The High Court · 2025

M/s. Sri Durga Wines, 2211A, Kalyan Nagar Venture - lll, Borabanda Main Road, Hyderabad. ...APPellant ...Respondent AND lncome Tax Officer, Ward - 3 (5), Hyderabad. Counsel for the Appellant : Sri A V A Siva Kartikeya Counsel for the Respondent: Ms. Bokaro Sapna Reddy, Junior Standing counsel for lncome Tax The Court delivdred the following: Judgment l J _t THE HON'BLE SRT JUSTICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA INCOME 'I'A)( TRIBUNAL APPEAL No.174 of 2OO8 JUDGMENT: (pe. tlle ILn 'bLe Si Justice P. Sam Kosh!) The instant ap;real is one which has been fiIed aggrie'ved by the order dated 14.O9.'.1,OO7, in I.T.A.No.257 /Hyd/02, pass,:d by the Income Tax Appe)late Tribuna,l, Hyderabad Bench 'B', for the assessment year 19<)8-99 (for short, the ITAT').

2. Heard Mr. A.',/.A. Siva Kartikeya, learned counsel 'for the appellant and Ms. llokaro Sapna Reddy, Iearned Jlrniol Standing Counsel for Income '[ax appearing on behalf of the respondent.

3. The appeed has been filed primarily on the following srubstantial question of law, viz.. "a) Whether r.:r. the facts and circum.stances of the cose the Hon'ble 'Tnbun,tl is correct in confinning the additions mzde under Sectior. 68 on th-e ground lhe assessee has not discharge:d the onus regarding the credit tuorthittt:ss and genuineness it1' the cash credit tronsactions inuoluing th,.- 3 partners K. Lokshman Goud, Durgados Goud ond Ramachander "

4. It is a case u,tLere the Assessing Officer as also the I'IAT found that the appellant herrein has not been able to show sufficierLt material to prove the investnrent made by the partners ancl therefore the addition made under Section 68 of the Income Tax Act, 196 1, could not had been confrrmed 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.O9.2O23.In paragraph Nos. 12 to 16 of the said judgment, it has been held as under, viz.,

72. Nout the onlg question that needs to be considered at this juacture, i.s th-at, in the euent of the appellant's partnership fnn di^sclosing that it tuas the partners uho had mntibuted in tl,Le capital tLrc source of income of the partners uas to be explained bg the partners tlLem-selues and not by the finn. In the case of M.Venkateshutar Rao, supra, the Diuision Bench of this Court tn paragraph No.7 h.eld as under: "It i,s a matter of record that th-e respondent-firm comprises ten partners ond eoch of them made contibution s, be it in the fonn of cash or bank guarantees to be furnished to tLe Couentment, at the comrtencement of business. The returns submitted bg tle respondent-firm uere processed, and the facts and figures fumi.strcd bg it u.tere accepted. Houteuer, the motter uas reopened ot a later point of time. The AssessirLg Offtcer treoted the copital roised by the fln in the form of contributions made bg th.e partners as income- This conclusion was arriued at on the ground thtt source of income for tlrc partners u)os not explained. tebn4a counsel lbr tht) oppellant placed reliance upon the ju(tqment of th( Patna High Court in CIT u. AnupamUdgoll [1tt83,t 142 ITR 133 (Pot). The Tribunal restczd it:; c'ortclt s:ions upon the judgment of ttLe Bombay Higlt Oourl t NoragondasKedornath u. CIT [1952] 22 ITll 18 (Bo,n) and tLnt of the Allahabad High Cottrt i.r. OI1- tt. Jaisuol Motor Finance [1983]141 ITI ?'O15(A.rll."

73. Re:centlq, again th,e Diui"sion Bench of thLs Court in someu.iutt s,snilar case betueen M/s. Noua Med.ico.re uzrsus The Incorne l'ax Officer, decided on j5.O2.2O23, relging upon the decLsion of M.Venkateshu.tor Rao, supra, in parcLrtraph No. 15 hel,7 a.; under: ");oLlot,ting ond applying tLrc oforesoid. decisictn ol tLi.s C,nrt, Patna High Court in Anurog Rice Mills (su1';ra., held thnt in such circumstances the uizexpl t[ned cash credits Luould houe to be as.ses-sed at the lnnds of the partners of the firm ancl not the firm itself. Such omounts could not haue been b.e ated as income of the finn bg relging ttpon S<:ct'ior r5B of the Act."

74. The Hon'ble Supreme Court of India otso in the case of th_e Commis:;ic,ner of Income Tax u. Louelg Exports (p) LTD2 in a short 1uclgmertt at paragraph No.2 held as und.er: "('ant th<z amount of share maney be regardeci as urldlsclo.sed income under s. 68 of IT Act, 196 j ?, We fi.n.d nt.' merit in this Special Leaue petitin for the sirnltls ,'s,11son that if the share application money is recetuer.l bg the assessee companA Jiom alleg'edltogus sharelnlders, uthose names are qtuen to the AO, then the Department is free to proceeri to -l reopen their indiuid.uat cssessmenrs in accordance uith laut. Hence, ute find no tnfirmitg utith the impugned judgment."

75. Tte ratio laid d.otan in tlw aforesaid three d.ecisiotts clearlg indicate that if in a proceed.ing under Section 6g of th,e Act, the assesse has been abte to explain the sources of income, which in the instant co^se, the appellont hnd been stating that tLLe copttol inuestment made bg the partners of ttte soid. rtnn is sulficient to meet the requirement und.er Section 6g of tLrc Act. Thereafier, if at all, if the respond.ent Department LUas not satisfted tuith the explanation, it toos for them to haue got it uerified from the partners. Ratherthan still pursing the matter before the appetlant's partnership firm, uthich is otlrcnai-se tmpermi"ssible in the light of th.e .judgement referred. to in the preceding poragraph.s

76. In the in-stant case ctlso the appelLant houing said. that the capital inuestment is that made bg the partners. Applging the aforesaid. judicial preced.ents, th-e burd.en now shifis upon the respondent-Deportment to get it counter uerified from th.e partners from their books of accounts ascertoining tulLether such inuestments haue been mad.e or not. In the absence of such an enquiry/ ueification from the portners bg the respondent-Department, the ord.er o/ fhe.Assessjng Officer, as al.so the stand taken bg the Hon'ble ITAT uould not be sustainable and the same deserues to be and is accord.ingly set aside/ quo-shed. T'he ord.er passed. bg tLrc CIT (Appeal"s) d.ated 3 O. 06. 20 1 7 stands affinned. " 6' Since the question of raw in the instant appear and the facts arso being same, we find that the instant appeal is squarely covered by the i I i I i ) -'- (' decision rendered b'r this Honble High Court itself in I.T.1'.A.No.3O of

7. The order of the Assessing Officer, as also the stand traken by the ITAT would not be sustainable and the same deserr..e to be and are accordingly set askle / quashed. Accordingly, the present appeal stands a,llowed No :osts. 8 As a seque[, rniscellaleous petitions pending if any, shall stand closed. //TRUE COPY// Sd/- A,V.S.S.C.S.M. SARMA JOINT REGISTRAR r\ \; CTION OFFICER To, \

1. The lncome I-ax F,ppellate Tribunal, Hyderabad Bench 'B', Hyderabad 2. The Commiss;ioner of lncome Tax (Appeals)-lV, Hyderabad 3. The lncome: l-ax t)fficer, Ward - 3 (5), Hyderabad 4. One CC to Sri A v A Siva Ka(ikeya, Advocate [OPUC] 5. One CC to Ms Bckaro Sapna Reddy, Junior Standing counsel for Income Tax \ Department. IOPLTC]

6. Two CD Copies ADK/gh +P HIGH COURT DATED:121021?.025 I ) 1HE sT ( 40 PA R ZW :-) <. o s r.c ,l 'aa-" JUDGMENT ITTA.No.I74 of 2008 ALLOWING THE ITTA WITHOUT COSTS ,\ &6 \