Punjab & Haryana High Court Judgments — 2000

The High Court held that the question referred to it was covered by its own previous decisions in the assessee's own case for earlier assessment years. The Court had previously allowed the claim for leave with wages, relying on the Supreme Court's decision in Bharat Earth Movers V. Commissioner of Income-tax, (2000) 245 ITR 428, and its own subsequent decision in Commissioner of Income-tax V. Oswal Woollen Mills Ltd., (2002) 254 ITR 666. Since the revenue's counsel could not present any contrary arguments or distinguish the present case from the earlier ones, the Court answered the question in favour of the assessee and against the revenue. The reference was disposed of accordingly.

The High Court held that the question of whether the explanation of the assessee regarding the nature and source of amounts credited in the books of account is satisfactory is a question of fact. The Court referred to its own recent orders in similar matters, citing cases like The Shiv Rice & General Mills, Jaitu Vs. Commissioner of Income Tax and M/S Masu Am Makhan Lal Vs. Commissioner of Income Tax, which held that findings on cash credits are findings of fact, giving rise to no substantial question of law for entertaining an appeal under Section 260A. The Court also agreed with the Tribunal's view that no addition could be made to the income of the firm even if the deposits made by partners were unexplained income of the partners. The Court relied on its earlier decision in Commissioner of Income-tax, Chandigarh -II Vs. M/S Metal & Metals of India, Mohali, which stated that if a partner admits making a deposit, even if the source of the gift claimed by the partner is rejected, the partner may be liable to tax, but the firm cannot be subjected to tax on that ground. The Court further cited the judgments relied upon by the Tribunal, including Commissioner of Income-Tax, Allahbad Vs.Jaiswal Motor Finance, Narayandas Kedar Nath Vs. Commissioner of Income-Tax, Central, Commissioner of Income-tax, Orissa Vs. Orrissa Corporation P.Ltd., Commission of Income Tax Vs. Ram Narain Goel, and Girdhari Lal Nannelal Vs. Sales Tax Commissioner, M.P., to support the principle that a firm cannot be assessed on cash credits from partners unless there is material to indicate they were profits of the firm, and the burden is not on the firm to prove the honest means of the partner or stranger. The question referred is answered against the Revenue and in favour of the assessee. The reference is disposed of.