CIT LUDHIANA vs. M/S GUPTA BRICKS SANDHUANA MOG

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ITR/76/1998HC Punjab & HaryanaPHHC01038058199831 October 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL2 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the question referred was primarily a finding of fact. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal were satisfied with the explanation furnished by the assessee regarding the cash credits in the partners' capital accounts. The learned counsel for the revenue could not point out any evidence or material on record that had not been considered by the authorities below, nor was it shown that the reasons given by the Tribunal were irrelevant or non-existent. Consequently, the finding could not be held to be perverse. The High Court answered the question of law against the revenue and in favour of the assessee. The reference was disposed of accordingly.

What were the facts?

The Income Tax Appellate Tribunal (ITAT) referred a question of law to the High Court of Punjab and Haryana concerning assessment year 1988-89. The case involved an addition of Rs. 37,500 made in the hands of M/s. Gupta Bricks Co. (the assessee firm) on account of unexplained cash credits in the capital accounts of its partners, Balbir Singh and Smt. Surinder Kaur. The Assessing Officer treated these as unexplained investments in the firm's hands. The Commissioner of Income Tax (Appeals) deleted the addition, accepting the assessee's explanation that Balbir Singh had raised a loan from Joginder Singh from agricultural income, and Smt. Surinder Kaur advanced the amount from her savings as a Staff Nurse. The ITAT upheld the CIT(A)'s order.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in upholding the order of the CIT(A) deleting the addition of Rs. 37,500/- made in the firm's hand on account of unexplained cash credits in the capital accounts of the partners, as appearing in the books of accounts maintained by the firm? (Question of law) Assessee's Contention: The judgment does not record specific arguments made by the assessee before the High Court. However, the ITAT's reasoning, upheld by the High Court, implies that if cash credits appear in the partners' capital accounts, any addition for unexplained amounts should be made in the hands of the partners, not the firm, especially when explanations were provided and accepted by the lower appellate authorities. Revenue's Contention: The revenue argued that the ITAT was not right in upholding the deletion of the addition. The revenue's counsel was unable to point out any evidence or material on record that was not considered by the authorities below, nor could they demonstrate that the Tribunal's reasons were irrelevant or non-existent.

Which sections of the Income-tax Act were involved?

None explicitly mentioned in the provided text, other than the implication of Section 68 regarding cash credits.

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

ITR No.76 of 1998 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No.76 of 1998 Date of decision:31.10.2006 Commissioner of Income tax, Ludhiana ....Petitioner versus M/s. Gupta Bricks Co.Sandhuana (Moga) ....Respondent CORAM: HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present: Mr. SK Garg Narwana, Advocate, for the Revenue.

JUDGMENT: Following question of law has been referred for the opinion of this Court by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for short, 'the Tribunal') arising out of its order dated 31.10.1997 in ITA No.434(ASR)/1991, for the assessment year 1988-89:- “Whether, on the facts and in the circumstances of the case, the ITAT was right in law in upholding the order of the CIT(A) deleting the addition of Rs.37,500/- made in firm's hand on account of unexplained cash credits in the capital accounts of the partners, as appearing in the books of accounts maintained by the firm?” During the assessment, cash credit entries in the names of partners Balbir Singh and Smt.Surinder Kaur were treated as unexplained investments in the hands of the firm. On appeal, the Commissioner of Income tax (Appeals) set aside the addition by holding that the assessee's explanation was that Balbir Singh had raised a loan from one Joginder Singh vide demand draft No.PWA-074981 dated 8.11.1986 which was advanced out of his agricultural income and Smt.Surinder Kaur was working as Staff nurse in Government TB Hospital, Solan and had advanced the amount out of her savings. The Tribunal upheld the said view. The ITR No.76 of 1998 2 Tribunal held that entries were appearing in the names of the partners and if no explanation was offered by the assessee, addition should have been made in the hands of the partners and not in the name of the firm.

We have heard learned counsel for the revenue. The finding recorded by the Tribunal is primarily a finding of fact. The CIT(A) as well as the Tribunal was satisfied with the explanation furnished by the assessee. Learned counsel for the revenue could not point out any evidence/material on record, which has not been considered by the authorities below. It has not been shown that the reasons given by the Tribunal are, in any manner, irrelevant or non-existent. The finding cannot be held to be perverse. The question referred is, thus, answered against the revenue and in favour of the assessee. Reference is disposed of accordingly. (Adarsh Kumar Goel) Judge October 31, 2006 (Rajesh Bindal) 'gs' Judge

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