Allahabad H.C : Whether, on the facts and in the circumstances of the case the Tribunal was right in holding that the onus placed on the assessee s. 68 of the IT Act bad been duly discharged ?

R.M. SAHAI, J. :

The following question of law has been referred for the opinion of this Court:

“Whether, on the facts and in the circumstances of the case the Tribunal was right in holding that the onus placed on the assessee s. 68 of the IT Act bad been duly discharged ?”

2. In 1971-72, the very first year of assessment of the firm, the ITO found certain deposits in the accounts of the partners in the books of the assessee. The explanation of the assessee that the source of these deposits was agricultural income of the partners was rejected except in respect of one of the partners. The order was maintained by the AAC as well. The Tribunal, however, found that these deposits had been made by the partners as their capital, because without these investments they could not have become partners. Consequently, according to the Tribunal, the assessee had discharged the burden of explaining the deposits in its account books. It was further not required to explain the source of these deposits in the hands of the depositors.

3. Having heard the learned counsel for the parties, we do not think that the Tribunal in construing s. 68 and holding that the assessee discharged its burden misdirected itself or committed any error of law. It appears to be well settled that if there are cash credit entries in the books of the firm in which the accounts of the individual partners exist and, it is found as a fact that cash was received by the firm from its partners then in the absence of any material to indicate that they were profits of I the firm, it could not be assessed in the hands of the firm. We are, therefore, of the opinion that the Tribunal did not commit any error of law and rightly held that the deposits shown in its accounts were satisfactorily explained.

4. In the result, the question referred to us is answered in the affirmative in favour of the assessee and against the Department. The assessee shall be entitled to its costs which are assessed at Rs. 250.

[Citation : 141 ITR 706]