CIT LUDHIANA vs. RAM PARKASH KAKKAR,LDH.

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ITR/35/1998HC Punjab & HaryanaPHHC01038006199822 November 2006Bench: MR. JUSTICE RAJESH BINDAL,MR. JUSTICE ADARSH KUMAR GOEL2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the ITAT was correct in its finding. The Tribunal had concluded that the partners had admitted the investment made. If this investment was disputed, the matter should have been investigated and assessed in the individual assessments of the partners, not in the hands of the firm. The Court relied on its own previous decision in CIT, Chandigarh-II v. M/s. Metal & Metals of India, Mohali, ITA No.370 of 2006, decided on 6.11.2006, which took a similar view. Therefore, the question of law was answered against the revenue and in favour of the assessee. The reference was disposed of accordingly.

What were the facts?

The Commissioner of Income Tax (Revenue) has filed an Income Tax Reference (ITR) No. 35 of 1998 before the High Court of Punjab and Haryana at Chandigarh. The reference arises from an order dated 23.12.1997 passed by the Income Tax Appellate Tribunal (ITAT), Amritsar Bench, in ITA No.622(ASR)/1991, concerning the assessment year 1989-90. The Assessing Officer had made an addition to the income of the assessee firm, M/s Bhagwati Rubber & Chemicals, Jalandhar, on account of an unexplained credit appearing in the capital accounts of its partners. The CIT(A) granted partial relief. The ITAT allowed the assessee's appeal, holding that the addition in the partners' capital accounts did not constitute a cash credit of the firm but rather an investment by the individual partners, to be assessed in their individual assessments.

What were the issues?

1. Whether, on the facts and circumstances of the case, the ITAT was right in law in holding that an addition made to the capital accounts of the partners does not constitute a cash credit of the firm, but rather an investment of the individual partner to be considered in their individual assessment? (Question of law) Assessee's Contentions: The assessee contended that the ITAT correctly held that additions to the partners' capital accounts represented individual investments and should be assessed in the hands of the partners, not the firm. The ITAT's finding was that the partners had admitted the investment, and any dispute regarding it should have been examined in their individual assessments. Revenue's Contentions: The revenue's contention is implicit in the reference of the question of law, challenging the ITAT's finding that the credits were not cash credits of the firm. The revenue likely argued that the unexplained credits in the firm's books, even if attributed to partners, should be treated as income of the firm unless properly explained and assessed in the hands of the partners.

Which sections of the Income-tax Act were involved?

None explicitly mentioned in the provided text, other than the general context of Income Tax Act proceedings.

AI-generated summary — verify with the full judgment below

ITR No.35 of 1998 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No.35 of 1998 Date of decision:22.11.2006 The Commissioner of Income Tax, Jalandhar

....Petitioner versus M/s Bhagwati Rubber & Chemicals, Jalandhar ....Respondent CORAM: HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present: Dr. N.L.Sharda, Advocate, for the petitioner. JUDGMENT: Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, ( for short, 'the Tribunal') arising out of its order dated 23.12.1997 in ITA No.622(ASR)/1991, for the assessment year 1989-90:-

“Whether, on the facts and circumstances of the case, the Ld. ITAT was right in law by giving finding that the addition in capital accounts of the partners does not constitute cash credit of the firm whereas the same will constitute the investment of the individual partner to be looked into the individual assessment?” The Assessing Officer made addition on account of unexplained credit appearing in the capital accounts of the partners of the assessee firm. The CIT(A) gave part relief out of the addition but the Tribunal allowed the appeal of the assessee and held that addition in capital accounts of the partners did not constitute cash credit of the firm and the same will constitute investment of the partners to be looked into in their individual assessments. We have perused the findings recorded. We are of the view that the finding recorded by the Tribunal

ITR No.35 of 1998 2 that the partners having admitted the investment made, if the same was disputed, matter had to be gone into in the individual assessments of the partners and not in the hands of the firm. The same view has been taken by this Court, inter-alia, in CIT, Chandigarh-II v. M/s. Metal & Metals of India, Mohali, ITA No.370 of 2006, decided on 6.11.2006. In view of the above, the question referred is answered against the revenue and in favour of the assessee. Reference is disposed of accordingly. (Adarsh Kumar Goel) Judge November 22, 2006 (Rajesh Bindal) 'gs' Judge

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