M/s Suriti Enterprises, Solan V. DCIT, Parwanoo

ITA 1208/CHANDI/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51536 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY SHARMA
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Unexplained cash credit; Unexplained investment; Gift; Opportunity of being heard; Question of law; Assessment record; Onus to prove
• Section: 68; 69; 6; 2; 143(3); 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: CHANDIGARH BENCH A BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENTAND SHRI MEHAR SINGH, HONBLE ACCOUNTANT MEMBER ITA NO. 1208/CHANDI/2010 ASSESSMENT YEAR 2006-07 M/S SURITI ENTERPRISES V. D.C.I.T. CIRCLE, PARWAN OO MODEL TOWN, KIRPAL PUR TEHSIL NALAGARH SOLAN ABAFS 8488 B ITA NO. 1209/CHANDI/2010 ASSESSMENT YEAR 2006-07 M/S SURITI & CO. V. D.C.I.T. CIRCLE, PARWANOO MODEL TOWN, KIRPAL PUR TEHSIL NALAGARH SOLAN ABCFS 2447 N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAKESH GUPTA RESPONDENT BY: SHRI AJAY SHARMA DATE OF HEARING: 28.9.2011 DATE OF PRONOUNCEMENT:17.10.2011 ORDER PER MEHAR SINGH, AM THE PRESENT APPEALS FILED BY THE ASSESSEE FOR ASSE SSMENT YEAR 2006-07, ARE DIRECTED AGAINST THE ORDERS OF LD. CIT (A), SHIMLA, DATED 20.11.2009 AND 23.11.2009 RESPECTIVELY PASSED U/S 2 50 (6) OF THE INCOME- TAX ACT (IN SHORT THE ACT). THE APPEALS WERE HEAR D TOGETHER AND ACCORDINGLY ARE DISPOSED OFF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 2 ITA NO. 1208/CHANDI/2010 2. THE ASSESSEE HAS TAKEN THE FOLLOWING TWO SUBSTAN TIVE GROUNDS OF APPEAL:- 1 THE LD. CIT(A) IS WRONG IN CONFIRMING THE CAPITA L ADDITION OF RS. 57,75,220/- ON ACCOUNT OF CAPITAL CONTRIBUTION BY THE PARTNERS IN THE HANDS OF THE ASSESSEE FIRM BY TREATING THEM AS UNEXPLAINED CASH CREDITS AND IGNORING THE EXPLANATIONS AND SUBM ISSIONS FILED BY THE ASSESSEE. 2 WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) IS WRO NG IN CONFIRMING THE CAPITAL ADDITION OF RS. 57,75,220/- AS UNEXPLAINED CASH CREDIT OF THE ASSESSEE FIRM AND BY IGNORING TH AT AMOUNT WAS INTRODUCED BY WITHDRAWING FROM SURITI & CO. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME, ON 31.10.2006, DECLARING INCOME OF RS. 25,1 1,540/-. THE ASSESSEE FIRM DERIVED INCOME FROM LIQUOR VENDS. DU RING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DECLARED TOTAL SALE S AT RS. 20,53,45,821/- AND AFTER CLAIMING VARIOUS EXPENSES, NET PROFIT HAS BEEN WORKED OUT AT RS. 25,02,844/-. AS PER THE PARTNERSHIP DEED EXECUTED, ON 1.4.2005, THERE ARE TWO PARTNERS NAMELY SHRI D.R. SHARMA SON OF SHRI P. D. SHARMA HAVING 70% SHARE AND ANOTHER PARTNER IS SHRI VIJAY KUMAR S HARMA SON OF SHRI MULAKH RAM SHARMA HAVING 30% SHARE. THE PARTNERS M ADE THE FOLLOWING ADDITIONS IN THEIR CAPITAL: S NO. NAME OF PARTNERS % OF SHARE OPENING BALANCE ADDITIONS MADE 1 SHRI D.R. SHARMA 70% RS. 6,59,619/- RS. 77,00,000 2 SHRI VIJAY KUMAR SHARMA 30% RS. 6,12,035/- RS. 33,00,000 4. IN THE APPELLATE PROCEEDINGS, THE LD AR FOR TH E ASSESSEE CONTENDED THAT THE LD. CIT(A) CONFIRMED THE ADDITIO N IN RESPECT OF CAPITAL ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 3 BELONGING TO PARTNERS, AND INTRODUCED BY THEM, IGNO RING THE FACTUAL MATRIX OF THE CASE AND THE DIRECT DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT AND HON'BLE SUPREME COURT AS INDICATED BELOW: I) CIT V. RAMESHWAR DASS SURESH PAL, CHEEKA, (2007) 208 CTR 459 (P & H) II) GIRDHARI LAL NANNE LAL V CONSTRUCTION (1977) 109 IT R 726 (S.C) III) CIT V. METAL & METALS OF INDIA, (2007) 208 CTR 457 (P&H) IV) CIT V BURMA ELECTRO CORPORATION 252 ITR 344 (P&H) V) CIT V. TAJ BOREWELLS, (2007) 291 ITR 232 (MAD). 4.1 IT WAS ARGUED BY THE LD AR FOR THE ASSESSEE THAT SOURCE OF SOURCE CANNOT BE EXPLAINED BY THE ASSESSEE-APPELLANT, IN V IEW OF VARIOUS DECISIONS OF HON'BLE HIGH COURTS AND HON'BLE SUPREM E COURT. HE MADE SIMILAR SUBMISSIONS IN RESPECT OF APPEAL NO. 1209/C HANDI/2010, IN THE CASE OF M/S SURITI & CO. 5. THE DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF LD. CIT(A) AND PLACED RELIANCE ON THE FOLLOWING DECISIONS:- M/S RAM GOPAL HARBANS LAL V. CIT, ITA 132 OF 2011 O RDER DATED 11.3.2011 SUNDER CHHABRA, PROP. M/S SANITARY SALES V. D.C.I.T . ITA NO. 461 OF 2010 ORDER DATED 28.9.2010 HE MADE SIMILAR SUBMISSIONS IN SUPPORT OF APPEAL NO . 1209/CHANDI/2010 AND PLACED RELIANCE ON THE ORDER OF LOWER AUTHORITI ES. NO OTHER DECISION WAS CITED BY THE LD. AR ON THE ISSUE IN QUESTION. 6. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, RIVAL SUBMISSIONS AND THE CASE LAWS. THE AO TREATED THE CAPITAL CONT RIBUTION OF THE PARTNERS NAMELY SHRI D.R. SHARMA AND SUB-PARTNERS AT RS. 33, 00,220/- AND SHRI VIJAY KUMAR SHARMA AND SUB-PARTNERS AT RS. 24,75,0 00/- AS INCOME OF THE ASSESSEE FIRM U/S 68 OF THE ACT, ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PROVE THE CAPACITY AND GENUINENESS OF THE SHARE CAPITAL CONTRIBUTION MADE BY THE PARTNERS/SUB-PARTNERS. THE LD. CIT(A), UPHELD THE FINDINGS OF ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 4 THE AO. THE RELEVANT PORTION OF THE SAME ARE REPRO DUCED HEREUNDER FOR THE PURPOSE OF PROPER APPRECIATION OF THE SAME: 5.3 FOR SOURCE OF CASH CONTRIBUTION, THE APPELLAN T HAS FILED CONFIRMATIONS STATING THE SAME ARE OUT OF PERSONAL SAVINGS. HOWEVER, THE CONFIRMATIONS ARE NOTHING BUT SELF SER VING DOCUMENTS IN THE ABSENCE OF SUPPORTING DOCUMENTS AND PRODUCTI ON OF THE DEPONENTS. MERE FILING OF CONFIRMATIONS IS NOT ENOUGH TO PRO VE GENUINENESS OF THE LOAN IN VIEW OF DECISIONS OF HON 'BLE ALLAHABAD HIGH COURT IN 140 ITR 151 (ALL) AND HON'BLE CALCUT TTA HIGH COURT IN 117 ITR 690 (CAL). THE ONUS TO PROVE A CASH CRE DIT ENTRY IS ON THE ASSESSEE IN VIEW OF HON'BLE DELHI HIGH COURT JU DGMENT IN 113 ITR 522 (DELHI) IN R. DALMIAS CASE AND HON'BLE PUN JAB & HARYANA HIGH COURT DECISION IN HARI CHAND VIRENDERA PANTS CASE IN 140 ITR 148 (P & H). THE APPELLANT MERELY SUCCEEDED IN PROVING THE IDENTITY WHICH IS NOT SUFFICIENT. MERE CHEQUE PAYM ENT IS NOT SUFFICIENT IN CASE OF FAILURE TO GIVE GENUINENESS I N VIEW OF HON'BLE MADRAS HIGH COURT JUDGMENT IN 315 ITR 105 (MAD) IN MANGI LAL JAIN V. ITO AND 208 ITR 465 (CAL). CASH AVAILABILIT Y AS ON THE CRUCIAL DATE NEEDS TO BE PROVED IN VIEW OF INDIA AR T EMPORIUM CASE REPORTED IN 50 ITD 21 (BOM). THE APPELLANT HAS FAI LED TO DISCHARGE THE ONUS PLACED UPON HIM TO PROVE THE CAPACITY AND GENUINENESS, THE CREDITS ARE ASSESSED AS INCOME OF THE ASSESSEE APPELLANT OF FINANCIAL YEAR 2006-07 U/S 68 OF THE INCOME-TAX ACT . AS A RESULT THE ADDITION OF RS. 57,75,220/- IS CONFIRMED AND GR OUND NOS. 1 TO 3 OF THE MEMORANDUM OF APPEAL ARE DISMISSED. 7. THE CIT(A), RECORDED SIMILAR FINDINGS IN THE CAS E OF M/S SURITI & CO. V DCIT, NOW IN APPEAL BEFORE US IN ITA NO. 1209 /CHD/2010. 8. WE PROCEED TO CONSIDER THE APPLICABILITY OR OTHE RWISE OF THE CASES RELIED UPON BY THE LD. AR. THE LD AR FOR THE ASSESSEE PLACED RELIANCE ON THE DECISIONS OF VARIOUS HIGH COURTS, T O SUPPORT HIS CONTENTIONS. IN THE CASE OF CIT V. RAMESHWAR DASS SURESH PAL CHEEKA (SUPRA), HON'BLE HIGH COURT HAS CLEARLY HELD THAT THE ADDITION TO THE INCOME OF THE FIRM COULD NOT BE MADE U/S 68 OF THE ACT EVEN IF THE DEPOSITS MADE WITH THE FIRM BY THE PARTNERS WERE UN EXPLAINED, RELYING ON THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF GIRDHARI LAL NANNELAL V CST (1977) 109 ITR 726 (S.C). IT H AS BEEN HELD BY THE HON'BLE PUNJAB & HARYANA HIGH COURT THAT ONCE THE PARTNER OF THE FIRM HAS ACCEPTED HAVING ADVANCED AMOUNT TO THE FIRM, NO ADDITION CAN BE ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 5 MADE IN THE HANDS OF THE FIRM U/S 68 OF THE ACT. T HE RELEVANT AND OPERATIVE PART OF THE DECISION IS REPRODUCED HERE UNDER FOR THE PURPOSE OF APPRECIATION OF THE SAME:- INCOME-CASH CREDIT GENUINENESS ADDITION OF R S. 70,000 MADE BY THE AO IN THE HANDS OF ASSESSEE-FIRM UNDER SEC 6 8 BY REJECTING THE EXPLANATION OF ONE OF THE PARTNERS K THAT IT WA S SHE WHO ADVANCED THE SAID AMOUNT TO THE FIRM SHE ALSO EXP LAINED THE SOURCE OF THE AMOUNT ADVANCED AO REJECTED THE EX PLANATION OF PARTNER AND MADE ADDITION U/S 68 IN THE HANDS OF FI RM NOT JUSTIFIED NO ADDITION TO THE INCOME OF THE FIRM C OULD BE MADE U./S 68 EVEN IF DEPOSITS MADE WITH THE FIRM BY THE PARTN ERS WERE UNEXPLAINED INCOME OF THE PARTNERS FURTHER, THE QUESTION WHETHER EXPLANATION OF THE ASSESSEE ABOUT NATURE AND SOURCE OF THE AMOUNTS CREDITED IN THE BOOKS OF ACCOUNT WAS SATISFACTORY I S A QUESTION OF FACT CIT V. ORISSA CORPORATION (P) LTD (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (S.C), CIT V. RAM NARAIN GOEL (19 97) 140 CTR (P&H) 148: 91997) 224 ITR 180 (P&H), CIT V. JAISWAL MOTRO FINANCE (1983) 37 CTR (ALL) 217: (1983) 141 ITR 70 6 (ALL), NARAYANDAS KEDARNATH V. CIT (1952) 22 ITR 18 (BOM) AND GIRDHARI LAL NANNELAL V. CST (1977) 109 ITR 726 (SC) RELIED ON; SHIV RICE & GENERAL MILLS V. CIT (2007) 208 CTR (P&H) 453 AND CIT V. METAL & METALS OF INDIA (2007) 208 CTR (P&H) 457 FO LLOWED. ONCE A PARTNER OF THE FIRM HAS ACCEPTED HAVING ADVA NCED AMOUNT TO THE FIRM, NO ADDITION COULD BE MADE IN THE HANDS OF THE FIRM U/S 68. 8.1 IN THE CASE OF CIT V. METAL & METALS OF INDIA ( SUPRA), THE HON'BLE PUNJAB & HARYANA HIGH COURT HELD THAT PARTNER HAVIN G ADMITTED THAT HE HAS MADE IMPUGNED DEPOSITS WITH THE ASSESSEE FIRM O UT OF AMOUNT RECEIVED AS GIFT, IT IS THE PARTNER AND NOT THE FI RM WHO IS LIABLE TO BE TAXED BY TREATING THE SAID AMOUNT AS UNDISCLOSED IN COME EVEN IF THE CLAIM OF THE GIFT SET TO HAVE BEEN IS REJECTED. THE RELE VANT PART OF THE DECISION OF THE HON'BLE HIGH COURT IS REPRODUCED HEREUNDER:- INCOME CASH CREDIT GENUINENESS PARTNER HAS A DMITTED HAVING MADE DEPOSIT WITH THE ASSESSEE FIRM OUT OF THE AMOU NT RECEIVED AS GIFT FROM AN NRI EVEN IF THE CLAIM OF GIFT IS REJE CTED, IT IS THE PARTNER WHO IS LIABLE TO BE TAXED BY TREATING THE S AID AMOUNT AS UNDISCLOSED INCOME FIRM CANNOT BE SUBJECTED TO TA X ON THAT GROUND VIEW OF THE TRIBUNAL THAT ADDITION TO THE INCOME OF THE FIRM WAS NOT CALLED FOR IS NOT ERRONEOUS NO SUBST ANTIAL QUESTION OF LAW ARISES. PARTNER HAVING ADMITTED THAT HE HAS MADE THE IMPUGN ED DEPOSIT WITH THE ASSESSEE FIRM OUT OF THE AMOUNT RECEIVED AS GIF T, IT IS THE PARTNER AND NOT THE FIRM WHO IS LIABLE TO BE TAXED BY TREAT ING THE SAID ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 6 AMOUNT AS UNDISCLOSED INCOME EVEN IF THE CLAIM OF G IFT SAID TO HAVE BEEN RECEIVED BY HIM IS REJECTED. 8.2 IN THE CASE OF CIT V. TAJ BOREWELLS (SUPRA), TH E HON'BLE MADRAS HIGH COURT HAS HELD THAT UNLESS THE EXPLANATION OFF ERED BY THE FIRM WAS REJECTED AND FOUND NOT GENUINE, THE AO COULD NOT IN VOKE THE PROVISIONS OF SECTION 68 OF THE ACT. HENCE, THE ADDITION COULD N OT BE MADE AS THE EXPLANATION OFFERED BY THE PARTNER WAS REJECTED. T HE RELEVANT AND OPERATION PART OF THE DECISION IS GIVEN HEREUNDER:- CASH CREDIT CONDITIONS PRECEDENT FOR APPLICATION OF SECTION 68 FIRM FIRST YEAR OF ASSESSMENT NO BOOKS OF ACCO UNT MAINTAINED BY FIRM PROFIT AND LOSS ACCOUNT CANNOT BE CONSID ERED TO BE BOOKS OF ACCOUNT AMOUNTS SHOWN AS CAPITAL CONTRIBUTION OF PARTNERS ACCEPTED BY AO SUBSEQUENT REJECTION OF EXPLANATIO N OF PARTNERS REGARDING SUCH CONTRIBUTION AMOUNTS NOT ASSESSEE IN HANDS OF FIRM UNDER SECTION 68 INCOME TAX ACT, 1961, S. 68 . 8.3 IN THE CASE OF CIT V BURMA ELECTRO CORPORATION, THE HON'BLE PUNJAB & HARYANA HIGH COURT HAS HELD AS UNDER: APPEAL TO HIGH COURT-INCOME FROM UNDISCLOSED SOURC ES-CASH CREDITS-FIRM-UNEXPLAINED CASH CREDITS IN CAPITAL AC COUNTS OF PARTNERS-NO EVIDENCE ON RECORD TO SHOW THAT PARTNER S WERE POSSESSED OF SUFFICIENT FUNDS ON DATE OF INVESTMENT -BUT NO MATERIAL TO INDICATE THAT UNEXPLAINED INVESTMENTS WERE PROFI TS OF FIRM- TRIBUNAL FOR COGENT REASONS DELETING ADDITIONS FROM INCOME OF FIRM- HIGH COURT-APPEAL-WILL NOT INTERFERE MERELY BECAUSE DIFFERENT OPINION POSSIBLE ON REAPPRAISAL OF MATTER-INCOME-TA X ACT,1961, SS.68, 69, 260A. THE ASSESSEE WAS A PARTNERSHIP FIRM COMPRISING 12 PARTNERS. FOR THE ASSESSMENT YEAR 1989-90, THE AO ASSESSED TH E FIRMS INCOME AT RS.1,32,331 AS AGAINST THE TOTAL INCOME D ECLARED OF RS.67,370. THE AO MADE AN ADDITION OF RS.35,000 SHO WN AS CREDITS IN THE ACCOUNTS OF SIX PARTNERS BECAUSE NO TANGIBLE EXPLANATION WAS OFFERED BY THE ASSESSEE IN RESPECT OF THESE CREDITS . ON APPEAL, THE TRIBUNAL DELETED THE ADDITION ON THE GROUND THAT TH OUGH THERE WAS NO EVIDENCE TO SHOW THAT ON THE DATE OF INVESTMENT, THE PARTNERS HAD SUFFICIENT FUNDS IN THEIR POSSESSION TO PROVE THAT THE INVESTMENTS WERE MADE FROM THAT AMOUNT IN THE CAPITAL ACCOUNT, SINCE THESE PARTNERS ADMITTED TO HAVE MADE THESE INVESTMENTS IN THE ASSESSEE- FIRM AND SINCE THERE WAS NO MATERIAL TO INDICATE TH AT THE CASH CREDITS WERE THE PROFIT OF THE FIRM, THEY COULD NOT BE ASSE SSED AS THE FIRMS INCOME AND THAT THE UNEXPLAINED INVESTMENTS COULD B E ASSESSED IN THE INDIVIDUAL HANDS OF THE PARTNERS UNDER SECTION 69 OF THE INCOME- TAX ACT, IF THAT WAS PERMISSIBLE. ON APPEAL: ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 7 HELD, DISMISSING THE APPEAL THAT THE REASONS ASSIG NED BY THE TRIBUNAL FOR DELETING THE ADDITIONS WERE DIRECTLY R EFERABLE TO THE PROVISIONS OF SECTION 68 OF THE ACT AND THERE WAS N O COGENT REASON TO INTERFERE WITH THE SAME MERELY BECAUSE ON A RE-A PPRAISAL OF THE ENTIRE MATTER, IT MIGHT BE POSSIBLE TO FORM A DIFFE RENT OPINION. 8.4 THE HON'BLE SUPREME COURT IN THE CASE OF GIRDHA RI LAL NANNELAL V CST (SUPRA) HELD AS UNDER : FURTHER, WHERE, AS IN A CASE LIKE THE PRESENT, A C REDIT ENTRY IN RESPECT OF RS.10,000/- STANDS IN THE NAME OF THE WI FE OF THE PARTNER, NO PRESUMPTION ARISES THAT THE SAID AMOUNT REPRESEN TS THE INCOME OF THE FIRM AND NOT OF THE PARTNER OR HIS WIFE. THE FA CT THAT NEITHER THE ASSESSEE FIRM NOR ITS PARTNER OR HIS WIFE ADDUCED S ATISFACTORY MATERIAL TO SHOW THE SOURCE OF THAT MONEY WOULD NOT , IN THE ABSENCE OF ANYTHING MORE, LEAD TO THE INFERENCE THAT THE SA ID SUM REPRESENTS THE INCOME OF FIRM ACCRUING FROM UNDISCLOSED SALE T RANSACTIONS. 8.5 THUS, HAVING REGARD TO THE FACT SITUATION OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE IN QUESTIO N IN THIS APPEAL IS COVERED BY THE DECISIONS OF THE HON'BLE HIGH COURTS AND SUPREME COURT. 9. THE DECISIONS RELIED UPON BY THE DR ARE NOT APPL ICABLE TO THE FACT SITUATION OF THE PRESENT CASE BEING MATERIALLY AND FACTUALLY DISTINGUISHABLE. IN THE CASE OF M/S RAMGOPAL HARBAN S LAL (SUPRA), THE FINDINGS OF THE TRIBUNAL WERE UPHELD BY THE HON'BLE PUNJAB & HARYANA HIGH COURT. THE FINDINGS OF THE HON'BLE TRIBUNAL, I N THIS CASE CLEARLY REVEAL THAT THE CREDITOR HAS STATED THAT HE HAS REC EIVED GIFT AS HE WAS IN NEED OF THE GIFT. NO CONFIRMATION OF THE DONOR WAS PRODUCED. RELEVANT FINDINGS OF THE TRIBUNAL AS REPRODUCED HEREUNDER AR E CLEAR AND TERSE IN THEIR CONTENTS : 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. IT IS SETTLED LAW THAT FOR PROVING THE CREDIT U/S 68 O F THE INCOME-TAX ACT, IDENTITY AND CREDIT WORTHINESS OF THE LENDER A S WELL AS GENUINENESS OF THE TRANSACTION ARE NEEDED TO BE EST ABLISHED BY THE ASSESSEE. AS PER ADMITTED FACTS OF THE CASE, AS SESSEE FIRM HAS RECEIVED AN UNSECURED LOAN OF RS.2,00,000/- FROM SH RI DINESH GOYAL. THE SAID LOAN HAS BEEN RECEIVED THROUGH CHEQ UE FROM ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 8 BANK ACCOUNT. AN EXAMINATION OF THE CREDITORS BANK ACCOUNT REVEALED THAT THERE WAS VERY MEAGER BALANCE IN THE ACCOUNT AND CREDITOR HAD RECEIVED RS.2,00,000/- BY DEMAND DRAFT WHICH HAS BEEN GIVEN BY CHEQUE TO THE ASSESSEE FIRM AS LOAN. THE SAID CREDITOR HAS CLEARLY STATED THAT HE HAS OBTAINED TH E GIFT AS HE WAS IN NEED OF THE GIFT. NO CONFIRMATION ETC. ON THE SO-CALLED DONOR WAS PRODUCED. HENCE THE CREDIT WORTHINESS OF THE DONOR HAS NOT AT ALL BEEN ESTABLISHED. THE CIRCUMSTANCES CLEARLY WARRANT A CONCLUSION THAT IT IS ASSESSEE'S OWN MONE Y IN THE GARB OF LOAN. 9.1. ON THE FACTS OF THE CASE AND FINDINGS OF THE T RIBUNAL THEREON, THE HON'BLE PUNJAB & HARYANA HIGH COURT UPHELD THE FIND INGS OF THE TRIBUNAL. IN THE PRESENT CASE, THE FACTS ARE PATENT LY DIFFERENT AND REQUISITE EVIDENCES HAVE BEEN FILED BY THE ASSESSEE FIRM AS D ISCUSSED ABOVE. THEREFORE, THE RATIO AS LAID DOWN ARE NOT APPLICABL E TO THE FACTS OF THE PRESENT CASE. 9.2. RELIANCE PLACED BY THE REVENUE ON ANOTHER CASE OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SUNDER C HHABRA, PROPRIETOR M/S SANITARY SALES IS ALSO MISPLACED. IN THIS CASE THE AO, CIT(A) AND THE TRIBUNAL HAD UPHELD THE ADDITIONS MADE U/S 68 OF TH E ACT ON THE BASIS OF STATEMENT OF SMT.ROSY CHHABRA AND SHRI SANJIT KUMAR , ON BEHALF OF THE HUF. SMT.ROSY CHHABRA, IN HER STATEMENT STATED THA T SHE DID NOT KNOW THE PERSON WHO IS RUNNING THE BROKERAGE AGENCY. SHE ALSO STATED THAT NO ADVANCE MONEY WAS GIVEN TO THAT PERSON. SHE EVEN DI D NOT KNOW THE COMMISSION PAID TO THE BROKERAGE AGENCY. IT WAS STA TED BY HER THAT COMMON FRIEND OF HER HUSBAND WAS THE SURETY WITH TH E BROKERAGE AGENCY. SHE ADMITTED THAT IN THE NEXT YEAR, SIMILAR TRANSAC TIONS OF COMMODITY FUTURE WAS DONE BUT SHE EXPRESSED INABILITY TO REVE AL THE IDENTITY OF THE BROKERAGE AGENCY. SIMILAR STATEMENT WITH SIMILAR CO NTENTS WAS GIVEN BY ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 9 SHRI SANJIT KUMAR. IT WAS, ON THE BASIS OF SUCH SPE CIFIC DEPOSITION BASED ON THE FACTUAL MATRIX OF THE CASE, THE ADDITION WAS UPHELD BY THE HON'BLE PUNJAB & HARYANA HIGH COURT. THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT AS CONTAINED IN PARA 8 ARE REPRODUCED HEREUND ER : THE AO, THE CIT(A) AND THE TRIBUNAL HAVE CONCURREN TLY ARRIVED AT THE CONCLUSION THAT TWO CASH CREDITS ALL EGEDLY ADVANCED BY ROSY CHHABRA WIFE OF THE ASSESSEE AMOUN TING TO RS.73,145/- AND SANJIT KUMAR COUSIN OF THE ASSESSEE IN RESPECT OF RS.1,00,000/- AND THE INTEREST PAID BY THE ASSES SEE THEREON OF RS.460/- AND RS.535/- RESPECTIVELY WERE UNEXPLAINED CASH CREDIT WHICH WERE ADDED UNDER SECTION 68 OF THE ACT . ONLY EFFORT ON THE PART OF THE LD. COUNSEL FOR THE ASSES SEE IS TO REAPPRECIATE THE MATERIAL AND CONCLUDE OTHERWISE. A LL THE AUTHORITIES HAVE CONCURRENTLY ON APPRECIATION OF MA TERIAL COME TO THE CONCLUSION THAT THE TWO CASH CREDITS WERE TH E UNEXPLAINED MONEY OF THE ASSESSEE INTRODUCED BY HIM IN THE BUSINESS. THE AUTHORITIES HAVE TAKEN A PLAUSIBLE VI EW WHICH DOES NOT CALL FOR ANY INTERFERENCE U/S 260A OF THE ACT. 9.3. IN VIEW OF THE ABOVE DISCUSSIONS, THE RATIO OF THE CASE LAWS RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACT SITUATION OF THE PRESENT CASE. 10. IN THE PRESENT CASE, THE EXISTENCE OF MAIN P ARTNERS, NAMELY SHRI D.R. SHARMA, PARTNER AND SHRI VIJAY KUMAR SHARMA, INCLUD ING THEIR RESPECTIVE SUB-PARTNERS IS NOT IN DISPUTE, AS IS EVIDENT FROM THE PERUSAL OF THE ASSESSMENT ORDER AND THE APPELLATE ORDER PASSED BY THE LD. CIT(A). THE AO MADE THE ADDITIONS, IN RESPECT OF CAPITAL CONTRI BUTION BY THE PARTNERS/ SUB-PARTNERS, ON THE GROUND THAT THE ASSESSEE HAS N OT PROVED GENUINENESS OF THE CAPITAL CONTRIBUTION, IN CASH, AS THE ONUS L IES ON ASSESSEE APPELLANT. RELEVANT PARA CONTAINING SUCH OBSERVATIONS, AS APPE ARING, AT PAGE 7 OF THE ASSESSMENT ORDER IS REPRODUCED HEREUNDER:- ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 10 4. THE DOCUMENTARY EVIDENCE REGARDING THE CASH DEP OSITS BY OTHER SUB-PARTNERS ARE NOT FILED THOUGH IT WAS SPEC IFICALLY ASKED TO FILE VIDE THIS OFFICE LETTER DATED 6.12.2008. IT I S PERTINENT TO MENTION HERE THAT THE ASSESSMENT PROCEEDINGS HAVE B EEN TAKEN UP RIGHT FROM JULY, 2008 AND THE CASE WAS FIXED FOR ON 23.7.2008, .., 13.7.2008, 19.8.2008, 3.11.2008, 14.11.2008, 28.11. 2008, 2.12.2008, 24.12.2008 AND 29.12.2008. THE ASSESSEE HAS BEEN GIVEN A FAIR OPPORTUNITY OF BEING HEARD. THE ONUS OF PROVING THE GENUINENESS OF CAPITAL CONTRIBUTION IN CASH LIES ON THE ASSESSEE WHICH HAS NOT BEEN DISCHARGED DESPITE OF SUFFICIENT OPPORTUNITY OF BEING HEARD AFFORDED. THEREFORE, THERE IS NO ALTER NATIVE BUT TO ADD THE CASH DEPOSITS BY THE PARTNERS/SUB-PARTNERS AS T ABULATED IN THE PREVIOUS PARAGRAPH AS PER THE PROVISIONS OF SECTION 68 OF THE INCOME-TAX ACT. 10.1 A BARE PERUSAL OF THE ASSESSMENT ORDER CLEARL Y REVEALS THAT THE APPELLANT FIRM FILED CONFIRMATION LETTER, AFFIDAVIT S AND WITHDRAWAL FROM FIRM M/S KOONER GARG & OTHERS, M/S SURITI & COMPANY AND M/S CHANDEL & ASSOCIATES, AS EVIDENCES TO ESTABLISH THE GENUINE NESS OF THE TRANSACTIONS, AND SOURCE OF SUCH CAPITAL CONTRIBUTI ONS. THE AO, IN THE ASSESSMENT ORDER, FROM PAGE 2 TO 5 HAD GIVEN NECESS ARY DETAILS OF THE EVIDENCES FILED BY THE APPELLANT FIRM, INDICATING I DENTITY, CAPACITY AND GENUINENESS OF THE TRANSACTIONS. FURTHER, COMPLETE ADDRESSES OF THE PARTNERS AND SUB-PARTNERS WHO CONTRIBUTED CAPITAL O F THE FIRM ARE ALSO FURNISHED. IN CERTAIN CASES, PAN HAVE ALSO BEEN FU RNISHED. A SUMMARY OF THE EVIDENCES FILED BY THE ASSESSEE, ON THE BASIS O F THE ASSESSMENT RECORDS, ARE ENUMERATED HEREUNDER : A S.NO. PARTICULARS OF PARTNER AMOUNT OF CAPITAL CONTRIBUTION NATURE OF EVIDENCE 1 SHRI D.R.SHARMA (MAIN PARTNER PAN AQQPS 6757C RS.5,49,780/- CONFIRMATION FOR CAPITAL CONTRIBUTION IN CASH WAS FILED 2 SHRI SATISH TAYAGI (SUB- PARTNER PAN-AAMPT 8595G RS.22,00,000/- CONFIRMATION FILED, RS.6,00,000/- CONTRIBUTED CASH OUT OF AGRICULTURAL INCOME OF WIFE AND RS.16,00,000/- FROM CASH WITHDRAWAL OF M/S SURITY & CO. 3. SHRI HARJINDER SINGH (SUB RS.43,99,840/- CONFIRM ATION ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 11 PARTNER) PAN-ABUPS-5194A FILED,AMOUNT INVESTED BY WITHDRAWAL FROM M/S KOONER GARG & OTHERS 4 SHRI ASHWANI WALIA RS.5,49,780/- AFFIDAVIT CONFIRMING INVESTMENT OF CAPITAL IN CASH WAS FILED TOTAL RS.77,00,060/- B 1 SHRI VIJAY KUMAR SHARMA RS.8,25,000/- CONFIRMATIO N FOR INVESTMENT OF CAPITAL CONTRIBUTION IN CASH WAS FILED 2 SHRI BHUPINDER SHARMA (SUB PARTNER) RS.8,25,000/- CONFIRMATION FILED, AMOUNT INVESTED BY WITHDRAWAL FROMM/S SURITI & CO. 3 CHANDEL & ASSOCIATES (SUB- PARTNER) RS.16,50,000/- COPY OF SUB- PARTNERSHIP FIRM DEED OF M/S CHANDEL & ASSOCIATES FILED FOR HOLDING 50% OUT OF RS.33,00,000/- TOTAL RS.33,00,000/- 10.2. THE FACT SITUATION OF THE PRESENT CASE CLEAR LY REVEALS THAT THE ASSESSEE FIRM HAS DISCHARGED ITS PRIMARY ONUS, AS T O THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE SHARE CAPITAL INT RODUCED BY THE PARTNERS AND SUB-PARTNERS. THE ASSESSEE DEMONSTRATED THAT T HE IMPUGNED AMOUNT HAS BEEN INTRODUCED AS CAPITAL BY THE PARTNERS AND SUB-PARTNERS. IT IS FURTHER, MENTIONED THAT THE EXISTENCE OF PARTNERSHI P AND SUB-PARTNERSHIP IS NOT IN DISPUTE. THE DEPARTMENT HAS FAILED TO BRING ON RECORD CREDIBLE AND RELEVANT MATERIAL, TO DEMONSTRATE THAT UNDISCLOSED PROFIT OF THE FIRM HAS BEEN INTRODUCED AS SHARE CAPITAL BY THE PARTNER AND THE SUB-PARTNERS. IT HAS NOT BEEN ESTABLISHED THAT THE UNDISCLOSED PROFIT OF THE FIRM HAS BEEN PLOUGHED-BACK IN THE SHAPE OF INTRODUCTION OF SHAR E CAPITAL. THE PARTNERS AND SUB-PARTNERS ARE NOT STRANGERS AND THEY ARE ENT ITLED TO THE SPECIFIED SHARE IN THE PROFIT OF THE FIRM. THE FACT-SITUATION OF THE PRESENT CASE IS ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 12 SQUARELY COVERED BY THE DECISIONS OF THE HON'BLE HI GH COURTS AND HON'BLE SUPREME COURT REPRODUCED ABOVE, WHEREIN IT HAS BEEN CLEARLY HELD THAT THE CASH CREDITS IN THE NAME OF PARTNERS OR CAPITAL INT RODUCED BY THE PARTNERS, EVEN IF UNEXPLAINED CANNOT BE TREATED AS INCOME OF THE FIRM BUT CAN BE CONSIDERED IN THE HANDS OF THE PARTNERS. 10.3. IT IS WELL SETTLED LEGAL PROPOSITION THAT RE VENUE IS NOT COMPETENT TO CONVERT A GOOD EXPLANATION OR EVIDENCE INTO NO EVID ENCE. IN THE PRESENT CASE, AS DISCUSSED ABOVE, THE ASSESSEE HAS DISCHARG ED THE ONUS CAST ON HIM IN RESPECT OF CAPITAL INTRODUCED BY THE PARTNER OR SUB-PARTNERS. HOWEVER, THE REVENUE HAS FAILED TO BRING ANY TANGIBLE AND AD VERSE MATERIAL TO REBUT THE EVIDENCES FILED BY THE ASSESSEE. 10.4. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCU SSIONS AND RESPECTFULLY FOLLOWING THE DECISIONS OF THE HON'BLE HIGH COURTS AND HON'BLE SUPREME COURT, AS REPRODUCED ABOVE, WE ARE OF THE CONSIDERE D OPINION THAT THE FINDINGS OF THE LD. CIT(A), IN THE MATTER CANNOT BE UPHELD. THEREFORE, SUCH FINDINGS OF THE CIT(A) ARE QUASHED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NO. 1209/CHANDI/2010 12. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1 THE LD. CIT(A) IS WRONG IN CONFORMING THE CAPITA L ADDITION OF RS. 52,27,500/- ON ACCOUNT OF CAPITAL CONTRIBUTION BY THE PARTNERS IN THE HANDS OF THE ASSESSEE FIRM BY TREATING THEM AS UNEXPLAINED CASH CREDITS AND IGNORING THE UNDISPUTED FACT THAT THE CAPITAL IS CONTRIBUTED BY THE PARTNERS, SO IT CANNOT BE TREATE D AS UNDISCLOSED INCOME OF THE FIRM. 2 WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) IS W RONG IN CONFIRMING THE CAPITAL ADDITION OF RS. 52,27,500/- AS UNEXPLAINED CASH CREDITS OF THE ASSESSEE FIRM DURING THE RELEVA NT YEAR BECAUSE ALL THE PARTNERS HAVE INTRODUCED THE CAPITAL IN THE ASSESSEE FIRM BY WAY OF BOOK ENTRY ON 1.4.2005 AND THE ACTUAL CASH W AS CONTRIBUTED BY THE PARTNERS INDIVIDUALLY DURING THE FINANCIAL Y EAR 2004-05 SO THIS ADDITION HAS NOT RELEVANCE DURING THE RELEVANT YEAR. ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 13 3 THE LD. CIT(A) IS WRONG IN CONFIRMING THE CAPITA L ADDITION OF RS. 52,27,500/- AS UNEXPLAINED CASH CREDITS OF THE ASSESSEE FIRM BY IGNORING THE EXPLANATION AND SUBMISSION FILED BY TH E ASSESSEE FIRM. 13. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-A PPELLANT FILED ITS RETURN OF INCOME, ON 31.10.2006, DECLARING INCOME AT RS.31 ,39,580/-. THE ASSESSEE FIRM DERIVED INCOME FROM LIQUOR VENDS. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO TH AT THE PARTNERS CONTRIBUTED THE SHARE CAPITAL AS PER FOLLOWING DETA ILS: S NO NAME OF THE PARTNER % OF SHARE ADDITIONS MADE 1 SHRI MOHIT GARG 40% RS. 88,00,000/- 2 SHRI BAKA RAM CHANDEL 7.50% RS. 16,50,000/- 3 SHRI JOGINDER SINGH 7.50% RS. 16,50,000/- 4 SHRI DIWAN CHAND SHARMA 40% RS. 88,00,000/- 5 SHRI SURINDER THAKUR 5% RS. 11,00,000/- 13.1 THE AO SOUGHT TO EXPLAIN THE SOURCES OF SUCH CAPITAL CONTRIBUTION, WITH SUPPORTING DOCUMENTS. IT WAS NOTICED BY THE A O THAT THE PARTNERS HAVE ENTERED INTO SUB-PARTNERSHIP. THE AO BEING NO T SATISFIED WITH EXPLANATION OF THE ASSESSEE, MADE AN ADDITION OF RS . 52,27,500/-, TO THE TOTAL INCOME OF THE ASSESSEE FIRM U/S 68 OF THE ACT , ON THE GROUND THAT THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF CAPITAL CO NTRIBUTED BY THE PARTNERS/SUB-PARTNERS. 14. THE FACT SITUATION, ISSUES INVOLVED AND RIVAL S UBMISSIONS MADE BY THE CONTENDING PARTIES, IN THE CASE OF M/S SURITI & CO. (ITA NO.1209/CHD/2010) AND IN THE CASE OF M/S SURITI ENT ERPRISES (ITA NO.1208/CHD/2010) ARE IDENTICAL. THE GROUNDS OF APP EAL IN BOTH THE CASES ARE ALSO SIMILAR. THE CORE ISSUE INVOLVED IN THIS CASE PERTAINS TO THE ADDITION MADE BY THE AO, IN RESPECT OF CAPITAL CONT RIBUTION MADE BY THE ITA NO. 1208/CHANDI/2010 SURITI ENTERPRISES V. DCIT 14 PARTNERS AND SUB-PARTNERS. THE SIMILAR ISSUE HAS B EEN CONSIDERED AND ADJUDICATED IN THE CASE OF M/S SURITI ENTERPRISES ( ITA 1208/CHD/2010). THEREFORE, WE DO NOT FIND IT ESSENTIAL TO REPRODUCE THE SAME FINDINGS, IN DETAIL, IN RESPECT OF THIS APPEAL, AS THE ASSESSMEN T ORDERS IN THESE CASES WERE PASSED U/S 143(3) OF THE ACT ON 30.12.2008, BY THE SAME AO, ON SIMILAR FACTS, RECORDING SIMILAR FINDINGS, ON THE A DDITION MADE IN RESPECT OF THE IMPUGNED SHARE CAPITAL CONTRIBUTIONS BY THE PARTNERS/SUB-PARTNERS. AS DISCUSSED EARLIER, THE CIT(A) ALSO RECORDED S IMILAR FINDINGS IN THIS CASE, WHILE UPHOLDING THE ADDITION MADE BY THE AO. THEREFORE, FOLLOWING THE ADJUDICATION MADE IN THE CASE OF M/S SURITI ENT ERPRISES, THE APPEAL OF THE ASSESSEE IS ALLOWED. 16. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED ON 17 .10.2011 SD/- SD/- (H.L. KARWA) (MEHA R SINGH) VICE PRESIDENT ACCOUNANT MEMBER CHANDIGARH, THE 17.10.2011 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE CIT(A) / THE DR