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C.I.T. versus M/S. J.G. STORES

High Court of Judicature at Allahabad

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C.I.T. v. M/S. J.G. Stores - INCOME TAX REFERENCE No. 330 of 1982 [2004] RD-AH 361 (26 July 2004)


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I.T.R. No.330 OF 1982

Commissioner of Income tax, Allahabad             ...Applicant


M/s. Jaiswal Grain Stores,

Jaunpur                                                          ...Respondent


Hon'ble R.K. Agarwal, J.

Hon'ble K.N. Ojha, J.

The Income Tax Appellate Tribunal has referred the following question of law under Section 256(1) of the Income Tax Act (herein after referred to as the Act) for opinion to this Court.

"Whether on the facts and  in  the   circumstances of  the case, the Appellate Tribunal was justified in taking the view that the deposits made by the partners on the first day of the accounting period could not be treated as the income of the assessee from unexplained sources.?"

Briefly stated the facts giving rise to the present petition are as follows.:-

The assessee, which is an Association of Persons runs a store in the name of M/s. Jaiswal Grain Stores at Jaunpur.  During the assessment proceedings for the assessment year 1976-77, the I.T.O. noticed that the three partners invested Rs.5,000/- each on 1.8.1975, the first day of the accounting period relevant to the assessment year in question.  The I.T.O. added the entire amount of Rs.15,000/- as income from undisclosed sources after finding that the statement of the partners' mother-in-law Smt. Dueja Devi was contradictory.  

The assessee being aggrieved, came up in appeal before the A.A.C.  It was explained that Rs.5,000/- each  were given by Smt. Dueja Devi to the three partners who were her daughters in-law.  The money so given was said to have been received by Smt. Dueja Devi from her husband Sankatha Prasad (who died in 1971) and kept at home.  However, the A.A.C. held that the case of the assessee was not substantiated.  He, therefore, confirmed the order of the I.T.O.

The assessee, being still aggrieved, came up in appeal before the Appellate Tribunal.  The Appellate Tribunal was of the view that since the assessee had no business prior to the assessment year in question and the deposits were made by the partners on the first day of the start of the business, the question of treating them as the unexplained income of the assessee could not arise.  The contention put forward on behalf of the assessee that the question of addition could, if at all, be considered in the hands of the individual partners, was upheld.  In this view of the matter, the addition was deleted.

We have heard Shri Govind Krishna, learned Standing Counsel for the Revenue.  Nobody has appeared on behalf of the respondent assessee.  Learned counsel for the Revenue submitted that under Section 68 of the Act, once an explanation offered by the assessee regarding the deposit has been disbelieved, the natural corollary is that it should be treated as income of the assessee of that year.  He  relied upon a Division Bench decision of this Court in the case of Commissioner of Income Tax, Lucknow Vs. Kapur Brothers (1979) 118 I.T.R. 741 and of the Hon'ble Calcutta High Court in the case of C. Kant & Company Vs. Commissioner of Income Tax, West Bengal-III, (1980) 126 I.T.R. 63.

From a perusal of the order of the Income Tax Tribunal, it does appear that the deposit of Rs.5000/- by each of the partner was made on the first day of the start of the assessee's business.  On the first day of the business, it can not be assumed by any stretch of imagination that the assessee, which is    a   firm, though   assessed    in   the   status   of  an  A.O.P.

( Association of Person ) had unexplained income of Rs.15,000/-  The decision of this Court in the case of Kapur Brothers and of the Calcutta High Court in the case of C. Kant and Co. are not applicable in the facts of the present case, in as much as in the aforementioned cases, the deposits/cash credits was made  in the middle of the year when business had already got established, unlike in the present case, when the deposits were made on the 1st day of the start of business.  The decision of this Court in the case of Kapur Brothers has been considered by this Court subsequently in the cases of India Rice Mills Vs. Commissioner of Income Tax (1996) 218 ITR 508 and Surendra Mahan Seth Vs. Commissioner of Income Tax (1996) 221 I.T.R. 239 and has been distinguished.  

In view of the foregoing discussions, we are of the considered opinion that the Tribunal had rightly deleted the addition. Accordingly, we answer the question of law referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue. Since nobody has appeared on behalf of the assessee, there shall be no order as to costs.

Dated :26/7/04



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