CIT JALANDHAR vs. M/S DOUBL;E AAY CASTING INDIA

Income Tax Appeal No.11 of 2000 -1-

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

I.T.A. No.11 of 2000. Decided on:-21.11.2013. The Commissioner of Income-Tax, Jalandhar.

………Appellant. Versus M/s Double Aay Castings (India) E-20, Indl. Area, Jalandhar.

………Respondent. CORAM: Hon’ble Mr. Justice Rajive Bhalla Hon’ble Mr. Justice Dr. Bharat Bhushan Parsoon. Present:- Mr. Vivek Sethi, Advocate for the appellant.

Ms. Supriya Garg, Advocate for the respondent.

***** Rajive Bhalla (J) Oral

The revenue is before us challenging order dated 26.8.1999 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as, the Tribunal) allowing an appeal filed by the assessee.

Counsel for the revenue submits that as the source of funds, invested by partners, in the assessee firm had not been disclosed, the Assessing Officer was justified in adding Rs.1,37,000/- to the income of the firm. It is further submitted that where partners invest any amount in a firm, it is for the firm to prove the source of their funds and, therefore, the Tribunal has committed an error by accepting the appeal filed by the Yag Dutt 2013.12.13 15:46 I attest to the accuracy and integrity of this document

Income Tax Appeal No.11 of 2000 -2- assessee, thereby giving rise to the following substantial question of law:

“Whether, on the facts and in the circumstances of the case, the Ld. ITAT was justified in law in partly allowing the appeal of the assessee whereby directing deletion of the addition of Rs.50,000/- made by the A.O. and confirmed by the Ld. CIT(A) on account of unexplained and ingenuine credits in the capital accounts of the partners namely Smt. Deepti Puri and Smt. Avinash Puri appearing in the books of account of the assessee in the asstt. year 1991-92, holding that no such addition was required to be made in the hands of the assessee?”

Counsel for the assessee, per contra, submits that as investment was made by partners, the firm has disclosed the source of its income. The revenue was required to call upon the partners to disclose the source of their funds. It is further submitted that the partners have already been assessed in relation to the disputed investments and the money invested has been added to their income as income from other sources. The Tribunal has not committed any error in accepting the appeal and deleting additions made by the Assessing Officer.

We have heard counsel for the parties, perused the impugned order and find no reason to hold that the question of law framed by the revenue arises for adjudication. If an entry in the account books of an assessee appears to be suspicious, the Assessing Officer may legitimately call upon the assessee to explain the entry. Where, however, the source of entry is disclosed, an Assessing Officer cannot call upon the assessee to disclose the source from which the person who deposited money with the Yag Dutt 2013.12.13 15:46 I attest to the accuracy and integrity of this document

Income Tax Appeal No.11 of 2000 -3- firm obtained funds. Admittedly, partners of the firm deposited certain amounts with the firm. The Assessing Officer recorded a finding that the assessee firm has not been able to disclose the source of funds in the hands of its partners and thereafter proceeded to add this amount to the income of the firm. The order so passed, in our considered opinion, was inherently flawed. An assessee can only disclose the source of entries in his account books and cannot be called upon to search for the source of money deposited or invested with him. The learned Tribunal has rightly set aside the order passed by the Assessing Officer. A relevant extract from the order passed by the Tribunal reads as follows:

“During the year under consideration Smt. Dipti Puri and Smt. Avinash Puri invested Rs.25,000/- each as partners of the firm. The A.O. observed in his order that the cash credits of the above partners are found to have been made after offering the same in their individual hands as income from other sources. The Ld. counsel of the appellant has pleaded that not only authorities below have erred in making addition on account of partners capital accounts in case of the firm but also they have ignored the fact that the partners have surrendered this amount for tax purpose in their individual assessments. This Bench has taken consistent view that unexplained investment of partners capital accounts has to be looked into in their individual cases and addition cannot be made as cash credit of the firm. As is clear from the records, partners have offered this for assessment in their individual cases. The addition made on this account is not sustained.” In view of what has been recorded by the Tribunal and the findings recorded Yag Dutt 2013.12.13 15:46 I attest to the accuracy and integrity of this document

Income Tax Appeal No.11 of 2000 -4- in preceding paragraphs, no question of law much less any substantial question of law arises for adjudication. The appeal is, consequently, dismissed.

(Rajive Bhalla) Judge

(Dr. Bharat Bhushan Parsoon) Judge November 21, 2013 ‘Yag Dutt’

Yag Dutt 2013.12.13 15:46 I attest to the accuracy and integrity of this document