The ITO, Ward-1., Gudivada v. M/s Naga Sai Constructions., Gudivada

ITA 53/VIZ/2007 | 2002-2003
Pronouncement Date: 17-05-2010 | Result: Allowed

Appeal Details

RSA Number 5325314 RSA 2007
Bench Visakhapatnam
Appeal Number ITA 53/VIZ/2007
Duration Of Justice 3 year(s) 2 month(s) 8 day(s)
Appellant The ITO, Ward-1., Gudivada
Respondent M/s Naga Sai Constructions., Gudivada
Appeal Type Income Tax Appeal
Pronouncement Date 17-05-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 17-05-2010
Date Of Final Hearing 28-04-2010
Next Hearing Date 28-04-2010
Assessment Year 2002-2003
Appeal Filed On 09-03-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.40/VIZAG/2007 ASSESSMENT YEAR : 2002-03 M/S. NAGA SAI CONSTRUCTIONS LOKUMUDIGARUVU KAIKALURU ITO WARD-1 GUDIVADA (APPELLANT) VS. (RESPONDENT) PAN NO.AAFFN 1811E ITA NO.53/VIZAG/2007 ASSESSMENT YEAR : 2002-03 ITO WARD-1 GUDIVADA M/S. NAGA SAI CONSTRUCTIONS LOKUMUDIGARUVU KAIKALURU (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI CA RESPONDENT BY: SHRI G.S.S. GOPINATH DR ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER:- THESE CROSS APPEALS ARE PREFERRED BY THE ASSESSEE AS WELL AS REVENUE AGAINST THE ORDER OF THE CIT(A) PERTAINING TO THE A SSESSMENT YEAR 2002-03. SINCE THESE APPEALS WERE HEARD TOGETHER THESE ARE B EING DISPOSED OFF THROUGH THIS COMMON ORDER FOR THE SAKE OF CONVENIEN CE. WE HOWEVER PREFER TO ADJUDICATE THEM ONE AFTER THE OTHER. ITA NO.40 OF 2007 : 2. THIS APPEAL IS PREFERRED BY THE ASSESSEE ASSAILI NG THE ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT CIT(A) IS NOT JUST IFIED IN REJECTING THE BIFURCATION OF INCOME BETWEEN THE TWO FIRMS RELATIN G TO THE CONTRACT AWARDED TO THE MANAGING PARTNER WITHOUT REALIZING THE FACT THAT INDEMNITY BOND WAS FILED ALONG WITH THE COPY OF THE TDS CERTIFICATE. THE FACTS BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE CLAIMED THE CREDIT OF TDS DEDUCTED ON THE BASIS OF TDS CERTIFICATE ISSUED IN THE NAME OF MR. U. GIR IDHAR KUMAR ON THE GROUND THAT THE MANAGING PARTNER M.V. GIRIDHAR KUMAR EXECU TED ONGC WORK AND SUPPLIED THE WORK RECEIPTS IN THE NAME OF TWO FIRMS NAMELY M/S. NAGA SAI 2 CONSTRUCTIONS AND M/S. KARTIKA CONSTRUCTIONS. THER EFORE THE TDS AMOUNT BE APPORTIONED ON THE TURNOVER BASIS IN THE AFORESAID FIRMS AND THE CREDIT OF THE CORRESPONDING SHARE OF THE ASSESSEE FIRM BE ALLOWED . THE A.O. DID NOT ACCEPT THE CLAIM OF THE ASSESSEES ON THE GROUND THA T ORIGINAL TDS CERTIFICATE WAS NOT FILED AND THE XEROX COPY OF TDS CERTIFICATE DOES NOT BEAR THE SIGNATURE OF THE OFFICER/OFFICIALS OF THE ONGC ALON G WITH ITS SEAL CERTIFYING THAT IT IS A DUPLICATE COPY OF THE TDS CERTIFICATE. IT I S NOT EVIDENT FROM THE CERTIFICATE THAT THE PAYMENTS WERE MADE BY THE ONGC . ONLY THE AMOUNTS WERE CREDITED WHICH WERE REFLECTED IN THE BALANCE S HEET OF THESE TWO FIRMS. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) B UT DID NOT FIND FAVOUR WITH HIM. 4. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND INVITED OUR ATTENTION TO THE PARTNERSHIP DEED AVAIL ABLE AT PAGE 8 TO 14 OF THE COMPILATION IN WHICH IT HAS BEEN MENTIONED THAT THE TENDERS CAN BE OBTAINED IN THE NAME OF THE FIRM OR IN THE NAME OF THE PARTN ERS INDIVIDUALLY. PURSUANT TO THE TERMS OF PARTNERSHIP DEED THE CONTRACT WAS O BTAINED BY THE MANAGING PARTNER OF THE FIRM MR. U. GIRIDHAR KUMAR BUT IT WA S EXECUTED BY ITS TWO PARTNERSHIP FIRMS. THE CONTRACT RECEIPT WAS ACCORD INGLY BIFURCATED BETWEEN THE TWO FIRMS AND THE CORRESPONDING INCOME WAS OFFE RED TO TAX WHICH WAS ACCEPTED BY THE A.O. THE ASSESSEE HAS FILED THAT C OPY OF THE TDS CERTIFICATE AS ORIGINALLY WAS LOST AND CLAIMED THE CREDIT OF PR OPORTIONATE TDS AMOUNT. IT WAS ALSO CONTENDED THAT ASSESSEE HAS ALSO FILED THE INDEMNITY BOND BUT IT WAS NOT TAKEN INTO ACCOUNT BY THE REVENUE AUTHORITI ES AND THEY HAVE DISALLOWED THE CLAIM OF THE ASSESSEES. THE LD. COU NSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT ONCE THE REVENUE HAS ACCEPTE D THE INCOME OFFERED BY THE ASSESSEE FIRM WITH RESPECT TO THE CONTRACT OBTA INED BY ITS MANAGING PARTNER THE CREDIT OF THE TDS SHOULD BE ALLOWED ON THE BASIS OF TDS CERTIFICATE ISSUED IN THE NAME OF THE MANAGING PART NER. IT CANNOT BE DISALLOWED DOUBTING THE GENUINENESS OF TDS CERTIFIC ATE WHERE THE ASSESSEE HAS SUBMITTED THE INDEMNITY BOND. 5. THE LD. D.R. ON THE OTHER HAND HAS SUBMITTED THA T THE ASSESSING OFFICER HAS DOUBTED THE TDS CERTIFICATE AS IT DOES NOT BEAR THE SIGNATURE OF THE ONGC OFFICIALS ALONG WITH THE CERTIFICATE TO TH E EFFECT THAT IT WAS A DUPLICATE TDS CERTIFICATE. THE A.O. HAS FURTHER OB SERVED THAT THIS TDS 3 CERTIFICATE DOES NOT SHOW THAT THE PAYMENTS WERE MA DE BY THE ONGC. SINCE THESE FACTS WERE NOT CLARIFIED BY THE ASSESSEES TH E REVENUE AUTHORITIES HAVE RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM CARE FUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW AND THE DOCUMENTS P LACED ON RECORD WE FIND THAT THE REVENUE HAS DENIED THE CREDIT OF CORRESPON DING SHARE OF THE TDS AMOUNT SHOWN IN THE CERTIFICATE ON THE GROUND THAT IT WAS ISSUED IN THE NAME OF THE MANAGING PARTNER OF THE ASSESSEE FIRM. THE REVENUE HAS DISALLOWED THE CLAIM OF THE ASSESSEES HAVING DOUBTED THE GENUI NENESS OF THE TDS CERTIFICATE. THEY HAVE SPECIFICALLY ALLEGED THAT T HE TDS CERTIFICATE DOES NOT BEAR THE SIGNATURE OF THE ONGC OFFICIALS ALONG WITH THEIR CERTIFICATE THAT IT WAS A DUPLICATE CERTIFICATE. THEY HAVE ALSO DOUBTED TH E GENUINENESS OF THE PAYMENTS WHETHER IT WAS MADE BY THE ONGC TO THE AS SESSEE. THOUGH THE ASSESSEE HAS FILED THE INDEMNITY BOND YET HE HAS N OT CLARIFIED THE DISPUTES RAISED BY THE REVENUE AUTHORITIES WITH REGARD TO TH E GENUINENESS OF THE TDS CERTIFICATE. THE INDEMNITY BOND WILL NOT MAKE THE DOCUMENT TO BE GENUINE. THE INDEMNITY BOND IS TECHNICAL GUARANTEE OF A PART ICULAR CLAIM WHICH IS TO BE ALLOWED BY THE AUTHORITIES WITH A CONDITION THAT IF THE CLAIM IS PROVED TO BE FALSE THE EXECUTOR WILL INDEMNIFY THE LOSS SUFFERE D TO THE AUTHORITIES. EVEN BEFORE US THE TDS CERTIFICATES ARE NOT PRODUCED AND IN THE ABSENCE OF THIS IT IS VERY DIFFICULT FOR US TO EXPRESS OUR VIEW WITH R EGARD TO THE GENUINENESS OF THE TDS CERTIFICATE. WE HOWEVER OF THE VIEW THAT THIS ISSUE REQUIRES A FRESH LOOK BY THE ASSESSING OFFICER IN THE LIGHT OF INDEM NITY BOND FILED BY THE ASSESSEES. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) IN THIS REGARD AND RESTORE THE MATTER TO THE FILE OF THE A.O. WITH A D IRECTION TO RE-EXAMINE THE VALIDITY OF THE TDS CERTIFICATE IN THE LIGHT OF IND EMNITY BOND FILED BY THE ASSESSEES. WE HAVE ALSO DIRECTED THE ASSESSEE TO P LACE ALL RELEVANT EVIDENCE TO PROVE THE GENUINENESS OF TDS CERTIFICATE. ACCOR DINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4 ITA NO.53 OF 2007 : 7. THIS IS AN APPEAL OF THE REVENUE IN WHICH THE OR DER OF THE CIT(A) IS ASSAILED ON THE GROUND THAT CIT(A) HAS ERRED IN DEL ETING THE ADDITIONS MADE ON ACCOUNT OF UNEXPLAINED CAPITAL INTRODUCED IN THE NAME OF ITS PARTNERS IN ITS BOOKS OF ACCOUNT. THE FACTS EMERGES FROM THE ORDER S OF THE LOWER AUTHORITIES ARE THAT DURING THE IMPUGNED ASSESSMENT YEAR THE F OLLOWING PARTNERS HAVE INTRODUCED NEW CAPITAL BY WAY OF A CASH: 1. SRI U. GIRIDHAR KUMAR RS.11 05 000 2. SRI U. RAGHAVA RAO RS. 2 50 000 3. SRI CH. RAJA RAO RS. 1 50 000 4. SRI CH. RANGA RAO RS. 1 45 000 5. SRI CH. VENKATESWARA RAO RS. 1 50 000 6. SRI K. KRISHNA MURTHY RS. 1 35 000 7. SRI U. SIVAJI RS. 1 75 000 8. SRI B. KRISHNA RS. 1 15 000 9. SMT. N. HAMSAVENI RS. 2 00 000 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. ASKED THE ASSESSEE TO PROVE THE SOURCE OF INVESTMENT BY THESE PARTNERS. THE ASSESSEE FILED CONFIRMATION LETTERS FROM THESE PARTNERS IN R ESPECT OF THE ADDITIONAL CAPITAL INTRODUCED IN THE FIRM. WHILE GOING THROUG H THE CONFIRMATORY LETTERS THE A.O. OBSERVED THAT EXCEPT IN THE CASE OF MANAGI NG PARTNER IN OTHER CASES THESE LETTERS ARE WRITTEN IN THE SAME FASHION AND A PPEARS TO BE WRITTEN BY ONE PERSON. IN ORDER TO VERIFY THE GENUINENESS OF T HE CAPITAL THE ASSESSEE WAS ASKED TO PRODUCE THESE PERSONS OTHER THAN THE MANAGING PARTNER WITH THEIR PATTA PASS BOOKS. THE ASSESSEE FAILED TO PRO DUCE THEM WHICH RESULTED INTO AN ADDITION OF RS.13 20 000/- U/S 68 OF THE AC T. THE A.O. ALSO DISALLOWED INTEREST OF RS.92 783/- PAID ON SUCH CAPITAL TO THE SE PARTNERS. 9. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) AND DURING THE COURSE OF APPELLATE PROCEEDINGS IT WAS SUBMITTED T HAT ADDRESSES OF THE PARTNERS WERE PROVIDED IN THE PARTNERSHIP DEED WHIC H WAS FILED ALONG WITH 5 THE CONFIRMATORY LETTERS BEFORE THE A.O. ALL THESE PARTNERS HAVE CONFIRMED THE INVESTMENT IN THE FIRM OUT OF SAVINGS FROM AGRI CULTURAL INCOME. IT WAS ALSO CONTENDED THAT THE PARTNERS COULD NOT APPEAR B EFORE THE A.O. DUE TO NON-AVAILABILITY OF TIME SINCE THEY WERE PRE-OCCUPI ED WITH AGRICULTURAL ACTIVITIES. KEEPING IN VIEW OF THESE FACTS THE CI T SOUGHT THE REMAND REPORT FROM THE ASSESSING OFFICER ASKING HIM TO EXAMINE TH E PARTNERS ON DIFFERENT ISSUES MENTIONED IN THE LETTER. IN TURN THE A.O. F ILED THE REMAND REPORT NARRATING THE STATEMENTS GIVEN BY THE PARTNERS. RE LYING UPON THE REMAND REPORT THE CIT(A) ACCEPTED THE CLAIM OF THE ASSESS EES AND DELETED THE ADDITIONS. 10. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSIONS THAT IN THE REMAND REPORT THE ASSESSIN G OFFICER HAS NARRATED IN BRIEF THE STATEMENTS OR THE EXPLANATIONS FURNISHED BY THE PARTNERS OR ON THEIR BEHALF. IN MOST OF THE CASES IT WAS STATED BY THE PARTNERS THAT THEY HAVE INVESTED OR CONTRIBUTED TO THE CAPITAL OF THE PARTN ERSHIP FIRM OUT OF THE SALE PROCEEDS OF THE AGRICULTURAL LAND SOLD. BUT WHEN T HEY WERE ASKED ABOUT THE EVIDENCE WITH REGARD TO THE SALE OF AGRICULTURAL LA ND AND ALSO HOW THE MONEY WAS KEPT AFTER THE SALE TILL IT IS INVESTED IN THE PARTNERSHIP FIRM THESE PARTNERS DID NOT FURNISH A SATISFACTORY EXPLANATION. SINCE THE PARTNERS COULD NOT EXPLAIN THE SOURCE OF CONTRIBUTION TO THE CAPITAL A CCOUNT THE A.O. HAS RIGHTLY ADDED THE SAME AS AN UNEXPLAINED CREDIT IN THE HAND S OF THE ASSESSEE FIRM. THE LD. D.R. FURTHER CONTENDED THAT IT HAS ALSO BEE N HELD BY VARIOUS HIGH COURTS THAT WHENEVER THE PARTNERS ARE FAILED TO EXP LAIN THE SOURCE OF FUNDS TO THEIR CAPITAL ACCOUNT IT CAN BE ADDED AS AN EXPLAI NED CASH CREDIT IN THE HANDS OF THE ASSESSEE FIRM. 11. IN OPPUGNITION THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE ASSESSEE HAS EXPLAINED THE SOURCE OF CONTRIBUTI ON AND FILED ITS CONFIRMATION LETTERS OF THE PARTNERS IN THIS REGARD . THE PARTNERS HAVE ALSO APPEARED BEFORE THE A.O. AND DEPOSED THAT THE CONTR IBUTIONS WERE MADE BY THEM TO THE PARTNERSHIP FIRM. IF THE REVENUE HAS A DOUBT TO THE GENUINENESS OF THE CONTRIBUTION IT CAN ONLY BE ADDED IN THE HA NDS OF THE PARTNERS AND NOT IN THE HANDS OF THE PARTNERSHIP FIRM. IN SUPPORT OF HIS CONTENTION HE HAS 6 PLACED A RELIANCE UPON THE JUDGEMENT IN THE CASE OF CIT VS. TAJ BOREWELLS OF MADRAS HIGH COURT REPORTED AT 291 ITR 232. 12. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A C AREFUL PERUSAL OF THE RECORD WE FIND THAT DURING THE IMPUGNED ASSESSMENT YEAR 9 PARTNERS HAVE INTRODUCED A SUBSTANTIAL CAPITAL IN CASH. THE A.O. VERIFIED THE GENUINENESS OF THE INTRODUCTION OF CASH AND HE HAS ACCEPTED THE IN TRODUCTION OF RS.11 05 000/- MADE BY U. GIRIDHAR KUMAR. HE DOUBT ED THE INTRODUCTION OF CAPITAL MADE BY 8 PARTNERS AND DISALLOWED IT. IN R EMAND PROCEEDINGS THE ASSESSING OFFICER HAS EXAMINED THE PARTNERS AND REC ORDED THEIR STATEMENTS. COPY OF THEIR STATEMENTS ARE NOT FILED BEFORE US. HOWEVER A REMAND REPORT IS PLACED AND FROM ITS PERUSAL WE FIND THAT THE PA RTNERS HAVE GIVEN A GENERAL REPLY WITH REGARD TO THE SOURCE OF FUNDS. PARTNERS SHRI CH. RAJA RAO CH. RANGA RAO CH. VENKATESWARA RAO K. KRISHNA MURTHY SHRI B. KRISHNA HAVE TAKEN A ONE STAND THAT THE SOURCE OF CONTRIBUTION O F CAPITAL WAS OUT OF THE SALE PROCEEDS OF SALE OF THE AGRICULTURAL LANDS. B UT THEY COULD NOT PLACE THE DOCUMENTS IN THIS REGARD. THOUGH THEY HAVE STATED THAT IT WAS SOLD ABOUT 10-11 YEARS BACK BUT NOTHING IS PLACED ON RECORD A S TO HOW THE SALE PROCEEDS WERE KEPT BY THE ASSESSEES. IT WAS SIMPLY STATED THAT SALE PROCEEDS WERE GIVEN TO VARIOUS PERSONS WHICH WERE R ECEIVED BACK AT THE TIME OF CONTRIBUTION OF THE CAPITAL. IN THE CASE OF U. RAGHAVA RAO DIFFERENT SOURCE OF FUNDS WERE EXPLAINED BUT NO EVIDENCE WAS PLACED ON RECORD TO SUPPORT THEIR STAND. WE HAVE ALSO EXAMINED THE MAIN ARGUME NTS OF ASSESSEES THAT ONCE THE ASSESSEE FIRM HAS EXPLAINED THE SOURCE OF ITS CAPITAL THE SOURCE OF SOURCE OF THE PARTNERS CANNOT BE EXAMINED. MORE OV ER IF THE REVENUE HAS DOUBT WITH REGARD TO THE GENUINENESS OF THIS CAPITA L INTRODUCED IT CAN ONLY BE ADDED U/S 68 OF THE ACT IN THE HANDS OF PARTNERS AN D NOT IN THE HANDS OF PARTNERSHIP FIRM. 13. WE HAVE ALSO EXAMINED THE JUDGEMENT OF THE MADR AS HIGH COURT REFERRED TO BY THE ASSESSEE IN THE CASE OF CIT VS. TAJ BOREWELLS (SUPRA) AND WE FIND THAT IN THAT CASE THE ASSESSEE FIRM HAD EXP LAINED THE SOURCE OF CAPITAL AND THE EXPLANATIONS OFFERED BY THE ASSESSEE FIRM W AS NOT REJECTED BY THE A.O. THE A.O. EXAMINED THE PARTNERS AND THEY HAVE EXPLAINED THE SOURCE OF 7 CONTRIBUTION OF THE CAPITAL AND THE A.O. PARTLY ACC EPTED THE EXPLANATIONS OFFERED BY THE PARTNERS. IN THAT CASE THEIR LORDSH IP HAVE HELD THAT UNLESS AND UNTIL THE EXPLANATIONS OFFERED BY THE FIRM IS R EJECTED AND THE SAME IS NOT GENUINE THE A.O. CANNOT INVOKE THE PROVISIONS OF S ECTION 68 OF THE ACT AND THE A.O. CANNOT ASK THE ASSESSEE FIRM TO PROVE SOUR CE OF SOURCE. THEIR LORDSHIP FURTHER OBSERVED THAT ONCE THE FIRM HAD OF FERED AN EXPLANATION AND ESTABLISHED THAT CAPITAL WAS CONTRIBUTED BY THE PAR TNERS THE SAME COULD NOT BE ASSESSABLE IN THE HANDS OF THE FIRM. UNLESS THE RE ARE CONTRADICTIONS AND INCONSISTENCY IN THE STATEMENT OF THE PARTNERS THE CREDIT CANNOT BE TREATED AS UNEXPLAINED AND CANNOT BE ADDED U/S 68 IN THE HA NDS OF THE ASSESSEE FIRM. IN THAT CASE THE ASSESSMENT YEAR INVOLVED WA S 1995-96 WHICH IS THE FIRST ASSESSMENT YEAR IN WHICH THE PARTNERS HAVE CO NTRIBUTED THEIR SHARE TO THE CAPITAL. IT HAS ALSO BEEN HELD IN VARIOUS CASES THAT IN THE FIRST YEAR OF THE FIRM WHERE THE CAPITAL WAS INTRODUCED BY THE PARTN ERS EVEN THE PARTNERS FAILED TO EXPLAIN THE SOURCE OF FUNDS THE ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 CANNOT BE MADE IN THE HANDS OF T HE FIRM BECAUSE IN THE FIRST YEAR OR AT THE TIME OF INCEPTION OF THE FIRM THERE CANNOT BE ANY UNDISCLOSED OR UNEXPLAINED CASH AVAILABLE WITH THE FIRM. IN SUCH TYPE OF CASES ADDITION ON ACCOUNT OF UNEXPLAINED CASH CRED IT U/S 68 CAN ONLY BE MADE IN THE HANDS OF THE PARTNERS AND NOT IN THE HA NDS OF PARTNERSHIP FIRM. ON THIS SUBJECT WE HAVE ALSO EXAMINED THE OTHER JU DGEMENTS OF DIFFERENT HIGH COURTS. IN THE CASE OF JAGMOHAN RAM RAM CHANDR A VS. CIT 274 ITR 405 IT HAS BEEN HELD THAT WHEN CASH CREDIT IS FOUN D IN THE NAME OF THE PARTNERS IN THE BOOKS OF FIRM IT IS THE FIRM WHICH HAD TO EXPLAIN THE IDENTITY AND SOURCE OF SUCH DEPOSITS. EXPLANATIONS OFFERED BY THE ASSESSEE FIRM REGARDING THE CASH CREDITS APPEARING IN THE NAME OF PARTNERS HAVING BEEN DISBELIEVED PROVISIONS OF SECTION 68 ARE ATTRACTED REGARDLESS OF THE FACT THAT THE SAME AMOUNT MAY HAVE BEEN ASSESSED IN THE HANDS OF THE PARTNERS U/S 69 OF THE ACT. 14. IN THE CASE OF CIT VS. SHIV SHAKTI TIMBERS 229 I TR 505 THE M.P. HIGH COURT HAVE EXPRESSED THE SIMILAR VIEW. THEIR LORDS HIP HAVE HELD THAT IF THE CREDIT ENTRY IN THE BOOKS OF FIRM IN THE NAME OF TH E PARTNERS ARE FOUND IT IS SEC. 68 THAT APPLIES AND NOT SECTION 69. 8 15. IN THE CASE OF CIT VS. KISHORILAL SANTHOSHILAL 2 19 ITR 9 THEIR LORDSHIP OF THE RAJASTHAN HIGH COURT HAVE HELD THAT CASH CRE DIT IN THE CAPITAL ACCOUNT OF PARTNER CAN BE TREATED AS UNDISCLOSED INCOME OF THE FIRM WHERE NEITHER THE PARTNER IS PRODUCED NOR SOURCE OF INCOME PROVED. 16. TURNING TO THE FACTS OF THE CASE WE FIND THAT THE PARTNERS WERE EXAMINED BY THE A.O. AND THEY HAVE EXPLAINED THE SO URCE OF THEIR CONTRIBUTION TO THE CAPITAL OF THE FIRM BUT NO EVID ENCE WAS PLACED ON RECORD. MOREOVER THE COMPLETE TEXT OF THE STATEMENT OF THE PARTNERS ARE ALSO NOT FILED BY THE REVENUE BEFORE US. IN THE ABSENCE OF WHICH IT IS VERY DIFFICULT FOR US TO DRAW ANY INFERENCE IN EITHER WAY. WE HOWEVER DO NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT IN SUCH TYPE OF SIT UATION THE ADDITION CAN ONLY BE MADE IN THE HANDS OF THE PARTNERS AND NOT IN THE HANDS OF THE FIRM. THIS CONTENTION OF THE ASSESSEE CAN ONLY BE ACCEPTED WHE RE THE CAPITAL IS INTRODUCED IN THE FIRST YEAR OF THE BUSINESS OF THE ASSESSEES WHERE NO INFERENCE CAN BE DRAWN ABOUT THE GENERATION OF UNEX PLAINED CASH OF THE FIRM ON ITS INCEPTION. BUT IN THE INSTANT CASE THE ASS ESSEE HAS BEEN DOING ITS BUSINESS FOR THE LAST SO MANY YEARS. AS SUCH THIS PROPOSITIONS CANNOT BE ACCEPTED. WE HOWEVER OF THE VIEW THAT THIS ISSUE R EQUIRES A FRESH LOOK BY THE ASSESSING OFFICER IN THE LIGHT OF AFORESAID OBSERVA TION. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTE R TO THE FILE OF THE A.O. WITH THE DIRECTION TO RE-ADJUDICATE THE ISSUE AFRES H AND IF NEED BE THE PARTNERS CAN BE RE-EXAMINED WITH REGARD TO THE SOUR CE OF THE FUNDS ALONG WITH CORRESPONDING EVIDENCE AFTER AFFORDING A PROPE R OPPORTUNITY OF BEING HEARD TO THE ASSESSEES. 17. IN THE RESULT THE APPEALS OF THE ASSESSEE AS WE LL AS THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 17.5.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 17 TH MAY 2010 9 COPY TO 1 SRI G.V.N. HARI CA 2 ND FLOOR D.NO.30-14-11 DABBIRU MANSIONS DABA GARDENS VISAKHAPATNAM-530 020. 2 ITO WARD-1 GUDIVADA 3 THE CIT VIJAYAWADA 4 THE CIT(A) VIJAYAWADA 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM