Law:

Section:

Section 143 of the Income-tax Act, 1961 - Assessment - Additions to income - Assessment years 1940-41 and 1941-42 - During relevant accounting years, partners of assessee-firm brought in certain amounts by means of bank drafts - Tribunal found that those amounts were brought in by partners from their native place but no adequate explanation was forthcoming from persons themselves as to where those moneys came from - Accordingly, Tribunal treated those amounts as undisclosed profits of firm itself - Whether assessee-firm had discharged burden which was upon it to explain credit entries by satisfying department that those entries represented genuine remittances and it was not for firm which was being assessed to satisfy department that moneys which it received from partners were moneys which partners obtained by honest means - Held, yes - Whether, therefore, there were no materials on which department could have come to conclusion that those credits represented undisclosed profits of firm - Held, yes FACTS During the accounting years relevant to the assessment years 1940-41 and 1941-42 certain amounts were brought in by the partners of the assessee-firm. The partners were called upon to explain how those moneys were available to them and how they managed to get those moneys to the credit of the assessee-firm, and Tribunal's finding was that no satisfactory explanation was vouchsafed by any of these partners. All that they said was that the firm had suffered losses and, therefore, they had brought those moneys and come to the help and assistance of the firm. On reference : HELD If the department was satisfied that moneys, although paid in the names of the partners or strangers, were really undisclosed profits of the firm and were not individual contributions made by partners or strangers, then it would be legitimate for the department to draw an inference that those moneys represented the undisclosed profits of the firm. But in the instant case the only finding from the Tribunal was that these moneys were brought in by the partners from their native place and that no adequate explanation was forthcoming from the persons themselves as to where these moneys came…

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