IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER . ITA.No.2054 Ahd 2010 Asstt. Year: 2006-2007 M s.Dhara Fashion ITO, Ward-9(1) 1st Floor, 33, Patel Nagar Vs Surat. A.K. Road, Surat. PAN : AAEFD 8864 R (Appellant) (Respondent) Assessee by : Shri M.K. Pael Revenue by : Shri O.P. Meena, Sr.DR Date of Hearing : 21 07 2016 Date of Pronouncement: 23 09 2016 ORDER Assessee is in appeal against order of ld.CIT(A)-V, Surat dated 30.3.2010 passed for Astt.Year 2006-07. 2. Assessee has taken five grounds appeal, but its grievance revolved around two issues viz. (a) ld.CIT(A) has erred in confirming addition of Rs.3,18,954 - on account of unexplained cash credit found in books of assessee, and (b) ld.CIT(A) has erred in confirming addition of Rs.10,37,000 - which was on account of alleged unexplained contribution introduced by partners in their capital account. 3. Brief facts of case are that assessee is partnership firm. It has filed its return of income on 26.2.2007 showing total income at Rs.8,080 -. During scrutiny of accounts, it revealed to AO that assessee has received unsecured loans aggregating to Rs.3,18,954 - from eight persons. ITA No.2054 Ahd 2010 2 AO has confronted assessee as to why such loans should not be added as income of assessee. In response to query of AO, assessee has filed details which are tabulated in para 3-1 of assessment order. They read as under: No. Name of depositors Proof of Details of Size of Photo Identity agriculture Land land 1 Anandbhai Odhabhai Adroja Voting Card Matiraza 0-80-94 2. Gunvatbhai Ranchhodbhai Voting Card Matiraza 0-30-35 Gadasara 0-62-73 3. Mukeshbhai Ranchhodbhai Driving Matiraza 0-30-35 Godasara License of 0-62-73 L.M.V. 4. Ranchhodbhai Shyamjibhai Voting Card Matiraza 0-30-35 Godasara 0-62-73 5. Ukabhai Lakhabhai Borsania Ration Card Matiraza 3-65-23 6. Jagdishbhai Ukabhai Borsania Not given Not given 7. Kantibhai - Ranchhodbhai Not given Not given Gadasara 8. Vasrambhai Gordhanbhai Not given Not given Godasara 4. ld.AO was not satisfied with nature of evidence for discharging burden cast upon assessee by virtue of section 68 of Income Tax Act. Accordingly, he made addition. On appeal, assessee has filed certain additional evidence and ld.CIT(A) has called for remand report from AO. However, ld.CIT(A) was also not satisfied with nature of evidence produced by assessee for discharging onus put upon it by section 68 of Act. Accordingly, ld.CIT(A) has also confirmed addition. 4. Before me, ld.counsel for assessee has submitted that assessee has produced voter-card, driving licence and other details of ITA No.2054 Ahd 2010 3 creditors. Therefore, it has proved their identity. Similarly, assessee has produced details of agriculture land holding of creditors, and it has discharged its burden of proving credit-worthiness of creditors. On other hand, ld.DR relied upon orders of Revenue authorities. 5. I have duly considered rival contentions and gone through record. Section 68 of Income Tax Act contemplates that where any sum is found credited in books of assessee maintained for any previous year, and assessee offers no explanation about nature and source thereof, or explanation offered by assessee is not, in opinion of AO satisfactory, then sum so credited in accounts may be treated as income of assessee of that previous year. perusal of details submitted by assessee would indicate that four persons were said to be holding one common piece of land. ld.CIT(A) has recorded specific finding that this piece of land was cultivated by one Shri Ranchhodbhai Shyamjibhai Godasara. Others have no concern with this land holding. AO has conducted inquiry in remand proceedings. Therefore, cognizance of land holding, whose details have been given cannot be taken for purpose of establishing credit-worthiness of alleged creditors. Main thrust of AO that assessee failed to prove credit- worthiness of creditor. Similarly, with regard to persons mentioned at Sr.No.6 to 8, assessee failed to give any evidence, therefore, I am of view ld.CIT(A) has appreciated controversy in right perspective, and has rightly confirmed addition. This ground of appeal is therefore rejected. 6. As far other addition of Rs.10,37,000 - is concerned, two partners, viz. Shri Chandubahi M. Virapra and Dipakbhai Harjibhai Viramgama have introduced capital of Rs.4,43,000 - and Rs.5,94,000 - respectively in their ITA No.2054 Ahd 2010 4 capital account. AO has treated this capital contribution as unexplained credits and made addition. Appeal to ld.CIT(A) did not bring any relief to assessee. ld.counsel for assessee relied upon order of ITAT in case of DCIT Vs. G.K. Patel & Co., rendered in ITA No.2938 Ahd 2009, wherein Tribunal after putting relies upon decision of Hon ble jurisdictional High Court held that capital contribution made by partner ought not to be treated as unexplained cash credit. finding recorded by Tribunal in this case read as under: 17. third ground of Cross Objection relates to confirmation of addition of Rs.2,90,000 - made by AO on account of cash deposits by partners by invoking provisions of section 68 of Act. This action of AO was confirmed by ld. CIT(A). 18. At time of hearing ld. counsel for assessee placed reliance on decision of Hon ble Gujarat High Court in case of CIT vs. Pankaj Dyestuff Industries in Income-tax Reference No.241 of 1993 dated 06 07 2005 and submitted that issue is covered in favour of assessee by said decision. 19. On other hand, ld. DR relied on decision of Hon ble Rajasthan High Court in case of CIT vs. Kishorilal Santoshilal (1995) 216 ITR 9 (Raj) and submitted that issue be decided in accordance with this decision. 20. After hearing both parties and perusing material placed on record, we are of view that issue is directly covered in favour of assessee by decision of Hon ble Jurisdictional High Court in case of CIT vs. Pankaj Dyestuff Industries (supra) wherein it was observed as under:- 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 ITA No.2054 Ahd 2010 5 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 vs. 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. 15. In these circumstances, it is not possible to find that order of Tribunal suffers from any infirmity which would require interference at hands of this Court. Accordingly, it is held that Tribunal was right in law and on facts in deleting addition of Rs.87,250 - being deposits in accounts of partners. question referred to this Court is, accordingly, answered in affirmative i.e. in favour of assessee and against revenue. Therefore, respectfully following decision in case of CIT vs. Pankaj Dyestuff Industries (supra) we delete addition made by AO and confirmed by ld. CIT(A). This ground of assessee is allowed. ITA No.2054 Ahd 2010 6 7. In light of above, if I examine facts of present case, then, it would reveal that identity of partners is not in dispute. They are not fictitious partners. No other person has introduced fund in their name. If any inquiry was required to be made, then it could be made in hands of partners. ld.CIT(A) was not justified in confirming this addition. I allow this ground of appeal and delete addition. 8. In result, appeal of assessee is partly allowed. Order pronounced in Court on 23rd September, 2016 at Ahmedabad. Sd - (RAJPAL YADAV) JUDICIAL MEMBER Ahmedabad; Dated 23 09 2016 M/s. Dhara Fashion v. ITO, Ward-9(1) Surat