NATIONAL STONE CRUSHING CO., KOTPUTLI V. ITO, BEHROR

ITA 136/JPR/2011

• Counselvise Citation: 13623114 RSA 2011
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 21-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Assessee Lawyers: MAHENDRA GARGIEY A
• Section: 131; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH SMC JAIPUR (BEFORE SHRI N.L. KALRA, ACCOUNTANT MEMBER) ITA NO. 136/JP/2011 ASSESSMENT YEAR: 2005-06 PAN AAFFN 3816 L M/S. NATIONAL STONE CRUSHING CO. VS. THE ITO VPO: PAWALA RAJPUT WARD- BEHOR KOTPUTLI BEHROR (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI MAHENDRA GARGIEYA DEPARTMENT BY: SHRI D.K. MEENA ORDER THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A) , ALWAR DATED 7-01-2011 FOR THE ASSESSMENT YEAR 2005- 06. 2.1 THE FIRST GROUND OF THE ASSESSEE IS THAT THE LD . CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 3,43,682/- U/S 68 OF THE ACT. 2.2 THE AO DURING THE COURSE OF ASSESSMENT PROCEEDI NGS NOTICED THAT ONE OF THE PARTNER NAMELY SMT. SAROJ YADAV HAD INTRODUC ED RS. 3,43,682/- AS CAPITAL. VIDE ORDER SHEET ENTRY DATED 10-07-07, THE ASSESSEE WAS ASKED TO PRODUCE SMT. SAROJ YADAVON 24-07-07. THE ASSESSEE W AS AGAIN ASKED VIDE ORDER SHEET ENTRY DATED 15-10-07 TO PRODUCE SMT. SA ROJ YADAV. THE ASSESSEE 2 VIDE ITS LETTER DATED 22-10-07 STATED THAT SMT. SAR OJ YADAV HAS RESIGNED FROM THE PARTNERSHIP BUSINESS AND IS NOT COOPERATING WIT H THE ASSESSEE . ACCORDING TO THE AO, THE BURDEN IS ON THE ASSESSEE TO PROVE T HE CREDITWORTHINESS, GENUINENESS OF THE TRANSACTIONS AND IDENTITY OF THE CREDITOR. THE AO HAS RELIED ON THE DECISION OF HON'BLE M.P. HIGH COURT IN THE CASE OF CIT VS SHIV SHAKTI TIMBERS, 229 ITR 505 IN WHICH IT HAS BE EN HELD THAT THE CASH CREDIT IN THE NAME OF THE PARTNER IS TO BE ADDED IN THE HANDS OF THE FIRM IN CASE THE FIRM HAS MAINTAINED THE BOOKS OF ACCOUNT. ACCORDINGLY, THE AO MADE THE ADDITION OF RS.3,43,682/- 2.3 BEFORE THE LD. CIT(A),IT WAS CONTENDED THAT THE ASSESSEE HAS FILED THE COPY OF CAPITAL ACCOUNT DULY SIGNED AND CONFIRMED B Y SMT. SAROJ YADAV. THE ACKNOWLEDGMENT REGARDING STATEMENT OF ACCOUNT O F THE PARTNERSHIP FIRM, COPY OF PARTNERSHIP DEED AND COPY OF SARAL FORM SHO WING THE CREDITOR AN INCOME TAX ASSESSEE , WERE SUBMITTED BEFORE THE AO. THE ASSESSEE MADE A REQUEST TO THE AO TO ISSUE SUMMON U/S 131 TO THE EX -PARTNER. THE ASSESSEE HAS DISCHARGED THE ONUS AND FOR THIS PROPOSITION, RELIANCE HAS BEEN PLACED ON FOLLOWING DECISIONS. 1, CIT VS KISHORILAL SANTOSHI LAL 129 CTR 450 (RA J.) 2. PRITAM DAFTRY VS CIT ,195ITR 304 (CAL.) 3. CIT VS SHREE GOPTAL & CO. 117 ITR 357 (GAU) 3 2.4 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S CONFIRMED THE ADDITION AFTER OBSERVING AS UNDER:- 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS W ELL AS SUBMISSION OF THE A AND CASE RELIED UPON, THE PA RTNER HAD INTRODUCED CAPITAL DURING THE YEAR AT RS. 3,43,682/ - BUT ON 01- 08-2004 NOT ONLY SMT. SAROJ DEVI YADAV WAS RETIRED BUT OTHER PARTNER NAMELY MUKESH KUMAR YADAV, MAHESH KUMAR YAD EV, PRITHVI SINGH YADAV AND DEVENDRA SINGH YADEV WERE A LSO RETIRED. THE REMAINING PARTNER WERE NAVAL KISHORE G UPTA AND ANUPAM BANSAL. SMT. SAROJ DEVI YADAV WAS RESIDENT O F KOTPUTLI, SHRI MUKESH YADAV, MAHESH YADAV AND PRITH VI SINGH YADAV WERE RESIDENT OF GURGAON TEHSIL. SHRI DEVENDR A SINGH YADAV RESIDENT OF NEW DELHI. THE REMAINING PARTNER NAMELY NAVAL KISHORE GUPTA AND ANMUPAM BANSAL WERE RESIDEN T OF KOTPUTLI. AS PER THE PARTNERSHIP DEED, IT IS JOINT AS WELL AS SEVERALLY RESPONSIBILITY OF THE PARTNER TO TAKE THE LIABILITY OF THE FIRM IN CASE OF ANY DEFAULT OF ANY PARTNER. THE EXI STENCE OF THE FIRM IS ONLY ON THE BASIS OF PARTNERSHIP DEED AND I TS TERMS AND CONDITIONS. IN CLAUSE NO. 4 OF THE PARTNERSHIP DEED THE CONTINUING PARTNER HAD TAKEN THE LIABILITIES AS UND ER:- THAT THE CONTINUING PARTNER HEREBY JOINTLY AND SEVERALLY COVENANT WITH THE RETIRING PARTNER TO PAY , DISCHARGE, AND FULFILL ALL DEBTS, LIABILITIES, AND OBLIGATION OF THE PARTNERSHIP AND AT ALL TIME TO INDEMNIFY AND INDEMNIFIED THE RETIRING PARTNER AND HIS LEGAL 4 REPRESENTATIVE, ESTATE AND EFFECT FROM ALL PROCEEDI NGS, COST, CLAIMS AND EXPENSES IN RESPECT THEREOF. THE ABOVE CASE LAWS CITED BY THE ASSESSEE ARE ON LO ANS TAKEN FROM THE CASH CREDITORS, ARE NOT APPLICABLE I N CASE OF PARTNERS CAPITAL. THEREFORE, THE AOS ACTION IS JU STIFIED. THE APPEAL OF THE ASSESSEE IS DISMISSED. 2.5 BEFORE ME, THE LD. AR HAS FILED THE WRITTEN SUB MISSIONS ALONGWITH PAPER BOOK CONTAINING 27 PAGES. BEFORE ME, THE LD. AR SUBMITTED THAT THE ASSESSEE HAS TO PROVE THE IDENTITY, CAPACITY OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION. ONCE THIS INITIAL ONUS IS DISCH ARGED THEN THE ONUS IS SHIFTED TO THE AO TO REBUT OR TO DISPROVE THE EVIDE NCE FILED BY THE ASSESSEE. RELIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS . 1. CIT VS SHREE BARKHA SYNTHETICS, 182 CTR 175 (RAJ.) 2. CIT VS FIRST POINT FINANCE LTD. , 286 ITR 477 (RAJ. ) THE IDENTITY OF THE CREDITOR HAS BEEN ESTABLISHED B Y THE ASSESSEE BY SHOWING PAN OF THE CREDITOR AND ALSO FILED THE PHOTOSTAT CO PY OF ACKNOWLEDGEMENT OF FILING OF RETURN OF INCOME BY THE CREDITOR. AS P ER PARTNERSHIP DEED, IT WAS MENTIONED THAT THE PARTNER HAS TO CONTRIBUTE THE NE CESSARY CAPITAL AS PER NEED OF THE FIRM. IN THE PARTNERSHIP DEED DATED 5-08-04 VIDE CLAUSE 2, THE CREDIT BALANCE LYING IN THE CAPITAL ACCOUNT OF SMT. SAROJ YADAV AND OTHER OUTGOING 5 PARTNERS WERE DETERMINED AND ACKNOWLEDGED BY ALL TH E PARTNERS. THE CLOSING BALANCE IS AFTER THE RECEIPT OF AMOUNT RECEIVED UND ER CONSIDERATION FROM SMT. SAROJ YADAV. SMT. SAROJ YADAV HAS FILED THE RE TURN OF INCOME FOR THE PERIOD 1997-98 TO 2000-01. SHE HAS SHOWN INCOME IN THE RETURNS FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 TO THE EXTENT OF RS. 1.33 LACS AND RS. 1.25 LACS. THUS THE CAPACITY OF THE CREDITOR STANDS ESTABLISHED. THE LD. AR HAS RELIED UPON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT VS ORISSA CREDIT CORP. LTD., 159 ITR 78. THE LD. AR HA S ALSO REFERRED TO THE DECISION OF ITAT JAIPUR BENCH IN THE CASE OF SOM PR AKASH KAYAKL VS ITO (ITA NO.364/JP/2005 DATED 9-08-06) IN WHICH THE TRI BUNAL AFTER FOLLOWING DECISION OF HON'BLE PATNA HIGH COURT IN THE CASE O F JHAVERI BHAI BIHARI LAL & CO. VS CIT , 154 ITR 991 HELD THAT IN CASE THE AO REFUSED TO ISSUE THE SUMMON THEN THE ONUS SHIFTED ON THE REVENUE IS NOT DISCHARGED. REFERENCE HAS BEEN PLACED ON THE DECISION OF ITAT JAIPUR BENC H IN THE CASE OF VIJETA CEMENT (P) LTD. VS JCIT , 24 TW 223. 2.6 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW, 2.7 I HAVE HEARD BOTH THE PARTIES. THE LD. AR HAS F AIRLY CONCEDED THAT SECTION 68 IS APPLICABLE IN RESPECT OF CREDIT IN TH E NAME OF THE PARTNER. THE LETTER DATED 22-10-07 IS AVAILABLE AT PAGE 9 OF THE PAPER BOOK . IN THIS LETTER, 6 IT WAS STATED THAT SMT. SAROJ YADAV IS NOT COOPERAT ING WITH THE FIRM AND THEREFORE, THE SUMMON U/S 131 SHOULD BE ISSUED. I H AVE ALSO SEEN THE COPY OF THE CAPITAL ACCOUNT OF SMT. SAROJ YADAV FOR THE FIN ANCIAL YEAR 2004-05. THE CLOSING BALANCE AFTER RECEIPT OF RS. 3,43,682/- IS RS. 2,95,800/-.. THE CLOSING BALANCE IS AS ON 5-08-04. FRESH PARTNERSHIP DEED WA S EXECUTED ON 5-08-04. IN THIS FRESH PARTNERSHIP DEED, THE CLOSING BALANCE OF ALL THE RETIRING PARTNERS HAS BEEN GIVEN. THE SIGNATURE OF SMT. SAROJ YADAV I S AVAILABLE AND BALANCE HAS BEEN SHOWN AT RS. 2,95,800/-. THE DECISION OF H ON'BLE APEX COURT IN THE CASE OF CIT VS ORISSA CREDIT CORP. LTD., 159 ITR 78 IS SQUARELY APPLICABLE AS THE ASSESSEE HAS MADE THE REQUEST TO THE AO TO ISSU E SUMMON TO SMT. SAROJ YADAV AS SHE IS NOT COOPERATING WITH THE ASSESSEE. THE ASSESSEE HAS FILED ALL THE NECESSARY EVIDENCES IN SUPPORT OF THE CREDITS M ADE IN THE NAME OF SMT. SAROJ YADAV. THUS THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 3,43,682/-. HENCE THE ADDITION CONF IRMED BY THE LD. CIT(A) IS DELETED 3.1 DURING THE COURSE OF HEARING THE GROUND NO. 2 O F THE ASSESSEE WAS NOT PRESSED BY THE LD. LD. AR. HENCE, THE SAME IS DISMI SSED BEING NOT PRESSED. 7 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 26-08 -2011. SD/- (N.L. KALRA) ACCOUNTANT MEMBER JAIPUR DATED: 26/08/2011 *MISHRA COPY FORWARDED TO:- 1. M/S. NATIONAL STONE CRUSHING CO. KOTPUTLI 2.THE I.T.O. , WARD BEHROR BY ORDER 3.THE LD. CIT(A) 4.THE LD. CIT 5.THE LD. DR 6.THE GUARD FILE (I.T.A. NO 136/JP/11) A.R. ITAT: JAIPUR