In case the AO have any doubt about the creditworthiness of individual than he can verified from his personal IT file

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
The AO was not satisfied about the source of the money introduced as capital. He, therefore, added the same to income. During the remand proceedings, the appellant produced all the five partners before the AO for examination. One partner had expired for which a death certificate was filed. The AO recorded their statements herein they affirmed having introduced their capital as above. They are all Income-tax assessees and they filed acknowledgements of their Income-tax returns for A.Y. 2003-04. All the six partners are agriculturists. They produced evidence of owning agricultural land, which has not been disputed. The AO's only doubt is about their capacity to have the money introduced as capital. In view of partner’s affirmations before the AO and the fact of their being engaged in agricultural operations for years, their living standards not warranting substantial expenditure, in my considered view, the amounts varying between 1,80,000/- to Rs.2,30,000/- by each one of them can be believed to have been contributed from their earnings. In any case it is seen that the partnership was constituted on 12.3.2002 and F.Y. 2002-03 was the first year of the business of the firm and all the partners have contributed the initial capital to commence the business and by no means it can be assumed that the appellant firm could have earned that amount even before the commencement of business so as to warrant assessment in its hand u/s 68. This also finds support from the pronouncement of the Hon'ble Supreme Court in the case of Noorjahan (Smt.P.K.), 237 ITR 570. Considering this and the fact that the appellant has declared income @5% (approx), no further addition in the hands of the appellant is justifiably warranted. The addition is deleted. Ground is allowed.

Citation :
Assistant Commissioner of Income Tax,Circle, Bulandshahr.(Appellant) Vs.M/s Kiran Pal Singh, Liquor Shop, Chhatri,District Bulandshahr. PAN : AAGFK6470Q.(Respondent)