G.S.SINGHVI, J. - (1.) IN this appeal, the Revenue has sought determination of the following question of law by this Court : "Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in law in allowing the appeal of the assessee relating to the addition of Rs. 35,000 made by the AO as also confirmed by the learned CIT(A) on account of unexplained credits in the capital accounts of the partners appearing in the account books of the assessee in the asst. year 1989 90, holding that the amount of such cash credits cannot be assessed as the income of the assessee under S. 68 but may be assessed in their individual hands as their unexplained investments if permissible under s. 69 of the IT Act, 1961 ?"
(2.) A perusal of the record shows that the assessee is a partnership concern comprising the following partners : It is engaged in the manufacture and transmission of line material which is sold to the State Electricity Boards. It filed a return under S. 139(1) of the IT Act, 1961 (for short "the Act"), declaring a total income of Rs. 67,730 for the asst. year 1989 90. Vide order dt. 28th March, 1990, passed under S. 143(3), the AO assessed its income at Rs. 1,32,331 and also issued penalty notice under S. 271(1)(c) of the Act. The appeal filed by the assessee was partly allowed by the CIT(A), Jalandhar [for short "the CIT(A)"], and its income was reduced to Rs. 1,10,331. In the second appeal filed by the assessee, the Tribunal, Amritsar Bench, Amritsar (for short, "the Tribunal"), further reduced the income of the assessee by deleting the additions of Rs. 35,000. Shri R.P. Sawhney argued that the Tribunal has gravely erred in deleting" the additions of Rs. 35,000 shown as credits in the accounts of six partners, namely, Smt. Dhan Raj, S/Sh. Sampuran Singh, Harmail Singh, Manohar Singh, Hari Singh and Gurdev Singh, because no tangible explanation had been offered by the assessee in respect of those credits. Learned counsel further argued that the view taken by the Tribunal is contrary to the decision of this Court in Smt. Shanta Devi vs. CIT (1988) 68 CTR (P&H) 52 : (1988) 171 ITR 532 (P&H) : TC 42R.1125 and, therefore, the question sought by the Revenue may be framed and decided by this Court.
(3.) WE have thoughtfully considered the arguments of learned counsel. While dealing with the issue Per cent Per cent (i) Sh. Gurbax Singh 10 (vii) Sh. Sampuran Singh 5 (ii) Smt. Jas Kaur 10 (viii) Smt. Gurmit Kaur 10 (iii) Sh. T. R. Batra 10 (ix) Sh. Harmail Singh 5 (iv) Smt. Dhan Raj 5 (x) Sh. Mahohar Singh 5 (v) Sh. Surinder Singh 20 (xi) Sh. Hari Singh 5 (vi) Sh. Baksha Singh 10 (xii) Sh. Gurdev Singh 5 relating to the credits shown in the names of six partners, the Tribunal referred to the provisions of s. 68 of the Act and observed as under : "11. In our opinion, for establishing the genuineness of cash credits the assessee is required to prove the following ingredients : (1) Proof of identity of his creditors ; (2) Capacity of creditors to advance money ; (3) Genuineness of the transaction. It means that the assessee's duty to prove that an unexplained entry in his account books does not represent his undisclosed income is not discharged by merely showing : (a) that the entry appears in the account of third party, and (b) that the party in whose name the amount is credited is not a fictitious party but a real party, (c) the assessee is further required to prove that the entry made in the account books is a genuine entry. Counsel has argued that Sh. Sampuran Singh is the father of S. Harmail Singh and Manohar Singh. He is a retired captain from the Army. The assessee produced before the ITO his statement and also jamabandi in proof of his owning nine acres of agricultural land. The assessee has also produced J. Forms in proof that Sampuran Singh has sold paddy to Jaswant Singh and Sons for Rs. 30,000 and has received payment in cash on the date of sale of paddy as mentioned on the J. Form. Over and above this Sampuran Singh has been getting pension and since his sons are out of India, he is living alone. Besides this he has sold the crops on the spot as well as to some other persons. So he was very much competent and in the capacity of making an investment of Rs. 30,000 in the name of his sons as well as in his own name. The ITO has added back Rs. 15,000 which is wrong and the same should be deleted. It is not out of place to mention that Sh. Sampuran Singh, Shri Harmail Singh and Manohar Singh has also introduced cash in the year, 1981, which is standing accepted, so they can be said to be in the capacity to introduce this minor amount of Rs. 10,000 in the year 1988, has also filed copies of the capital accounts of S/Shri Sampuran Singh, Harmail Singh and Manohar Singh." The Tribunal then proceeded to deal with the individual credits and recorded its findings in the following words : "13. Now, before us, the uncontroverted facts are that Shri Sampuran Singh has retired from the Army as captain and drawing some pension. However, the assessee has not filed any record of this monthly pension or any bank pass book to reveal his monthly pension or monthly savings from his pension. Shri Sampuran Singh is also alleged to be owning nine acres of agricultural land but again we find that we are deprived from his earning monthly or yearly savings from the agricultural income as no record of savings has been maintained by him. May be that through the records he is able to show that he sold paddy worth Rs. 30,000 and received cash in lieu of the same but he was further required to prove through the evidence that it was this very particular amount of Rs. 30,000 which was available to him from the sale of paddy which he had introduced in the assessee firm as cash amount of Rs. 10,000 each (total Rs. 30,000) in the assessee firm in his own name as well as in the names of his two sons. ;