M/S KARNI MAA INTERNATIONAL, JAIPUR V. THE ITO, WARD 6 (2), JAIPUR

ITA 527/JPR/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2027 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 29-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POONUM RAI DCIT DHK
• Keywords: Unexplained cash credit; Source of fund; Additional evidence; Question of law
• Section: 40A(3); 68; 69; 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH FOT; IKY JKO ] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 527/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 M/S KARNI MAA INTERNATIONAL 64, AYUWAN SINGH, NAGAR, MAHARANI, FARM, DURGAPURA, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD 6(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAHFK 6082 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONUM RAI (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22/12/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 08/03/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 27.04.2015 OF LD. CIT(A), JAIPUR FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS GROSSLY ERRED IN PASSING THE IMPUGNED ORDER U/S 144 OF THE INCOME TAX ACT, 1961 WITHOUT PROVIDING ADEQUATE OPP ORTUNITY TO THE ASSESSEE, HENCE THE ORDER SO PASSED DESERVES TO BE QUASHED. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS GROSSLY ERRED IN MAKING ADDITION OF RS. 45,724/- ON ACCOUNT OF ITA 527/JP/15_ M/S KARNI MAA INTERNATIONAL VS. ITO 2 DISALLOWANCE U/S 40A(3) WITHOUT CONSIDERING THE SUB MISSION MADE AND EVIDENCE ADDUCED DURING THE REMAND PROCEEDINGS, THUS ADDITION SO MADE DESERVES TO BE DELETED. 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 1,24,514/- MADE BY LD. AO ON ACCOUNT OF REMUNERATION TO PARTNERS WI THOUT CONSIDERING THE SUPPLEMENTARY DEED SUBMITTED AS ADD ITION EVIDENCE DURING THE PROCEEDINGS, THUS DISALLOWANCE SO UPHELD DESERVES TO BE DELETED. 4. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE CAPITAL ADDITION OF RS. 13,20,500/- MADE BY LD. AO ON ACCOUNT OF UNEXPLAINED INCOME WIT HOUT CONSIDERING THE SUBMISSION MADE AND EVIDENCE ADDUCE D, THUS ADDITION SO SUSTAINED DESERVES TO BE DELETED. 4.1 THAT THE LD. CIT(A) HAS FURTHER ERRED IN IGNORI NG THE FACT THAT VERIFICATION OF ALL THE PERSONS FROM WHOM LOAN WAS TAKEN FOR INTRODUCTION OF FRESH CAPITAL WAS SUBMITTED WHICH I TSELF EXPLAINS THE SOURCE OF INVESTMENT, THUS ADDITION SO SUSTAINED DE SERVES TO BE DELETED. 5. THAT THE APPELLANT CRAVES THE RIGHT TO ADD, DELE TE, AMEND OR ABANDON ANY OF THE GROUNDS OF THIS APPEAL EITHER BE FORE OR AT THE TIME OF HEARING OF APPEAL. 2. GROUND NO. 1, AT THE TIME HEARING, THE LEARNED C OUNSEL FOR THE ASSESSEE HAS STATED AT BAR THAT THE ASSESSEE DOES N OT PRESS GROUND NO. 1 AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE L D. DR HAS RAISED NO OBJECTION IF GROUND NO. 1 OF THE ASSESSEES APPEAL IS DISMISSED AS NOT PRESSED. ACCORDINGLY THE GROUND NO. 1 OF THE ASSESS EES APPEAL IS DISMISSED BEING NOT PRESSED. 3. GROUND NO. 2 IS REGARDING DISALLOWANCE MADE U/S 40A(3) OF THE ACT. THE ASSESSEE IS A PARTNERSHIP FIRM CREATED VIDE PA RTNERSHIP DEED DATED ITA 527/JP/15_ M/S KARNI MAA INTERNATIONAL VS. ITO 3 17.10.2005. THE ASSESSEE IS IN THE BUSINESS OF TRAD ING AND JOB WORK OF READYMADE GARMENTS AND THIS IS THE FIRST YEAR OF BU SINESS OF THE ASSESSEE. THE AO MADE DISALLOWANCE OF RS. 4,93,238/- BY APPLY ING THE NET PROFIT OF THE ASSESSEE OF THE EARLIER YEAR. ON APPEAL THE ASS ESSEE PRODUCED BOOKS OF ACCOUNTS AS WELL AS OTHER RELEVANT MATERIAL/DETA ILS BEFORE THE LD. CIT(A) AS ADDITIONAL EVIDENCE U/R 46A OF THE INCOME TAX R ULES. THE LD. CIT(A) FORWARDED THE ADDITIONAL EVIDENCE TO THE AO FOR VER IFICATION AND CALLED FOR A REMAND REPORT. THE AO IN THE REMAND REPORT AS POI NTED THAT TWO PAYMENTS OF RS. 24,094/- & 21,630/- HAVE BEEN MADE IN CASH, FOR PURCHASES IN VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. ACCORDINGLY, THE LD. CIT(A) HAS DIRECTED THE AO TO MADE AN ADDITION OF RS. 45,724/- U/S 40A(3) BY HOLDING THAT THE PAYMENTS MA DE BY THE ASSESSEE IN CASH TO M/S S.K. GRAFTS AND M/S VARDHAMAN CREATI ONS WERE IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. 4. BEFORE THE TRIBUNAL, LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE LD. CIT(A) HAS FAILED TO CONFRONT THIS ISSUE AND N O EXPLANATION WAS CALLED FROM THE ASSESSEE ON THIS ISSUE. THUS, LD. CIT(A) H AS MADE THE ADDITION WITHOUT PROVIDING AN OPPORTUNITY OF HEARING. NEVERT HELESS, HE HAS SUBMITTED THAT THE PAYMENTS WERE MADE UNDER EXIGENC Y AFTER THE NORMAL BANKING HOURS. FURTHER THE AFORESAID TWO PARTIES HA D DESIRED PAYMENT FROM ASSESSEE URGENTLY WITHOUT PROVIDING PROPER TIM E TO ASSESSEE TO MAKE ITA 527/JP/15_ M/S KARNI MAA INTERNATIONAL VS. ITO 4 PAYMENT THROUGH PROPER BANKING CHANNEL. THUS, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE PAYMENTS WERE MADE IN CASH DUE TO AFORESAID UNAVOIDABLE EXCEPTIONAL CIRCUMSTANCES AN D THEREFORE, THE PROVISIONS OF SECTION 40A(3) OF THE ACT ARE NOT AP PLICABLE IN THE CASE. HE HAS THUS SUBMITTED THAT THE CASE OF THE ASSESSEE FA LLS IN THE EXCEPTIONAL CIRCUMSTANCES PROVIDED UNDER RULE 6DD OF THE INCOME TAX RULE, 1962. 5. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT IT IS CLEAR A CASE OF VIOLATION OF THE PROVISIONS OF SECTION 40A(3) R.W.R 6DD OF THE INCOME TAX RULES. HE HAS RELIED UPON THE ORDER OF THE LD. CIT( A). 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE PAYMENT IN QUESTIONS WERE MADE FOR P URCHASES OF GARMENTS/MATERIAL AND THEREFORE, IT IS NOT A PAYMEN T IN URGENT OR COMPELLING CIRCUMSTANCES. THE DECISIONS FOR PURCHAS ES ARE MADE AFTER WELL THOUGHT OUT PROCESS AND THEREFORE, NOT IN AN URGENT SITUATION OF PAYMENT. FURTHER, IT IS NOT THE CASE OF THE ASSESSEE THAT TH E OTHER PARTIES ARE NOT HAVING THE BANK ACCOUNTS. THEREFORE, THE CASE OF TH E ASSESSEE DOES NOT FALL IN THE EXCEPTIONS PROVIDED UNDER RULE 6DD OF T HE INCOME TAX RULES. THE ORDER OF THE LD. CIT(A) QUA THIS ISSUE IS UPHEL D. 7. GROUND NO. 3 DISALLOWANCE OF INTEREST AND REMUNE RATION TO PARTNERS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE FI RM PAID RS. 60,853/- TO THE PARTNERS AS REMUNERATION AND ALSO PAID INTER EST OF RS. 63,660/-. THE ITA 527/JP/15_ M/S KARNI MAA INTERNATIONAL VS. ITO 5 AO MADE DISALLOWANCE OF BOTH THE AMOUNTS TOTALING A MOUNTING TO RS. 1,24,514/- BY HOLDING THAT THESE PAYMENTS COULD NOT BE VERIFIED FOR WANT OF PARTNERSHIP DEED. THE ASSESSEE PRODUCE THE PARTN ERSHIP DEED DATED 17.10.2005 AS WELL AS THE COPY OF SUPPLEMENTARY PAR TNERSHIP DEED DATED 02.01.2006 BEFORE THE LD. CIT(A) IN SUPPORT OF THE CLAIM OF PAYMENT OF REMUNERATION AND INTEREST TO THE PARTNERS. SINCE, T HESE PARTNERSHIP DEEDS WERE SUBMITTED AS ADDITIONAL EVIDENCE U/R 46A ACCOR DINGLY THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. AFTER CONS IDERING THE REMAND REPORT THE LD. CIT(A) HAS NOTED THAT THERE IS NO PR OVISIONS OF PAYMENT OF REMUNERATION IN THE ORIGINAL PARTNERSHIP DEED DATED 17.10.2005 AND FURTHER THE SUPPLEMENTARY DEED DATED 02.01.2006 CAN NOT BE VERIFIED FROM INDEPENDENT SOURCE THEREFORE, HE HAS CONFIRMED THE DISALLOWANCE OF REMUNERATION PAID TO THE PARTNERS. AS REGARDS PAYME NT OF INTEREST THE LD. CIT(A) HAS OBSERVED THAT THE ENTIRE INTEREST IS NOT ALLOWABLE BUT RESTRICTED ONLY WHICH IS RELATABLE TO CAPITAL OF RS. 1,47,000/ - BECAUSE THE BALANCE CAPITAL WAS NOT ACCEPTED AND ADDITION WAS MADE IN T HE HAND OF THE PARTNERSHIP FIRM THEREFORE, THE CLAIM OF INTEREST W AS RESTRICTED BY THE LD. CIT(A). 8. BEFORE US, LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE AO DISALLOWANED REMUNERATION TO THE PARTNER FOR WANT O F PARTNERSHIP DEED WHICH WAS SUBMITTED AS ADDITIONAL EVIDENCE ALONG WI TH SUPPLEMENTARY ITA 527/JP/15_ M/S KARNI MAA INTERNATIONAL VS. ITO 6 PARTNERSHIP DEED DATED 02.01.2006. HE HAS REFERRED TO THE SUPPLEMENTARY PARTNERSHIP DEED DATED 02.01.2006 AND SUBMITTED THA T VIDE CLAUSE 3 THEREOF, THE REMUNERATION PAYABLE TO THE PARTNERS I S FIXED IN TERMS OF THE PROVISIONS CONTAINED THEREIN. THUS, LD. AR HAS SUBM ITTED THAT ONCE THE ASSESSEE HAS PRODUCED THE SUPPLEMENTARY PARTNERSHIP DEED WHICH CONTAINS THE PROVISIONS FOR PAYMENT OF REMUNERATION TO THE PARTNERS THEN THE DISALLOWANCE MADE BY THE AUTHORITIES BELOW IS N OT JUSTIFIED. 9. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE OR DER OF THE LD. CIT(A) AND SUBMITTED THAT THE GENUINENESS OF THE SU PPLEMENTARY PARTNERSHIP DEED COULD NOT BE VERIFIED FROM INDEPEN DENT SOURCE AND THEREFORE, IT IS AN AFTERTHOUGHT DEED PREPARED BY T HE ASSESSEE WHICH WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER. 10. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE PR ODUCED THE PARTNERSHIP DEED AS WELL AS SUPPLEMENTARY PARTNERSHIP DEED BEFO RE THE LD. CIT(A). AS REGARDS THE PAYMENT OF REMUNERATION TO THE PARTNERS IT IS A DECISION TO BE TAKEN BY THE PARTNERS OF THE PARTNERSHIP FIRM BY MA KING A PROVISION IN THE PARTNERSHIP DEED. ONCE, THE PARTNERS HAVE TAKEN A D ECISION TO MAKE THE PROVISIONS IN THE PARTNERSHIP DEED FOR PAYMENT OF R EMUNERATION TO THE PARTNERS THEN THE TAXING AUTHORITY CANNOT QUESTION SUCH PROVISIONS IN THE PARTNERSHIP DEED. ACCORDINGLY, THE PARTNERSHIP FIRM IS GOVERNED AND BOUND ITA 527/JP/15_ M/S KARNI MAA INTERNATIONAL VS. ITO 7 BY THE TERMS AND CONDITIONS OF THE PARTNERSHIP DEED AND THEREFORE, THE ASSESSEE HAS RIGHTLY PAID THE SALARY TO THE PARTNER S IN TERMS OF THE SUPPLEMENTARY PARTNERSHIP DEED WHICH IS ALLOWABLE D EDUCTION. EVEN OTHERWISE IN CASE OF PARTNERSHIP FIRM THE INCOME HA S TO BE EITHER TAXED IN THE HAND OF THE FIRM OR IN THE HAND OF THE PARTNERS TO THE EXTENT OF SALARY OR INTEREST PAID TO THE PARTNERS. IF THE PARTNERS H AVE DECIDED TO INCLUDE THE INCOME IN THEIR PERSONAL HAND ON ACCOUNT OF INT EREST AND SALARY AND THE SAID PAYMENT IS IN ACCORDANCE WITH TERMS OF THE PARTNERSHIP DEED THEN THE DISALLOWANCE IS NOT JUSTIFIED. AS REGARDS THE D ISALLOWANCE OF INTEREST THE LD. CIT(A) HAS RESTRICTED THE INTEREST CLAIM ON LY TO THE EXTENT OF THE CAPITAL INTRODUCED BY THE PARTNERS WHICH WAS ACCEPT ED THEREFORE, THE ISSUE IS DEPENDENT ON THE OUTCOME OF THE ADDITION MADE BY THE AO/LD. CIT(A) U/S 68 ON ACCOUNT OF CAPITAL CONTRIBUTION BY THE PA RTNERS. 11. GROUND NOS. 4 AND 4.1 ARE REGARDING ADDITION U/ S 68 ON ACCOUNT OF CAPITAL CONTRIBUTION OF THE PARTNERS. DURING THE AS SESSMENT PROCEEDING THE AO QUESTIONED THE SOURCE OF CAPITAL CONTRIBUTION TO TAL AMOUNTING TO RS. 14,67,500/-. SINCE, THE ASSESSEE COULD NOT SUBMIT ITS EXPLANATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS THEREFORE, THE AO TREATED THIS ENTIRE AMOUNT AS ASSESSEES UNEXPLAINED INCOME AND MADE AD DITION ACCORDINGLY. ON APPEAL, BEFORE THE LD. CIT(A) THE ASSESSEE PRODU CE COMPLETE DETAILS ALONG WITH THE RELEVANT EVIDENCES IN SUPPORT OF THE SOURCE OF MONEY IN THE ITA 527/JP/15_ M/S KARNI MAA INTERNATIONAL VS. ITO 8 HANDS OF THE PARTNERS. THE ASSESSEE EXPLAINED THAT THE CAPITAL OF RS. 6,93,500/- WAS CONTRIBUTED BY PARTNER SHRI JAIRAJ S INGH OUT OF HIS PAST SAVINGS AND OWN FUNDS AS WELL AS UNSECURED LOAN TAK EN FROM RELATIVES. THE BALANCE AMOUNT OF RS.7,74,000/-WAS CONTRIBUTED BY T HE PARTNER SHRI JAIRAJ SINGH. THE LD. CIT(A) ACCEPTED ONLY AN AMOUNT OF RS . 1,47,000/- AS GENUINE ON THE GROUND THAT ONLY 7 PERSONS WERE HOLD ING PAN FROM WHOM THE PARTNERS CLAIMED TO HAVE TAKEN LOAN. ACCORDINGL Y THE REMAINING AMOUNT OF RS. 13,20,500/- WAS SUSTAINED BY THE LD. CIT(A). 12. BEFORE THE TRIBUNAL, LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THIS IS THE FIRST YEAR OF BUSINESS OF THE ASSESSEE FIRM AND THEREFORE, THE SOURCE OF CAPITAL CANNOT BE HELD AS UNEXPLAINED IN THE HAN DS OF ASSESSEE FIRM. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS PRODUCE D AMPLE EVIDENCES TO SUPPORT THE SOURCE OF FUNDS IN THE HAND OF THE PART NERS WHO HAVE CONTRIBUTED TO THE CAPITAL OF THE PARTNERSHIP FIRM. WHEN THE PARTNERS HAVE INTRODUCED THE AMOUNT AS THEIR CAPITAL CONTRIBUTION THEN THE SAID AMOUNT CANNOT BE HELD AS UNEXPLAINED CASH CREDIT IN THE HA ND OF PARTNERSHIP FIRM. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE FOLLOWING DECISIONS:- CIT VS. KEWAL KRISHAN & PARTNERS 18DTR 121. CIT VS. PANDIAN DISTRIBUTORS 259ITR 428. INDIA RICE MILLS V. CIT 218 ITR 508,511. CIT VS. ELECTRO POLYCHEM LTD. 294ITR 661. ITA 527/JP/15_ M/S KARNI MAA INTERNATIONAL VS. ITO 9 ABHUDAYA PHARMACEUTICALS V. CIT 32 TAXMANN.COM 68. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE IS N OT OBLIGED TO ESTABLISH THE SOURCE OF COURSE IN AS MUCH AS THIS IS THE FIR ST YEAR OF OPERATION OF ASSESSEES BUSINESS. EVEN OTHERWISE THE ASSESSEE HA S SATISFACTORILY EXPLAINED THE AVAILABILITY OF FUNDS IN THE HANDS OF THE PARTNERS ACCORDINGLY, HE HAS PLEADED THAT THE ADDITION SUSTAINED BY THE L D. CIT(A) BE DELETED. 13. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT TH E ASSESSEE HAS NOT PRODUCED ANYTHING BEFORE THE AO AND ONLY BEFORE THE LD. CIT(A) THE ASSESSEE CLAIMED THAT THE PARTNERS ARE HAVING THE S OURCE OF CAPITAL CONTRIBUTION THOUGH IT WAS CLAIMED THAT THE PARTNER S HAVE TAKEN LOANS FROM NUMBERS OF PERSONS WHO WERE NOT EVEN HAVING THE PAN OR ASSESSED TO INCOME. HE HAS RELIED UPON THE ORDER OF THE LD. CIT (A). 14. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE FI RM WAS CREATED VIDE PARTNERSHIP DEED DATED 17.10.2005 AND THEREFORE, TH IS IS FIRST YEAR OF THE BUSINESS OF THE ASSESSEES FIRM. EVEN ONLY FOR LESS THAN 6 MONTHS PERIOD THE ASSESSEE HAS CARRIED OUT THE BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, CAPITAL CONTRIBUTION MA DE BY THE PARTNERS PRIOR TO THE COMMENCEMENT OF THE BUSINESS CANNOT BE TREA TED AS THE INCOME OF THE ASSESSEE PARTNERSHIP FIRM. THE HONBLE JURISDIC TION HIGH COURT IN CASE ITA 527/JP/15_ M/S KARNI MAA INTERNATIONAL VS. ITO 10 OF CIT VS. KEWAL KRISHAN & PARTNERS (SUPRA) WHILE D EALING WITH AN IDENTICAL ISSUE HAS HELD IN PARA 7 AND 8 AS UNDER:- 7. IT IS NOT IN DISPUTE THAT THE MEMBERS OF THE AO P S/SHRI ALI MOHD. DEPOSITED RS. 5,00,000/-, AMARNATH DEPOSITED RS. 3, 00,000/- AND KEWAL KRISHAN DEPOSITED RS. 50,000/- AS CAPITAL CON TRIBUTION ON THE FIRST DAY OF COMMENCEMENT OF THE BUSINESS BY THE FI RM I.E. 01.04.1989. ALL THE PARTNERS HAVE CONFIRMED THAT TH EY HAD INTRODUCED THOSE AMOUNT AS THEIR CAPITAL CONTRIBUTI ON. OBVIOUSLY, IT WAS FOR THE PARTNERS TO EXPLAIN THE SOURCE OF THE D EPOSITS AND IF THEY FAILED TO DISCHARGED THE ONUS THEN, SUCH DEPOSITS C OULD BE ADDED IN THE HANDS OF THE PARTNERS ONLY AND NOT IN THE HANDS OF THE ASSESSEE FIRM. IN ANY CASE, SUCH CAPITAL CONTRIBUTIONS ENTER ED INTO THE BOOKS OF THE ACCOUNTS OF THE ASSESSEE FIRM PRIOR TO THE C OMMENCEMENT OF THE BUSINESS CANNOT BE TREATED TO BE THE INCOME OF THE ASSESSEE FIRM. IN CONSIDERED OPINION OF THIS COURT, SUCH UNE XPLAINED CREDITS MAY BE ADDED TO THE INCOME OF THE PARTNERS CONCERNE D IN TERMS OF SECTION 69 AND NOT U/S 68 OF THE ACT OF 1961. 8. FOR THE AFOREMENTIONED REASONS, IN OUR VIEW, NO SUBSTANTIAL QUESTION OF LAW ARISES OUT OF THE ORDER IMPUGNED PA SSED BY THE LEARNED ITAT FOR CONSIDERATION OF THIS COURT. A SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE MADRAS HIGH COURT IN CASE OF CIT PANDIAN DISTRIBUTORS (SUPRA) AS WELL AS THE HON BLE ALLAHABAND HIGH COURT IN CASE OF INDIA RICE MILLS VS. CIT (SUPRA). THEREFORE IN VIEW OF A SERIES OF DECISION ON THIS POINT THAT THE CAPITAL I NTRODUCED/ CONTRIBUTED BY THE PARTNERS BEFORE THE COMMENCEMENT OF THE BUSINES S OF THE PARTNERSHIP FIRM CANNOT BE TREATED AS INCOME OF THE PARTNERSHIP FIRM. THE AO WAS FREE TO EXAMINE THE ADDITION OF THE SAID AMOUNT IN THE H AND OF THE PARTNERS ITA 527/JP/15_ M/S KARNI MAA INTERNATIONAL VS. ITO 11 INSTEAD OF ADDING THE SAME IN THE HAND OF THE ASSES SEE FIRM. FOLLOWING THE DECISIONS AS RELIED UPON BY THE ASSESSEE CITED (SUPRA) THE ADDITION MADE ON ACCOUNT OF CAPITAL CONTRIBUTION BY THE PART NERS IS DELETED. 15. FURTHER, THE DISALLOWANCE MADE BY THE LD. CIT(A ) ON ACCOUNT OF PAYMENT OF INTEREST TO THE PARTNERS IS ALSO ALLOWED BEING CONSEQUENTIAL TO THE ISSUE OF CONTRIBUTION OF CAPITAL BY THE PARTNER S. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/03/2018. SD/- FOT; IKY JKO (VIJAY PAL RAO) U;KF;D LNL; @ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 08/03/2018 *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S KARNI MAA INTERNATIONAL , JAIPUR . 2. IZR;FKH @ THE RESPONDENT- THE ITO, WARD 6(2), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 527/JP/15) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRA