The ITO,S.K.Ward-1, Himatnagar V. M/s. Akshar Agro Tech, Sabarkantha

ITA 1063/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5788 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Assessee Lawyers: P R SHAH
• Section: 68; 69

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : A HMEDABAD (BEFORE HON'BLE SHRI G.D. AGRAWAL, V.P. (AZ) & HON BLE SHRI T.K. SHARMA, J.M.) I.T.A. NO. 1063/AHD./2010 ASSESSMENT YEAR : 2006-2007 INCOME TAX OFFICER, S.K. WARD-1, HIMATNAGAR VS.- M/S. AKSHAR AGRO TECH, SABARKANTHA (PAN : AALFA 7455 Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. KHANDELWAL , D.R. RESPONDENT BY : SHRI P.R. SHAH O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 16.11.2009 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-VI, AHMEDABAD F OR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A FIRM ENGAGED IN THE BUSINESS OF COTTON SEEDS PROCESSING AND SEEDS PROCESSING PLANT AT VILL AGE DHAMDI, DIST. SABARKANTHA. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN O F INCOME DECLARING TOTAL INCOME AT NIL. ON VERIFICATION OF PARTNERS CAPITAL ACCOUNT FOR THE Y EAR UNDER CONSIDERATION, THE ASSESSING OFFICER OBSERVED THAT PARTNERS HAVE BROUGHT THE CAPITAL OF RS.15,62,646/- IN CASH AS UNDER :- 1 BHOGILAL N. PATEL 2,83,509/- 2 MOHANBHAI M. PATEL 1,66,754/- 3 KIRTIBHAI M. PATEL 3,12,800/- 4 HARIBHAI D.PATEL 1,66,754/- 5 KIRTIBHAI B. PATEL 3,48,508/- 6 SACHINKUMAR B. PATEL 1,17,567/- 7 JASODABEN L. PATEL 1,66,754/- TOTAL 15,62,646 IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER TREA TED THE AFORESAID CAPITAL INTRODUCTION BY THE PARTNERS OF THE ASSESSEE-FIRM THROUGH AGRICULTURAL INCOME IN THE FIRM OF PARTNERS CAPITAL ACCOUNT AMOUNTING TO RS.15,62,646/- AS UNEXPLAINED CASH CRE DIT UNDER SECTION 68 OF THE INCOME TAX ACT 2 ITA NO. 1063/AHD/2010 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE-FIRM. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), IN THE IMPUGNED ORDER THE L D. CIT(A.) RELIED ON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- PANKAJ DYESTUFF INDUSTRIES IN INCOME TAX REFERENCE NO. 241 OF 1993 DELETED THE ADDITION OBSE RVING AS UNDER :- KEEPING IN VIEW THE AFORESAID FACTS, CIRCUMSTANCES AND VARIOUS JUDICIAL PRONOUNCEMENTS, IT IS ABUNDANTLY CLEAR THAT THE ACT ION OF ASSESSING OFFICER (I.E. MAKING ADDITION OF UNEXPLAINED CAPITA L INTRODUCED BY THE PARTNERS IN THE CASE OF PARTNERSHIP FIRM) IS NOT CA LLED FOR, THEREBY, THE ADDITION IN QUESTION IS DELETED. BUT IT IS ALSO A F ACT THAT AS FACTS AND CIRCUMSTANCES ESTABLISH, THE CAPITAL INTRODUCED BY THE PARTNERS STANDS UNEXPLAINED, THEREBY THE ASSESSING OFFICER IS DIREC TED TO TAKE ACTION IN THE RESPECTIVE HANDS OF THE PARTNERS. WITH THE RESU LT, THE APPEAL IS PARTLY ALLOWED ON THIS GROUND. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS :- (1) THE LD. CIT(A.) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.15,62,646/- MADE BY THE A.O. ON ACCOUNT OF UN VERIFIABLE SHARE CAPITAL INTRODUCED IN THE FIRM IN CASH. (2) THE LD. CIT(A.) HAS ERRED IN LAW AND ON FACTS I N NOT APPRECIATING THE FACT THAT THE INTRODUCED SHARE CAPITAL REMAINS UNEX PLAINED IN THE HANDS OF THE PARTNERS. (3) THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPE ALS) HAS ERRED IN LAW AND ON FACTS IN NOT TAKING COGNIZANCE OF THE DE CISIONS REPORTED AT 118 ITR 741 (ALL.) AND 142 ITR 133 (PAT.) WHICH IS DIRE CTLY APPLICABLE TO THE FACTS OF THIS CASE. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A.) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. AT THE TIME OF HEARING BEFORE US, SHRI A.K. KHAN DELWAL, D.R. APPEARING ON BEHALF OF REVENUE CONTENDED THAT WHERE A FIRMS BOOKS SHOWING CASH CREDIT IN NAMES OF PARTNERS AND NO SATISFACTORY EXPLANATION IS FURNISHED, IT WILL BE D EEMED TO BE INCOME OF THE FIRM AS HELD IN THE FOLLOWING DECISIONS :- (I) CIT VS.- SHIV SHAKTI TIMBERS (M.P.) 229 ITR 505 (II) ANAND RAM RAITANI VS.- CIT (GAU.) 223 ITR 5 44; (III) SHANTA DEVI VS.- CIT (P&H) 171 ITR 532; 3 ITA NO. 1063/AHD/2010 (IV) DCIT VS.- PUNJAB KIRANA BHANDAR (ITATM JP.) 64 ITD 92; (V) CIT VS.- KISHORILAL SONTISHILAL (RAJ.) 216 I TR 9; (VI) HARDWARMAL ONKARMAL VS.- CIT (PAT.) 102 ITR 779. THE LD. D.R. FURTHER DREW OUR ATTENTION TO THE HEAD NOTES FROM THE DECISION OF THE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS.- SHIV SHAKTI TIMBERS [229 ITR 505], WHICH READS AS UNDER :- THE ASSESSEE-FIRM WAS MAINTAINING BOOKS OF ACCOUNT . THE ASSESSING OFFICER FOUND CREDITS RECORDED IN THE BOOKS IN THE NAMES OF PARTNERS AND AFTER CONSIDERING THAT THE EXPLANATIONS WERE NOT SATISFAC TORY, MADE AN ADDITION IN THE ASSESSMENT OF THE FIRM UNDER SECTION 68 OF THE INCO ME TAX ACT, 1961. ON APPEAL, THE COMMISSIONER OF INCOME TAX(APPEALS) PARTLY SUST AINED THE ADDITION. THE TRIBUNAL ALLOWED THE APPEAL BY THE ASSESSEE ON THE GROUND THAT CASH CREDITS WERE IN THE NAMES OF PARTNERS AND SECTION 69 OF THE ACT WAS APPLICABLE, NOT SECTION 68 OF THE ACT. ON A REFERENCE :- HELD, THAT A CLOSE READING OF BOTH THE SECTIONS MAK ES IT CLEAR THAT IN SECTION 68, THERE SHOULD BE A CREDIT ENTRY IN THE BOOKS OF ACCO UNT, WHEREAS IN SECTION 69, THERE MAY NOT BE AN ENTRY IN THE BOOKS OF ACCOUNTS. THE PRESENT CASE WAS GOVERNED BY SECTION 68, BECAUSE THERE WERE ENTRIES IN THE BOOKS OF ACCOUNT. WHERE THERE IS A CREDIT ENTRY IN THE BOOKS OF ACCOU NT OF THE ASSESSEE AND THERE IS NO SATISFACTORY EXPLANATION, THEN IT WILL BE DEEMED TO BE THE INCOME OF THE FIRM. THE LD. D.R. CONTENDED THAT IN THIS CASE, THE ASSES SEE HAS NOT PROVED THE GENUINENESS OF THE TRANSACTIONS AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER HAS HELD THAT CAPITAL INTRODUCED BY THE PARTNERS STANDS UNEXPLAINED, THEREFORE, THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- PANKAJ DYESTUFF INDUSTRIES (SUPRA) RELIED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT APPLICABLE. THE LD. D.R. ACCORDINGLY POINTED OUT THAT THE ADDITION AMOUNTING TO RS.15,62 ,646/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT BE RESTORED. 4. ON THE OTHER HAND, SHRI P.R. SHAH, LD. COUNSEL A PPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX(APPEALS). HE PRODUCED A COPY OF THE JUDGMENT OF THE HON'BLE GUJA RAT HIGH COURT IN THE CASE OF CIT VS.- PANKAJ DYESTUFF INDUSTRIES (SUPRA) AND CONTENDED TH AT WHEN PARTNERS HAVE ADMITTED THE POSSESSION WITH REGARD TO INTRODUCTION OF CAPITAL, ADDITION UNDER SECTION 68 CANNOT BE MADE IN THE 4 ITA NO. 1063/AHD/2010 HANDS OF THE FIRM. THEREFORE, THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 5. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE GROUNDS OF APPEAL ITSELF, REVENUE HAS POINTED OUT THAT LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT T O HAVE FOLLOWED THE JUDGMENT OF NON- JURISDICTIONAL HIGH COURT. IN OUR OPINION, WE HAVE NO OPTION BUT TO FOLLOW THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- PANKAJ DYESTUFF INDUSTRIES (SUPRA), WHICH IS ALSO RELIED BY THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) FOR DELETING THE ADDITION OF RS.15,62,646/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68. APART FROM THIS, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) HAS DIRECTED THE ASSESSING OFFICER TO TAKE ACTION IN RESPECT OF THE HANDS OF PARTNERS. TH E VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS IN CONFORMITY WITH THE JUDGM ENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- PANKAJ DYESTUFF INDUSTRIES (S UPRA). WE, THEREFORE, DECLINE TO INTERFERE WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APP EALS). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 25.06.201 0 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 25 / 06 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.