Telangana High Court
M/S. Sri Durga Wines vs Income Tax Officer on 12 February, 2025
Author: P. Sam Koshy
Bench: P.Sam Koshy
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA
INCOME TAX TRIBUNAL APPEAL No.174 of 2008
JUDGMENT:
(per the Hon'ble Sri Justice P. Sam Koshy)
The instant appeal is one which has been filed aggrieved by the
order dated 14.09.2007, in I.T.A.No.257/Hyd/02, passed by the
Income Tax Appellate Tribunal, Hyderabad Bench 'B', for the
assessment year 1998-99 (for short, the 'ITAT').
2. Heard Mr. A.V.A. Siva Kartikeya, learned counsel for the
appellant and Ms. Bokaro Sapna Reddy, learned Junior Standing
Counsel for Income Tax appearing on behalf of the respondent.
3. The appeal has been filed primarily on the following substantial
question of law, viz.,
"a) Whether on the facts and circumstances of the case the
Hon'ble Tribunal is correct in confirming the additions made
under Section 68 on the ground the assessee has not
discharged the onus regarding the credit worthiness and
genuineness of the cash credit transactions involving the 3
partners K. Lakshman Goud, Durgadas Goud and
Ramachander."
4. It is a case where the Assessing Officer as also the ITAT found
that the appellant herein has not been able to show sufficient material
to prove the investment made by the partners and therefore the
addition made under Section 68 of the Income Tax Act, 1961, could
not had been confirmed unless there was an independent enquiry
conducted in respect of the investment so made by the respective
partners in the said firm.
5. The said question of law raised in the instant appeal came up for
consideration before this Hon'ble High Court recently in I.T.T.A.No.30
of 2023, decided on 04.09.2023.In paragraph Nos.12 to 16 of the said
judgment, it has been held as under, viz.,
12. Now the only question that needs to be considered at this
juncture, is that, in the event of the appellant's partnership firm
disclosing that it was the partners who had contributed in the
capital, the source of income of the partners was to be
explained by the partners themselves and not by the firm. In the
case of M.Venkateshwar Rao, supra, the Division Bench of this
Court in paragraph No.7 held as under:
"It is a matter of record that the respondent-firm
comprises ten partners and each of them made
contributions, be it in the form of cash or bank
guarantees to be furnished to the Government, at
the commencement of business. The returns
submitted by the respondent-firm were processed,
and the facts and figures furnished by it were
accepted. However, the matter was reopened at a
later point of time. The Assessing Officer treated the
capital raised by the firm in the form of contributions
made by the partners as income. This conclusion
was arrived at on the ground that source of income
for the partners was not explained. Learned counsel
for the appellant placed reliance upon the judgment
of the Patna High Court in CIT v. AnupamUdyog
[1983] 142 ITR 133 (Pat). The Tribunal rested its
conclusions upon the judgment of the Bombay High
Court in NarayandasKedarnath v. CIT [1952] 22 ITR
18 (Bom) and that of the Allahabad High Court in
CIT v. Jaiswal Motor Finance [1983]141 ITR
706(AII)."
13. Recently, again the Division Bench of this Court in
somewhat similar case between M/s. Nova Medicare versus
The Income Tax Officer, decided on 15.02.2023, relying upon
the decision of M.Venkateshwar Rao, supra, in paragraph
No.15 held as under:
"Following and applying the aforesaid decision of
this Court, Patna High Court in Anurag Rice Mills
(supra) held that in such circumstances the
unexplained cash credits would have to be
assessed at the hands of the partners of the firm
and not the firm itself. Such amounts could not have
been treated as income of the firm by relying upon
Section 68 of the Act."
14. The Hon'ble Supreme Court of India also in the case of the
Commissioner of Income Tax v. Lovely Exports (P) LTD2 in a
short judgment at paragraph No.2 held as under:
"Can the amount of share money be regarded as
undisclosed income under s. 68 of IT Act, 1961 ? We
find no merit in this Special Leave Petitin for the
simple reason that if the share application money is
received by the assessee company from
allegedbogus shareholders, whose names are given
to the AO, then the Department is free to proceed to
reopen their individual assessments in accordance
with law. Hence, we find no infirmity with the
impugned judgment."
15. The ratio laid down in the aforesaid three decisions clearly
indicate that if in a proceeding under Section 68 of the Act, the
assesse has been able to explain the sources of income, which
in the instant case, the appellant had been stating that the
capital investment made by the partners of the said firm is
sufficient to meet the requirement under Section 68 of the Act.
Thereafter, if at all, if the respondent-Department was not
satisfied with the explanation, it was for them to have got it
verified from the partners. Ratherthan still pursing the matter
before the appellant's partnership firm, which is otherwise
impermissible in the light of the judgement referred to in the
preceding paragraphs.
16. In the instant case also the appellant having said that the
capital investment is that made by the partners. Applying the
aforesaid judicial precedents, the burden now shifts upon the
respondent-Department to get it counter verified from the
partners from their books of accounts ascertaining whether
such investments have been made or not. In the absence of
such an enquiry/verification from the partners by the
respondent-Department, the order of the Assessing Officer, as
also the stand taken by the Hon'ble ITAT would not be
sustainable and the same deserves to be and is accordingly set
aside/quashed. The order passed by the CIT (Appeals) dated
30.06.2017 stands affirmed."
6. Since the question of law in the instant appeal and the facts also
being same, we find that the instant appeal is squarely covered by the
decision rendered by this Hon'ble High Court itself in I.T.T.A.No.30 of
2023.
7. The order of the Assessing Officer, as also the stand taken by the
ITAT would not be sustainable and the same deserve to be and are
accordingly set aside / quashed. Accordingly, the present appeal
stands allowed. No costs.
8. As a sequel, miscellaneous petitions pending if any, shall stand
closed.
__________________
P.SAM KOSHY, J
_________________________________
NARSING RAO NANDIKONDA, J
Date: 12.02.2025
GSD
