M/s Varinder Singh & Other, Ludhiana V. ITO, Ludhiana

CO 14/CHANDI/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7160 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-04-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 10-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Keywords: Question of law; Corroborative evidences
• Section: 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.23/CHD/2010 (ASSESSMENT YEAR : 2001-02) THE INCOME TAX OFFICER, VS. SH.VARINDER SINGH, WARD VI(3), S/O SH.JASWANT SINGH, LUDHIANA. 318, MODEL TOWN, LUDHIANA. PAN: ACXPJ7843H ITA NO.36/CHD/2010 (ASSESSMENT YEAR : 2001-02) THE INCOME TAX OFFICER, VS. SH.VARINDER SINGH & O THERS, WARD IV(1), C/O SARA DISTRIBUTORS, 185-B, LUDHIANA. INDUSTRIAL ESTATE, LUDHIANA. PAN: - AND C.O.NO.14/CHD/2010 ARISING OUT OF ITA NO.36/CHD/2010 (ASSESSMENT YEAR : 2001-02) SH.VARINDER SINGH & OTHERS, VS. THE INCOME TAX OF FICER, C/O SARA DISTRIBUTORS, 185-B, WARD IV(1), INDUSTRIAL ESTATE, LUDHIANA. LUDHIANA. PAN: - (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK GOYAL DEPARTMENT BY : SHRI MANJEET SINGH, DR DATE OF HEARING : 11.04.2012 DATE OF PRONOUNCEMENT : 25.04.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THESE TWO APPEALS ARE BY THE REVENUE AGAINST THE S EPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, LUDH IANA DATED 2 26.10.2010 RELATING TO ASSESSMENT YEAR 2001-2002 IN THE CASE OF TWO DIFFERENT ASSESSEES I.E. SHRI VARINDER SINGH AND M/ S VARINDER SINGH & OTHERS AGAINST THE ORDER PASSED U/S 148 R.W.S. 147 AND U/S 143(3)/148 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSEE IN M/S VARINDER SINGH & OTHERS HAS FILED CROSS OBJECTION A GAINST THE APPEAL MOVED BY THE REVENUE RELATING TO ASSESSMENT YEAR 20 01-02. 2. BOTH THE APPEALS OF THE REVENUE AND THE CROSS OB JECTION FILED BY THE ASSESSEE ON SIMILAR ISSUE WERE HEARD TOGETHER A ND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONV ENIENCE. 3. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN I TA NO.23/CHD/2010 ARE AS UNDER: 1. THAT THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE BY DELETING THE ADDITION OF RS.20,60,000/- MADE BY THE AO AS UNDISCLOSED INCOME/CAPITAL INVESTMENT OF SH.VARINDER SINGH IN M/S VARINDER SINGH SADHU RAM & CO. 2. THAT THE LD. CIT(A)-II, LUDHIANA HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN ACCEPTING THE CASH CREDITS IN THE HANDS OF THE ASSESSEE WITHOUT HAVING LOOKED INTO THE IDENTITY AND CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS. 3. THAT THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE BY IGNORING THE HUMAN PROBABILITIES THAT ALL THE EIGHT ENTITIES FROM WHOM THE ASSESSEE CLAIMED TO HAVE RECEIVED RS.20,60,000 COULD NOT HAVE RESIDED AT THE SAME ADDRESS AND FILED THEIR RETURNS OF INCOME ON THE SAME DATE. 4. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE IN THE PRESENT APPEAL IS COVERED BY THE ORDER OF THE HON'BLE HIGH COURT IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2000-01 WHERE SIMILAR ISSUE WAS RAISED. 3 5. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 6. AFTER HEARING THE RIVAL CONTENTIONS AND PERUSAL OF RECORD WE FIND THAT THE ASSESSMENT IN THE CASE WAS REOPENED UNDER SECTION 147 OF THE ACT ON ACCOUNT OF SOURCE OF INVESTMENT AS CAPITAL B Y THE ASSESSEE IN THE FIRM M/S VARINDER SINGH SANDHU RAM & CO. THE ASSES SEE HAD 10% SHARE IN THE SAID PARTNERSHIP AND INVESTED RS.21.10 LACS IN CASH ON 1.4.2000. THE SOURCE OF CAPITAL CONTRIBUTION OF SUB-PARTNERSH IP FIRM FORMED BY THE ASSESSEE IN THE NAME AND STYLE OF M/S VARINDER SING H & OTHERS, LUDHIANA. AS PER THE ASSESSING OFFICER THE ACCOMMO DATION ENTRIES WERE MADE BY DIFFERENT PERSONS TOTALING RS.21.10 LACS. NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED TO THE ASSESSEE AGAINST W HICH THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME OF RS.45,98 4/-. THE ASSESSEE WAS TAKING CONTRACT OF WINE FROM THE EXCISE DEPARTM ENT. THE MODUS OPERANDI OF THE ASSESSEE WAS THAT GROUP OF PERSONS WERE TAKING CONTRACT OF WINE FROM EXCISE DEPARTMENT IN AUCTION FOR FARID KOT AND SURROUNDING AREAS. FOR THE SAID PURPOSE, THE CONTRACT WAS TAKE N ON YEARLY BASIS AND FOR EVERY YEAR THE NAME OF THE FIRM WAS GENERALLY C HANGED. THE FIRM WAS REQUIRED TO PAY 15% OF THE AUCTION AMOUNT OF SE CURITY AT THE TIME OF AWARD OF CONTRACT AND REMAINING AMOUNT WAS TO BE PA ID ON MONTHLY BASIS. THE MODUS ADOPTED FOR ARRANGING THE FUNDS W AS THAT INDIVIDUAL PARTNERS FORMED A SUB-PARTNERSHIP FIRM WITH OTHERS AND PROMISED TO SHARE WITH SUCH SUB-PARTNERS HIS SHARE OF PROFIT FROM THE MAIN CONTRACTING FIRM. THE ASSESSING OFFICER WAS OF THE VIEW THAT I N THE FIRM M/S VARINDER SINGH SANDHU RAM & CO. THERE WERE 12 PARTN ERS AND ALMOST EACH OF THEM HAD FURTHER FORMED A SUB-PARTNERSHIP F IRM WITH MANY MORE PERSONS FOR SHARING OF THEIR INDIVIDUAL SHARE IN TH E PARTNERSHIP FIRM. AS PER THE ASSESSING OFFICER SUB-PARTNERSHIP FIRMS WER E APPARENTLY 4 CONSTITUTED TO PLOUGH BACK UNACCOUNTED FUNDS IN THE BOOKS OF ACCOUNT THROUGH ACCOMMODATING ENTRIES. THE ASSESSING OFFIC ER FURTHER NOTED THAT THOUGH THE SHARE OF PROFIT RECEIVED BY INDIVID UAL PARTNERS FROM THE PARTNERSHIP FIRM WAS BEING FURTHER SHARED WITH SUB- PARTNERS, BUT PROPER INCOME TAX WAS NOT BEING PAID BEFORE SHARING IT WIT H SUB-PARTNERS. THE ASSESSING OFFICER ISSUED VARIOUS LETTERS CALLING FO R INFORMATION UNDER SECTION 133(6) OF THE ACT FROM THE RESPECTIVE PARTI ES/PERSONS FROM WHOM THE ASSESSEE HAD RECEIVED CASH AMOUNTING TO RS.20.6 0 LACS. DUE TO NON- COMPLIANCE TO THE NOTICES ISSUED TO THE SAID PARTIE S, THE ASSESSING OFFICER WAS OF THE VIEW THAT SUM OF RS.20.60 LACS W AS APPARENTLY UNDISCLOSED INCOME OF THE ASSESSEE AND ADDITION TO THE SAID EXTENT WAS MADE IN THE HANDS OF THE ASSESSEE. THE BALANCE SUM OF RS.50,000/- CONTRIBUTED BY THE ASSESSEE IN SUB-PARTNERSHIP WAS ACCEPTED BY THE ASSESSING OFFICER. THE CIT (APPEALS) NOTED THAT SI MILAR ISSUE HAD ARISEN IN ASSESSMENT YEAR 2000-01, WHEREIN ADDITION OF RS.15.50 LACS CLAIMED TO BE BROUGHT IN BY EIGHT PERSONS AS CAPITA L IN SIMILAR MANNER WAS MADE. THE CIT (APPEALS) FURTHER NOTED THAT TH E SAID ADDITION WAS DELETED IN APPEAL AND SUCH DELETION WAS CONFIRMED B Y THE TRIBUNAL IN ITA NO.692/CHD/2008 VIDE ORDER DATED 25.9.2009. ON E OF THE MAIN GROUNDS ON WHICH THE ADDITION WAS DELETED WAS THAT ALL THE PERSONS WHO HAD CONTRIBUTED THE SAID SUM OF RS.15.50 LACS WERE FOUND TO BE INCOME- TAX ASSESSEES, WHO HAD REGULARLY FILED THEIR RETURN S OF INCOME, WELL BEFORE THE INVESTIGATIONS WITH REGARD TO THE SOURCE OF AMOUNTS WERE STARTED BY THE DEPARTMENT. THE CIT (APPEALS) FURTH ER NOTED THAT DURING THE YEAR UNDER APPEAL OUT OF EIGHT PERSONS WHO HAD CONTRIBUTED SAID SUM OF RS.20.60 LCS, SEVEN WERE SAME PERSONS WHO HAD BR OUGHT IN CAPITAL IN THE SIMILAR MANNER IN ASSESSMENT YEAR 2000-01. ONL Y SMT.KARTAR KAUR, RESIDENT OF RAIKOT WAS A NEW PERSON. SHE WAS PARTN ER IN THE FIRM M/S NAAGAR SINGH TILAK RAJ & CO., IN WHOSE HANDS THE IN COME AFTER APPEAL 5 EFFECT WAS ASSESSED AT RS.58,51,105/- VIDE ORDER DA TED 30.6.2004. THE SUM OF RS.5 LACS INTRODUCED BY SMT. KARTAR KAUR WAS WITHDRAWN FROM HER CAPITAL ACCOUNT IN THE PARTNERSHIP FIRM. IN VIEW T HEREOF, THE CONTRIBUTION MADE BY THE LADY WAS ACCEPTED. THE CIT (APPEALS) A LSO HELD THAT MERELY BECAUSE THE SAID PERSONS HAD NOT COMPLIED WITH THE NOTICES ISSUED UNDER SECTION 133(6) OF THE ACT ADVERSE VIEW COULD NOT BE TAKEN AGAINST THE ASSESSEE WHERE INFORMATION GIVEN BY THE ASSESSEE IN RESPECT OF THE SAID PERSONS WAS FOUND TO BE NOT FALSE. IN VIEW THEREOF , THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.20.60 LACS WAS DELETED BY THE CIT (APPEALS). 7. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT (APPEALS) AND HAS RAISED GROUND NOS. 1 TO 3. 8. WE FIND THAT SIMILAR ISSUE IN RELATION TO THE CA PITAL INVESTMENT BY THE ASSESSEE IN THE PARTNERSHIP FIRM BY WAY OF SUB- PARTNERSHIP AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2000-01. THE TRIBUNAL IN ITA NO.692/CHD/2008 VIDE ORDER DATED 25.9.2009 HAD DELETED THE SAID ADDITION HOLDING AS UNDER: 6. HAVING GIVING OUR CAREFUL CONSIDERATION TO THE RIVAL CONTENTIONS WE ARE OF THE CONSIDERED VIEW THAT THE CIT (A) WAS INDEED JUSTIFIED IN HOLDING THAT THERE IS N O MATERIAL TO ESTABLISH THAT RS.15,50,000/- RECEIVED BY THE ASSESSEE FROM PARTNERSHIP THE SUB-PARTNERSHIP F IRM CAN BE TREATED AS ASSESSEE'S UNDISCLOSED INCOME. AS WE COME TO THIS CONCLUSION, WE HAVE PARTICULARLY TAKEN NOTE OF THE FACT THAT ALL THE PARTNERS IN THE SUB- PARTNERSHIP ARE DULY ASSESSED TO TAX, THAT COPIES O F BALANCE-SHEET AND OTHER REQUISITE DETAILS ARE PLACE D ON RECORD AND THAT, DESPITE AMPLE OPPORTUNITIES, THE REVENUE AUTHORITIES HAVE NOT EVEN MADE EFFORTS TO H AVE INDEPENDENT VERIFICATION ABOUT BONA FIDES OF THESE PERSONS. THE AO IS SWAYED BY THE INPUTS RECEIVED FR OM THE INVESTIGATION WING INASMUCH AS HE DID NOT SEE E VEN THE NEED TO EXAMINING THE EVIDENCES WHICH WERE CONFRONTED TO HIM BY THE CIT (A) IN REMAND PROCEEDINGS. HE SIMPLY PROCEEDED TO BRUSH ASIDE T HE SAME AND HOLD THAT THE SUB-PARTNERS WERE BENAMIDARS OF THE ASSESSEE MERELY ON THE BASIS OF SUSPICION AN D CONJECTURES. IN OUR CONSIDERED VIEW THE ASSESSEE HA S REASONABLY EXPLAINED THE SOURCE OF INVESTMENTS IN T HE PARTNERSHIP AND GIVEN ADEQUATE SUPPORTING EVIDENCES 6 FOR THE SAME. WHILE IT IS INDEED OPEN TO THE AO TO EXAMINE THESE EVIDENCES, IT CANNOT BE OPEN TO HIM SIMPLY BRUSH THEM ASIDE ON THE BASIS OF SUSPICION A S HE HAS PROCEEDED TO DO. THE CIT (A) WAS THUS JUSTIFIED IN GIVING IMPUGNED RELIEF AND HOLD THAT THERE IS NO MATERIAL TO MAKE ADDITION ON ACCOUNT OF MONIES RECEIVED FROM THE SUB-PARTNERSHIP. WE DECLINE TO INTERFERE IN THE MATTER. 9. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN ITA N O.876 OF 2010 IN THE APPEAL FILED BY THE REVENUE AGAINST THE ORDE R OF THE TRIBUNAL DELETING THE ADDITION OF RS.15.50 LACS RELATING TO ASSESSMENT YEAR 2000- 01 CONSIDERED THE ISSUE OF THE INVESTMENT MADE BY T HE ASSESSEE AS HIS CAPITAL CONTRIBUTION IN THE PARTNERSHIP FIRM, WHICH IN TURN WAS RECEIVED FROM EIGHT DIFFERENT INDIVIDUALS, WHO WERE NOT LIVI NG AT THE ADDRESSES GIVEN BY THE ASSESSEE, OBSERVED THAT WHERE THE TRIB UNAL HAD RECORDED A FINDING THAT THE PARTNERS WERE INCOME-TAX ASSESSEES AND COPIES OF THE BALANCE SHEET AND THE REQUISITE DETAILS WERE PLACED ON RECORD. IN THE ABSENCE OF THE REVENUE REBUTTING THE CORRECTNESS OF SUCH DOCUMENTS, THE HON'BLE COURT HELD THAT THE FINDINGS RECORDED BY TH E TRIBUNAL WERE BASED UPON THE EVIDENCE LED BY THE ASSESSEE, WHICH WAS NO T REBUTTED BY THE REVENUE AND SUCH FINDINGS WERE FINDINGS OF FACT WHI CH DOES NOT GIVE RISE TO SUBSTANTIAL QUESTION OF LAW. THE APPEAL OF THE REVENUE WAS DISMISSED BY THE HON'BLE HIGH COURT. 10. IN THE FACTS OF THE PRESENT CASE BEFORE US THE TOTAL CAPITAL CONTRIBUTION BY THE ASSESSEE AGAINST HIS 10% SHARE IN THE PARTNERSHIP FIRM IS RS.21.10 LACS. A SUM OF RS.50,000/- HAS BE EN CONTRIBUTED BY THE ASSESSEE FROM HIS OWN ACCOUNT, WHICH HAS BEEN ACCEP TED BY THE ASSESSING OFFICER. THE BALANCE CONTRIBUTION OF RS. 20.60 LACS IS MADE BY OTHER EIGHT PERSONS. THE CIT (APPEALS) HAS GIVEN A FINDING THAT OUT OF THE SAID EIGHT PERSONS SEVEN PERSONS WERE SAME AS T HOSE WHO WERE PART OF THE SUB-PARTNERSHIP FIRM IN ASSESSMENT YEAR 2000 -01. THE ONLY ONE NEW PARTNER SMT.KARTAR KAUR HAD JOINED THE SUB-PART NERSHIP FIRM DURING 7 THE YEAR UNDER APPEAL. IN RESPECT OF SEVEN PERSONS WHO WERE COMMON AS IN THE PRECEDING YEAR I.E. ASSESSMENT YEAR 2000-01, THE FINDING OF THE TRIBUNAL AND THE CIT (APPEALS) IN THE EARLIER YEAR WAS THAT THEY WERE ALL ASSESSED TO TAX AND WERE FILING THEIR RESPECTIVE RE TURNS OF INCOME EVEN BEFORE THE INITIATION OF INVESTIGATION IN THE CASE OF THE ASSESSEE. SAME PERSONS HAD CONTRIBUTED TO THE SUB-PARTNERSHIP FIRM DURING THE YEAR UNDER CONSIDERATION AND FOLLOWING THE RATIO LAID DO WN BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER YEAR, WHICH IN T URN HAS BEEN UPHELD BY THE HON'BLE PUNJAB & HARYANA HIGH COURT (SUPRA), TH E CAPITAL INTRODUCED BY SUCH SEVEN PERSONS TO THE SUB-PARTNERSHIP FIRM M ERITS TO BE ACCEPTED IN ENTIRETY. THE EIGHTH SUB-PARTNER SMT.KARTAR KAU R WAS FOUND BY THE CIT (APPEALS) TO BE A PARTNER IN ANOTHER CONCERN M/ S NAAGAR SINGH TILAK RAJ & CO. THE SAID PARTNERSHIP FIRM WAS ASSESSED T O TAX WITH ACIT, CIRCLE 32(1), NEW DELHI AND THE COY OF THE ORDER PA SSED UNDER SECTION 250/143(3) DATED 30.6.2004, RELATING TO ASSESSMENT YEAR 2000-01 DETERMINING THE INCOME IN THE HANDS OF THE SAID CON CERN AT RS.58,51,105/-AFTER GIVING APPEAL EFFECT, HAS BEEN PLACED ON RECORD. THE SAID SMT.KARTAR KAUR HAD INTRODUCED SUM OF RS.5 LACS IN THE PARTNERSHIP FIRM, WHICH IN TURN WAS WITHDRAWN FROM HER CAPITAL ACCOUNT WITH M/S NAAGAR SINGH TILAK RAJ & CO. THE SAID LAD Y HAD EXPIRED AND THE INFORMATION WAS CALLED FOR FROM HER LEGAL HEIR AND WAS FILED BEFORE THE CIT (APPEALS). THE ASSESSING OFFICER HAD MADE ADDITION IN THE HANDS OF THE ASSESSEE ON THE NON-COMPLIANCE AND NON -SUBMISSION OF INFORMATION BY THE ASSESSEE IN RESPONSE TO NOTICES ISSUED U/S 133(6) OF THE ACT. ALL THE PERSONS TO WHOM THE AFORESAID NOT ICES WERE ISSUED UNDER SECTION 133(6) OF THE ACT WERE ASSESSED TO TA X AND WERE FILING THEIR RETURNS OF INCOME. THE ADDITION MADE IN THE PRECEDING YEAR I.E. ASSESSMENT YEAR 2000-01 I.E. HAD BEEN DELETED AND U PHELD BY THE HON'BLE HIGH COURT (SUPRA) IN ASSESSEES OWN CASE. IN LINE THEREWITH WE FIND NO 8 MERIT IN THE GROUNDS OF APPEAL RAISED BY THE REVENU E AND WE UPHOLD THE ORDER OF THE CIT (APPEALS). THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS DISMISSED. 11. THE REVENUE IN ITA NO.36/CHD/2010 HAS RAISED TH E FOLLOWING GROUND OF APPEAL: 1. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.20.60 LAC MADE BY THE A.O. ON PROTECTIVE BASIS. 12. THE REVENUE IS AGGRIEVED BY THE DELETION OF PRO TECTIVE ADDITION MADE IN THE HANDS OF THE ASSESSEE FIRM AMOUNTING TO RS.20.60 LACS AS THE SUBSTANTIVE ADDITION HAS BEEN DELETED IN THE HANDS OF SHRI VARINDER SINGH. IN VIEW OF OUR ORDER IN PARAS HEREINABOVE, THE CONSEQUENT PROTECTIVE ADDITION MADE IN THE HANDS OF THE ASSESS EE FIRM HAS NO BASIS AND THE SAME IS DELETED. UPHOLDING THE ORDER OF TH E CIT (APPEALS) WE DISMISS GROUND OF APPEAL RAISED BY THE REVENUE. 13. THE ASSESSEE HAS FILED CROSS OBJECTIONS IN C.O. NO.14/CHD/2010. THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT TH E ONLY ISSUE RAISED IN THE CROSS OBJECTIONS FILED BY THE ASSESSEE WAS AGAI NST THE INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE ACT, WHICH IS NOT PRESSED. HENCE, THE CROSS OBJECTION IS DISMISSED AS NOT PRES SED. 14. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AND THE CROSS OBJECTION FILED BY ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH DAY OF APRIL, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25 TH APRIL, 2012 RATI COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 9