M.M. Kumar, J. - (1.) THE revenue has approached this Court by challenging order dated 16 -12 -1997 passed by the Income Tax Appellate Tribunal, Amristsar Bench, Amritsar (for brevity 'the Tribunal') in ITA No. 312(ASR)/ 1991 in respect of assessment year 1989 -1990. The revenue succeeded in persuading the Tribunal to refer the following question of law under Section 256(1) of the Income Tax Act, 1961 (for brevity 'the Act') for the opinion of this Court: Whether, on the facts and circumstances of the case, the Ld. ITAT was right in law to hold that the addition to the capital of the partner is not cash credit in the books of accounts of the firm but is cash credit in the case of the partner?
(2.) FACTS as emerge from the statement of the case are that M/s Kulwant Industries, Jalandhar ( to be referred as 'assessee') is a partnership firm, which has four partners. The assessee firm drives its income from manufacture and sale of oil Engine parts. It filed its return on 25 -08 -1989 declaring an income of Rs.1,00,040/ -and the assessment was completed by the Assessing Officer vide order dated 29 -11 -1989 under Section 143(3) of the Act. One of the partners Sh.Jaswinder Singh, who enjoyed 15% of the share in the assessee firm was asked to explain the credits, which appeared in his capital account amounting to Rs.25,000/ -., which he claimed as gift by Non -Resident Indian. The Assessing Officer made an addition of Rs.25,000/ -by treating the same as un -explained income credited in the capital account of Sh. Jaswinder Singh -partner. The assessee firm challenged the order of assessment before the Commissioner of Income Tax (Appeal), Jalandhar, who vide his order dated 13 -12 -1990 deleted the addition of Rs.25,000/ -by upholding the other additions. In the appeal filed by the revenue, the order of the CIT(A) was challenged on account of deletion of Rs.25,000/ -, which was added by the Assessing Officer by treating the same as un -explained credit. However, the Tribunal upheld the view taken by CIT(A) with regard to deleting the amount of Rs.25,000/ -in respect of Sh. Jaswinder Singh. The view of the Tribunal is discernible from para 6 of its order, which reads as under: The gifts have not been accepted because there is no direct relationship between donor and donee and there is no occasion for making gifts in question. The gifts have also been taken as genuine because the donee has not given gift to his own relations. The A.O. & the CIT (A) has taken into account circumstantial evidence as well as preponderance evidence into consideration. However, the authorities below have not denied the existence of NRE account maintained by the donor. The remittence of NRE A/C will come only from foreign earnings. The account is treated as genuine as no defect or non -existence of A/C is mentioned in the finding of the A.O. The donor is also identified and the payment has been made by way of gift and as such payment is made through the cheque. The basic ingredients of cash credit is source of money and income and genuiness of the transaction. If the source is clearly and categorically explained and the amount is paid through genuine process then it is not advisable to refer to circumstantial and preponderance of the evidence. We, therefore, are of the opinion that in this case leading evidence is available on record which goes in favour of the appellant, as such it is not logical to go to the circumstantial evidence and then give a finding which will make leading evidence to look as illogical. We are of the opinion that there is no logic in treating the gifts as income of the firm.
(3.) NO one has put in appearance on behalf of the respondent despite service. After hearing the learned Counsel for the revenue, we find that the findings recorded by the Tribunal are unassailable. It has been categorically found by the Tribunal that the gift is genuine for the reason that the donor is the real maternal uncle of the donee i.e. brother of his mother. It has further been found that gift was made from the NRE account maintained by the donor and remittance in such an account could only be made from foreign earnings. The account has also been found to be genuine as per the findings recorded by the Assessing Officer which have been duly approved by the Tribunal. The identity of the donor stands established and the gift has been made by banking channel through cheque. For the aforementioned view, we place reliance on a judgment of Hon'ble the Supreme Court in the case of C.I.T. v. : [1987]165ITR36(SC) .;