M/s. Sri Durga Wines V. Income Tax Officer

ITTA/174/2008

AI Insights

The case involves M/s. Sri Durga Wines, which appealed against the order confirming additions under Section 68 of the Income Tax Act, 1961, related to unexplained cash credits in the assessment year 1998-99. The primary legal question was whether the ITAT was correct in upholding these additions when the appellant argued that the investments were made by the partners and not the firm itself. The High Court referenced several precedents, including a recent decision in I.T.T.A.No.30 of 2023, which clarified that the partners themselves must explain the source of their investments, not the firm. The court noted that the Income Tax Department did not verify the partners' contributions independently, leading to the decision to allow the appeal and quash the additions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 752447 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 12-02-2025
• Assessment Year: misc
• Other Referred Cases: I.T.T.A.No.30 of 2023, CIT u. Anupam Udgoll [1983] 142 ITR 133 (Pat), Noragondas Kedornath u. CIT [1952] 22 ITR 18 (Bom), O1- Jaisuol Motor Finance [1983]141 ITR 7015(Arll), M.Venkateshutar Rao, M/s. Noua Medico.re vs The Income Tax Officer, Commissioner of Income Tax u. Louelg Exports (p) LTD
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: BOKARO SAPNA REDDY
• Assessee Lawyers: A V A SIVA KARTIKEYA
• Keywords: Assessment Year; Cash credit; Income Tax; Investment; Partners
• Section: 68; 2604

Judgement Text

"134471 IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY, THE TWELFIH DAY OF FEBRUARY TWO THOUSAND AND TWENry FIVE PRESENT THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA INCOME TAX TRIBUNAL APPEAL NO: 't74 OF 2008 lncome Tax Tribunal Appeal Under Section 2604 of the lncome Tax Act,196'l against the Order dated 14-09-2007 passed in ITA No. 257lHYDl02 for the Assessment Year 1998-99 on the file of the lncome Tax Appellate Tribunal, Hyderabad Bench 'B', Hyderabad preferred against the Order dated 18-02-2002 passed in Appeal No.609A//-3(5yClf(A)lVl20O1-02 on the file of the Commissioner of lncome Tax (Appeals)-lV, Hyderabad preferred against the Onder dated 30-03-2001 passed in P.A.N./G.l.R.No.S-447A/V-3(5) on the file of the lncome Tax Officer, Ward - 3 (5), Hyderabad. Between: M/s. Sri Durga Wines, 2211A, Kalyan Nagar Venture - lll, Borabanda Main Road, Hyderabad. ...APPellant AND lncome Tax Officer, Ward - 3 (5), Hyderabad. ...Respondent Counsel for the Appellant : Sri A V A Siva Kartikeya Counsel for the Respondent: Ms. Bokaro Sapna Reddy, Junior Standing counsel for lncome Tax The Court delivdred the following: Judgment l J _t THE HON'BLE SRT JUSTICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA INCOME 'I'A)( TRIBUNAL APPEAL No.174 of 2OO8 JUDGMENT: (pe. tlle ILn 'bLe Si Justice P. Sam Kosh!) The instant ap;real is one which has been fiIed aggrie'ved by the order dated 14.O9.'.1,OO7, in I.T.A.No.257 /Hyd/02, pass,:d by the Income Tax Appe)late Tribuna,l, Hyderabad Bench 'B', for the assessment year 19<)8-99 (for short, the ITAT'). 2. Heard Mr. A.',/.A. Siva Kartikeya, learned counsel 'for the appellant and Ms. llokaro Sapna Reddy, Iearned Jlrniol Standing Counsel for Income '[ax appearing on behalf of the respondent. 3. The appeed has been filed primarily on the following srubstantial question of law, viz.. \"a) Whether r.:r. the facts and circum.stances of the cose the Hon'ble 'Tnbun,tl is correct in confinning the additions mzde under Sectior. 68 on th-e ground lhe assessee has not discharge:d the onus regarding the credit tuorthittt:ss and genuineness it1' the cash credit tronsactions inuoluing th,.- 3 partners K. Lokshman Goud, Durgados Goud ond Ramachander \" 4. It is a case u,tLere the Assessing Officer as also the I'IAT found that the appellant herrein has not been able to show sufficierLt material to prove the investnrent made by the partners ancl therefore the Page 2 of 5 addition made under Section 68 of the Income Tax Act, 196 1, could not had been confrrmed unless there was an independent enquiry conducted in respect of the investment so made by the respective partners in the said firm. 5. The said question of law raised in the instant appeal came up for consideration before this Hon'ble High Court recently in I.T.T.A.No.30 of 2023, decided on 04.O9.2O23.In paragraph Nos. 12 to 16 of the said judgment, it has been held as under, viz., 72. Nout the onlg question that needs to be considered at this juacture, i.s th-at, in the euent of the appellant's partnership fnn di^sclosing that it tuas the partners uho had mntibuted in tl,Le capital tLrc source of income of the partners uas to be explained bg the partners tlLem-selues and not by the finn. In the case of M.Venkateshutar Rao, supra, the Diuision Bench of this Court tn paragraph No.7 h.eld as under: \"It i,s a matter of record that th-e respondent-firm comprises ten partners ond eoch of them made contibution s, be it in the fonn of cash or bank guarantees to be furnished to tLe Couentment, at the comrtencement of business. The returns submitted bg tle respondent-firm uere processed, and the facts and figures fumi.strcd bg it u.tere accepted. Houteuer, the motter uas reopened ot a later point of time. The AssessirLg Offtcer treoted the copital roised by the fln in the form of contributions made bg th.e partners as income- This conclusion was arriued at on the ground thtt source of income for tlrc partners u)os not explained. tebn4a counsel Page 3 of 5 lbr tht) oppellant placed reliance upon the ju(tqment of th( Patna High Court in CIT u. AnupamUdgoll [1tt83,t 142 ITR 133 (Pot). The Tribunal restczd it:; c'ortclt s:ions upon the judgment of ttLe Bombay Higlt Oourl t NoragondasKedornath u. CIT [1952] 22 ITll 18 (Bo,n) and tLnt of the Allahabad High Cottrt i.r. OI1- tt. Jaisuol Motor Finance [1983]141 ITI ?'O15(A.rll.\" 73. Re:centlq, again th,e Diui\"sion Bench of thLs Court in someu.iutt s,snilar case betueen M/s. Noua Med.ico.re uzrsus The Incorne l'ax Officer, decided on j5.O2.2O23, relging upon the decLsion of M.Venkateshu.tor Rao, supra, in parcLrtraph No. 15 hel,7 a.; under: \");oLlot,ting ond applying tLrc oforesoid. decisictn ol tLi.s C,nrt, Patna High Court in Anurog Rice Mills (su1';ra., held thnt in such circumstances the uizexpl t[ned cash credits Luould houe to be as.ses-sed at the lnnds of the partners of the firm ancl not the firm itself. Such omounts could not haue been b.e ated as income of the finn bg relging ttpon S<:ct'ior r5B of the Act.\" 74. The Hon'ble Supreme Court of India otso in the case of th_e Commis:;ic,ner of Income Tax u. Louelg Exports (p) LTD2 in a short 1uclgmertt at paragraph No.2 held as und.er: \"('ant th