The ITO, Bhavnagar V. M/s Surya Cattlefeed Industries, Bhavnagar

ITA 1497/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0579 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 12-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP GARG
• Keywords: Unexplained cash credit; Corroborative evidences
• Section: 143(3); 142(1); 143(1); 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI H. L. KARWA, JM AND D. C. AGRAWAL, A M) ITA NO.1497/AHD/2009 A. Y.: 2005-06 THE INCOME TAX OFFICER, WARD-2(4), AAYAKAR BHAVAN, NAKUBAUG, JASHONATH CHOWK, BHAVNAGAR- 364 001 VS M/S. SURYA CATTLEFEED INDUSTRIES, GIDC, AT TIMBI, TAL: UMRALA, DOST. BHABNAGAR, PA NO. AAIFS 4813 R (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI SANJAY R. SHAH, AR DEPARTMENT BY SHRI SANDEEP GARG, DR O R D E R PER H. L. KARWA: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-XX, AHMEDABAD DATED 07-01-209 RELATING TO ASSESSMENT YEAR 2005-06. 2. THE ONLY EFFECTIVE GROUND RAISED BY REVENUE READ S AS UNDER: 1. THE LD. CIT(A)XX, AHMEDABAD HAS ERRED IN LAW AN D ON FACTS IN DELETING THE ADDITION OF RS. 56,50,000/- M ADE BY THE AO U/S. 68 OF THE I. T. ACT ON ACCOUNT OF UNEXPLAIN ED CAPITAL INTRODUCED BY THE PARTNERS OF THE FIRM, WITHOUT PRO PERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CATTLE FEEDS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT DURING THE YEAR UNDER CONSIDERATION THE FOLLOWING CAPITAL ACCOUNT W AS INTRODUCED BY THE TWO PARTNERS OF THE ASSESSEE: 1. SHRI VIPINBHAI Z. PATEL RS. 35,45,000/- 2. SHRI MADHAVJIBHAI J. PATEL RS. 21,05,000/- RS. 56,50,000/- ITA NO.1497/AHD/2009 SURYA CATTLE FEED INDUSTRIES 2 THE AO ASKED THE ASSESSEE TO FURNISH THE SOURCE OF CAPITAL INTRODUCED BY THE PARTNERS WITH SUPPORTING EVIDENCES. HOWEVER, IN SPITE OF SEVERAL OPPORTUNITIES GRANTED TO THE ASSESSEE, IT FAILED TO FURNISH ANY DETAILS IN THIS REGARD. THE AO OPINED THAT THE ASSESSEE FAILED TO DISCHARGES ITS ONUS. THEREFORE, THE AMOUNT OF RS.56,50,000/- CLAIM ED TO HAVE BEEN INVESTED BY THE PARTNERS DURING THE YEAR WAS CONSID ERED AS UNEXPLAINED CASH CREDIT AND ADDED THE SAME UNDER THE HEAD INCOM E FROM OTHER SOURCES U/S 68 OF THE INCOME TAX ACT,1961 (IN SHORT THE ACT). 4. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT BOTH THE PARTNERS WHO HAD INTRODUCED CAPITAL WERE ASSESSED TO TAX SEPARATELY AND THEY HAVE FILED THEI R INCOME TAX RETURNS. IT WAS BROUGHT TO THE NOTICE OF THE CIT(A) THAT THE AS SESSMENT OF ONE OF THE PARTNERS NAMELY VIPINBHAI Z. PATEL FOR THE YEAR UND ER CONSIDERATION HAS ALSO BEEN COMPLETED U/S 143(3) OF THE ACT AND THE S AME AO HAS ACCEPTED HIS INCOME SHOWN IN THE RETURN WITHOUT MAKING ANY A DDITION. FURTHER CONTENTION OF THE ASSESSEE WAS THAT BOTH THE PARTNE RS HAD INTRODUCED CAPITAL FROM THEIR REGULAR BOOKS OF ACCOUNTS WHICH WERE NOT REJECTED BY ANY OF THE ASSESSING OFFICER ASSESSING THEM. THE AS SESSEE ALSO SUBMITTED BEFORE THE CIT(A) THAT IDENTITY OF THE PERSONS WAS ESTABLISHED AS THEY WERE THE PARTNERS OF THE ASSESSEE FIRM. FURTHER, TH E GENUINENESS OF THE TRANSACTION WAS ALSO ESTABLISHED AS THE TRANSACTION S HAVE COME FROM PERSONAL BOOKS OF ACCOUNTS OF THE PARTNERS AS WELL AS THROUGH BANK CHEQUES AND FINAL SOURCES OF CAPITAL WAS ALSO EXPLA INED AS BOTH THE PARTNERS WERE ASSESSED TO TAX SEPARATELY AND THEIR BOOKS OF ACCOUNTS WERE NOT REJECTED BY ANY OF THE ASSESSING OFFICER A SSESSING THEM. 5. THE CIT(A) DELETED THE ADDITION OBSERVING AS UND ER: 5.3 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE LEARNED COUNSEL OF THE APPELLANT ASSESSMENT ORDER A ND THE CASE-LAWS CITED BY THE LEARNED COUNSEL. IT IS EXPLA INED THAT THE ITA NO.1497/AHD/2009 SURYA CATTLE FEED INDUSTRIES 3 AMOUNTS INTRODUCED BY TH80E PARTNERS OF THE FIRM IN THEIR CAPITAL ACCOUNTS HAVE BEEN INTRODUCED FROM THEIR RE GULAR BOOKS OF ACCOUNT AND BOTH THE PARTNERS ARE ASSESSED TO TAX SEPARATELY. THE COPIES OF INCOME-TAX RETURNS HAVE B EEN FILED BEFORE ME DURING THE APPELLATE PROCEEDINGS. THE IDE NTITY OF THE PARTNERS IS ALREADY ESTABLISHED AS THEY ARE REGULAR INCOME-TAX PAYERS AND ARE THE PARTNERS OF APPELLANT-FIRM SHARI NG EQUAL PROFIT AND LOSS. MOREOVER, THE GENUINENESS OF THE T RANSACTIONS HAVE ALSO BEEN MADE FROM THE PERSONAL BOOKS OF THES E PARTNERS AND THE SAME ARE MADE THROUGH BANK CHEQUES . NOW THE QUESTION OF CREDITWORTHINESS REMAINS WHICH IS A LSO PROVED AS BOTH THE PARTNERS HAD SUFFICIENT CAPITAL IN THEI R ACCOUNTS AS PER THE DETAILS FURNISHED BEFORE THE AO AND THE UND ERSIGNED. THE AO HAS NOT BROUGHT ANY ADVERSE EVIDENCES ON REC ORD IN THIS RESPECT. MOREOVER FROM THE REMAND REPORT RECEI VED NOW FROM THE PRESENT AO, IT IS SEEN THAT THE AO HAS ACC EPTED THE CAPITAL INTRODUCED BY THE PARTNERS AND BELIEVED THA T THE ENTRIES AND TRANSACTIONS ARE GENUINE. IN SUCH SET O F FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO AS PER JUDICIAL PRONOUNCEMENTS CITED BY THE LEARNED COUNSEL, I HOLD THAT THE ADDITION MADE BY THE AO IN THIS REGARD IS NOT JUSTI FIED BECAUSE THE PRIMARY ONUS HAS CLEARLY BEEN DISCHARGE D BY THE APPELLANT IN RESPECT OF CAPITAL INTRODUCED BY THE P ARTNERS OF THE FIRM AND SINCE THE PARTNERS ARE ALREADY ASSESSE D TO TAX, THE ADDITION CANNOT BE MADE IN THE HANDS OF THE APP ELLANT- FIRM. THE ADDITION MADE BY THE AO IN THIS CASE ON S UCH FACTS AND CIRCUMSTANCES DESERVES TO BE DELETED. THEREFORE , THE ADDITION MADE IS HEREBY DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T IN THIS CASE, THE AO HAS FAMED THE ASSESSMENT U/S 144 OF THE ACT. IT SEEMS THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT PRODUCED THE RELEVANT MATERIALS IN SUPPORT OF ITS CLAIM. HOW EVER, AT THE APPELLATE STAGE, THE ASSESSEE FURNISHED CERTAIN EVIDENCES AND THESE WERE FORWARDED TO THE AO FOR HIS COMMENTS. THE AO SUBMITTED HIS RE MAND REPORT DATED 12-12-2008, CONTAINING HIS COMMENTS AND RESULT OF S CRUTINY IN CONNECTION WITH THE IMPUGNED ADDITION WHICH WAS AGI TATED BY THE ASSESSEE IN GROUND NO.1 OF THE APPEAL RAISED BEFORE THE CIT(A). THE REMAND REPORT DATED 12-12-2008 READS AS UNDER: ITA NO.1497/AHD/2009 SURYA CATTLE FEED INDUSTRIES 4 4. THERE ARE TWO PARTNERS VIZ. S/SHRI VIPINBHAI Z. PATEL AND MADHAVJIBHAI J. VAGHANI AND THEY INTRODUCED NEW CAPITAL OF RS.3,454,000/- AND RS.2,105,000/- RESPEC TIVELY DURING THE YEAR UNDER ASSESSMENT. SHRI V. Z. PATEL IS ASSESSED TO TAX IN THIS CHARGE I.E. BY THE ITO, WD- 2(4), BHAVNAGAR AND SHRI M. J. VAGHANI IS ASSESSED TO TAX BY THE ITO, WD-1(2), BHAVNAGAR. 5. ON VERIFICATION OF THE CASE RECORDS OF SHRI V. Z. PATEL ASSESSED TO TAX UNDER THIS CHARGES, IT IS SEEN THAT THE ASSESSEE VIZ. V. Z. PATEL FILED RETURN OF INCOME SH OWING TOTAL INCOME OF RS.134,935/- VIDE ACKNOWLEDGEMENT RECEIPT NO.0241003366 ON 28/10/2005 FOR A. Y. 2005-06. THE INCOME SHOWN IN THE RETURN OF INCOME COMPRISED OF S HARE OF PROFIT, REMUNERATION AND INTEREST ON CAPITAL FROM M /S. SURYA CATTLE FEED INDS. RETURN OF INCOME WAS ACCOMPANIED WITH COPY OF CAPITAL ACCOUNT. BALANCE SHEET AND INTEREST ACCOUNT. SINCE, ASSESSEE SHOWN OUTSTANDING UNSECURED LOANS/D EPOSITS EXCEEDING RS.10 LACS WHICH WERE OBTAINED DURING THE PREVIOUS YEAR RELEVANT TO THE A. Y. 2005-06 AND THE CASE OF THE ASSESSEE WAS COVERED WITHIN THE PURVIEW OF CRITERIA LAID DOWN BY THE CBDT, THE ASSESSMENT FOR THE A. Y. 2005-06 I N THE CASE WAS SELECTED FOR MAKING THE ASSESSMENT UNDER SCRUTI NY. ON VERIFICATION OF RECORDS, IT TRANSPIRES THAT THE ASS ESSEE FURNISHED RELEVANT DETAILS AND INFORMATION TO THE A SSESSING OFFICER AS CALLED FOR VIDE QUESTIONNAIRE ISSUED U/S 142(1) OF THE ACT WHICH INCLUDES THE DETAILS AND INFORMATION RELATING TO THE ACCEPTANCE/OBTAINING OF FRESH/NEW LOANS/DEPOSIT S DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2 005-06. AFTER SCRUTINY AND VERIFICATION OF DETAILS AND INFO RMATION, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S. 143 (3) OF THE ACT DETERMINING TOTAL INCOME OF RS.143,935/- I.E. A CCEPTING THE INCOME RETURNED BY ASSESSEE VIDE ASSESSMENT ORDER D ATED 20/11/2007. 6. IN RESPECT OF ANOTHER PARTNER VIZ. SHRI M. J. VH AGANI CONCERN, IT MAY, BE MENTIONED THAT HE IS ASSESSED T O INCOME TAX BY THE INCOME TAX OFFICER, WARD-1(2), BHAVNAGAR . HE FILED THE RETURN OF INCOME FOR A. Y. 2005-06 SHOWING TOTA L INCOME OF RS.120,380/- VIDE ACKNOWLEDGEMENT RECEIPT NO.012100 6942 ON 28/10/2005. THE RETURN OF INCOME WAS PROCESSED U 9/S. 143(1) OF THE ACT VIDE D & C R NO.6811/2005-2006 ON 17/01/2006. ON INQUIRY WITH THE ASSESSING OFFICER, IT IS GIVEN TO UNDERSTAND THAT THE CASE OF SHRI M. J. VAGHANI W AS NOT SELECTED FOR MAKING T4HE ASSESSMENT FOR A. Y. 2005- 06 UNDER SCRUTINY. SINCE THE CASE OF SHRI M. J. VAGHANI WAS NOT SELECTED ITA NO.1497/AHD/2009 SURYA CATTLE FEED INDUSTRIES 5 FOR MAKING THE ASSESSMENT FOR A. Y. 2005-06 UDDER S CRUTINY, IT INDICATES THAT THE RETURN OF INCOME AND DOCUMENTS A TTACHED THERE WITH HAVE BEEN ACCEPTED AND AS SUCH IT SHOWS THAT THE DEPOSITS/LOANS ACCEPTED/OBTAINED BY THE ASSESSEE DU RING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION HAVE BEEN ACCEPTED BY THE ASSESSING O FFICER. HOWEVER, IT MAY BE MENTIONED THAT ASSESSEE STATED T HAT HE HAD ACCEPTED/OBTAINED LOANS BY CHEQUES AND ALL THE DEPOSITORS ARE ASSESSED TO INCOME TAX FOR WHICH ASS ESSEE FILED A ZEROX COPY OF RETURN OF INCOME FOR A. Y. 20 05-06 IN RESPECT OF DEPOSITORS. 7. ON PERUSAL OF ABOVE REMAND REPORT IT IS CLEAR TH AT THE AO HAS ACCEPTED THE CAPITAL INTRODUCED BY THE PARTNERS AND BELIEVED THAT THE ENTRIES AND TRANSACTIONS ARE GENUINE. IT IS APPAREN T FROM THE RECORD THAT THE AMOUNTS INTRODUCED BY THE PARTNERS OF THE FIRM IN THEIR CAPITAL ACCOUNTS HAD BEEN INTRODUCED FROM THEIR REGULAR BOO KS OF ACCOUNTS AND BOTH THE PARTNERS WERE ASSESSED TO TAX SEPARATELY. THE ASSESSEE FIRM HAS PROVED THE IDENTITY OF THE PARTNERS SINCE THEY ARE REGULAR INCOME TAX PAYEES AND WERE PARTNERS OF THE ASSESSEE FIRM SHARI NG EQUAL PROFIT & LOSS. THE ASSESSEE FIRM HAS ALSO ESTABLISHED THE GE NUINENESS OF THE TRANSACTIONS AS THE TRANSACTIONS WERE MADE FROM THE PERSONAL BOOKS OF ACCOUNTS OF THESE PARTNERS AND THE SAME WERE MADE T HROUGH BANK CHEQUES. AS REGARDS THE CREDIT WORTHINESS OF THE PA RTNERS, IT IS SEEN THAT BOTH THE PARTNERS HAVE SUFFICIENT CAPITAL IN THEIR ACCOUNTS, AS PER THE DETAILS FURNISHED BEFORE THE LOWER AUTHORITIES. THU S, THE ASSESSEE HAS DISCHARGED THE ONUS AND PROVED THE IDENTITY OF THE CREDITORS, THE CAPACITY OF THE CREDITORS TO ADVANCE MONEY, AND THE GENUINEN ESS OF THE TRANSACTIONS. IN OUR VIEW, THE REVENUE SHOULD NOT H AVE FILED THIS APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) WHEN IN THE REMAND REPORT THE AO WAS SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. THUS, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF T HE REVENUE. ITA NO.1497/AHD/2009 SURYA CATTLE FEED INDUSTRIES 6 8. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 0 5-11-2009 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (H. L. KARWA) JUDICIAL MEMBER DATE : 05-11-2009 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD