V.K.SINGHAL, J. - (1.) THE Tribunal, Jaipur Bench, Jaipur, has referred the following question of law arising out of its order dt. 19th Sept., 1981, in respect of the asst. year 1977 78 under S. 256(1) of the IT Act, 1961 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the cash credits of Rs. 11,502 in the account of Shri Kishorilal, one of the partners, could not be assessed in the hands of the firm and in deleting the same ?"
(2.) THE brief facts of the case are that during the course of assessment proceedings, the ITO recognised the capital account of Kishorilal, one of the partners of the firm, and it was found that a sum of Rs. 11,502 was credited in his account in the books of the firm. A notice was issued to the firm and in response to such notice it was stated that the investment has been made by the partner which is out of the recoveries made from money lending business carried on by Kishorilal and such income has been declared to the extent of Rs. 5,329 in the accounting year in his individual return and the balance amount of Rs. 6,172 is the sale proceeds of groundnut on the agricultural land of Shri Kishorilal, and such income has also been declared in his individual return. The information was called for from the circle where the assessment of Kishorilal was made and it was found that he has not filed any return for the asst. year 1977 78 and, therefore, the ITO came to the conclusion that the income is of the firm which has been shown as deposit in the hands of the partner. The ITO concluded that the sum of Rs. 11,502 is the assessee's income as "income from undisclosed sources". An appeal was preferred against the order of the ITO to the CIT(A) and counsel for the assessee was unable to furnish the details showing the name of the person from whom the recovery was alleged to have been made by Shri Kishorilal. No evidence with regard to the sufficient surplus amount from agricultural income to the extent of the net saving of the amount of Rs. 6,172 was furnished. Since the deposits were in the books of the firm, the CIT(A) came to the conclusion that the income has rightly been added in the hands of the assessee firm. In the second appeal before the Tribunal, the matter was not considered on the merits and on the legal point that in a case where any cash credit is found in the account of the partner in the books of a firm and the assessee is unable to give any satisfactory explanation, the income cannot be assessed in the hands of the firm.
(3.) THE submission of learned standing counsel for the Department is that since the entry was in the books of account of the firm and, therefore, the assessment has to be made in accordance with the provisions of S. 68 in the hands of the firm.;