Rajes Kumar, J. :- This is an ap­peal filed by the Commissioner of Income Tax-1, Agra under Section 260-A of the Income Tax Act, 1961 relating to the assessment year 1999-2000. The following Substantial Questions of Law have been raised in this appeal:- 1. Whether on the facts and in the circum­stances of the case the Tribunal is legally correct in upholding the finding of the CIT(A)-1, Agra in deleting the addition of Rs.7,74,000/- made under section 68 on ac­count of unexplained deposits in the books of the firm, by holding that action, if any, can be taken in the hands of the partners u/S. 69 of the IT Act, 1961? 2. Whether on the facts and circumstances of the case the Tribunal is legally correct in upholding the finding of the CIT (A), Agra who held that since the AO had made esti­mation of income after rejecting the books of account u/S. 145, the addition of Rs.67,104/-made u/S. 40A(3) was not called for ?" 2. The assessee is partnership firm consti­tuted to carry on the business of construction of flats and has shown nil income on the ground that no sale was made and only con­struction had been carried on. It appears that to carry on the business, the partners intro­duced the capital in the partnership firm. During the course of the assessment proceed­ings, the Assessing Authority issued the no­tice to the partnership firm to explain the capi­tal investment made by the partners. The part­nership firm filed their reply. A part from ex­plaining the source of investment, it was con­tended that the partners were Income Tax Assessees in their own right and the capital investments were made to carry on the busi­ness. It was contended that the capital intro­duced by the partners was not the income of the partnership firm in as much as no income has been earned by the partnership firm and in the case of doubt about the source of amount, necessary enquiry may be made from the part­ners. The Assessing Authority has not accepted the explanation of the assesee and made on addition of Rs.7,74,000/- towards in cash cred­its under Section 68 of the Act. However, no business income has been assessed. 3. Being aggrieved by the assessment or­der, the assessee filed the appeal before the Commissioner Income Tax (Appeal) which has been allowed and additions have been deleted. 4. However, no business income has been assessed. 3. Being aggrieved by the assessment or­der, the assessee filed the appeal before the Commissioner Income Tax (Appeal) which has been allowed and additions have been deleted. 4. Against the said order, the revenue filed an appeal before the Income Tax Appellate Tribunal, Agra Bench, Agra which has been dismissed by the impugned order. 5. Both the appellate authorities have held that the partnership firm introduced the capi­tal to carry on the business. All the partners are Income Tax Assessees and this is the first year of the business where no income has been earned by the partnership firm. It has also been observed that the proceedings un­der Section 148 of the Act have been initi­ated against the partners. On these facts, it has been held that the capital investment made by the partners cannot be treated as income of the partnership firm and accordingly the Tribunal has deleted the addition. 6. So far as the addition u/S. 40-A(3) is concerned, it has been held by the Tribunal that no profit and loss A/c has been made and no expenditure has been claimed as deduc­tion and therefore provision of Section 40-A(3) is not applicable. The Assessing Au­thority has, however, made addition of Rs, 67,104/- under Section 40-A(3) on the ground that the assessee had not produced the books of account on the presumption that some pay­ment towards expenditure must have been made in cash exceeding Rs.20,000/-. 7. We have heard Sri R.K. Upadhaya, learned counsel for the department and Sri R.R.Agrawal, learned counsel on behalf of the assessee and perused the impugned or­der. We do not find any error in the order. 8. In the case of India Rice Mills v. Com­missioner of Income Tax, reported in (1996) 218ITR 508, there was a deposit in the name of the partners in the partnership firm towards capital investment. The said deposits have been treated as undisclosed income of the partnership firm. Relying upon the Division Bench of this Court in the case of CIT v. Kapoor Brothers, reported in (1979) 118 ITR 741 (All), the Tribunal has confirmed the addition in the case of partnership firm. The said deposits have been treated as undisclosed income of the partnership firm. Relying upon the Division Bench of this Court in the case of CIT v. Kapoor Brothers, reported in (1979) 118 ITR 741 (All), the Tribunal has confirmed the addition in the case of partnership firm. In the reference, at the instance of the assessee, this Court has held that the addition was not justified mainly on the ground that the year under consideration was the first year of the business and the business has not been com­menced when the deposits were made. This Court has held as follows:- "On the facts and the circumstances of this case, we are of the considered view that the Tribunal has fallen into serious error. The Tribunal should have taken note of the fact that all the deposits aggregating to Rs. 1,43,000 represented the capital contribu­tion of the partners in the firm and they were made before the firm started its business. It was for the partners to explain the source of the deposits and if they failed to discharge the onus, then such deposits could be added in the hands of the partners only. The Tribu­nal erroneously came to the conclusion that the deposits represented the undisclosed in­come of the assessee-firm. The approach of the Commissioner of Income-tax (Appeal) in this case seems to be correct who clearly held that unexplained deposits in no case, could be the income of the assessee-firm because the firm started its business only after the credits had been made in its books. Reliance on Kapoor Brothers' case (1979) 118 ITR 741 (All) is mis-placed, inasmuch as in that case deposits were entered in the books of the firm when it was already carry­ing on its business. The firm was called upon to explain the source of the deposits. The ex­planation of the firm was that the deposits represented the sale proceeds of certain as­sets belonging to the partners. When no evi­dence was adduced to substantiate that ex­planation, the assessing authority added the amount as income of the partnership-firm. These facts are materially different from the fact of the instant case. Most striking feature of the case on hand is that all the deposits came to be made during the accounting year in the books of the assessee-firm before it started its business. These facts are materially different from the fact of the instant case. Most striking feature of the case on hand is that all the deposits came to be made during the accounting year in the books of the assessee-firm before it started its business. Therefore, the onus was on the partners to explain the source in the case on hand and if they failed, the amount could have been added in their hands only and not in the hands of the assessee-firm." 9. In the present case also, the deposits in the name of partners were before the com­mencement of business. No sale was made and no in come had been earned. The Assess­ing Authority itself has not estimated any business income. Therefore, Tribunal was right in deleting the additions. 10. We also agree with the view taken by the Tribunal in respect of the addition under Section 40-A(3) of the Act. Section 40-A(3) of the Act reads as follows:- Section 40-A(3)- "Where the assessee in­curs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in re­spect of such expenditure." 11. Perusal of Section 40-A(3) shows that it contemplates disallowance of the deduc­tion in case the payment towards expenditure is made in cash exceeding Rs.20,000/-. If no deduction is made, the question of disallow­ance does not arise. 12. In the present case, the Tribunal found that no profit and loss account has been worked out and no deduction has been claimed towards expenditure, the provisions of Section 40-A(3) of the Act does not apply. 13. We do not see any error in the view taken by the Tribunal. The findings of the Tribunal are based on material on record and are finding of facts. 14. Under these circumstances, we are of the opinion that no substantial question of law is involved which requires consideration by this Court. 15. The appeal is accordingly, dismissed. Appeal dismissed.