M/s. Geeta Industries, Visnagar V. The Income tax Officer, Ward-3, Mehsana

ITA 1069/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8770 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 12-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: P M MEHTA
• Keywords: Income from undisclosed sources
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M M/S.GEETA INDUSTRIES, SURVEY NO.643/1, UMATA-PALDI ROAD, SARDAR ESTATE,VISNAGR V/S . INCOME TAX OFFICER, WARD-3 PATAN, INCOME TAX OFFICE, WARD-3, PATAN, MEHSANA. PAN NO.AJRPS 4228 G (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI P.M. MEHTA RESPONDENT BY:- SHRI M.C. PANDIT,SR.D.R. O R D E R PER SHRI D.C.AGRAWAL, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A), GANDHINAGAR DATED 07-12-2006 WHEREIN HE HAS RAISED FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) HAS ERRED IN CONFIRMING AN ADDITION OF RS.9 LACS WH ICH WAS MADE BY THE THREE PARTNERS OF THE ASSESSEE FIRM. 2. WITHOUT PREJUDICE ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE CIT(A) SHOULD HAVE APPROVED THE ASSES SEES RELIANCE ON REPORTED DECISIONS WHICH WERE CITED BY THE ASSESSEE AND SHOULD HAVE REJECTED DEPARTMENTS RELI ANCE ON THOSE REPORTED DECISIONS WHICH WERE IN DEPARTMENTS FAVOUR. ITA NO. 1069/AHD/07 ASST. YEAR :2003-04 ITA.1069/07 2 3. WITHOUT PREJUDICE, THERE IS ABSOLUTELY NO JUSTIF ICATION FOR NOT DELETING THE ADDITION OF RS.2 LACS FOR CASH CREDIT IN THE NAME OF SHRI BHADRESHBHAI SHAH. 2. THE EFFECTIVE GROUND IS IN RELATION TO CASH CRED IT OF RS. 9 LACS IN THE BOOKS OF THE FIRM INTRODUCED BY THE PARTNERS OF THE FIRM AS UNDER :- SR. NO. NAME OF THE PARTNER. OPENING BALANCE ADDITION WITHDRAWAL CLOSING BALANCE. 1. SHRI BHADRESHBHAI 2,48,290 2,00,000 25,000 4, 23,290 2. SMT. SANGITABEN 2,31,046 2,00,000 - 4,31,046 3. SMT. RANJANBEN 2,10,881 5,00,000 - 7,10,881 3. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO P RODUCE THE DETAILED EVIDENCE FOR THE FRESH CAPITAL INTRODUCED IN THE CA PITAL ACCOUNT OF THE FIRM IN A YEAR BUT ACCORDING TO A.O. THE FIRM DID NOT PR ODUCE ANY COGENT EVIDENCE AND ACCORDINGLY, HE PROPOSED AN ADDITION O F RS.9 LACS UNDER SECTION 68 OF THE ACT, IN THE HANDS OF THE FIRM. 4. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT FIRS T PARTNER SHERI BHADRESHBHAI SHAH IS ASSESSED TO TAX AND HAS FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 WHEREIN COPY OF THE BAL ANCE SHEET HAS BEEN FILED WHICH SHOWED THE BALANCE AGAINST THE FIRM GEE TA INDUSTRIES AT RS.4,23,290/-. IN ADDITION, OTHER 2 PARTNERS ALSO H AVE ADMITTED THE INTRODUCTION OF CAPITAL IN THEIR ACCOUNTS AND THE S AME WERE SHOWN TO THE A.O. ACCORDINGLY, THE IDENTITY OF THE CREDITORS IS PROVED AND IT WAS FOR THE PARTNERS TO EXPLAIN THE CREDITS IN THEIR ASSESSMENT . 5. THE LD. CIT(A) HOWEVER, HELD THAT CASH CREDITS I N THE FIRM ARE NOT SATISFACTORILY EXPLAINED AND ACCORDINGLY IT IS INCO ME OF THE FIRM. ACCORDING TO THE LD. CIT(A) ASSESSEE DID NOT ESTABL ISH THE SOURCE OF THE ITA.1069/07 3 CREDIT AND GENUINENESS THEREOF AND ACCORDINGLY SUM OF RS.9 LACS REMAINED UNEXPLAINED. THE LD. C.I.T.(A) ARRIVED AT FOLLOWING CONCLUSION: COMING TO THE CONTENTION OF THE APPELLANT THAT THE AMOUNT IN QUESTION COULD NOT BE TREATED AS INCOME OF THE APPE LLANT, IT IS QUITE OBVIOUS THAT WHERE A CASH CREDIT APPEARS IN THE BOO KS OF ACCOUNTS OF THE FIRM, ALTHOUGH IN THE NAME OF THE PARTNER OF THE FIRM, SECTION 68 APPLIES TO THE FIRM ONLY. SECTION 68 CANNOT BE M ADE APPLICABLE TO TREAT SUCH CASH CREDIT AS THE INCOME OF THE PART NER. THIS WAS HELD SO IN THE CASE OF ANAND RAM RAITANI VS. CIT (1997) 223 ITR 544 (GAUHATI). IN THE CASE OF CIT VS. KISHORILAL SANTOS HILAL (1995) 216 ITR 9 (RAJASTHAN), IT WAS HELD THAT SIMPLY BECAUSE THE AMOUNT IS CREDITED IN THE BOOKS OF THE FIRM IN THE PARTNERS CAPITAL ACCOUNT, IT COULD NOT BE SAID THAT IT IS NOT THE UNDISCLOSED IN COME OF THE FIRM AND THAT OF THE PARTNER. IN A FURTHER CASE OF CIT VS. SHIVSHAKTI TIMBERS (1998) 229 ITR 505 (MP), IT WAS HELD THAT W HERE THE BOOKS OF ACCOUNTS OF THE FIRM SHOW A CASH CREDIT IN THE NAME OF A PARTNER AND NO SATISFACTORY EXPLANATION IS OFFERED, THE AMOUNT OF CASH CREDIT CAN BE DEEMED TO BE THE INCOME OF THE A SSESSEE-FIRM BY INVOKING THE PROVISIONS OF SECTION 68. THE SAME LOG IC WAS ADOIPTED IN THE CASE OF CIT VS. BHADRA ENTERPRISES (1997) 228 ITR 645 (KERALA) WHERE CASH CREDITS IN THE NAME OF PART NERS WERE RECORDED ON 31.3.1978 ESPECIALLY WHEN IT WAS FOUND THAT THE PARTNERSHIP DEED WAS EXECUTED ON 1.3.1997 AND THE F IRM HAD PARTICIPATED IN A BID ON 10.3.1978. THE DECISION C ITED BY THE ASSESSING OFFICER IN THE CASE OF JAGMOPHAN RAM RAM CHANDRA VS. CIT REPORTED IN 274 ITR 405 IS QUITE RELEVANT. IN T HE ABOVE DECISION, THE HONBLE ALLAHABAD HIGH COURT HAD DISC USSED VARIOUS ITA.1069/07 4 EARLIER DECISIONS, INCLUDING DECISION OF THE APEX C OURT AND MADE THE FOLLOWING OBSERVATIONS : THUS, FROM THE AFORESAID DECISIONS, IT IS SETTLED THAT IF AN ENTRY OF CASH CREDIT IS FOUND IN THE BOOKS OF ACCOU NTS OF A FIRM, IT IS FOR THE FIRM TO GIVE EXPLANATION REGARD ING THE IDENTITY AND SOURCE OF CASH DEPOSITS AND IF THE EXP LANATION IS DISBELIEVED THEN IT IS TO BE ADDED AS AN INCOME UND ER SECTION 68 OF THE ACT IN THE HANDS OF THE FIRM. SIMILARLY, IF AN ASSESSEE, WHO IS A PARTNER IN THE PARTNERSHIP FIRM, HAS MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY HIM FOR ANY SOURCE OF INCOME AND THE EXPLANATION GIVEN BY THE PARTNER OR INDIVIDUAL REGA RDING THE SOURCE OF DEPOSITS IS DISBELIEVED, THEN SUCH DEPOSI TS WHICH ARE INVESTMENT CAN BE BROUGHT TO TAX AS INCOME FROM UNDISCLOSED SOURCES UNDER SECTION 69 OF THE ACT. TH ERE IS NO QUESTION OF ANY DOUBLE TAXATION. FULL EFFECT OF THE DEEMING PROVISIONS AND THE PRESUMPTIONS PROVIDED UNDER SECT ION 68 AND 69 OF THE ACT HAS TO BE GIVEN. THE PARTNERSHIP FIRM AND THE PARTNERS BEING TREATED AS SEPARATE ASSESSEES UN DER THE ACT, ASSESSMENT OF THE INCOME OF THE HANDS OF DIFFE RENT ASSESSEES UNDER DIFFERENT PROVISIONS OF THE ACT IS PERMISSIBLE. IN THE CASES DISCUSSES ABOVE, THE COURTS HAVE UNIFO RMLY HELD THAT ONCE THE CASH CREDITS WERE NOT EXPLAINED, THE SAME ARE LIABLE TO BE ASSESSED AS INCOME U/S. 68 IN THE HANDS OF THE FIRM EVEN THOUGH THE CREDITS WERE IN THE CAPITAL ACCOUNTS OF THE PARTNER S. IN THE ABOVE CONTEXT, THE ASSESSMENT OF INCOME IN THE HANDS OF T HE FIRM IS FOUND ITA.1069/07 5 TO BE CORRECT AND THE ADDITION MADE IS UPHELD. THE GROUND RAISED IS DISMISSED. 6. BEFORE US LEARNED A.R. FOR THE ASSESSEE SUBMITTE D THAT ONCE THE CASH CREDIT IS INTRODUCED IN THE FIRM AND PARTNERS ADMIT TO HAVE INTRODUCED THE CAPITAL THEN ONUS FROM THE ASSESSEE IS DISCHARG ED AND IN CASE CREDITS ARE NOT FOUND EXPLAINED THEN ADDITION SHOULD BE MAD E ONLY IN THE HANDS OF THE NON PARTNERS. FOR THIS PROPOSITION THE LD. A . R. FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES IN I.T. REF.NO.241/1993 DECIDED ON 6.7.2005 WHEREIN HONBLE GUJARAT HIGH COURT OBSERVED IN PARA -13 AS UNDER :- 13. APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF THE PRESENT CASE, IT IS APPARENT THAT THE ASSESSEE HAD FURNISHE D THE DETAILS WHICH WOULD DISCHARGE THE ONUS WHICH LAY ON THE ASS ESSEE. IT IS NOT THE CASE OF THE REVENUE THAT THE PARTNERS OF THE AS SESSEE FIRM ARE FICTITIOUS. THE INCOME TAX OFFICER HAS NOT DISPUTED THAT THE CREDITS IN THE ACCOUNTS OF THE PARTNERS WERE NOT DEPOSITS F ROM THE PARTNERS. MOREOVER, IT IS AN ADMITTED POSITION THAT THIS WAS THE SECOND YEAR OF THE FIRM, AND THAT IT WAS RUNNING IN LOSS. IT IS TRUE THAT THE INCOME TAX OFFICER DID NOT ACCEPT THE EXPLANATION G IVEN ON BEHALF OF THE ASSESSEE IN RESPECT OF THE NEW DEPOSITS OR C ASH CREDITS IN THE ACCOUNTS OF THE PARTNERS. THE MERE NON-ACCEPTANCE O F THAT EXPLANATION DOES NOT, HOWEVER, PROVIDE MATERIAL FOR FINDING THAT THE SAID SUM REPRESENTED INCOME OF THE ASSESSEE FIR M,. AS HELD BY THE ALLAHABAD HIGH COURT IN THE CASE OF COMMISSIONE R OF INCOME TAX ALLAHABAD VS. JAISWAL MOTOR FINANCE (SUPRA), IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THERE WERE PROFITS OF THE FIRM, THE AMOUNT CREDITED TO THE PARTNERS ACCOUNTS COULD NOT BE ASSESSED IN THE HANDS OF THE FIRM. ONCE THE PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED IN THEIR ACCOUNTS ARE THEIR OWN, T HE INCOME TAX OFFICER IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AND ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATIO N IS NOT FOUND SATISFACTORY. 7. ACCORDING TO THE LD. A.R. ABOVE DECISION WAS REL IED ON BY ITAT D-BENCH, AHMEDABAD IN THE CASE OF M/S. BHUMI PAPER PRODUCT VS. ITO ITA.1069/07 6 IN ITA. NO.1284/AHD/2005 PRONOUNCED ON 18-12-2009. IN ADDITION TO ABOVE, LD. A.R. RELIED ON THE FOLLOWING JUDGEMENTS :- (I) UNION OF INDIA VS. OMKAR F. KANWAR 258 ITR 761 (SC); (II) ACIT VS. THANTHI TRUST 247 ITR 785 (SC); (III) VIJAY OMPRAKASH BANSAL VS. CIT 257 ITR 649 (BOM.); (IV) CIT VS. L.G. BALAKRISHNAN 255 ITR 339 MAD.); (V) CIT VS. QUANTAS AIRLINES 256 ITR 84 (DEL.) AND (VI) SOUTHERN ROADWAYS LTD VS. CWT 251 ITR 213 (MAD.) 8. AGAINST THIS LD. D.R. RELIED ON THE ORDERS OF AU THORITIES BELOW. 9. IN ADDITION TO THIS HONBLE RAJASTHAN HIGH COURT IN CIT VS. KEWAL KRISHAN & PARTNERS (2009) 18 DTR-121 (RAJ.) HELD TH AT IF PARTNERS FAIL TO DISCHARGE THE ONUS OF PROVING THE SOURCE OF DEPOSIT S BY THEM IN THE FIRM THEN THE SAME COULD BE ADDED TO THE INCOME OF THE P ARTNERS CONCERN IN TERMS OF SECTION 69 OF THE ACT. 10 IN VIEW OF THE ABOVE AND LOOKING TO THE FACT TH AT PARTNERS HAVE ADMITTED THROUGH THEIR BALANCE-SHEET AND COPY OF AC COUNTS THAT THEY HAVE INTRODUCED THEIR OWN MONEY IN THE FIRM WHICH HAS BE EN CREDITED INTO THEIR CAPITAL ACCOUNT IN THE FIRM THEN NO ADDITION IS CAL LED FOR IN THE HANDS OF THE FIRM. ACCORDINGLY THE ADDITION SO SUSTAINED BY LD. CIT (A) IS HEREBY DELETED. 9. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS ALL OWED. SD/- SD/- (BHAVNESH SAINI) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 22-03-2010 ORDER PRONOUNCED IN OPEN COURT ON 22 -03- 2010 ITA.1069/07 7 PATKI. COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD