INDIA RICE MILLS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) PURSUANT to a direction of the High Court under Section 256(2) of the Income-tax Act, 1961, the Income-tax Appellate Tribunal has referred the following question for the opinion of this court :

(2.) THE dispute was carried in appeal to the Commissioner of Income-tax (Appeals) (for short, "the C. I. T. (Appeals)"). He held that since the deposits were made in the assessee-firm by the partners before the firm started its production, the deposits aggregating to Rs. 1,43,000 could not be taken to be the income of the firm from undisclosed sources. This is how he deleted the addition.

(3.) RELIANCE on Kapur Brothers' case [1979] 118 ITR 741 (All) is misplaced, inasmuch as in that case deposits were entered in the books of the firm when it was already carrying on its business. The firm was called upon to explain the source of the deposits. The explanation of the firm was that the deposits represented the sale proceeds of certain assets belonging to the partners. When no evidence was adduced to substantiate that explanation, the assessing authority added the amount as income of the partnership-firm. These facts are materially different from the fact of the Infant case. Most striking feature of the case on hand is that all the deposits came to be made during the accounting year in the books of he assessee-firm before it started its business. Therefore, the onus was on the partners to explain the source in the case on hand and if they failed, the amount could have been added in their hands only and not in the hands of the assessee-firm.