The ITO,S.K.Ward-4, Modasa V. M/s. I.G. Tractors, Modasa

ITA 1139/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9833 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 13-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: K J THAKKAR
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABA D (BEFORE HON'BLE SHRI G.D. AGRAWAL, V.P.(AZ) & HON BLE SHRI T.K. SHARMA, J.M. ) I.T.A. NO. 1139/AHD./2010 ASSESSMENT YEAR : 2006-2007 INCOME TAX OFFICER, SARBARKANTHA WARD-4, -VS.- M/S. I.G. TRACTORS, MODASA, (PAN : AABFI 8666 H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.K. MISHRA, S R. D.R. RESPONDENT BY : SHRI K.J. THAKKAR 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 FOR THE ASSESSMENT YEAR 2006-07. THE GROUNDS RAISED IN THIS APPEAL ARE AS UNDER :- 1)THE LD. CIT(A.) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 6 LAKH MADE BY THE ASSESSING OFFICER U/S. 69 OF THE I .T. ACT ON ACCOUNT OF UNVERIFIABLE SHARE CAPITAL INTRODUCED IN THE FIRM. (2)THE LD. CIT(A.) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.33,995/- MADE OUT OF SALES PROMOTION AND SALES S CHEME EXPENSES. 2. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN GROUND NO. 1 OF THIS APPEAL ARE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER MADE ADDITI ON IN RESPECT OF CREDITING IN PARTNERS CAPITAL ACCOUNT TO THE EXTENT OF RS.6,00,000/- UNDER SECTIO N 69 OF THE INCOME TAX ACT, 1961. THE REASONS GIVEN BY THE ASSESSING OFFICER FOR MAKING T HIS ADDITION ARE CONTAINED IN PARA 7 OF THE ASSESSMENT ORDER. ON APPEAL, BEFORE THE LEARNED COM MISSIONER OF INCOME TAX(APPEALS) IT WAS CONTENDED BY THE LD. COUNSEL OF THE ASSESSEE THAT N O ADDITION CAN BE MADE IN THE FIRM IN VIEW OF THE DECISIONS OF DIFFERENT HON'BLE HIGH COURTS NAME LY AS UNDER :- (1) METACHEM INDUSTRIES VS.- CIT [245 ITR 160] (MA DHYA PRADESH HIGH COURT); (2) CIT VS.- JAISWAL MOTOR FINANCE [141 ITR 706] (ALLAHABAD HIGH COURT); (3) CIT VS.- PANKAJ DYESTUFF INDUSTRIES [IT REFERE NCE NO. 241 OF 1993 DECIDED IN 06.07.2005 (GUJARAT HIGH COURT). 2 ITA NO. 1139/AHD/2010 IT WAS SUBMITTED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT IN THE CASE OF JAISWAL MOTOR FINANCE REPORTED IN 141 ITR 706 (ALLA HABAD), THE HON'BLE ALLAHABAD HIGH COURT HAS HELD AS UNDER :- IT APPEARS TO BE WELL SETTLED THAT IF THERE ARE CA SH CREDIT ENTRIES IN THE BOOKS OF THE FIRM IN WHICH THE ACCOUNTS OF THE INDIVIDUAL PA RTNERS EXIST AND IT IS FOUND AS A FACT THAT CASH WAS RECEIVED BY THE FIRM FROM ITS PA RTNERS THEN IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THEY WERE PROFITS OF THE FIRM, IT COULD NOT BE ASSESSED IN THE HANDS OF THE FIRM. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- PRAGATI COOPERATIVE BANK LTD. IT REFERENCE NO.215 OF 1993 HAS REFERRED THE DECISION OF THE SUPREME COURT REPORTED IN 237 ITR 571 IN THE CASE OF SMT.P.K. NOORJAHAN AND HAS HELD AS UNDER :- APPLYING THE AFORESAID PRINCIPLE TO THE FACTS FOUN D, IT IS NOT POSSIBLE TO STATE THAT THE TRIBUNAL COMMITTED ANY ERROR WHEN IT CONFIRMED THE FINDINGS OF CIT(APPEALS) DELETING THE ADDITION. THE ASSESSEE OFFERED AN EXPL ANATION. THE SAID EXPLANATION IS NOT FOUND TO BE FALSE. THE ASSESSING OFFICER MER ELY DOES NOT ACCEPT THE EXPLANATION BECAUSE HE FINDS IT NOT SATISFACTORY. F ROM THAT, LEGALLY THERE IS NO OBLIGATION, ON THE ASSESSING OFFICER, TO TREAT THE FIXED DEPOSITS AS INCOME OF THE ASSESSEE. THE HON'BLE GUJARAT HIGH COURT ALSO REFERRED TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF NARAYANDAS KEDARNATH VS.- CIT 22 IT R 18, WHILE DEALING WITH THE QUESTION AS TO WHETHER CERTAIN AMOUNTS STANDING TO THE CREDIT OF S OME OF THE PARTNERS OF THE ASSESSEE FIRM COULD BE TREATED AS UNDISCLOSED PROFITS OF THE FIRM ITSEL F, OBSERVED THUS :- IF THE DEPARTMENT WAS SATISFIED THAT MONEYS, ALTHO UGH PAID IN THE NAMES OF THE PARTNERS OR STRANGERS, WERE REALLY UNDISCLOSED PROF ITS OF THE FIRM AND WERE NOT INDIVIDUAL CONTRIBUTIONS MADE BY PARTNERS OR STRANG ERS, THEN IT WOULD BE LEGITIMATE FOR THE DEPARTMENT TO DRAW AN INFERENCE THAT THOSE MONEYS REPRESENTED THE UNDISCLOSED PROFITS OF THE FIRM. BUT HERE THE O NLY FINDING WE HAVE FROM THE TRIBUNAL IS THAT THESE MONEYS WERE BROUGHT IN BY TH E PARTNERS FROM THEIR NATIVE PLACE AND THAT NO ADEQUATE EXPLANATION IS FORTHCOMI NG FROM THE PERSONS THEMSELVES AS TO WHERE THESE MONEYS CAME FROM. NOW IT SEEMS TO ME THAT THE ASSESSEE FIRM HAS DISCHARGED THE BURDEN WHICH WAS U PON IT TO EXPLAIN THESE CREDIT ENTRIES AND IT HAS DISCHARGED THE BURDEN BY SATISFY ING THE DEPARTMENT THAT THESE ENTRIES REPRESENT GENUINE REMITTANCES RECEIVED FROM JAIPUR WHICH HAVE GONE INTO THE COFFERS OF THE FIRM. WHEN THAT BURDEN IS DISCHA RGED, IT WOULD BE FOR THE DEPARTMENT TO FIND THAT NOTWITHSTANDING THE FACT TH AT THESE MONEYS WERE ACTUALLY BROUGHT IN THEY DO NOT REPRESENT THE MONEYS OF THE PARTNERS BUT THEY REPRESENT THE UNDISCLOSED PROFITS OF THE FIRM WHICH LEFT THE FIRM EARLIER AND RETURNED THROUGH THE INTERMEDIARY OF THE PARTNERS. IF THE DEPARTMENT WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE PARTNERS THEN IT IS LEGITI MATE FOR THE DEPARTMENT TO DRAW AN INFERENCE THAT THESE AMOUNTS REPRESENT UNDISCLOS ED PROFITS OF THE PARTNERS AND TO ASSESS THEM IN THEIR OWN INDIVIDUAL ASSESSMENT. 3 ITA NO. 1139/AHD/2010 3. AFTER CONSIDERING THE AFORESAID SUBMISSIONS, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE HON'BLE GUJARAT HIGH CO URT AS WELL AS HON'BLE BOMBAY HIGH COURT, HON'BLE M.P. HIGH COURT AND HON'BLE ALLAHABAD HIGH COURT UNANIMOUSLY HELD THAT CREDITS IN THE PARTNERS ACCOUNT COULD NOT BE TREATED AS INCOME OF THE FIRM. IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE EXPLANATION HE MAY PROCEED THE C ASES OF INDIVIDUAL PARTNERS. ON THIS BASIS, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) DELETED THE ADDITIONS. AGGRIEVED WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING, ON BEHALF OF REVENUE SHR I C.K. MISHRA, LD. SR. D.R. APPEARED AND RELYING ON THE REASONING GIVEN BY THE ASSESSING OFF ICER CONTENDED THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT JUSTIFIE D IN DELETING THE ADDITION OF RS.6,00,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 69 OF T HE INCOME TAX ACT, 1961. 5. ON THE OTHER HAND, SHRI K.J. THAKKAR, LD. COUNSE L APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX (APPEALS). HE CONTENDED THAT IN THE IMPUGNED ORDER, THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) HAS FOLLOWED THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- PRAGATI COOPERATIVE BANK LTD. (SUPRA), THEREFORE, THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 6. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE FIRM HAD BE EN STARTED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. IT IS THE FIRST Y EAR OF ASSESSMENT OF THE FIRM. THREE ARE ONLY TWO PARTNERS. THE PARTNERS HAVE INTRODUCED CAPITAL IN T HE FIRM FOR DOING THE BUSINESS. BOTH THE PARTNERS ARE INCOME-TAX PAYER HAVING P.A. NO. AND A LSO BEING ASSESSED SINCE MORE THAN 10 YEARS. COPIES OF RETURN OF INCOME ALONG WITH PROFIT & LOSS A/C., BALANCE-SHEET AND STATEMENT OF INCOME FOR THIS YEAR WERE FILED BEFORE THE AUTHORIT IES BELOW. BOTH THE PARTNERS HAVE THEIR OWN SOURCE OF INCOME, THEY PREPARED PROFIT & LOSS A/C. AND ALSO BALANCE-SHEET. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) DELETED THE ADDITION OBSERVING AS UNDER :- 4 ITA NO. 1139/AHD/2010 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 CAPITAL INTROD UCED BY THE PARTNERS IN THE CASE OF PARTNERSHIP FIRM) IS NOT CALLED FOR, TH EREBY DELETED. BUT IT IS ALSO A FACT THAT AS FACTS AND CIRCUMSTANCES ESTABLI SH, THE CAPITAL INTRODUCED BY THE PARTNERS STANDS UNEXPLAINED, THER EBY, THE ASSESSING OFFICER IS DIRECTED TO TAKE ACTION IN THE RESPECTIV E HANDS OF THE PARTNERS. WITH THE RESULT, THE APPEAL IS PARTLY ALLOWED ON TH IS GROUND. 7. FROM THE ABOVE, IT IS CLEAR THAT THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) HAS GIVEN COGENT REASON FOR DELETING THE ADDITION AND D IRECTING THE ASSESSING OFFICER TO TAKE ACTION IN RESPECTIVE HANDS OF THE PARTNERS. WE, THEREFORE, IN CLINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. RESULTANTLY, THIS GROUND OF APPEAL IS REJECTED. 8. THE ONLY OTHER GROUND RAISED IN THIS APPEAL IS A GAINST DELETING THE DISALLOWANCE OF RS.33,995/- MADE BY THE ASSESSING OFFICER OUT OF SA LES PROMOTION AND SALES SCHEME EXPENSES. 9. WE HAVE HEARD BOTH THE SIDES. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED SALES PROMOTION AND SALES SCHEME EXPENSES TO THE EX TENT OF RS.33,995/-. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), IT WAS CONTEN DED THAT COMPLETE DETAILS OF EXPENDITURES WERE FURNISHED AND NOTHING HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN RESPECT OF ANY PARTICULAR EXPENDITURE, WHICH IS WAS NOT FOR THE PU RPOSE OF BUSINESS. IN OUR OPINION, THE ASSESSING OFFICER MADE AD HOC DISALLOWANCE AND LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) IS LEGALLY AND FACTUALLY CORRECT IN DELET ING THE SAME. WE, THEREFORE, INCLINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (AP PEALS). RESULTANTLY, GROUND NO. 2 OF THIS APPEAL IS REJECTED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 01.10.201 0 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 01/10 / 2010 5 ITA NO. 1139/AHD/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 REGIS TRAR, ITAT, AHMEDABAD LAHA/SR.P.S.