M/s Jai Alankar Jewellers, V. ACIT,

ITA 17/PAT/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1186 (ITAT-PATNA)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 26-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K PAUL
• Assessee Lawyers: ASHISH AGARWAL; A K RASTOGI RAKESH KUMAR
• Keywords: Unexplained investment; Opportunity of being heard
• Section: 133A; 69

Judgement Text

1 ITA NO. 17/PAT/2016. IN THE INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA. BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO.17 /PAT/ 2016. ASSESSMENT YEAR : 2006 - 07. M/S JAI ALANKAR JEWELLERS, ASSTT. COMMISSIONER OF INCOME - TAX, PATNA. VS. CIRCLE - 4, PATNA. APPELLANT. RESPONDENT. APPELLANT BY : S/SHRI A.K. RASTOGI, RAKESH KUMAR & ASHISH AGARWAL. RESPONDENT BY : SHRI S.K. PAUL. DATE OF HEARING : 02 - 0 8 - 2016 DATE OF PRONOUNCEMENT : 06 - 09 - 2016 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - 2, PATNA DATED 19 - 01 - 2016 AND PERTAINS TO ASSESSMENT YEAR 2006 - 07. THE GROUNDS OF APPEAL READ AS UNDER : 1. FOR THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.1L,62,734/ - MADE U / S 69 OF THE INCOME TAX ACT ON ACCOUNT OF ALLEGED EXCESS STOCK FOUND IN COURSE OF SURVEY. 2. FOR THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT INCOME OF THE FIRM CANNOT BE OWNED BY THE PARTNERS AND THAT THE INCOME OF A PARTICULAR ENTITY IS TO BE TAXED IN THE HANDS OF ENTITY EARNING THE INCOME AND NOT IN ANY OTHER HAND. 3. FOR THAT THE LD. CIT(A ) HAS ERRED IN HOLDING THAT UNACCOUNTED STOCK FOUND FROM THE BUSINESS PREMISES OF THE APPELLANT IS UNACCOUNTED STOCK OF THE APPELLANT AND NOT OF THE PARTNERS AND ACCORDINGLY SUSTAINED ADDITION MADE U/S 69. 4. FOR THAT THE LD. CIT(A) HAS FAILED TO APPRECIAT E THAT THE SOURCES OF ACQUISITION OF UNACCOUNTED STOCK FOUND IN COURSE OF SURVEY ARE OUT OF INCOME OFFERED BY THE 2 ITA NO. 17/PAT/2016. PARTNERS IN THEIR RESPECTIVE RETURNS. 5. FOR THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE FIRM AND PARTNERS ARE NOT DIFFERENT ENT ITIES. 6. FOR THAT THE LD. CIT(A) HAS ERRED IN NOT PERMITTING TELESCOPING OF INCOME OFFERED BY THE PARTNERS IN THEIR RESPECTIVE RETURNS AGAINST THE STOCK FOUND IN COURSE OF SURVEY FROM THE BUSINESS PREMISES OF THE APPELLANT. 7. FOR THAT THE SUSTENANCE OF ADD ITION BY LD. CIT(A) AMOUNTED TO DOUBLE TAXA TION OF THE SAME AMOUNT OF RS.11 ,62,734/ - , ONE IN THE HANDS OF FIRM U/S 69 AND THE OTHER IN THE HANDS OF THE PARTNERS WHO HAVE DECLARED THE SAID SUM AS THEIR INCOME IN THEIR RESPECTIVE RETURNS AND ITS APPROPRIA TION TOWARDS STOCK FOUND IN COURSE OF S URVEY. 8. FOR THAT THE SUSTENANCE OF ADDITION OF RS.11,62,734/ - IS W RO NG, ILLEGAL AND UNJUSTIFIED ON THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 9. FOR THAT THE WHOLE ORDER IS BAD IN FACT AND LAW OF THE CASE AND IS FIT TO BE MODIFIED. 2. IN THIS CASE UNDER A SURVEY U/S 133A CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE THE DIFFERENCE IN STOCK AMOUNTING TO RS.11,62,734/ - WAS FOUND. THE PARTN ER OF THE ASSESSEE FIRM COULD NOT EXPLAIN THE SAME. HOWEVER, HE STATED THAT HE WAS READY TO PAY TAX IN THE DIFFERENCE. HOWEVER, THE AO NOTED THAT FROM PERUSAL OF RETURN OF INCOME AS WELL AS THE AUDIT REPORT IT TRANSPIRED THAT THE ASSESSEE FIRM HAD NOT OFFERED ANY AMOUNT FOR TAXATION IN THIS REGARD. THE ASSESSEE EXPLAINED AS UNDER : SURVEY U/S 133A ON 08/12/2005 WAS CONDUCTED AT BUSINESS PREMISES. DURING THE COU8RSE OF SURVEY, DIFFERENCE OF STOCK FOUND AT RS.11,62,734/ - . THE ASSESSEE HAS ACCOUNT ED FOR THE SAME IN RESPECT OF AFORESAID STOCK. COPY OF CAPITAL A/C, ACKNOWLEDGEMENT SLIP, COMPUTATION OF TAXABLE INCOME OF PARTNERS ARE ATTACHED HEREWITH FOR YOUR KIND PERUSAL AND VERIFICATION. THE AR STATED THAT THE ASSESSEE HAS CREDITED THE PARTNERS A CCOUNT TO THE EXTENT OF RS.11,62,734/ - AS UNDER : 3 ITA NO. 17/PAT/2016. 1. SRI PRAVESH KUMAR GUPTA - RS. 360447.57 2. SMT. ARTI PRASAD - RS. 267428.84 3. SMT. ASHA GUPTA - RS. 267428.85 4. SMT. KUSUM GUPTA - RS. 267428.85 TOTAL - RS. 1162734.11 TH E AO, HOWEVER, WAS NOT CONVINCED. HE HELD AS UNDER: A SURVEY WAS CONDUCTED IN THE BUSINESS PREMISES SOF THE PARTNERSHIP FIRM AND STOCK DIFFERENCE WORTH RS.11,62,734/ - WAS FOUND WHICH CLEARLY BELONGS TO THE FIRM . IT IS NOT KNOWN HOW THE PARTNER WILL OFFER THE SAME FOR TAXATION IN THE GARB OF THEIR INCOME FROM OTHER SOURCES. DURING THE SURVEY THE MAIN MANAGING PARTNER SHRI PRAVESH KR. GUPTA WAS PRESENT AND HIS STATEMENT ON OATH WAS TAKEN. IN RESPECT OF DIFFERENCE OF STOCK HE STATED THAT HE READY TO PAY THE TAX. HE GIVEN THE STATEMENT AS PARTNER OF THE FIRM WHICH IS EVIDENT FROM QUESTION NO. 2 AND ITS ANSWER. HOW THE GOLD ORNAMENTS AND OTHER ARTICLES BELONGING TO THE FIRM COULD BE OWNED B Y ALLEGED PARTNERS. OBVIOUSLY THIS HAS BEEN DONE WITH INTENTION TO REDU CE THE INCIDENCE OF THE TAXATION. UNDER THE CIRCUMSTANCES I HAVE NO ALTERNATIVE BUT TO TREAT THE DIFFERENCE OF THE STOCK FOUND DURING THE COURSE OF SURVEY AS UNEXPLAINED INVESTMENT U/S 69 OF THE IT ACT IN THE HANDS OF THE FIRM. ACCORDINGLY A SUM OF RS. 11, 62,734/ - IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S 69 OF THE ACT ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK BELONGING TO THE FIRM. 3. AGAINST THE ABOVE ORDER, ASSESSEE APPEALED BEFORE THE LEARNED CIT(APPEALS). THE LEARNED CIT(APPEALS) HELD AS UNDER : WITH REGARD TO ADDITION OF RS.11,62,734/ - , I AGREE WITH THE OBSERVATIONS OF THE AO THAT THE INCOMER OF THE FIRM CANNOT BE OWNED BY THE PARTNERS. IT IS SETTLED LAW THAT INCOME OF A PARTICULAR ENTITY HAS TO BE TAXED IN THE HANDS OF ENTITY EARNIN G THE INCOME AND NOT IN ANY OTHER HANDS. IN THE PRESENT CASE, THE STOCK WAS FOUND AT THE BUSINESS PREMISES OF THE FIRM AND IT WAS UNACCOUNTED STOCK OF THE FIRM AND NOT OF THE PARTNERS. IN THE CIRCUMSTANCES, THE ADDITION U/S 69 HAS CORRECTLY BEEN MADE BY THE AO IN THE HANDS OF THE FIRM AMOUNTING TO RS.11,62,734/ - AS IT WAS AN EXCESS STOCK FOUND IN THE BUSINESS PREMISES OF THE APPELLANT. ACCORDINGLY, THE ADDITION OF RS.11,62,734/ - IS UPHELD. 4. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 4 ITA NO. 17/PAT/2016. 5. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE REITERATED THAT THE INCOME - TAX ACT DOES NOT DIFFERENTIATE BETWEEN THE PARTNER AND THE FIRM AND HENCE THE ASSESSEE FIRM PARTNERS WERE RIGHT IN OFFERING THE SHORT AGE IN STOCK IN THEIR INDIVIDUAL INCOME - TAX RETURNS. LEARNED COUNSEL FURTHER SUBMITTED THAT THE STATEMENT U/S 133A CANNOT BE AN EVIDENCE FOR ADDITION. HE FURTHER SUBMITTED THAT NO INCRIMINATING DOCUMENT OF EARNING OF UNDISCLOSED INCOME BY THE FIRM WAS FOUN D DURING THE SURVEY. IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS ALSO MADE THE FOLLOWING SUBMISSIONS : IN COURSE OF HEARING ON 02.08.2016, IT WAS SUBMITTED THAT THE ADDITION OF RS. 11 ,62,734/ - HAS BEEN SUBJECTED TO DOUBLE ADDITION, ONE IN THE HA ND OF THE APPELLANT FIRM (DISPUTED IN GROUND NOS. I TO 8) AND THE OTHER BY WAY OF DECLARATION OF INCOME FROM OTHER SOURCES IN THE HANDS OF THE FOUR PARTNERS (COPY OF ACKNOWLEDGEMENT OF RETURN AND COMPUTATION OF INCOME OF ALL THE FOUR PARTNERS ENCLOSED AT PAGES 10 TO 21 OF P.B SUBMITTED ON 01.08.2016). THE TOTAL TAX LIABILITY ON THE ADDITION OF RS.L1,62,734/ - IS RS.3,91,367/ - (DETAILS ENCLOSED) AND THE APPELLANT HAS ALSO WORKED OUT THE TAX LIABILITY OF THE PARTNERS AS PER RETURN (INCLUDING THE DISCLOSURE OF STOCK) AND TAX LIABILITY WITHOUT INCLUDING THE INCOME FROM OTHER SOURCES WHICH IS EQUIVALENT TO THE AMOUNT OF THE VALUE OF STOCK OF RS.11,62,734/ - (DETAILS ENCLOSED). AS STATED ABOVE, THE TAX LIABILITY IN THE HANDS OF THE FIRM RELATING TO ADDITION OF R S.II,62,734/ - WILL BE RS.3,91,367/ - AS AGAINST WHICH THE TAX LIABILITY IN THE HANDS OF THE PARTNERS ON INCLUSION OF THE SAID SUM IS RS.2,30,1 05/ - . THUS, BY THIS METHODOLOGY, IT CAN BE SAID THAT THERE HAS BEEN LESSER PAYMENT OF TAX OF RS.1 ,61 ,271/ - (RS. 3,91 ,367/ - MINUS RS.2,3 0,105/ - ) IN THE HANDS OF THE PARTNERS. THE PARTNERS ARE READY TO COMPENSATE THE REVENUE BY MAKING FURTHER PAYMENT OF TAX IN THEIR HANDS AMOUNTING TO RS.L ,61 ,271 / - (DETAILS ENCLOSED) AND IN THE CIRCUMSTANCES, IT IS PRAYED THAT THE ADDITION OF RS.11 ,62,734/ - MAY KINDLY BE ORDERED TO BE DELETED AS IT SUSTENANCE WI LL AMOUNT TO DOUBLE TAXATION ONE IN THE HANDS OF THE APPELLANT BY WAY OF ADDITION OF RS.11,62,734/ - AND THE OTHER BY WAY OF DECLARATION BY THE PARTNERS IN THEIR RESPE CTIVE RETURNS. THE APPELLANT HAS ALREADY RELIED ON JUDICIAL PRECEDENCE IN ITS WRITTEN 5 ITA NO. 17/PAT/2016. SUBMISSION AT PAGES 3 & 4 AGAINST DOUBLE ADDITION WHICH INTER ALIA INCLUDES THE JUDGMENT OF SUPREME COURT AS WELL. IT IS THEREFORE, PRAYED THAT YOUR HONOUR WOULD BE KIND ENOUGH TO DELETE THE ADDITION OF RS. 11 , ,62,734/ - AND THE PARTNERS OF THE APPELLANT FIRM UNDERTAKE TO MAKE PAYMENT OF RS. 1 ,61 ,273/ - WITHIN A W EEK OF THE RECEIPT OF THE ORDER OF THE HON'BLE TRIBUN AL. 6. PER CONTRA, LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. I FIND THAT THOUGH IT IS TRUE THAT THE FIRM AND ITS PARTNERS ARE DISTINCT ENTITIES AND HAVE FILED THEIR RETURNS ALSO IN THEIR RESPECTI VE CAPACITIES, AT THE SAME TIME IT WILL ALSO NOT BE PROPER THAT THE SAME AMOUNT BE TAXED TWICE IN DIFFERENT HANDS. IF THE EXCESS STOCK FOUND IN SURVEY BELONGS TO THE FIRM AND THE SAME WAS OFFERED BY THE PARTNERS IN THEIR INDIVIDUAL ACCOUNTS, THE SAME WAS NOT ASSESSABLE IN THEIR INDIVIDUAL HANDS. IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS MADE SUBMISSION S AS ABOVE. I FIND THAT THIS SUBMISSION WAS NOT BEFORE THE AUTHORITIES BELOW. HENCE IN THE INTEREST OF JUSTICE I REMIT THIS ISSUE TO THE FILE OF T HE AO. THE AO IS DIRECTED TO CONSIDER THE ASSESSEES OFFER AND DECIDE ACCORDINGLY AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF SEPT. , 2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. DATED: 6 TH SEPT. , 2016. 6 ITA NO. 17/PAT/2016. COPY FORWARDED TO : 1. M/S JAI ALANKAR JEWELLERS, BORING ROAD, PATNA. 2. A.C.I.T., CIRCLE - 4, PATNA. 3. C.I.T. - , PATNA. 4. CIT(APPEALS), - 2 , PATNA. 5. D.R., ITAT, PATNA. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, PATNA BENCH, PATNA. WAKODE .