSO SAFEGUARDED AS THE INCOME TAX O FFICER HAS BEEN GIVEN THE LIBERTY TO CONSIDER THE SAID CREDITS IN THE HAN DS OF THE PARTNERS IF HE IS NOT SATISFIED WITH THE SOURCES OF INVESTMENT OF CAS H CREDITS IN THE ACCOUNTS OF THE PARTNERS. 15. IN THESE CIRCUMSTANCES, IT IS NOT POSSIBLE TO F IND THAT THE ORDER OF THE TRIBUNAL SUFFERS FROM ANY INFIRMITY WHICH WOULD REQ UIRE INTERFERENCE AT THE HANDS OF THIS COURT. ACCORDINGLY, IT IS HELD THAT T HE TRIBUNAL WAS RIGHT IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.87,250/ - BEING DEPOSITS IN THE ACCOUNTS OF THE PARTNERS. THE QUESTION REFERRED TO THIS COURT IS, ACCORDINGLY, ANSWERED IN THE AFFIRMATIVE I. E. IN F AVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 5.4. IN THE LIGHT OF AFORESAID DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN PANKAJ DYESTUFF INDUSTRIES(SUPRA) AND UNDISPUTED FINDINGS OF THE LEARNED CIT(A), ESPECIALLY WHEN REVENUE HAVE NOT PLACED ANY MATERIAL BEFORE US, CONTROVERTING THE FINDINGS OF THE LD. CIT(A) AND AL L THE FOUR PARTNERS HAVE OWNED ITA N O.4022/AHD/2008 9 THE MONIES DEPOSITED IN THEIR ACCOUNTS AS THEIR OW N, WE HAVE NO HESITATION IN UPHOLDING HIS FINDINGS . ACCORDINGLY, GROUND NOS. 1 TO 4 RAISED IN THE APPEAL OF THE REVENUE ARE DISMISSED. WE MAY CLARIFY THAT THE AO I S FREE TO CONSIDER THE SAID CREDITS IN THE HANDS OF THE PARTNERS IF HE IS NOT S ATISFIED WITH THE SOURCES OF INVESTMENT OF CASH CREDITS IN THE ACCOUNTS OF THE P ARTNERS. 6. GROUND NOS. 5 & 6 BEING MERE PRAYER AND NO SEPARATE SUBMISSIONS HAVING BEEN MADE , THESE GROUNDS DO NO T REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED . 7. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 10-05-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 10 -05-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S MEGH MALHAT DEVELOPERS, F.P.NO. 45, BLOCK NO . 139, T.P. NO. 44, JAHANGIRABAD, B/H SUBHASH GARDEN, PAL, SURAT 2. THE ACIT, CIRCLE-3, SURAT 3. CIT CONCERNED 4. CIT(A)-II, SURAT 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD