The ITO,S.K. Ward-3, Himatnagar V. M/s. Raj Container, Himatnagar

ITA 1114/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5825 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAVIN R SHAH
• Keywords: Unexplained investment
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 18/06/2010 DRAFTED ON: 25/06 /2010 ITA NO.1114/AHD/2010 ASSESSMENT YEAR : 2006-07 THE INCOME TAX OFFICER WARD-3, S.K.WARD-3 HIMATNAGAR VS. M/S.RAJ CONTAINER B/H. GIDC ESTATE MOTIPUR HIMATNAGAR 383 001 PAN/GIR NO. : AAIFR 2569 M (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI K.MADHUSUDAN, SR. D.R. RESPONDENT BY: SHRI PRAVIN R.SHAH O R D E R PER SHRI MUKUL SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHI CH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-VI, AHMEDABA D DATED 27/11/2009 AND THE ONLY SUBSTANTIAL GROUND READS A S UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.12,07,000/- MADE ON ACCOUNT OF UNACCOUNTED CA PITAL INTRODUCTION BY THE PARTNERS IN CASH. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 19/12 /2008 WERE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF PET BOTTLES. IT WAS NOTICED THAT CAPITAL WAS INTRODUCED BY THE PART NERS. THE ASSESSING OFFICER HAS OBJECTED ABOUT THE GENUINENESS OF THE C APITAL INTRODUCED BY THE PARTNERS. HE HAS ALSO RECORDED THE STATEMENTS OF THE PARTNERS. ITA NO. 1114/AH D/2010 ITO VS. M/S.RAJ CONTAINER ASST.YEAR 2006-07 - 2 - THEREAFTER, HE HAS ARRIVED AT THE CONCLUSION THAT THE CAPITAL INTRODUCED BY THE PARTNERS REMAINED UNEXPLAINED AND BY INVOKING T HE PROVISIONS OF SECTION 68 OF THE I.T. ACT, 1961, MADE THE IMPUGNED ADDITION. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHO RITY. 3. THE LEARNED CIT(APPEALS) HAS REITERATED ALL THOS E FACTS AT LENGTH AND THEREAFTER BY PLACING A RELIANCE ON THE DECISIO N OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PANKAJ DYESTUFF I NDUSTRIES (IN INCOME TAX REFERENCE NO.241 OF 1993) ORDER DATED 06/07/200 5, HELD THAT IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS THE ASSESS ING OFFICER WAS NOT LEGALLY CORRECT IN MAKING THE ADDITION OF CAPITAL I NTRODUCED BY THE PARTNERS IN THE CASE OF PARTNERSHIP-FIRM. ON ONE HAND HE HAS DIRECTED TO DELETE THE ADDITION IN THE HANDS OF THE FIRM, HOWEV ER, HE HAS GIVEN A DIRECTION THAT THE ASSESSING OFFICER SHOULD TAKE AC TION IN THE RESPECTIVE HANDS OF THE PARTNERS SINCE THE CAPITAL INTRODUCED BY THE PARTNERS WAS NOT EXPLAINED. NOW THE REVENUE IS IN APPEAL. 4. FROM THE SIDE OF THE REVENUE, LEARNED DEPARTMENT AL REPRESENTATIVE SHRI K.MADHUSUDAN APPEARED AND PLACE D RELIANCE ON THE FOLLOWING DECISIONS:- SL.NO(S) DECISION IN THE CASE OF REPORTED IN 1. CIT VS. SHIV SHAKTI TIMBERS 229 ITR 505 (M.P.) 2. ANAND RAM RAITANI VS. CIT 223 ITR 544 (GAUHATI) 3. BASANATIPUR TEA COMPANY PVT.LTD. VS. CIT 180 ITR 261 (CAL.) 4, CIT VS. ASHOK TIMBER INDUSTRIES 125 ITR 336 (CAL.) ITA NO. 1114/AH D/2010 ITO VS. M/S.RAJ CONTAINER ASST.YEAR 2006-07 - 3 - 4.1. THE LEARNED AUTHORISED REPRESENTATIVE OF THE A SSESSEE SHRI PRAVIN R.SHAH APPEARED AND PLACED RELIANCE ON THE FOLLOWIN G THREE DECISIONS:- SL.NO(S) DECISION IN THE CASE OF HON'BLE 1. CIT VS. PANKAJ DYESTUFF INDUSTRIES GUJARAT HIGH COURT IN INCOME TAX REFERENCE NO.241 OF 1993; DTD.06/07/2005 2. CIT VS. KEVAL KRISHNA AND PARTNERS RAJASTHAN HIGH COURT; IN IT APPEAL NO.185 OF 2008; DTD. 12/01/2009 3. ACIT VS. PATEL RAJESHKUMAR KANTILAL & CO. ITAT AHMEDABAD BENCH IN ITA NO.3824/AHD/1992; DTD.03/06/1998 5. ON HEARING BOTH THE SIDES, IT IS WORTH TO COMMEN T THAT THE BASIC FACTS ABOUT THE INTRODUCTION OF CAPITAL OF THE PART NERS IN THEIR RESPECTIVE CAPITAL ACCOUNTS IN THE BOOKS OF THE ASSESSEE-FIRM ARE NOT IN QUESTION. THE ONLY QUESTION IS ABOUT THE APPLICABILITY OF THE CASE LAWS CITED FROM THE RIVAL SIDES. AS FAR AS THE DECISIONS CITED FRO M THE SIDE OF THE REVENUE ARE CONCERNED, WE HAVE EXAMINED EACH OF THEM AND HA VE NOTICED THAT THEY ARE NOT RELATED WITH THE ISSUE IN HAND. THE D ECISION OF HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF SHIV SHAKT I TIMBERS REPORTED AS 229 ITR 505 (M.P.) IS ON THE ISSUE THAT WHETHER THE CASH CREDIT ENTRY IN THE BOOKS OF THE FIRM IN THE NAME OF THE PARTNER IS SUBJECT TO TAX EITHER U/S.68 OR U/S.69 OF THE I.T. ACT, 1961. THE HON'B LE HIGH COURT HAS PRONOUNCED THAT THERE IS A DISTINCTION BETWEEN THE TWO SECTIONS I.E. ITA NO. 1114/AH D/2010 ITO VS. M/S.RAJ CONTAINER ASST.YEAR 2006-07 - 4 - SECTION 68 APPLIES WHERE A SUM IS FOUND CREDITED IN THE BOOKS; WHEREAS SECTION 69 APPLIES TO UNEXPLAINED INVESTMENT WHICH WAS FOUND RECORDED IN THE BOOKS OF ACCOUNT. SO IT IS APPARENT THAT TH E ISSUE AS SETTLED BY THE HON'BLE HIGH COURT HAS NOTHING TO DO WITH THE ISSUE NOW RAKED UP IN THIS APPEAL. LIKEWISE, IN THE CASE OF ANAND RAM RAITANI REPORTED AS 223 ITR 544 (GAUHATI) IT WAS HELD THAT THE EXISTENCE OF BOO KS OF ACCOUNT IS A CONDITION PRECEDENT FOR AN ADDITION U/S.68 OF THE I .T. ACT, 1961. FOR BEING A SEPARATE ASSESSABLE ENTITY THEN THE BOOKS O F ACCOUNT OF THE FIRM CANNOT CONSTITUTE THE BOOKS OF ACCOUNT OF THE PARTN ERS FOR THE PURPOSE OF SECTION 68 OF THE I.T. ACT, 1961. IT WAS HELD THAT SINCE NO SUCH BOOKS OF ACCOUNT HAVING MAINTAINED BY THE PARTNER, THEREFORE , ADDITION U/S.68 OF THE I.T. ACT, 1961 COULD NOT BE MADE. LIKEWISE, R EST OF THE DECISIONS; NAMELY BASANTIPUR TEA COMPANY PVT.LTD. REPORTED AS 180 ITR 261(CAL.) AND THE DECISION OF ASHOK TIMBER INDUSTRIES REPORTE D AS 125 ITR 336 (CAL.), BOTH ARE ALSO NOT ON THE ISSUE IN HAND BECA USE DETAILS IN RESPECT OF THE CASH CREDIT FOUND ON THE VERY FIRST DAY OF THE ACCOUNTING YEAR. IN ALL, THEREFORE, THE DECISIONS AS CITED BY THE SIDE OF T HE REVENUE CAN BE SAID TO BE MISPLACED AND DO NOT COVER EXACTLY THE ISSUE IN HAND. ON THE OTHER HAND, THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES(SUPRA) IS DIRECTLY ON THE ISSU E WHEREIN THE HON'BLE COURT HAS HELD QUOTE ONCE PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED IN THEIR ACCOUNTS ARE THEIR OWN, THE INCO ME TAX OFFICER IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AN D ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATION IS NOT FOUND SATI SFACTORY. UNQUOTE. ITA NO. 1114/AH D/2010 ITO VS. M/S.RAJ CONTAINER ASST.YEAR 2006-07 - 5 - 5.1. SINCE LEARNED CIT(APPEALS) BEING UNDER THE TER RITORIAL JURISDICTION OF THE HON'BLE GUJARAT HIGH COURT HAS ALSO DIRECTED THE ASSESSING OFFICER TO TAKE DUE LEGAL ACTION IN THE HANDS OF THE PARTNE R CONSIDERING THE CAPITAL INTRODUCED BY THEM IN THEIR RESPECTIVE HANDS, THERE FORE, IN OUR CONSIDERED OPINION, BEING WITHIN THE JURISDICTION OF THE GUJAR AT HIGH COURT, THE DIRECTIONS GIVEN BY THE LEARNED CIT(APPEALS) DESERV ES TO BE UPHELD AND THE DELETION OF ADDITION IN THE HANDS OF THE ASSESS EE-FIRM IS HEREBY CONFIRMED. WITH THE RESULT, GROUND OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30/ 06 /2010. SD/- SD/- ( N.S. SAINI ) ( MUKUL SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/ 06 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-VI, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD