M/s M/s Ganpati Jewellers, Gurdaspur V. The Dy Commissioner of Income Tax, Pathankot

CO 7/ASR/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6797 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-06-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 09-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M P SINGH
• Assessee Lawyers: J S BHASIN
• Keywords: Bogus purchase; Bogus Share capital; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. VIKRAM SINGH YADAV , ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER CO NO. 07/ASR/2017 ASSESSMENT YEAR:2013- 14 THE DY. CIT, CIRCLE- VI PATHANKOT [PAN: AADFG 9406H] VS. M/S GANPATI JEWELLERS, MAIN BAZAR, GURDASPUR (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J. S. BHASIN (ADV.) RESPONDENT BY: SH. M. P. SINGH (CIT DR) DATE OF HEARING: 13.06.2019 DATE OF PRONOUNCEMENT: 24.07.2019 ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS A CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE O RDER OF LD. CIT(A)-2, AMRITSAR DATED 26.07.2016 FOR A.Y. 2013-14 WHICH RELATES TO APPEAL OF THE REVENUE IN ITA NO. 530/ASR/2016. THE APPEAL OF THE REVENUE HAS SINCE BEEN DISMISSED BY THE COORDINATE BENCH V IDE ITS ORDER DATED 5.09.2018 ON ACCOUNT OF LOW TAX EFFECT IN VIEW O F CBDT INSTRUCTION NO. 3 OF 2018 DATED 11.07.2018. 2. IN ITS CROSS OBJECTION, THE LIMITED ISSUE RAISED BY THE ASSESSEE RELATES TO ADDITION OF RS. 11,90,000/- U/S 68 OF THE ACT WHICH HAS BEEN SUSTAINED BY THE LD CIT(A). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF SALE PURCHASE OF GOLD, SILVER AND CO NO. 07 /ASR/2017 (A.Y.2013-14) DCIT, CIRCLE- VI, PATHANKOT VS. M/S GANPATI J EWELLERS, GURDASPUR 2 DIAMOND JEWELLERY. DURING THE YEAR UNDER CONSIDERATIO N, THERE IS INTRODUCTION OF CAPITAL BY SH. TARSEM RAJ, THE PARTNER OF THE FIRM AMOUNTING TO RS. 64,32,220/- AND THE ASSESSEE FIRM WAS ASKED TO EXPLAI N THE SOURCE OF CAPITAL INTRODUCED BY ITS PARTNER. IN RESPONSE, THE ASSESS EE SUBMITTED THAT RS. 11,90,000/- HAS BEEN WITHDRAWN BY SH. TARSEM RAJ F ROM HIS PROPRIETARY CONCERN M/S TARSEM RAJ AND CO. AND SAME WAS TRANSFERRED TO ASSESSEE FIRM AS HIS CAPITAL CONTRIBUTION. FURTHER, AN AMOUNT OF RS. 52,42,220/- HAS BEEN CREDITED TO HIS CAPITAL ACCOUNT ON ACCOUNT OF SALE OF GOLD AND SILVER JEWELLERY. THE SUBMISSIONS SO FILED BY THE ASSESSEE WERE NOT FOUND ACCE PTABLE TO THE ASSESSING OFFICER. AS PER THE ASSESSING OFFICER, THE ASSESSEE HAS NOT SHOWN ANY INCOME FROM HIS PROPRIETARY CONCERN M/S TARSEM RAJ A ND CO. IN HIS RETURN OF INCOME. FURTHER, ON PERUSAL OF THE RESPECTIVE PAGES OF THE CASH BOOK SUBMITTED BY THE ASSESSEE, CASH AS ON 02.04.2012 SHOWN AT RS. 18,16,885/- WAS FOUND UNEXPLAINED. FURTHER, THE ASSESSI NG OFFICER DID NOT AGREE TO THE CONTENTIONS OF THE ASSESSEE FIRM REGARDING THE INTRODUCTION OF CAPITAL CORRESPONDING TO SALE OF GOLD AND SILVER JEWELLE RY TO THE FIRM HOLDING THAT THE SAME IS NATURE OF BOGUS PURCHASE BY THE FIRM AN D BOGUS SALE BY THE PARTNER. ACCORDINGLY, AN ADDITION OF RS. 64,32,220/- WAS MADE IN THE HANDS OF THE ASSESSEE FIRM TOWARDS UNEXPLAINED SHARE CAPITAL INT RODUCED IN THE CAPITAL ACCOUNT OF THE PARTNER OF THE FIRM DURING THE FINANCIAL YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS GIVEN PART RELIEF TO THE ASSESSEE IN RESPECT OF ADDITION AMOUNTING TO RS. 52,42,220/- ON ACCOUNT OF INTRODUCTIO N OF CAPITAL BY SALE OF GOLD AND SILVER JEWELLERY AND BALANCE ADDITION OF RS 1 1,90,000 HAS BEEN SUSTAINED. 5. AS PER LD. CIT(A), TO VERIFY THE WITHDRAWAL OF RS. 11,90,000/- FROM CAPITAL ACCOUNT BY THE PARTNER FROM HIS PROPRIETARY CONCE RN M/S TARSEM RAJ CO NO. 07 /ASR/2017 (A.Y.2013-14) DCIT, CIRCLE- VI, PATHANKOT VS. M/S GANPATI J EWELLERS, GURDASPUR 3 AND CO., THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO PROD UCE THE CASH BOOK OF M/S TARSEM RAJ AND CO. DURING THE ASSESSMENT PROCE EDINGS BUT THE ASSESSEE ONLY FURNISHED RESPECTIVE PAGES OF CASH BOOK ON 02.0 4.2012, 10.05.2012 AND 19.02.2013 AND NOT WHOLE OF THE CASH B OOK. FURTHER, THE ASSESSING OFFICER OBSERVED THAT CASH OF RS. 18,16,885/- AS ON 02.04.2012 WAS ALSO FOUND UNEXPLAINED. ACCORDINGLY, THE LD. CIT(A ) OBSERVED THAT SINCE THE ASSESSEE HAS FAILED TO PRODUCE THE COMPLETE CASH BOOK AN D JUSTIFY THE CASH BALANCE OF RS. 18,16,885/- AS ON 02.04.2012 AND EVE N DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS NOT REBUTTED THE SA ID OBSERVATION OF THE ASSESSING OFFICER, THE SOURCE OF RS. 11,90,000/- INTRO DUCED BY SH. TARSEM RAJ IN THE ASSESSEE FIRM REMAINED UNEXPLAINED AND THE ADDITION WAS CONFIRMED. AGGRIEVED WITH THE SAID FINDINGS OF THE LD. CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 6. DURING THE COURSE OF HEARING, THE LD. AR SUBMITTED THAT SH. TARSEM RAJ HAS WITHDRAWN AN AMOUNT OF RS. 11,90,000/- FROM H IS PROPRIETARY CONCERN M/S TARSEM RAJ AND CO. ON 02.04.2012, 10.05.201 2 AND 09.02.2013. IN SUPPORT, OUR REFERENCE WAS DRAWN TO THE COPY OF THE CAPITAL AMOUNT OF SH. TARSEM RAJ MAINTAINED WITH PROPRIETAR Y CONCERN M/S TARSEM RAJ AND CO. WHICH SHOWS WITHDRAWALS OF THESE AMOUNTS ON T HE RESPECTIVE DATES. FURTHER, OUR REFERENCE WAS DRAWN TO THE CAPITAL AMOUNT OF SH. TARSEM RAJ IN THE BOOKS OF ASSESSEE FIRM WHEREIN THE CORRESPONDIN G CREDITS HAVE BEEN SHOWN IN THE CAPITAL AMOUNT OF THE FIRM. IT WAS A CCORDINGLY SUBMITTED THAT THE SOURCE OF CAPITAL INTRODUCED IN THE ASSESSEES FIRM HAS BEEN DULY DEMONSTRATED BY WAY OF CASH WITHDRAWALS FROM THE PROPRI ETORSHIP CONCERN OF THE PARTNER WHO HAS INTRODUCED THE CAPITAL IN THE FIRM AND THE ONUS CAST ON THE ASSESSEE FIRM HAS BEEN DISCHARGED IN TERMS OF IDENTITY , CREDITWORTHINESS, AND GENUINENESS OF THE TRANSACTION. REGARDING OBSERVATIO NS OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT SHOWN INCOME FROM HIS PROP RIETORSHIP CONCERN IN HIS RETURN OF INCOME, OUR REFERENCE WAS DRAWN TO THE COMPUTATION CO NO. 07 /ASR/2017 (A.Y.2013-14) DCIT, CIRCLE- VI, PATHANKOT VS. M/S GANPATI J EWELLERS, GURDASPUR 4 OF INCOME WHEREIN THE ASSESSEE HAS SHOWN NET PROFIT OF RS. 609,513/- UNDER THE HEAD BUSINESS/PROFESSION FROM M/S TARSEM RAJ CONTRACTO R. FURTHER, THE LD. AR RELIED ON THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN CASE OF CIT VS. METACHEM INDUSTRIES [2002] 245 ITR 160 (MP) FOR THE PROPOSITION THAT WHERE THE ASSESSEE FIRM HAD SATISFACTORILY EXPLAINED THE CREDITS STANDING IN THE NAME OF THE PARTNER, THE RESPONSIBILITY OF THE ASSESSEE FIRM HAS BEEN DISCHARGED. IT WAS ACCORDINGLY SUBMITTED THAT THE ADDITI ON SO MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) SHOULD B E DELETED. 7. PER CONTRA, THE LD. DR VEHEMENTLY ARGUED THE MAT TER AND RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES. 8. HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AV AILABLE ON RECORD. IT IS A CASE WHERE CAPITAL HAS BEEN INTRODUCED BY A PARTNER MR. TARSEM RAJ IN THE ASSESSEES FIRM BY WAY OF HIS CASH CONTRIBUTIONS DURING T HE YEAR. THE ASSESSEE FIRM HAS REASONABLY DEMONSTRATED THAT THE PARTNER HAS CONTRIBUTED THE CAPITAL BY WAY OF CASH WITHDRAWALS FROM HIS SOLE PRO PRIETORSHIP CONCERN M/S TARSEM RAJ AND CO. FURTHER, MR. TARSEM RAJ HAS DULY REPORTED HIS INCOME FROM PROPRIETORSHIP CONCERN IN HIS RETURN OF INCO ME AND THE CASH WITHDRAWAL HAVE BEEN DULY REFLECTED IN THE CAPITAL ACCO UNT OF THE PROPRIETARSHIP CONCERN M/S TARSEM RAJ AND CO. THEREFORE , WE FIND THAT THE ONUS CAST ON THE ASSESSEE FIRM HAS BEEN DULY DISCHARGED IN THE INSTANT CASE AND THERE IS NO BASIS FOR THE ASSESSING OFFICER TO DOUBT T HE GENUINENESS OF THE TRANSACTION SO REPORTED BY THE ASSESSEE FIRM. IN THE R ESULT, THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DIRECTED TO BE DE LETED. IN THE RESULT, THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 24.07.2019. CO NO. 07 /ASR/2017 (A.Y.2013-14) DCIT, CIRCLE- VI, PATHANKOT VS. M/S GANPATI J EWELLERS, GURDASPUR 5 SD/- SD/- (N.K.CHOUDHRY) ( VIKRAM SINGH YADAV ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24.07.2019 GANESH KR. PS COPY OF THE ORDER FORWARDED TO: (1) M/S GANPATI JEWELLERS, GURDASPUR (2) THE DY. CIT, CIRCLE-VI, PATHANKOT (3) THE CIT(A)-2, AMRITSAR (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER CO NO. 07 /ASR/2017 (A.Y.2013-14) DCIT, CIRCLE- VI, PATHANKOT VS. M/S GANPATI J EWELLERS, GURDASPUR 6 DATE INITIAL 1 . DRAFT DICTATED ON PS/SR. PS 2. DRAFT PLACED BEFORE AUTHOR PS/SR. PS 3. DRAFT PR OPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS PS/SR. PS 6. KEPT FOR PRONOUNCEMENT ON PS/SR. PS 7. FILE SENT TO THE BENCH CLERK PS/SR. PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER