O/TAXAP/325/2002 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 325 of 2002 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to civil judge ? M/S.MAHARASHTRA PACKAGING.....Appellant(s) Versus INCOME TAX OFFICER....Opponent(s) Appearance: MR MANISH J SHAH FOR MR JP SHAH, ADVOCATE for Appellant(s) No. 1 MR SUDHIR M MEHTA, ADVOCATE for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and Page 1 of 5 Downloaded on : Wed Jul 22 15:33:25 IST 2020 O/TAXAP/325/2002 JUDGMENT HONOURABLE MR.JUSTICE K.J.THAKER Date : 17/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This Tax Appeal u/s.260A of Income tax Act, 1961 is filed against judgment and order passed by Income Tax Appellate Tribunal, Ahmedabad Bench in ITA No.561/AHD/2001 dated 17.04.2002 whereby, appeal filed by assessee was partly allowed. 2. Briefly stated, assessee firm is engaged in activity of manufacturing corrugated boxes. This appeal is against upholding of capital contribution of partner Khimjibhai Patel of assessee firm of Rs.1.70 Lacs and another partner Bhimjibhai Patel of Rs.2,01,000/ totalling Rs.3,71,000/ as unexplained cash credit in hands of assessee firm. During year under account, partner Bhimjibhai Patel and Khimjibhai Patel had introduced capital of Rs.2,01,000/ and Rs.1,70,000/ respectively in their capital account included in audit report. 3. return of income was filed on 31.10.1997 declaring total income of Rs.35,122/ . Assessment scrutiny was undertaken and it was allegedly found that assessee has not maintained day to day quantity tally of craft and other papers. A.O passed order of assessment u/s.143(3) on 31.03.2000. 4. Against order of A.O, appeal was preferred before Page 2 of 5 Downloaded on : Wed Jul 22 15:33:25 IST 2020 O/TAXAP/325/2002 JUDGMENT CIT(A). Vide order dated 03.01.2001, CIT(A) partly allowed appeal by directing A.O to restrict disallowance out of telephone expenses to extent of 50% of residential telephone expenses and make disallowance of Rs.10,000/ out of factory expenses and canteen expenses taken together. Being aggrieved by order of CIT(A), assessee preferred appeal before Appellate Tribunal. Vide judgment and order dated 17.04.2002, Appellate Tribunal partly allowed appeal. Being dissatisfied with same, assessee has filed present appeal. 5. While admitting appeal on 23.12.2002, following substantial question of law was formulated for our consideration; Whether, on facts and in circumstances of case, Tribunal was right in law in holding that capital contribution of Rs.3,71,000/ by two partners could have been added in hands of assessee firm under section 68 of Income tax Act, 1961? 6. We have heard learned counsel for both sides. It was submitted by learned Counsel Mr. MJ Shah appearing for assessee that issue involved in this appeal is concluded by decision of this Court rendered in Income Tax Reference No.241/1993 decided on 06.07.2005. He placed reliance upon observations made by Bench in Paras 13 & 14 of said decision, which is reproduced hereunder; Page 3 of 5 Downloaded on : Wed Jul 22 15:33:25 IST 2020 O/TAXAP/325/2002 JUDGMENT 13. Applying aforesaid principles to facts of present case, it is apparent that assessee had furnished details which would discharge onus which lay on assessee. It is not case of revenue that partners of assessee firm are fictitious. Income Tax Officer has not disputed that credits in accounts of partners were not deposits from partners. Moreover, it is admitted position that this was second year of firm, and that it was running in loss. It is true that Income Tax Officer did not accept explanation given on behalf of assessee in respect of new deposits or cash credits in accounts of partners. mere non acceptance of that explanation does not, however, provide material for finding that said sum represented income of assessee firm. As held by Allahabad High Court in case of Commissioner of Income Tax, Allahabad v. Jaiswal Motor Finance (supra), in absence of any material to indicate that there were profits of firm, amount credited to partners' accounts could not be assessed in hands of firm. Once partners have owned that monies deposited in their accounts are their own, Income Tax Officer is entitled to and may proceed against partners and assess same in their hands, if their explanation is not found satisfactory. 14. In facts and circumstances of present case, both Deputy CIT (Appeals) and Tribunal have found that assessee had discharged primary onus which was on it by offering explanation, which has not been found to be incorrect or false in any manner. interest of revenue is also safeguarded as Income Tax Officer has been given liberty to consider said credits in hands of partners if he is not satisfied with sources of investment of cash credits in accounts of partners. 7. Learned Standing Counsel Mr. Sudhir Mehta appearing for Revenue was not in position to dispute aforesaid proposition of law. Page 4 of 5 Downloaded on : Wed Jul 22 15:33:25 IST 2020 O/TAXAP/325/2002 JUDGMENT 8. In view of same, issue is answered in favour of assessee and against Revenue. Since we are concurring with view taken in aforesaid decision, no elaborate reasons are assigned. 9. Accordingly, appeal stands allowed. (K.S.JHAVERI, J.) (K.J.THAKER, J) Pravin/* Page 5 of 5 Downloaded on : Wed Jul 22 15:33:25 IST 2020 Maharashtra Packaging v. Income-tax Officer