Reserved AFR In Chamber Case : INCOME TAX APPEAL No. 17 of 2007 Appellant : M/s Kesharwani Sheetalaya Sahsaon Allahabad Respondent : Commissioner of Income Tax Allahabad Counsel for Appellant : R.R. Agarwal (Senior Advocate) assisted by Umesh Chandra Kesarwani Counsel for Respondent : Manu Ghildyal Hon'ble Biswanath Somadder,J. Hon'ble Dr. Yogendra Kumar Srivastava,J. (Per : Dr. Yogendra Kumar Srivastava,J.) 1. present appeal has been filed under Section 260 of Income Tax Act, 1961 (in short 'the Act') against order of Income Tax Appellate Tribunal, Allahabad Bench, Allahabad (for short 'the I.T.A.T.') dated 30.10.2006, for assessment year 1999 2000, whereby Tribunal partly allowed appeal filed by Revenue. 2. instant appeal was admitted on questions of law, as mentioned in memo of appeal, which are as follows: (i) Whether, on facts and in circumstances of case, Tribunal was legally justified in upholding order of assessing officer of making addition U/s 68 of Income Tax Act at Rs.4,00,000/ in hand of firm? (ii) Whether, on facts and in circumstances of case, Tribunal was correct in holding that assessee was not able to prove source of income of partners who have made deposit with firm in their capital account therefore addition u/s 68 is justified? 3. records of case before us indicate that assessee has described itself as partnership firm having sixteen partners engaged in business of cold storage. For assessment year 1999 2000, assessee filed return 2 I NCOME T AX PPEAL No.17 of 2007 of income on 01.11.1999 declaring income of Rs.36,92,056/ . case was selected for scrutiny and notices under Section 143(2)/142(1) of Act were issued. assessment was thereafter made under Section 143(3) and in terms of order dated 26.03.2002 Assessing Officer noted following credits in names of partners: Sr. Name Amount/ Nature Evidence No. Date 1 Vishwanat 50,000/ Agricultural Photo copy Prasad 01 03 99 Income of hand Kesharwani record (HUF) 2 Bhairo Nath 50,000/ do do (HUF) 01 03 99 3 Prabhu Nath 50,000/ do do (HUF) 01 03 99 4 Raj Kumar 50,000/ do do 01 03 99 5 Subhash 50,000/ do do Chandra 01 03 99 6 Satish 50,000/ do do Chandra 01 03 99 7 Harish 50,000/ do do Chandra 01 03 99 Kesharwani 4. Assessing Officer held credits as unproved and made addition of Rs.4,00,000/ under Section 68 of Act relying upon decision of this Court in Commissioner of Income Tax, Lucknow v Kapur Borthers1, which was case where assessee had entered deposits in books of firm in names of partners and upon explanations for deposits being rejected same were treated as income of 1 [1979] 118 ITR 741 (All) 3 I NCOME T AX PPEAL No.17 of 2007 firm and not of individual partners. 5. appeal was filed by assessee against aforesaid order dated 26.03.2002 before Commissioner of Income Tax (Appeals), Allahabad, which was partly allowed and addition made by Assessing Officer under Section 68 of Act with regard to cash credits in names of partners in their capital accounts was deleted. 6. deletion of cash credits was made on ground that partners had shown agricultural income in their returns. It was taken note of that partners were identifiable and separately assessed to tax and firm had explained source of investment as agricultural income of partners, therefore, if at all additions were to be made, then same had to be made in hands of partners and not in hands of firm. 7. Aggrieved against aforesaid order, Revenue filed appeal before Income Tax Appellate Tribunal, Allahabad being I.T.A. No.344/(Alld) of 2004 to which assessee filed cross objections, being C.O. No.16(Alld) of 2006. I.T.A.T. by order impugned dated 30.10.2006 partly allowed appeal filed by Revenue and dismissed cross objections filed by assessee. Tribunal held that credits in names of partners as agricultural income were not proved within meaning of Section 68 and therefore order of Assessing Officer treating same to be as firm's deemed income, was restored and order passed by I.T.A.T., in that regard, was set aside. 4 I NCOME T AX PPEAL No.17 of 2007 8. We have heard counsel for parties and perused records. 9. principal ground sought to be canvassed by appellant assessee is that partners having shown agricultural income in their personal returns of previous years, which had been accepted by Revenue as such without any addition, and out of said agricultural income partners having made deposits with firm in their capital accounts, appellant assessee had satisfied conditions provided under Section 68 of Act with regard to identity and capacity of depositors as well as genuineness of transactions. It is submitted that only point which was required to be considered on question of making addition under Section 68 of Act in hands of firm was nature and source of transaction and appellant assessee was not required to prove source of source. 10. It has been further contended that genuineness of transactions having been proved and firm having duly explained deposit, impugned order passed by Tribunal was not justifiable, and deserves to be set aside. 11. Per contra, learned counsel appearing for Revenue has supported order passed by Tribunal by submitting that credits having been found in hands of firm onus was on firm to prove creditworthiness of partners as well as genuineness of transaction and no evidence having been given with regard to agricultural operations of partners, 5 I NCOME T AX PPEAL No.17 of 2007 transactions in books of firm were rightly held to be not genuine and proved within meaning of Section 68 and there was no infirmity in order passed by Tribunal restoring order of Assessing Officer and setting aside order passed by C.I.T.(A). Reliance has been placed upon decision in case of Kapur Brothers (supra) to contend that cash credits which are unexplained are to be added in hands of firm. 12. In order to answer questions of law upon which present appeal has been admitted it would be necessary to advert to provisions contained under Section 68 of Act. For ease of reference, Section 68 of Act, as it stood prior to Finance Act, 2012, is being extracted below: 68. Cash credits 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 him is not, in opinion of Assessing Officer, satisfactory, sum so credited may be charged to income tax as income of Assessee of that previous year. 13. As per Section 68, where any sum is found credited in books of assessee maintained for any previous year, and assessee offers no explanation about nature and source of same or explanation offered by assessee is not satisfactory, in opinion of Assessing Officer, sum so credited may be charged to income tax as income of assessee of that previous year. 14. conditions for applicability of Section 68 would therefore be as follows (i) existence of books of accounts made by 6 I NCOME T AX PPEAL No.17 of 2007 assessee itself; (ii) credit entry in books of account; and (iii) absence of satisfactory explanation by assessee about nature and source of amount credited. 15. requirement under Section is that assessee is to submit explanation about nature and source of sum which has been credited. explanation furnished by assessee is to be satisfactory and creditworthiness or financial strength of creditor is to be proved by showing that it had sufficient balance in its accounts to explain source and credits in books of accounts of assessee. assessee would be required to explain source of credit in books of accounts but not source of source i.e. source of creditor. It is seen that although requirement under Section 68 is that Assessing Officer must be satisfied that explanation offered by assessee is genuine, but it is also provided that in absence of satisfactory explanation, unexplained cash credit may be charged to income tax therefore, unsatisfactoriness of explanation would not automatically result in deeming amount credited in books as income of assessee. 16. similar view was taken in case of Deputy Commissioner of Income Tax v Rohini Builders2, wherein referring to judgment of Supreme Court in case of Commissioner of Income Tax v Smt. P.K. Noorjahan3, 2 [2002] 256 ITR 360 (Guj) 3 [1999] 237 ITR 570 (SC) 7 I NCOME T AX PPEAL No.17 of 2007 rendered in context of Section 69 of Act, it was held as follows: phraseology of section 68 is clear. Legislature has laid down that in absence of satisfactory explanation, unexplained cash credit may be charged to income tax as income of assessee of that previous year. In this case legislative mandate is not in terms of words shall be charged to income tax as income of assessee of that previous year . Supreme Court while interpreting similar phraseology used in section 69 has held that in creating legal fiction phraseology employs word "may" and not "shall". Thus unsatisfactoriness of explanation does not and need not automatically result in deeming amount credited in books as income of assessee as held by Supreme Court in case of CIT v. Smt. P.K. Noorjahan [1999] 237 ITR 570. 17. question of addition under Section 68 in case of capital introduced by partners was considered in Commissioner of Income Tax v Taj Borewells4, and taking note of fact that Section 68 is charging section and also deeming provision it was held that once firm had offered explanation and established that capital was contributed by partners, same could not be assessable in hands of firm. relevant observations made in judgment are as follows: 7. Section 68 is charging section and it is also deeming provision. Unless following circumstances exist, Revenue cannot rely on section 68 of Act. (a) Credit in books of assessee maintained for year. (b) assessee offers no explanation or if assessee offers explanation Assessing Officer is of opinion that same is not satisfactory, sum so credited is chargeable to tax as income from other sources . x x x x x 13. ...Once firm had offered explanation and 4 [2007] 291 ITR 232 (Mad) 8 I NCOME T AX PPEAL No.17 of 2007 established that capital was contributed by partners, same could not be assessable in hands of firm. Unless there are contradictions and inconsistencies in statement of partners, credit cannot be treated as unexplained and cannot be added under section 68 of Act in hands of assessee firm... 18. issue relating to addition under Section 68 also came up in Commissioner of Income Tax v Pragati Co operative Bank Limited5, and taking note of language of Section 68 it was held that word may indicates that intention of legislature is to confer discretion on Assessing Officer in matter of treating source of investment or credit which had not been satisfactorily explained as income of assessee, but it is not obligatory to treat such source as income in every case where explanation offered was found to be not satisfactory. It was held thus: 14. Section 68 of Act requires that there has to be credit in books maintained by assessee; such credit has to be of sum during previous year; and assessee offers no explanation about nature and source of such credit; or explanation offered by assessee is not, in opinion of assessing authority, satisfactory, then sum so credited may be charged to tax as income of assessee of that previous year. apex court in case of CIT v. Smt. P.K. Noorjahan [1999] 237 ITR 570 has laid down that word may indicated intention of Legislature that discretion was conferred on Assessing Officer in matter of treating source of investment/credit which had not been satisfactorily explained as income of assessee, but it was not obligatory to treat such source as income in every case where explanation offered was found to be not satisfactory. 19. nature and scope of Section 68 of Act fell for consideration before Supreme Court in Commissioner 5 [2005] 278 ITR 170 (Guj) 9 I NCOME T AX PPEAL No.17 of 2007 of Income Tax v P. Mohanakala6, and it was held as follows: 16. question is what is true nature and scope of section 68 of Act? When and in what circumstances section 68 of Act come into play? bare reading of section 68 suggests that there has to be credit of amounts in books maintained by assessees; such credit has to be of sum during previous year; and assessees offer no explanation about nature and source of such credit found in books; or explanation offered by assessees in opinion of Assessing Officer is not satisfactory, it is only then sum so credited may be charged to income tax as income of assessees of that previous year. expression "the assessees offer no explanation" means where assessees offer no proper, reasonable and acceptable explanation as regards sums found credited in books maintained by assessees. It is true opinion of Assessing Officer for not accepting explanation offered by assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. opinion of Assessing Officer is required to be formed objectively with reference to material available on record. Application of mind is sine qua non for forming opinion. 20. aforementioned principle of law has been reiterated and followed in recent judgment in Principal Commissioner of Income Tax (Central) I v NRA Iron and Steel Private Limited7. 21. judgment in case of Kapur Brothers, which forms basis of order passed by Assessing Officer and also that of Tribunal, and upon which strong reliance has been placed by Revenue, was case where entries had been made in books of account of assessee firm about three weeks prior to end of accounting period and different explanations furnished 6 [2007] 291 ITR 278 (SC) 7 [2019] 412 ITR 161 (SC) 10 I NCOME T AX PPEAL No.17 of 2007 by assessee at different stages of proceedings were disbelieved for reason that assesee had failed to establish that partners had actually deposited money and that entries were not fictitious, and it was in view of said facts that court proceeded to answer question referred to it by holding that cash credit entries standing in names of partners in account books of firm could validly be treated as income of firm from undisclosed sources. operative portion of judgment in case of Kapur Brothers is being extracted below: In that case, entries were alleged to have been made week before end of accounting period. In present case, entries were made about three weeks prior to end of accounting period. Identical amounts were entered as deposited in name of each partner. Different explanations were given by assessee at different stages of proceedings. They were disbelieved. In this view of matter, Tribunal was not justified in treating amount as income of individual partner in view of finding that assessee had failed to establish that partners have actually deposited money and that entries were not fictitious. Accordingly, we answer question referred to us by holding that cash credit entries standing in names of partners in account books of firm could validly be treated as income of firm from undisclosed sources. As no one appeared on behalf of assessee, there will be no order as to costs. 22. question as to whether in case where there are cash credit entries in books of assessee firm in which accounts of individual partners exist and it is found as fact that cash was received by firm from its partners then in absence of any material to indicate that there were profits of firm, sum so credited could be assessed in hands of firm was considered in decision in 11 I NCOME T AX PPEAL No.17 of 2007 Commissioner of Income Tax, Allahabad v Jaiswal Motor Finance8, and it was stated thus: ...It appears to be well settled that if there are cash credit entries in books of firm in which accounts of individual partners exist and it is found as fact that cash was received by firm from its partners then in absence of any material to indicate that they were profits of firm, could not be assessed in hands of firm. We are, therefore, of opinion that Tribunal did not commit any error of law and rightly held that deposits shown in its accounts were satisfactorily explained. 23. questions with regard to burden of proof in respect of addition under Section 68 came up for consideration in India Rice Mills v Commissioner of Income Tax9, and it was held that where capital contributions are made by partners prior to commencement of business by assessee firm, it is for partners to explain source of such capital contribution and if they failed to discharge such onus then such capital contributions, although entered in books of accounts of assessee firm, cannot be regarded as income of assessee firm but same were to be added in hands of partners. Distinguishing judgment in case of Kapur Brothers, it was held as follows: Reliance on Kapur Brothers' case [1979] 118 ITR 741 (All) is misplaced, inasmuch as in that case deposits were entered in books of firm when it was already carrying on its business. firm was called upon to explain source of deposits. explanation of firm was that deposits represented sale proceeds of certain assets belonging to partners. When no evidence was adduced to substantiate that explanation, assessing authority added amount as income of partnership firm. These facts are materially different from fact of Infant case. Most striking feature of case on hand is that all deposits came to be made during 8 [1983] 141 ITR 706 (All) 9 [1996] 218 ITR 508 (All) 12 I NCOME T AX PPEAL No.17 of 2007 accounting year in books of he assessee firm before it started its business. Therefore, onus was on partners to explain source in case on hand and if they failed, amount could have been added in their hands only and not in hands of assessee firm. 24. question as to whether in case where there was credit in capital account of partners in books of firm, addition thereof could be made in hands of firm or same had to be considered in hands of partners, came up in reference under Section 256(1) of Act in Commissioner of Income Tax v Metachem Industries10, and it was held that according to Section 68 burden was on assessee to satisfactorily explain credit entry in books of account of previous year and in case where satisfactory explanation had been given by establishing that amount had been invested by particular person, be he partner or any individual then burden of assessee firm is discharged and credit entry could not be treated to be income of firm for purposes of income tax. relevant observations made in judgment are as follows: ...Section 68 of Act of 1961 says 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 him is not, in opinion of Income tax Officer, satisfactory, sum so credited may be charged to income tax as income of assessee of that previous year. Therefore, according to section 68, first burden is on assessee to satisfactorily explain credit entry in books of account of previous year. If explanation given by assessee is satisfactory, then that entry will not be charged with income of previous year of assessee. In case explanation offered by assessee is not satisfactory or source offered by assessee firm is not satisfactory, then in that 10 [2000] 245 ITR 160 (MP) 13 I NCOME T AX PPEAL No.17 of 2007 case, amount should be taken to be income of assessee. In present case, Assessing Officer did not feel satisfied with explanation given by assessee and accordingly assessed all three credit entries to account of assessee as income. ...Once it is established that amount has been invested by particular person, be he partner or individual, then responsibility of assessee firm is over. assessee firm cannot ask that person who makes investment whether money invested is properly taxed or not. assessee is only to explain that this investment has been made by particular individual and it is responsibility of that individual to account for investment made by him. If that person owns that entry, then burden of assessee firm is discharged. It is open to Assessing Officer to undertake further investigation with regard to that individual who has deposited this amount. So far as responsibility of assessee is concerned, it is satisfactorily discharged. Whether that person is income tax payer or not or from where he has brought this money is not responsibility of firm. moment firm gives satisfactory explanation and produces person who has deposited amount, then burden of firm is discharged and in that case that credit entry cannot be treated to be income of firm for purposes of income tax. It is open to Assessing Officer to take appropriate action under section 69 of Act, against person who has not been able to explain investment... 25. similar question was considered in Commissioner of Income Tax v Burma Electro Corporation11 wherein deletion of addition made by Tribunal, on ground that though there was no evidence on record to show availability of funds with partners at time of investment with assessee firm concerned partners having admitted to have made those investments and there being no material to indicate that those investments were profits of assessee firm, sum so credited could not be assessed as income of firm in terms of Section 68 but 11 [2001] 252 ITR 344 (P&H) 14 I NCOME T AX PPEAL No.17 of 2007 could be assessed in hands of individual partners, was upheld. 26. We may also refer to decision in case of Abhyudaya Pharmaceuticals v Commissioner of Income Tax12, wherein earlier decision in case of Jaiswal Motor Finance was followed on point that if there are cash credit entries in books of assessee firm in which accounts of individual partner exists, and it is found as fact that cash was received by firm from its partners then in absence of any material to indicate that same were profits of firm, it could not be assessed in hands of firm. judgment in case of Kapur Brothers was also considered and distinguished on facts. relevant observations made in judgment are as follows: 13. So far as second limb of argument that at whose hands addition should be made is concerned, it is apt to have look to section 68 of Income tax Act. Heading of said section is Cash Credits and it reads 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 him is not, in opinion of Assessing Officer, satisfactory, sum so credited may be charged to income tax as income of assessee of that previous year. 14. It may be noted that section 68 of Income tax Act, 1961 is new provision in sense that there was no such provision under old Act, i.e., Indian Income tax Act, 1922. Even then underlying principle of section 68 was given judicial recognition by courts. In other words, principle has been developed on basis of judicial decisions which has been given statutory recognition by section 68. 15. CIT v. Jaiswal Motor Finance [1983] 141 ITR 706 (All) is Division Bench authority of this court wherein it has been laid down that if there are cash credit entries in 12 [2013] 350 ITR 358 (All) 15 I NCOME T AX PPEAL No.17 of 2007 books of assessee firm in which accounts of individual partner exists, and it is found as fact that cash was received by firm from its partners then in absence of any material to indicate that they were profits of firm, it could not be assessed in hands of firm. learned counsel for appellant submits that aforesaid decision applies with full force to facts of case on hand. Noticeably, this was also case where it was first year of assessment of firm. observations made therein if read in context of facts of present case, submission of appellant's counsel is well founded. relevant extract is reproduced below (page 707): "It appears to be well settled that if there are cash credit entries in books of firm in which accounts of individual partners exist and, it is found as fact that cash was received by firm from its partners then in absence of any material to indicate that they were profits of firm, it could not be assessed in hands of firm. We are, therefore, of opinion that Tribunal did not commit any error of law and rightly held that deposits shown in its accounts were satisfactorily explained." 16. At this stage, learned standing counsel for Department places reliance upon another Division Bench decision of this Court in case of Kapur Brothers [1979] 118 ITR 741 (All). It is apt to examine facts of case of Kapur Brothers (supra). Assessing Officer found deposit of certain amount while making assessment of M/s. Kapoor Brothers. amount was deposited in name of its partners. deposits were entered as on October 20, 1966. accounting period for assessment year 1967 68 ended on November 11, 1968. explanation offered by assessee was not found satisfactory. In this factual background, it was noticed that entries were made about three weeks prior to end of accounting period. In this factual background High Court held that cash credit entries standing in name of partners in account books of Firm would validly be treated as income of Firm from undisclosed source. 17. On first flash, it appears that ratio of aforesaid decisions given in case of Kapur Brothers [1979] 118 ITR 741 (All) and Jaiswal Motor Finance [1983] 141 ITR 706 (All) is conflicting, but on meaningful reading thereof, would show that they were rendered in different factual matrix. ratio laid down in 16 I NCOME T AX PPEAL No.17 of 2007 case of Kapur Brothers [1979] 118 ITR 741 (All) will be applicable in case where partner brings capital amount at formation of firm itself, before commencement of business by firm. It would not be applicable in case where deposit is reflected in account books of firm during currency of business of firm. underlying idea in case of Kapur Brothers [1979] 118 ITR 741 (All) is that when assessee firm has no business, it cannot possibly have any income. Therefore, in such case question of presumption of income of assessee firm would not arise generally. But it is not appropriate when assessee firm is earning income from its business and in that situation assessee firm has to explain cash credit standing in its account. If above line of distinction is kept in mind, we find that both decisions are standing on different factual background. 18. It is interesting to note that aforesaid two decisions one given in case of Jaiswal Motor Finance [1983] 141 ITR 706 (All) and another in case of Kapur Brothers [1979] 118 ITR 741 (All) were again up for consideration before Division Bench of this court in case of India Rice Mill v. CIT (1996) 218 ITR 508. relevant extract is reproduced below (page 510 of 218 ITR): "However, Tribunal relying on CIT v. Kapur Brothers [1979] 118 ITR 741 (All), held that since amount was credited in books of assessee firm, it is for assessee to explain source of deposits and as assessee firm failed to discharge that onus, deposits were rightly taken to be income of assessee firm from undisclosed sources by assessing authority..." Reliance on Kapur Brothers' case [1979] 118 ITR 741 (All) is misplaced, inasmuch as in that case deposits were entered in books of firm when it was already carrying on its business. firm was called upon to explain source of deposits. explanation of firm was that deposits represented sale proceeds of certain assets belonging to partners. When no evidence was adduced to substantiate that explanation, assessing authority added amount as income of partnership firm. These facts are materially different from fact of instant case. Most striking feature of case on hand is that all deposits came to be made during accounting year in books of assessee firm before it started its business. Therefore, onus was on 17 I NCOME T AX PPEAL No.17 of 2007 partners to explain source in case on hand and if they failed, amount could have been added in their hands only and not in hands of assessee firm." 19. On facts and circumstances of this case, we are of considered opinion that authorities below have committed error as they have failed to take into account that this was first year of business of assessee firm. partnership firm was formed on July 5, 1990 and on July 7, 1990, Master Shishir Garg deposited Rs.1,90,000 and Rs.72,000 as capital money with Firm through bank clearance of two bank drafts. accounting period being financial year, i.e., ending on March 31, 1991, Firm could not have any income at time of its formation. identity of depositor, i.e., Master Shishir Garg was not in issue at any point of time before income tax authorities. They treated said deposit by Master Shishir Garg. This being so, if for one reason or other, they were not satisfied with financial capability of Master Shishir Garg, amounts could have been added at hands of Master Shishir Garg and not at hands of firm. 20. decision relied upon by learned counsel for Department is clearly distinguishable on facts as it was not in respect of first year of business and has no application whatsoever. argument put by him that income was liable to be added in hands of firm as Master Shishir Garg being minor could not be prosecuted, has no substance. 21. It may be noted that decision given in case of Jaiswal Motor (supra) is being constantly followed by this court in subsequent decisions. Reference can be made to Surendra Mohan Seth v. CIT [1996] 221 ITR 239 (All). 22. Rajasthan High Court in CIT Vs. Kewal Krishna and Partners [2009] 18 DTR 121 (Raj) has also taken similar view. 27. Section 68 requires Assessing Officer to satisfy itself of source of credit and if during course of enquiry undertaken, entries are found to be not genuine then sum represented by such credit entry is to be added as income of assessee. satisfaction of Assessing Officer thus forms basis for invocation of provisions of Section 68. satisfaction in this regard, however, must 18 I NCOME T AX PPEAL No.17 of 2007 not be illusory or imaginary but is required to be based on facts and evidence and on basis of proper enquiry of material before Assessing Officer. enquiry envisaged under provision is to be reasonable and just. 28. Under Section 68, onus is on assessee to offer explanation where any sum is found credited in books of account and where assessee fails to prove to satisfaction of Assessing Officer, source and nature of amount of cash credits inference may be drawn that credit entries represent income taxable in hands of assessee. This does not however absolve responsibility of Assessing Officer to prove that cash credits constitute income of assessee. onus on assessee has to be understood with reference to facts of each case and if prima facie inference on basis of facts is that assessee's explanation is probable, onus shifts to Revenue. It has been consistently held that once assessee has proved identity of its creditors, genuineness of transactions and creditworthiness of creditors vis vis transactions which it had with creditors, burden stands discharged and burden then shifts to Revenue to show that amount in question actually belong to, or was owned by assessee himself. 29. question as to whether in case where money has come from partner, addition, if any, has to be made in hands of partner or of firm came up for consideration upon reference under Section 256(1) of Act in case of Commissioner of Income Tax v 19 I NCOME T AX PPEAL No.17 of 2007 Kishorilal Santoshilal13, and referring to language used under Section 68 and various authorities on point it was held that in this regard following points are required to be noted: On basis of language used under section 68 and various decisions of different High Courts and apex court, only conclusion which could be arrived at is : (i) that there is no distinction between cash credit entry existing in books of firm whether it is of partner or of third party, (ii) that burden to prove identity, capacity and genuineness has to be on assessee, (iii) if cash credit is not satisfactorily explained Income tax Officer is justified to treat it as income from "undisclosed sources", (iv) firm has to establish that amount was actually given by lender, (v) genuineness and regularity in maintenance of account has to be taken into consideration by taxing authorities, (vi) if explanation is not supported by any documentary or other evidence, then deeming fiction credited by section 68 can be invoked. 30. It is therefore seen that in case where sum is credited in books of account of firm from partner, assessee firm could discharge its onus by proving three things: (i) identity of creditor; (ii) creditworthiness of creditor; and (iii) genuineness of transaction in question. Once assessee proves all three things its onus is discharged. It has also been consistently held that assessee only needs to prove source of credit entries and he is not required to prove source of source or creditors' credit. 31. In case where integrity of creditors is 13 [1995] 216 ITR 9 (Raj) 20 I NCOME T AX PPEAL No.17 of 2007 established and entries are shown to be not fictitious, burden would shift on Revenue. 32. In case at hand, partners have shown agricultural income in their personal returns of past years which had been accepted by department as such. partners are all identifiable and separately assessed to tax. source of investment having been explained, in event Assessing Officer was not satisfied addition could have been considered in hands of partners and not in hands of firm. burden of proving source of credits having been sufficiently explained addition could not have been made in hands of firm in facts of present case. 33. In view of aforementioned facts and circumstances questions of law are answered in favour of assessee and against Revenue. 34. appeal stands, accordingly, allowed. Order Date : 24.04.2020 Shahroz (Biswanath Somadder,J.) (Dr. Y.K. Srivastava,J.) Kesharwani Sheetalaya Sahsaon v. Commissioner of Income-tax, Allahabad