ASST. COMMISSIONER OF INCOME, CIRCLE-9(1)., HYDERABAD. vs. RAJESH YADAV PASHAM., HYDERABAD.

Brief facts of the case are that the assessee, an individual, engaged in the business of trading in Tractors and its supplements in the name and style of M/s Laxmi Sai Tractors and Implements, filed his return of income for the A.Y 2011-12 on 10.10.2011 admitting the total income of Rs. 11,04,120/-. During the assessment proceedings u/s 143(3) of the IT Act, the A.O verified the books of account of the assessee and observed that during the relevant financial year the assessee has introduced a capital of Rs.

Aggrieved, the assessee preferred an appeal before the CIT(A) along with the necessary evidence explaining the sources for introduction of capital of Rs. 81,50,000/-. It was submitted that the assessee was a partner of a partnership firm M/s Laxmi Sai Tractors with PAN No. AABFL4840J which is assessed to tax before the ITO ward -15 Hyderabad, and that the amount has been transferred from the account of M/s Laxmi Sai Tractors to the assessee, who in-turn has transferred the same to M/s Laxmi Sai Tractors and Implements towards his capital contribution. Thus, he explained the sources of introduction for capital. The CIT(A) called for a remand report from the A.O on the evidence filed by the assessee. The A.O filed the remand report confirming that the assessee has received Rs. 81,50,000/- from M/s Laxmi Sai Tractors, which in-turn has been transferred by him to M/s Laxmi Sai Tractors and Implements. The assessee also filed his reply and after taking the same in to consideration, the CIT(A) at para 5.4 of his order has held as under:

Before us, the Ld. DR submitted that in the remand report, the A.O has clearly stated that it was not possible to verify the creditworthiness of M/s Laxmi Sai Tractors as said firm was not in existence as on the date of the remand report and hence could not be verified. Thus, according to her, the assessee has not discharged the onus of proving the creditworthiness of the creditor. In support of her contention that the onus is on the assessee to prove the creditworthiness of the creditor, the Ld. DR has placed reliance upon the judgment of the Hon’nle High Court of Culcutta in the case of CIT Vs Maithan International, reported in (2015) 56 Taxmann.com 283 (Kol).

The Ld. Counsel for the assessee, on the other hand, supported the order of the CIT(A) and submitted that the fact of the transfer of the funds from M/s Laxmi Sai Tractors to the assessee and from the assessee to M/s Laxmi Sai Tractors and Implements is not disputed by the A.O and he submitted that the assessee has given the PAN No of the said firm and also the details of the A.O with whom the said firm is assessed. It is submitted that the A.O could have verified from the assessment records of the said firm and the assessee is not expected to explain the source of source. Therefore, he prayed that the order of the CIT(A) be confirmed.

Having regard to the rival contentions and the material on record, we find that undisputedly the assessee was the partner of the M/s Laxmi Sai Tractors and has received a sum of Rs. 81,50,000/- from the said firm through banking channel and has transferred the same to M/s Laxmi Sai Tractors and Implements, also through bank transfer only. The assessee has also given the PAN No of the firm and therefore the existence of the firm and the genuineness of the transaction is not doubted by the A.O. The only question is about the creditworthiness of the said firm to advance a sum of Rs. 81,50,000/-. The A.O, in the remand report observed that the said firm is not in existence. But, in our opinion the assessment records would be very much available

In the result appeal filed by the Revenue is dismissed.