Sh.Sushil Kumar, Chandigarh V. The Deputy Commissioner of income Tax, Chandigarh

ITA 104/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9736 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 04-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 16-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Section: 143(3); 133A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 104/CHD/2016 (ASSESSMENT YEAR : 2011-12) SH.SUSHIL KUMAR, VS. THE D.C.I.T., SCO: 361-362, SECTOR 35, CIRCLE -4 (1), CHANDIGARH. CHANDIGARH. PAN: AEQPK7276N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 21.07.2016 DATE OF PRONOUNCEMENT : 26.07.2016 O R D E R THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, CHANDIGARH DATED 28.12.2015 FOR ASSESSMENT YEAR 2011-12 ON THE FOLLOWING GROUND S: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE AD DITION OF RS.37.50,000/- MADE IN RESPECT OF THE CASH DEPOS ITS WHICH IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS FAILED TO APPRECIATE THAT THE AMOUNT DEPOSITED IN TH E BANK ACCOUNT OF THE ASSESSEE WAS THE SU RRENDERED 2 AMOUNT OF THE FIRM M/S BHARAT DISTRIBUTORS OF WHICH THE ASSESSEE WAS THE PARTNER. 3. THAT UPHOLDING OF THE ADDITION HAS LED TO DOUBL E ADDITION OF THE SAME SURRENDERED AMOUNT ONCE IN THE HANDS OF T HE FIRM AND THEN IN THE HANDS OF THE ASSESSEE WHICH IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 4. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME T AX (APPEALS) IS ERRONEOUS, ARBITRARY, OPPOSED TO LAW AND FACTS OF THE CASE AND IS, THUS, UNTENABLE. 2. BRIEF FACTS ON THE ISSUE ARE THAT A SURVEY UNDE R SECTION 133A OF THE ACT, WAS CONDUCTED AT THE BUSIN ESS PREMISES OF THE FIRM M/S BHARAT DISTRIBUTORS ON 19.10.2010. THE ASSESSEE IS ONE OF THE PARTNERS IN M/S BHARAT DISTRIBUTORS, WHICH IS DOING BUSINESS OF TRA DING IN KITCHENWARE AND KITCHEN APPLIANCES, METAL GOODS AND CROCKERY ETC. DURING THE COURSE OF SURVEY, DISCREP ANCIES IN STOCK, CASH ETC. WERE DETECTED AND TO COVER UP THESE DISCREPANCIES, THE PARTNERS MADE DISCLOSE R OF RS.75 LACS (RS. 9 LACS EXCESS CASH, RS.10 LACS EXCE SS STOCK AND RS.56 LACS ADVANCE RECEIVABLE) IN THE HAN DS OF THE FIRM I.E. M/S BHARAT DISTRIBUTORS. THE ASSESSIN G OFFICER NOTED THAT THERE ARE CASH DEPOSITS IN THE B ANK ACCOUNT OF THE ASSESSEE ON VARIOUS DATES TOTALING T O RS.38 LACS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF THE CASH DEPOSITS. THE ASSESSEE EXPL AINED THAT THE CASH WERE DEPOSITED IN HIS BANK ACCOUNT O UT OF THE INCOME SURRENDERED AT THE TIME OF SURVEY. THE 3 ASSESSING OFFICER WAS NOT SATISFIED WITH THIS EXPLA NATION AS THE SURRENDER OF RS.75 LACS WAS MADE BY THE ASSE SSEE IN HIS CAPACITY AS PARTNER IN THE HANDS OF THE FIRM M/S BHARAT DISTRIBUTORS AND THE ENTIRE AMOUNT HAS BEEN OFFERED FOR TAXATION IN THE HANDS OF THE FIRM. THE ASSESSING OFFICER FURTHER NOTED THAT NO NEXUS HAS B EEN PROVED BY THE ASSESSEE OF THE SURRENDERED INCOME WI TH THE CASH DEPOSITS IN HIS BANK ACCOUNT. THE IDENTITY OF THE PERSONS FROM WHOM CASH RECEIVED OR THE GENUINENESS OF THE TRANSACTION WERE NOT PROVED. THEREFORE ASSESSIN G OFFICER ADDED RS.37,50,000/- OUT OF THE TOTAL CASH DEPOSIT AS AN UNEXPLAINED INCOME UNDER SECTION 69/69B OF T HE ACT. 3. THE ASSESSEE FILED WRITTEN SUBMISSION BEFORE TH E LEARNED CIT (APPEALS), WHICH READS AS UNDER : WHILE FRAMING ASSESSMENT OF SH. SUSHIL KUMAR KANS AL PARTNER M/S BHARAT DISTRIBUTORS IT WAS EXPLAINED DURING THE ASS ESSMENT PROCEEDINGS IT WAS EXPLAINED DURING THE ASSESSMENT PROCEEDINGS THAT THE AMOUNT OF RS. 37,50,000/- WHICH FORMS PART OF T HE SURRENDERED CASH AMOUNT PERTAINING TO FIRM M/S BHARAT DISTRIBUT ORS WAS FIRST DEPOSITED IN THE PARTNERS' INDIVIDUAL BANK ACCOUNT BEING MAINTAINED IN THE CANARA BANK AND THEREAFTER SAME AMOUNTS WERE TRANSFERRED TO FIRMS ACCOUNTS BY WAY OF AMOUNTS PAYEE CHEQUES. THE DETAILS OF CASH DEPOSIT IN BANK ACCOUNTS OF SH. SUSHIL KUMAR AND TH EREAFTER TRANSFER OF THE SAME AMOUNTS IN FIRM'S ACCOUNT BY WAY OF CHE QUES FURNISHED DURING ASSESSMENT PROCEEDINGS ARE REITERATED AS UND ER:- DATE OF DEPOSIT IN PARTNER'S ACCOUNT AMOUNTS DATE OF DEPOSIT IN FIRM'S ACCOUNT AMOUNT 4 16/11/2010 500000 20/11/2010 CHEQUE NO. 750753 500000 15/12/2010 300000 16/12/2010 400000 18/12/2010 17/12/2010 250000 (CHEQUE NO. 750755) 950000 08/12/2010 300000 08/02/2011 (CHEQUE NO. 750756) 325000 11/02/2011 475000 12/02/2011 12/02/2011 475000 (CHEQUE NO. 750757) 950000 16/03/2011 450000 18/03/2011 18/03/2011 450000 (CHEQUE NO. 750760) 900000 29/03/2011 100000 29/03/2011 (CHEQUE NO. 294671) 75000 30/03/2011 100000 29/03/201 1 (CHEQUE NO. 294672) 125000 TOTAL 3800000 382500 COPY OF THE BANK ACCOUNT STATEMENT OF THE FIRM IS A/SO ENCLOSED WHEREIN AMOUNTS TRANSFERRED BY SH. SUSHIL KUMAR PAR TNER HAVE BEEN CONSIDERED TOWARDS SURRENDERED INCOME OF THE FIRM. BESIDE ABOVE AMOUNTS RS. 13,50,000/- AND RS. 9,00,0 00/- WERE DIRECTLY DEPOSITED CASH IN THE FIRM'S ACCOUNT TOWARDS ADVANC E PAYMENT OF TAX ON 14-12-2010 AND 14-03-2011 RESPECTIVELY. -THE LD. DY. COMMISSIONER HAS MADE ADDI TIONS UNDER THE VIEW THAT THE SURRENDER IF ANY WAS MADE BY THE AS SESSEE AS PARTNER AND NOT IN HIS INDIVIDUAL CAPACITY AND MOREOVER THE SURRENDER WAS MADE IN THE HANDS OF THE FIRM'S M/S BHARAT DISTRIBU TORS AS PER THE SURRENDER LETTER DATED 19/10/2010 SIGNED BY SH. SUS HIL KUMAR IN THE CAPACITY OF PARTNER M/S BHARAT DISTRIBUTORS. -IT IS RESPECTFULLY SUBMITTED THAT THE MAIN ISSUE I S THAT PARTNER HAS FIRST DEPOSITED THE CASH IN HIS INDIVIDUAL ACCOUNT ON BEHALF OF THE FIRM BEING PARTNER OF THE FIRM, AND THEREAFTER THE SAME AMOUNT HAVE BEEN TRANSFERRED TO THE FIRMS ACCOUNTS BY WAY OF A/ C PAYEE CHEQUES. FURTHER THE SAME AMOUNTS HAVE NOT BEEN DISPUTED IN FIRM'S ACCOUNT AND HAVE BEEN DULY ACCEPTED AS THE SURRENDERED INCOME OF THE FIRM. 5 THERE CANNOT BE ANY SITUATION WHERE SAME AMOUNTS DE POSITED SHOULD BE CONSIDERED AS INCOME TWICE I.E. ONCE IN THE HANDS OF PARTNER AND THEN IN THE HANDS OF THE FIRM. THE FIRM HAS ALREADY PAID DUE TAXES ON THE SAME AMO UNTS CONSIDERED AS INCOME OF FIRM. SAME AMOUNTS ON WHICH TAX HAS BE EN PAID BY THE FIRM CANNOT BE CONSIDERED AS INCOME OF ASSESSEE SH. SUSHIL KUMAR ONLY BECAUSE THE FIRM'S SURRENDERED INCOME HA S BEEN ENROUTED THROUGH PARTNER'S INDIVIDUAL ACCOUNT. AS PER THE SECTION 18 OF THE PARTNERSHIP ACT READS; SUBJECT TO PROVISION OF THIS ACT, A PARTNER IS THE AGENT OF THE FIRM FOR THE PURPOSE OF BUSINESS OF FIRM. THEREFORE, SH SUSHILL KUMAR IS ALSO THE AGENT OF TH E FIRM M/S BHARAT DISTRIBUTORS. ALL ACTS DONE BY THE PARTNER ARE CONSIDERED AS ACTS DONE ON BEHALF OF THE FIRM. PAYMENT OF ADVANCE TAX OF RS. 22 LAKH DEPOSITED CASH BY THE PARTNER THE APPELLANT AS AGENT OF THE FIRM HAS BEEN DULY ACCEPTED IN THE ACCOUNT OF T HE FIRM. THE STATUS OF THIS PAYMENT IS NOT DIFFERENT FROM THE IM PUGNED PAYMENT OF RS.37,50,000/-. 4. THE LEARNED CIT (APPEALS), HOWEVER, DISMISSED THE APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 5 .3 ARE AS UNDER : THE SUBMISSION OF THE APPELLANT HAVE BEEN CONSIDER ED CAREFULLY. THE PLEA OF THE ASSESSEE THAT RS 37,50, 000/- IS OUT OF THE SURRENDERED AMOUNT CANNOT BE ACCEPTED AS THERE WAS NO SURRENDER IN THE HANDS OF THE APPELLANT. IT CANNOT ALSO BE A CCEPTED THAT PARTNER IS THE AGENT OF THE FIRM AND THEREFORE THE CASH WAS DEPOSITED IN THE INDIVIDUAL BANK ACCOUNT OF THE PARTNER AS TH E PARTNER AND THE FIRM ARE TWO DIFFERENT TAXABLE ENTITIES UNDER THE A CT. THE CONTENTION OF THE ASSESSEE THAT TAXING OF THIS AMOUNT AT THE HAND S OF THE PARTNER (APPELLANT) WOULD AMOUNT TO DOUBLE TAXATION IS NOT CORRECT AS THE APPELLANT FAILED TO ESTABLISHED THE NATURE AND SOUR CE OF CASH 6 DEPOSITS IN THE INDIVIDUAL BANK ACCOUNT AND THEREFO RE IT CANNOT BE ACCEPTED THAT IT IS THE MONEY BELONGING TO THE FIRM OUT OF THE DISCLOSER MADE IN THE HANDS OF THE FIRM. AS PER THE APPELLANT SUBMISSION THAT CASH OF RS 37,50,000/- WERE DEPOSITED IN THE INDIVI DUAL BANK ACCOUNT AND RS.13,15,000/- AND 9,00,000/- CASH WERE DEPOSIT ED IN THE FIRM'S BANK ACCOUNT FOR ADVANCE PAYMENT OF TAX IS ALSO CON TRADICTORY TO THE STAND TAKEN BY THE APPELLANT. AS PER THE ARGUMENT O F THE APPELLANT IF THIS CASH IS OUT OF THE DISCLOSER MADE AND BELON GING TO THE FIRM THEN WHY THE PART AMOUNT WAS DEPOSITED IN THE BANK ACCOU NT OF THE FIRM AND PART IN THE INDIVIDUAL BANK ACCOUNT OF THE PARTNER. THE ASSESSING OFFICER ASKED THE APPELLANT TO PROVE THE NEXUS OF C ASH DEPOSITED WITH THE AMOUNT DECLARED AT THE TIME OF SURVEY AND ALSO TO PROVE THE IDENTITY AND THE GENUINENESS OF THE TRANSACTION. AP PELLANT FAILED TO FURNISH EVEN THE NAMES AND ADDRESSES OF THE PERSONS FROM WHOM CASH RECEIVED AGAINST REPAYMENT OF ADVANCES, THE MO DE OF PAYMENT OF SUCH ADVANCES AND THE DATE ON WHICH THESE WERE R ECEIVED BACK. NO SUCH DETAILS WERE FURNISHED AND THE APPELLANT IS INSISTING THAT THE CASH DEPOSITS BE ACCEPTED AS BELONGING TO THE FIRM AND NOT TAXABLE IN THE HANDS OF THE ASSESSEE. IT IS HELD TH AT AO HAS RIGHTLY MADE THESE DEPOSITS ASSESSED IN THE HANDS OF THE AP PELLANT AS AN UNEXPLAINED INCOME. THE GROUNDS OF APPEAL NO. 1,2,3 & 4 TAKEN BY THE APPELLANT ARE THEREFORE DISMISSED. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, I AM O F THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION A T THE LEVEL OF THE ASSESSING OFFICER. THE ASSESSEE IS A PARTNER IN M/S BHARAT DISTRIBUTORS, IN WHICH THE FIRM HAS SURRENDERED RS.75 LACS. THE SURVEY HAD BEEN CONDUC TED ON 19.10.2010 AND AS PER THE EXPLANATION OF THE ASS ESSEE, THE AMOUNT IN QUESTION WAS FIRST DEPOSITED IN THE B ANK ACCOUNT OF THE ASSESSEE INDIVIDUAL AND THEREAFTER TRANSFERRED TO THE FIRM, IN WHICH CASE SURRENDER OF RS.75 LACS WAS MADE. THE CHART REPRODUCED ABOVE, WOULD C LEARLY 7 SHOW THAT THE AMOUNT IN QUESTION WAS DEPOSITED IN T HE ACCOUNT OF THE ASSESSEE FROM WHERE THE SAME AMOUNT WAS TRANSFERRED TO THE FIRM IN WHOSE CASE SURRENDER WAS MADE. THE AUTHORITIES BELOW, THEREFORE, WERE NOT JUSTIFIE D IN HOLDING THAT THE ASSESSEE HAS FAILED TO PROVE THE N EXUS WITH THE CASH DEPOSITS IN HIS BANK ACCOUNT. THE LE ARNED COUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE ASSES SMENT ORDER PASSED IN THE CASE OF M/S BHARAT DISTRIBUTOR S FOR ASSESSMENT YEAR 2011-12 DATED 10.1.2014 UNDER SECTI ON 143(3) OF THE INCOME TAX ACT, WHICH IS PASSED BY TH E SAME ASSESSING OFFICER ACCEPTING THE SURRENDER OF RS.75 LACS. THE ASSESSING OFFICER IS SAME IN THE CASE OF THE F IRM AS WELL AS OF THE PRESENT ASSESSEE. IF THE ASSESSING OFFICER HAD ANY DOUBT ABOUT THE EXPLANATION OF THE ASSESSEE , HE COULD HAVE VERIFIED THIS FACT FROM THE RECORD OF M/ S BHARAT DISTRIBUTORS. THE EXPLANATION OF THE ASSESSEE IS SUPPORTED BY THE FACT THAT NO SURRENDER WAS OFFERED IN THE CASE OF THE ASSESSEE INDIVIDUAL. THEREFORE, WHEN THE AMOUNT WAS DEPOSITED IN THE ACCOUNT OF THE ASSESSEE INDIVIDUAL AND THEN TRANSFERRED TO THE FIRM WHERE A MOUNT OF RS.75 LACS HAVE BEEN SURRENDERED, WOULD CLEARLY SHOW THAT THE AMOUNT OF SURRENDER WAS INITIALLY DEPOSITE D IN THE ACCOUNT OF THE ASSESSEE, WHICH WAS LATER ON TRANSFERRED TO THE FIRM. THE AUTHORITIES BELOW HAV E NOT APPRECIATED THIS VITAL POINT WHILE DECIDING THE MAT TER IN ISSUE. IT IS WELL SETTLED LAW THAT THE INCOME TAX AUTHORITIES SHALL HAVE TO CONSIDER THE MATERIAL BEF ORE THEM BY APPLYING THE TEST OF HUMAN PROBABILITY AFTE R 8 CONSIDERING THE SURROUNDING CIRCUMSTANCES. THE EXPLANATION OF THE ASSESSEE IS DISBELIEVED WITHOUT ANY VALID REASON, OTHERWISE IT WOULD AMOUNT TO DOUBLE ADDITION IN THE CASE OF THE ASSESSEE. IN THIS VIE W OF THE MATTER, I SET SIDE THE ORDERS OF THE AUTHORITIES BE LOW AND RESTORE THE MATTER IN ISSUE TO THE FILE OF THE ASSE SSING OFFICER WITH DIRECTION TO REDECIDE THE ISSUE IN ACC ORDANCE WITH LAW AFTER GIVING REASONABLE SUFFICIENT OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 26 TH JULY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH