M/s.Asit Dixit, Jabalpur V. Income Tax Officer Ward2(2), Jabalpur

ITA 19/JAB/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3995 (ITAT-JABALPUR)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 07-09-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K HALDER
• Assessee Lawyers: SANJAY SETH
• Keywords: Onus to prove; Set aside
• Section: 143(2); 48; 72; 13; 68; 145; 144

Judgement Text

ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 1 IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH , JABALPUR (SMC) (THROUGH VIDEO CONFERENCING) BEFORE SH. SANJAY ARORA, HON'BLE ACCOUNTANT MEMBER ITA NO. 19/JAB/2020 ASSESSMENT YEAR : 2005-06 ASIT DIXIT, JABALPUR (M.P.) [PAN: AANFM 5798A] VS. INCOME TAX OFFICER, WARD-2(2), JABALPUR (APPELLANT) (RESPONDENT) APPELLANT BY SH. SANJAY SETH, CA RESPONDENT BY SH. S.K. HALDER, SR. DR DATE OF HEARING 16/09/2021 DATE OF PRONOUNCEMENT 07/10/2021 ORDER PER SANJAY ARORA, AM THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-28, MUMBAI (CA MP AT JABALPUR) (CIT(A) FOR SHORT) DATED 02/01/2014, DISMISSING T HE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT UNDER SECTION 144 OF TH E INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (AY) 2005 -06 VIDE ORDER DATED 24/11/2010. 2. THE APPEAL RAISES TWO GROUNDS, AS UNDER, WHICH S HALL BE TAKEN UP IN SERIATIM: 1. THAT THE ASSESSEE HAD FILED ITR DECLARING LOSS OF RS. 26,130 AND THE AO HAS ESTIMATED PROFIT AT RS. 6,44,516 BY ESTIMATING THE NET PROFIT OF 2% ON SALES TURNOVER OF RS. 3,22,25,835. COMMISSIONER OF INCOME TAX (APPEAL S) HAS UPHELD THE ORDER PASSED BY THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE. ESTIMATION OF NET PROFIT BY AO ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 2 AND CIT(A) IS NOT CORRECT AND RETURNED LOSS AS DECL ARED BY THE ASSESSEE MAY KINDLY BE ACCEPTED. 2. THAT THE AO HAS MADE THE ADDITION OF RS. 37,80,0 00 ON ACCOUNT OF UNEXPLAINED CAPITAL INTRODUCED BY THE PARTNERS, SH. SANTOSH JAI SWAL RS. 37,00,000 AND SH. ASIT DIXIT RS. 80,000. ASSESSEE HAS SUBMITTED THE DETAIL S OF CAPITAL INTRODUCED BY BOTH THE PARTNERS BEFORE AO AND CIT(A) BUT BOTH HAVE NOT ACC EPTED AND ADDITION MADE BY AO WHICH IS CONFIRMED BY CIT(A) SAME IS NOT CORRECT AN D MAY KINDLY BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, A PARTNERSHIP FIRM SELLING COUNTRY LIQUOR UNDER LICENCE FROM THE STATE EXCISE DEPARTMENT, RETURNED ITS INCOME FOR THE YEAR AT RS. (-) 26,130, I.E., AFTER DEDUCTING INTEREST TO PARTNERS AT RS. 4,45,680. THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNT DURING ASSESSMENT PROCEEDINGS, I.E., IN RESPONSE TO NOTICE U/S. 143(2 ), AND IT WAS FOUND BY THE ASSESSING OFFICER (AO) THAT IT HAD FAILED TO MAINTA IN VERIFIABLE EVIDENCES IN RESPECT OF SALES, SEALING AND BOTTLING CHARGES, AND LEASE MONEY, THE LATTER TWO BEING EXPENSES, CLAIMED AT RS. 51.31 LACS AND RS. 2 58.99 LACS RESPECTIVELY (PB PG. 74). REJECTING THE DISCLOSED BOOK RESULTS, HE E STIMATED THE ASSESSEES NET PROFIT AT 2% OF THE DISCLOSED TURNOVER OF RS. 322.2 6 LACS, I.E., AT RS. 6,44,516 (REFER PARA 3 OF THE ASSESSMENT ORDER). IT IS THIS ESTIMATION, SINCE CONFIRMED IN FIRST APPEAL, THAT IS BEING CHALLENGED AS EXCESSIVE BY THE ASSESSEE PER ITS GD. 1. ARGUMENTS 4. IT WAS CONTENDED BY SH. SETH, THE LD. COUNSEL FO R THE ASSESSEE, THAT THE PAYMENT OF LEASE MONEY AND SEALING & BOTTLING CHARG ES ARE TO THE AGENCIES OF THE STATE GOVERNMENT, AND THAT THEREFORE THERE IS N O QUESTION OF ANY INFLATION THEREIN. THE NON-MAINTENANCE OF SALE BILLS WAS THOU GH ADMITTED BY HIM, JUSTIFYING THE SAME ON THE BASIS OF BEING A TRADE PRACTICE; THE CASH COLLECTION FOR THE DAY BEING REGARDED AS SALE. THE AO, IT WAS FURTHER SUBMITTED, HAD NOT CITED ANY COMPARABLE CASE. THE LD. SR. DR, SH. HALD ER, WOULD IN RESPONSE RELY ON THE CONCURRENT FINDINGS BY THE ASSESSING AND THE FIRST APPELLATE AUTHORITY. ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 3 5. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. 5.1 MY FIRST OBSERVATION IN THE MATTER IS THAT THE ASSESSEE HAS NOT, AT ANY STAGE, INCLUDING BEFORE THE TRIBUNAL, DISPUTED THE INVOCATION OF SEC. 144, AND FOR WHICH REFERENCE IS ALSO MADE TO THE ASSESSEES SUBM ISSIONS DATED 18/6/2012 BEFORE THE LD. CIT(A) (PB PGS. 66-68), ALSO REPRODU CED IN THE IMPUGNED ORDER (IO) (PGS. 3-5). IN FACT, AS A READING OF THE ASSES SMENT ORDER SHOWS, THERE HAS BEEN NON-COMPLIANCE OF NOTICE/S U/S. 143(2) AS WELL AS U/S. 142(1), LEADING TO THE BEST JUDGMENT ASSESSMENT. REFERENCE TO SEC. 145 (3), WHICH ALSO RESULTS IN THE SAME CONSEQUENCE, THUS BECOMES AN ADDITIONAL GR OUND FOR THE APPLICATION OF SEC. 144. FURTHER, AS REGARDS SEC. 145(3), A SALE B ILL IS A PRIMARY DOCUMENT OF ANY BUSINESS ENTITY SELLING GOODS OR SERVICES, ALSO HAVING LEGAL IMPLICATIONS. IT IS THE SALE BILL THAT EVIDENCES THE SALE, RAISING A CH ARGE ON THE BUYER, AND ON THE BASIS OF WHICH THE SALE CONSIDERATION CAN BE CORREL ATED WITH THE GOOD SOLD THERE- AGAINST, INCLUDING THE QUANTITY THEREOF. YIELDING T HUS ITS SALE PRICE, EXCESS OF WHICH OVER THE COST THEREOF IS PROFIT BY DEFINITION . THIS IS IRRESPECTIVE OF WHETHER THE SALE CONSIDERATION IS RECEIVED/RECEIVAB LE WHOLLY OR PARTLY IN CASH (LEGAL TENDER) AND, FURTHER, OF WHETHER THE BUYER D EMANDS HIS COPY THEREOF OR NOT. AS REGARDS LEASE MONEY AND SEALING & BOTTLING CHARGES, SURELY ONE WOULD NOT NORMALLY EXPECT INFLATION THEREIN, HOWEVER, THE RE IS NOTHING ON RECORD TO EXHIBIT THE RECONCILIATION OF THE PAYMENTS WITH THE AMOUNTS CLAIMED, WHICH ARE IN NO INSUBSTANTIAL SUMS. THE NON-ACCEPTANCE OF THE ASSESSEES BOOK RESULTS, AND COMPLETING THE ASSESSMENT AS A BEST JUDGMENT ASSESS MENT, IS, UNDER THE CIRCUMSTANCES, UNEXCEPTIONAL. 5.2 AS REGARDS THE REASONABILITY OF THE ESTIMATION OF PROFIT, IN THE ABSENCE OF PAST HISTORY; THE CURRENT BEING THE FIRST YEAR OF T HE ASSESSEES BUSINESS, A COMPARABLE CASE/S BECOMES THE ONLY MANNER OF TESTIN G THE ASSESSEES DECLARED RESULTS. THE LD. CIT(A) HAS REBUTTED THE COMPARABLE CASE CITED BY THE ASSESSEE BEFORE HIM (REFER PG. 9 OF THE IO). A PERUSAL OF TH E SAID ORDER BY THE TRIBUNAL (IN ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 4 ITA NO. 159/JAB/2009, DATED 13/7/2012), PLACED AT P GS. 3-10 OF THE ASSESSEES PAPER-BOOK, THOUGH NOT ADVERTED TO DURING HEARING, SHOWS THAT IN THAT CASE THE ASSESSEE DISCLOSED A NET PROFIT OF RS. 1,74,530 ON A SALE OF RS. 328.72 LACS, JUSTIFYING THE SAME WHICH FOUND ACCEPTANCE BY THE TRIBUNAL, ON THE BASIS OF LOSS ON ACCOUNT OF UNUTILIZED LEASE MONEY AT RS. 8, 09,338, STOCK AGAINST WHICH COULD NOT BE LIFTED DUE TO DULL MARKET CONDITIONS. NO SUCH CLAIM OBTAINS IN THE INSTANT CASE, WHICH PERTAINS TO THE PRECEDING YEAR. THE NORMAL PROFIT, I.E., BUT FOR THE SAID LOSS, IS THUS RS.9,79,868, OR ABOUT 3% OF SALES, THE QUANTUM OF WHICH APPROXIMATES THAT BY THE ASSESSEE FOR THE RELEVANT YEAR. IT IS THIS PROFIT RATE THAT IS THEREFORE RELEVANT AND COMPARABLE. THE SAID CASE , WHICH IS THUS COMPARABLE, FAVOURS THE REVENUES ESTIMATION RATHER THAN BEING SUPPORTIVE OF THE ASSESSEES CASE. RATHER, NORMAL MARKET CONDITIONS, AS AGAINST DULL, WHICH OBTAINED IN THAT YEAR, WOULD YIELD A STILL HIGHER PROFIT RATE. WHY, THE ASSESSEES DISCLOSED PROFIT IS AT 1.3%, AS AGAINST 3% IN THE CITED CASE. THE HO NBLE JURISDICTIONAL HIGH COURT IN BADRI PRASAD BHAGWANDAS & CO. V. CIT [1995] 82 TAXMAN 109 (MP) APPROVED A NET PROFIT RATE OF 5% OF SALES. THE ESTI MATION OF THE NET PROFIT OF THE LIQUOR BUSINESS AT 2% OF SALES IS, THUS, REASONABLE , AND UPHELD. I DECIDE ACCORDINGLY, AND THE ASSESSEE FAILS ON ITS GD. 1. 6. GD. 2 AGITATES THE ADDITION OF RS. 37.80 LACS, C REDITED BY THE ASSESSEE IN ITS ACCOUNTS IN THE NAME OF ITS TWO PARTNERS, I.E ., SH. SANTOSH JAISWAL AND SH. ASIT DIXIT, AT RS. 37 LACS AND RS. 0.80 LACS RESPEC TIVELY. THE ASSESSEES CASE IS THAT SH. ASIT DIXIT PARTICIPATED IN A LOTTERY SYSTE M IN FEBRUARY, 2004 TO OBTAIN COUNTRY LIQUOR SHOP (CLS) OF THE GOVERNMENT OF MP, AND WAS SUCCESSFUL IN GETTING THREE SUCH SHOPS FOR F.Y. 2004-05. AS THE S AME INVOLVED CAPITAL, I.E., TOWARD EARNEST MONEY; ARRANGING BANK GUARANTEE, ETC ., WHICH HE DID NOT HAVE, SH. DIXIT (AD) MADE SH. JAISWAL (SJ) HIS PARTNER WI TH 75% SHARE, AND WHO PROVIDED THE NECESSARY CAPITAL. ACCORDINGLY, THE BA LANCE-SHEET OF THE FIRM AS ON 31/3/2004 IS AS UNDER: (PB PG. 65) ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 5 M/S. ASIT DIXIT - BALANCE-SHEET AS ON 31.03.2004 SR. LIABILITY AMOUNT (RS.) SR. CREDIT AMOUNT (R S.) 1. 2. CAPITAL A/C. PARTNER SANTOSH JAISWAL CAPITAL A/C. PARTNER ASIT DIXIT 37,00,000 80,000 1. 2. 3. 4. 5. EARNEST MONEY DEPOSITED WITH EXCISE DEPARTMENT FDR (ALLAHABAD BANK) BANK GUARANTEE EXPENDITURE ADVANCE LOCAL DUTY CASH-IN-HAND 18,00,000 11,87,100 1,18,730 2,00,000 47,960 TOTAL 37,80,000 TOTAL 37,80,000 THE SAME, HOWEVER, DID NOT FIND ACCEPTANCE WITH THE AO FOR THE FOLLOWING REASONS: I) SH. JAISWAL WAS STATED TO HAVE INTRODUCED CAPITAL B Y WAY OF BANK FDR IN 2004, BUT NO SUCH FDR WAS FOUND IN HIS BALANCE-S HEET; II) HE WAS FURTHER STATED TO HAVE WITHDRAWN CAPITAL FRO M HIS SAND BUSINESS, BUT NO WITHDRAWALS WERE FOUND IN M/S. SAN TOSH JAISWAL (SAND CONTRACT) (PB PGS. 36-49, AT PG. 48); III) NO DATE-WISE DETAILS OF WITHDRAWAL OF RS. 37 LACS, NOR HIS PERSONAL BOOKS, WERE FURNISHED; IV) NO EVIDENCE TO SUBSTANTIATE THE BUILT-UP OR OTHERWI SE OF SAVINGS BY SH. ASIT DIXIT, WAS PROVIDED. THESE FINDINGS WERE ENDORSED BY THE LD. CIT(A). HIS DECISION, AT PARA 3.3 (PGS. 8-10) OF HIS ORDER, READ OUT DURING HEARING, IS BAS ED ON AND COMPRISES THE FOLLOWING REASONS: A). THE ASSESSEE-FIRM CAME INTO EXISTENCE ONLY VIDE PARTNERSHIP DEED DATED 26/4/2004, W.E.F. 01/4/2004. HOW COULD IT BE THEN S AID THAT THE CAPITAL WAS ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 6 INTRODUCED BY THE PARTNERS IN THE FIRM DURING THE P RECEDING YEAR, I.E., FY 2003- 04?; B). NO DOCUMENTS TO SHOW THE HUGE CASH WITHDRAWAL O F RS. 145 LACS BY SH. SANTOSH JAISWAL (IN FY 2003-04) HAD BEEN SUBMITTED, NOR ITS BREAK-UP SO AS TO EXHIBIT ITS INVESTMENT, FURNISHED DESPITE BEING CAL LED FOR; C). NO LINKAGE HAD BEEN ESTABLISHED BETWEEN THE CAS H WITHDRAWN AND THE INVESTMENT IN THE ASSESSEE-FIRM; D). NO EVIDENCE/DETAILS AS TO SAVINGS, THE STATED S OURCE OF CAPITAL ATTRIBUTED TO SH. ASIT DIXIT, HAD BEEN PRODUCED, NOR HIS TAX RETURNS FURNISHED. ARGUMENTS 7. THE ASSESSEES CASE BEFORE ME REMAINED THE SAME. THE WITHDRAWAL (RS. 145 LACS) BY SJ WAS FROM M/S. SANTOSH JAISWAL (RATL AM), ALSO IN LIQUOR BUSINESS (AS EVIDENCED FROM ITS BALANCE-SHEET (PB PGS. 20-3 5, AT PG. 32)), AND NOT HIS SAND BUSINESS, AS STATED BY THE AO. THE AMOUNT WAS WITHDRAWN CASH, AND INTRODUCED IN THE ASSESSEE-FIRM FROM 18/2/2004 TO 3 1/3/2004 BY WAY OF PARTNERS CAPITAL. IT IS FOR THIS REASON THAT THE S AME IS REFLECTED AS THE CLOSING CAPITAL IN THE NAMES OF ITS TWO PARTNERS AS ON 31/ 3/2004 (PB PG. 65) AND AS OPENING CAPITAL (ON 01/4/2004), THE LATTER SOUGHT T O BE EXPLAINED THUS BY WAY OF A CA CERTIFICATE DATED 27/8/2012 FURNISHED IN THE R EMAND PROCEEDINGS. SH. DIXIT, PRIOR TO VENTURING INTO THIS BUSINESS, WORKE D AS A SALES MANAGER IN A LIQUOR FIRM, DRAWING A SALARY OF RS. 10,000 TO RS. 12,000 PER MONTH, AND WHICH EXPLAINS THE NOMINAL CAPITAL OF RS. 80,000 ATTRIBUT ED TO HIM. THE REVENUES CASE, AGAIN NOT ASSAILED BEFORE ME WITH ANY MATERIA L, ALSO REMAINS THE SAME. DECISION 8. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. 8.1 AT THE VERY OUTSET, IT MAY BE CLARIFIED THAT TH E FACT OF THE PROFIT OF THE BUSINESS HAVING BEEN ESTIMATED IS BY ITSELF NO BAR FOR REGARDING A CREDIT IN THE BOOKS OF THE BUSINESS AS UNEXPLAINED AND, THUS, AS ITS INCOME, AS EXPLAINED BY THE APEX COURT PER ITS DECISIONS, AS IN KALE KHAN MOHD. HANIF V. CIT [1963] ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 7 50 ITR 1 (SC); CIT V. DEVI PRASAD VISHWANATH PRASAD [1969] 72 ITR 194 (SC). THIS LEGAL ASPECT, THOUGH TO BE FAIR WAS NOT CANVASSED BEFORE ME, IS YET CLARIFIED IN VIEW OF IT CONTINUING TO BE RAISED BEF ORE THE TRIBUNAL. IN FACT, IRRESPECTIVE OF A PLEADING BEING ASSUMED BY EITHER PARTY BEFORE IT, THE TRIBUNAL IS DUTY BOUND TO DECIDE AN APPEAL, BEING A CONTINUA TION OF THE ASSESSMENT PROCEEDINGS, IN ACCORDANCE WITH LAW. WHY, IN THE FA CTS OF THE CASE, IT IS ABUNDANTLY CLEAR THAT THE AMOUNTS UNDER REFERENCE H AVE NO RELATION WITH THE TRADING PROFIT ARISING TO THE ASSESSEE ON THE SALE OF LIQUOR. 8.2 THE FIRST ASPECT OF THE MATTER, WHICH WOULD REL ATE TO BOTH THE SUMS UNDER REFERENCE, IS THAT THE FIRM CAME INTO EXISTENCE ONL Y W.E.F. 01.04.2004 AND, THEREFORE, CANNOT HAVE ANY OPENING CAPITAL, WHICH I MPLIES A CARRY FORWARD OF CLOSING CAPITAL, I.E., AS ON 31/3/2004. FURTHER, IN ASMUCH AS THE DIFFERENT ASSETS, VIZ. EARNEST MONEY, FDR, ETC. CANNOT BE SAID TO BE OF THE ASSESSEE-FIRM, BEING NON-EXISTENT ON THAT DATE, THE BALANCE-SHEET AS ON 31.03.2004 ALSO CANNOT BE SAID TO BE OF THE ASSESSEE-FIRM. PER CONTRA, THE FIRM CL AIMING TO BE THE OWNER OF THE ASSETS AS REFLECTED IN ITS BALANCE-SHEET AS ON 01/ 4/2004, THE FIRST DAY OF ITS EXISTENCE, EVEN AS IT CANNOT BE SAID TO BE THE OWNE R THEREOF AS AT THE CLOSE OF 31/3/2004, NOR HAS SHOWN ANY RECEIPT OF FUNDS ON 01 /4/2004, IT IS LIABLE TO SATISFACTORILY EXPLAIN THE NATURE AND SOURCE THEREO F, FAILING WHICH THE SAME COULD BE ASSESSED AS ITS INCOME CHARGEABLE TO TAX. THE REVENUES ARGUMENT IS VALID, AND IS PRECISELY T HE REASON WHY THE ASSESSEE IS BEING CALLED UPON TO EXPLAIN THE CREDIT S IN ITS ACCOUNTS, WHICH, THEREFORE, CAN ONLY BE REGARDED AS ON 01.04.2004, T HE BEGINNING OF THE YEAR, I.E., EVEN IF INVESTMENTS BY THE CONCERNED CREDITORS WERE MADE DURING THE PRECEDING YEAR, ENJOINING THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE THEREOF, WHICH OTHERWISE COULD ONLY BE ENQUIRED INTO, AND IN THE E VENT OF THE SAME BEING NOT EXPLAINED, BROUGHT TO ASSESSMENT AS INCOME FOR THE PRECEDING YEAR. SH. SETH WOULD DURING HEARING EXPLAIN THIS BY STATING THAT T HE PARTNERSHIP WAS IN ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 8 EXISTENCE DURING F.Y.2003-04, ALBEIT PER AN ORAL CO NTRACT, AND CAME TO BE EVIDENCED VIDE AN INSTRUMENT ONLY ON 26.4.2004, EFF ECTIVE 01.04.2004 (AT PB PGS. 61-64). THE CONTENTION IS UNTENABLE . THE PARTNERSHIP DEED, IN THAT CASE, WOULD CLEARLY RECORD THIS FACT, STATING OF THE PART NERSHIP BEING EFFECTIVE FROM AN EARLIER DATE. THAT APART, THE DIFFERENT ASSETS STAT ED AS HELD BY THE FIRM AS ON 31.03.2004, WOULD BE IN THE NAME OF THE FIRM, WHICH IS NEITHER CLAIMED, MUCH LESS SHOWN, AT ANY STAGE, INCLUDING BEFORE ME. WHY, THE LICENSE ISSUED BY THE STATE EXCISE DEPARTMENT, NOT FURNISHED DESPITE BEIN G CALLED FOR BY THE REVENUE, WOULD ALSO BE IN THE NAME, OR ENDORSED IN FAVOUR, O F THE ASSESSEE-FIRM. RATHER, THE CLAIM OF AN ORAL ARRANGEMENT (I.E., PRIOR TO 01 .04.2004) ITSELF CLARIFIES THAT THERE WAS NO INSTRUMENT OF PARTNERSHIP, I.E., IN WR ITING, FOR THE SAID PERIOD, WHICH COULD HAVE BEEN FURNISHED TO THE RESPECTIVE D EPARTMENTS, VIZ. EXCISE DEPARTMENT, COLLECTOR, BANK, STATE WAREHOUSE (FOR S EALING AND BOTTLING), ETC. BY THE FIRM TOWARD REGISTRATION AND MONIES PAID TO/DEP OSITED, THEREWITH, BY, OR FOR OR ON BEHALF OF, THE ASSESSEE-FIRM. THE MATTER, IT MAY BE APPRECIATED, HAS SERIOUS IMPLICATIONS QUA THE GENUINENESS OF THE IMPUGNED CREDITS. WHY WOULD ANYONE, ONE MAY ASK, INVEST WITHOUT CONSIDERATION, EVEN IF ONLY IN THE FORM OF A FIRM ARRANGEMENT, WHICH CASTS A SERIOUS SHADOW OF DOUBT ON THE GENUINENESS OF THE IMPUGNED CREDITS, BEING OSTENSIBLY TOWARD CAPITAL C ONTRIBUTION BY THE PARTNERS . CONTINUING FURTHER, THE TAX COLLECTION AT SOURCE ON THE PURCHASES MADE DURING THE YEAR (AT RS. 2,50,487/PB PG. 73), WHICH ARE FRO M THE STATE EXCISE DEPTT., IS TO THE ACCOUNT OF THE ASSESSEE-FIRM (PAN:AANFM 5798 A), IN WHICH THE CREDITORS ARE PARTNERS. THIS WOULD ALLAY ALL DOUBTS WITH REGARD TO THE GENUINENESS OF THE IMPUGNED CREDITS. THE NATURE THEREOF AS PARTNERS CAPITAL, I.E., AS CONTRIBUTION TOWARD THE CAPITAL OF THE PAR TNERSHIP, CAN THUS BE SAID TO HAVE BEEN ESTABLISHED. THE ONLY IMPORT OF THIS FACT, I.E., OF THE FIRM BEI NG NOT IN EXISTENCE UP TO 31/3/2004, THAT THEREFORE OBTAINS IS THAT THE ASSES SEE HAS BEEN VALIDLY CALLED ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 9 UPON TO EXPLAIN THE CREDITS (WHICH CAN EXTEND ONLY TO SUMS CREDITED DURING THE RELEVANT YEAR) IN THE NAMES OF ITS PARTNERS, AND IN THE EVENT OF NON (OR NON- SATISFACTORY) EXPLANATION THEREOF AS TO THEIR SOURCE , DEEMED AS ITS INCOME CHARGEABLE TO TAX U/S. 68 OF THE ACT. THE LAW MAKES NO DIFFERENCE ON THE BASIS OF THE DATE, THE FIRST OR THE LAST DAY OF THE PREVIOUS YEAR, WHEREAT A SUM COMES TO BE CREDITED IN THE BOOKS OF THE ASSESSEE; THE PREMISE BEING OF THE ASSESSEE BEING THE BENEFICIARY OF THE SUM/S CREDITED ( GOVINDARAJULU MUDALIAR V. CIT [1958] 34 ITR 807 (SC); KALE KHAN MOHAMED HANIF V. CIT [1963] 50 ITR 1 (SC), AFFIRMING THE DECISION BY THE HONBLE JURISDICTIONA L HIGH COURT IN [1958] 34 ITR 609 (MP)). THIS IS IRRESPECTIVE OF WHETHER THE CREDIT IN THE ASSESSEES BOOKS IS TO THE ACCOUNT OF A PARTNER OR ANOTHER ( GOVINDARAJULU MUDALIAR (SUPRA); CIT V. METACHEM INDS . [2000] 245 ITR 160 (MP); CIT V. KISHORILAL SANTOSHILAL [1995] 216 ITR 9 (RAJ)). 8.3 I MAY NEXT CONSIDER BOTH THE SUMS CREDITED ON T HE MERITS OF THE EXPLANATION/S FURNISHED: (A) RS.80,000/- ( SH. ASIT DIXIT) THE SOURCE OF THIS SUM STATED TO BE THE SAVINGS (CA PITAL) OF AD, BUILT-UP OVER THE PERIOD OF HIS SERVICE AS A SALES MANAGER IN A L IQUOR FIRM, DRAWING RS. 10,000 TO RS.12,000 PER MONTH. THE CLAIM IS WHOLLY UNSUBSTANTIATED, WHICH IS THE P RINCIPAL REASON FOR ITS NON-ACCEPTANCE BY THE REVENUE, BEING OTHERWISE A PL AUSIBLE EXPLANATION, PARTICULARLY CONSIDERING ITS QUANTUM, VALUE OF WHI CH THOUGH, GIVEN THE CURRENT PRICE LEVELS, CANNOT BE EQUATED WITH THE SAME AMOUN T TODAY. THERE IS NO BANK ACCOUNT OR OTHERWISE ANYTHING TO DEMONSTRATE THE SA VINGS OVER A PERIOD OF TIME. WHY, EVEN THE NAME OF THE CONCERN WHERE HE WAS WORK ING, OR THE PERIOD OF HIS SERVICE, BOTH RELEVANT FROM THE STANDPOINT OF THE T RUTH OF THE EXPLANATION, HAVE NOT BEEN STATED, MUCH LESS SHOWN. EVEN IF THE SALAR Y, AS STATED, WAS RECEIVED, AND HELD, IN CASH, NOT IMPRACTICAL, PARTICULARLY CO NSIDERING ITS VOLUME, ALL THAT ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 10 WAS REQUIRED WAS TO OBTAIN A LETTER TO THAT EFFECT OR A SALARY CERTIFICATE FROM THE SAID FIRM. IN FACT, THE UTILITY OR THE VALUE OF MON EY IS NOT CONSTANT ACROSS ALL PERSONS, AND IT DEPENDS LARGELY ON THE QUANTUM OF T HE SUM UNDER QUESTION WITH REFERENCE TO HIS TOTAL CAPITAL AT THE RELEVANT TIME . IN THE INSTANT CASE, GOING BY THE EXPLANATION FURNISHED, THE SAME PERHAPS REPRESE NTS THE TOTAL CAPITAL (OR AT LEAST THAT REPRESENTED BY MOVABLE PROPERTY) OF THE CREDITOR, SO THAT IT IS SURPRISING THAT HE HOLDS THE ENTIRE OF IT IN CASH, WHICH, APART FROM BEING NON- REMUNERATIVE, IS A VERY RISKY PROPOSITION. FURTHER, SAVINGS WOULD, APART FROM INCOME, THE STATED SOURCE THEREOF, ALSO DEPEND ON T HE FINANCIAL OBLIGATIONS OF THE CONCERNED PERSON, VIZ. TOWARD FAMILY, ETC. HE MAY, FOR ALL WE KNOW, HAVE PARENTS, SIBLINGS, OR EVEN CHILDREN TO SUPPORT, INC LUDING THEIR EDUCATION, OR MAY HAVE FINANCED ASSETS ON EMI, ETC. THIS IS NO WHISPE R, MUCH LESS EXHIBITION, QUA THIS RELEVANT ASPECT IN THE ASSESSEES EXPLANATION. IN FACT, A SAVINGS BANK ACCOUNT, NOT EXHIBITED, IS, APART FROM SAFE-KEEPING , A VERY ENABLING INSTRUMENT FOR SAVINGS, AS ONE COULD DEPOSIT RS. 1000 OR 2000 (SAY) FROM HIS MONTHLY SALARY, I.E., ASSUMING SO, WITHDRAWING OR RETAINING THE BALANCE IN CASH FOR MEETING HIS HOUSEHOLD/DAY-TO-DAY EXPENSES. THE EXPLANATION, TOTALLY UN-EVIDENCED, ACCORDINGLY FAILS ON ALL FOURS. THERE IS IN FACT NO EXPLANATION, I.E., IN THE EYES OF LAW. T HAT ADJUDICATION BY ANY AUTHORITY, INCLUDING THE TRIBUNAL, THE FINAL FACT-F INDING BODY, IS TO BE BASED ON, AND WITH REFERENCE TO, THE MATERIAL ON RECORD, IS W ELL-SETTLED (VIZ. CIT V. RADHA KISHAN NANDLAL [1975] 99 ITR 143 (SC); CIT V. DAULAT RAM RAWATMULL [1973] 87 ITR 349 (SC)). THE SAID CREDIT HAS, UNDER THE CI RCUMSTANCES, BEEN RIGHTLY REGARDED BY THE REVENUE AS NOT PROVED. (B) RS.37,00,000/- (SH. SANTOSH JAISWAL) THE SOURCE HAS, AGAIN, BEEN ASCRIBED TO THE CREDITO RS CAPITAL, WITHDRAWN FROM ANOTHER PARTNERSHIP FIRM, SANTOSH JAISWAL (RAT LAM), ALSO A JABALPUR BASED LIQUOR DEALER. ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 11 THE REASON FOR ITS NON-ACCEPTANCE IS TWO-FOLD. THE RE IS NOTHING TO SHOW THAT THE SAID WITHDRAWAL HAS BEEN IN CASH AND, TWO, NO DATE-WISE BREAKUP OF THE SAME HAS BEEN PROVIDED. ALSO, AND EQUALLY, IN THE A BSENCE OF ANY BREAK-UP OF THE WITHDRAWAL, STATED TO BE IN CASH, IT CANNOT BE LINKED WITH THE INVESTMENT IN HIS NAME IN THE ASSESSEE-FIRM, THE STATED AVENUE OF THE SAID WITHDRAWAL. HOW, PRAY, ARE THESE OBJECTIONS BY THE REVENUE TO BE FAU LTED WITH, EVEN AS NO EXPLANATION TOWARD THE SAME WAS FORTHCOMING DURING HEARING AS WELL ? IN CASE OF A DIRECT TRANSFER OF FUNDS, EACH DEBIT TO HIS CA PITAL ACCOUNT IN SANTOSH JAISWAL (RATLAM) WOULD GET REFLECTED AS A CORRESPONDING CRE DIT IN HIS ACCOUNT WITH EITHER THE ASSESSEE-FIRM (OR, RATHER, THE PAYEE-ENTITY INA SMUCH AS THE ASSESSEE WAS NOT IN EXISTENCE UP TO 31.03.2004), OR ANY OTHER ENTITY /INVESTMENT AVENUE, AS INDEED CREDITED TO THE CAPITAL ACCOUNT IN M/S. SJ (SAND) ( PB PG. 48). HOWEVER, THAT BEING NOT THE CASE, IT IS ONLY THE CASH ACCOUNT IN THE (PERSONAL) BOOKS OF SJ, REFLECTING THE CASH AMOUNTS WITHDRAWN BY HIM (FROM ANY SOURCE) THAT WOULD EXHIBIT THE SOURCE AND, CORRESPONDINGLY, THE APPLIC ATION OF CASH WITH HIM. THE SUMMARY OF HIS CAPITAL ACCOUNT IN THE BOOKS OF M/S. SANTOSH JAISWAL (RATLAM) FOR F.Y. 2003-04 (PB PG.32), AS INDEED AT PB PG. 48 , DOES NOT EXHIBIT DATE-WISE WITHDRAWAL NOR OF IT BEING IN CASH AND, RATHER, REF LECTS ANOTHER WITHDRAWAL OF RS.74 LACS AS WELL AS A CAPITAL INTRODUCTION AT RS. 80 LACS, AGAIN EMPHASIZING THE NEED FOR THE CASH ACCOUNT AFORESAID, WHICH WOULD IN CLUDE ALL THESE ENTRIES, THEREBY EXPLAINING THE INVESTMENT IN THE ASSESSEE-F IRM. THIS WOULD FURTHER ALSO INCLUDE ANOTHER WITHDRAWAL (FOR FDR) AT RS.2,42,786 , WHICH MAY BE RELEVANT; THE ASSESSEE STATING BEFORE THE AO OF SJ HAVING INT RODUCED CAPITAL (IN THE ASSESSEE-FIRM) IN THE FORM OF FDR IN 2004 OUT OF HI S PAST CAPITAL. THE ASSESSEE, WHO HAS THUS THOUGH MADE OUT A PRIMA FACIE CASE, CANNOT BE SAID TO HAVE DISCHARGED THE BURDEN OF PROOF CAST ON IT BY LAW. THE MATTER IS ACCORDINGLY SET ASIDE TO THE FILE OF THE AO TO PROVIDE AN OPPORTUNITY TO THE ASSESSEE TO STATE ITS CASE BEFO RE HIM. SURELY, IT IS EXTREMELY ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 12 UNDESIRABLE THAT MATTERS SHOULD GET REMITTED BACK A FTER YEARS. AN APPEAL, HOWEVER, IS TO BE DECIDED BASED ON THE EVIDENCE ON RECORD AND CONSISTENT WITH THE JUSTICE OF THE CASE. ALL THAT WAS REQUIRED; THE ACCOUNTS OF THE FIRM/S FROM WHICH THE CASH WAS WITHDRAWN AND THE FIRM/S IT STAN DS INVESTED IN, BEING, AS APPARENT (PB PGS. 20-49), AUDITED, WAS TO GIVE A DA TE-WISE ACCOUNT OF THE CASH AVAILABLE WITH SJ, FROM WHATEVER SOURCE, SUMMARIZED EXTRACT OF WHICH, IN OTHER FIRMS, IS PLACED ON RECORD. WHY, ONE WONDERS, THE L EDGER ACCOUNT OF SJ IN THESE FIRMS WAS NOT PROVIDED, WHICH WOULD EXHIBIT BOTH TH E DATE AND THE MANNER OF THE WITHDRAWAL, WHICH COULD THEN BE MATCHED WITH HI S LEDGER ACCOUNT WITH THE ASSESSEE-FIRM, ONLY ON THE BASIS OF WHICH HE IS STA TED BY THE ASSESSEE TO HAVE INVESTED THEREIN FROM 18/2/2004 TO 31/3/2004? WHILE ON FACTS ONE FINDS THAT THE ASSESSEE DID NOT EVEN PRODUCE ITS OWN BOOKS OF ACC OUNT BEFORE THE AO . IT WOULD THEREFORE ONLY BE FAIR TO ALLOW THE ASSESSEE A FINAL OPPORTUNITY TOWARD PROVING ITS CASE. I AM CONSCIOUS THAT THE ASSESSMENT BEING A BEST JUD GMENT ASSESSMENT, WHICH CONTINUES TO OBTAIN, A REMISSION WOULD AMOUNT TO IN EFFECT OVERTURNING THE SAME. THIS IS AS ONLY MATERIALS FURNISHED BY TH E ASSESSEE OR OTHERWISE GATHERED BY THE AO COULD FORM THE BASIS OF SUCH AN ASSESSMENT. IT IS THE BEST JUDGMENT OF THE ASSESSING AUTHORITY AND NOT OF ANY OTHER, SO THAT IT WOULD, UNLESS SHOWN TO BE VITIATED, HOLD ( CIT V. RAYALA CORPORATION (P.) LTD . [1995] 215 ITR 883 (MAD)). THE ADDITION UNDER REFERENCE HOWEVER IS NOT BASED ON OR THE RESULT OF ANY ESTIMATE BY THE AO BASED ON THE MATERIAL ON RECORD. BUT ONE MADE IN VIEW OF AN UNSATISFACTORY EXPLANATION INASMUCH AS I T IS NOT SUBSTANTIATED. NOT PRODUCING THE EVIDENCE WHICH THE ASSESSEE IS EXPECT ED TO BE POSSESSED OF WOULD EVEN OTHERWISE ENTAIL AN ADVERSE INFERENCE ( UNION OF INDIA V. RAI DEB SINGH BIST [1973] 88 ITR 200 (SC)). THE QUESTION THAT THEREFO RE OBTAINS IS WHETHER THE ASSESSEE IS UNDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE; THE MATTER ALREADY HAVING TRAVERSED THROUGH ASSESSMENT, REMAND AND FIRST APPELLATE STAGE, ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 13 TO BE ALLOWED A FURTHER OPPORTUNITY. IT IS THIS QUE STION THAT NEEDS TO BE ADDRESSED, AND QUA WHICH THIS TRIBUNAL CONSIDERS THE ANSWER AS IN AFF IRMATIVE. FURTHER, EVEN AS SUCH A REMISSION WOULD USUALLY BE AT A COST, PARTICULARLY CONSIDERING THE NON-COOPERATION BEFORE THE AO, IT I S BEING ABSTAINED FROM IN THE FACTS AND CIRCUMSTANCES OF THE CASE. I AM CONSCIOUS , I MAY ADD, THAT SJ HAS A NEGATIVE CAPITAL IN THE FIRM SANTOSH JAISWAL (RATLA M), WHICH IN FACT EXCEEDS HIS INVESTMENT IN THE ASSESSEE-FIRM. RATHER, THE SAID F IRM ITSELF HAS NO CAPITAL. IN VIEW OF HIS NEGATIVE BALANCE THEREIN, THERE IS NO Q UESTION OF HIS WITHDRAWING HIS CAPITAL THEREFROM, AND WHICH THEREFORE IS NOT A COR RECT DESCRIPTION OF THE SOURCE OF HIS INVESTMENT IN THE ASSESSEE-FIRM. THAT, HOWEV ER, WOULD NOT MATERIALLY ALTER THE ASSESSEES EXPLANATION AS TO SOURCE, WHICH, THU S, IS TO BE REGARDED AS A BORROWING FROM SJ (RATLAM), A FIRM IN WHICH HE IS A 30% PARTNER (PB PGS. 20- 21). IN FACT, IT HAS BEEN ALREADY CLARIFIED THAT TH E IMMEDIATE SOURCE OF INVESTMENT BY SJ CAN ONLY BE SAID TO BE THE CASH AV AILABLE WITH HIM, ON THE RELEVANT DATES, FROM ANY SOURCE, ACCOUNTS OF ALL OF WHICH, AS IT APPEARS, ARE AUDITED. IN FACT, THAT ALL THE RELEVANT ACCOUNTS ST AND MAINTAINED AND, FURTHER, AUDITED, IS ITSELF A REASON FOR REMISSION INASMUCH AS IT INDICATES THE EXISTENCE OF THE RELEVANT EVIDENCE WITH THE ASSESSEE, WHILE AT T HE SAME TIME THOUGH IT DOES MAKE IT UNFATHOMABLE THAT THE SAME WERE NOT PRODUCE D AND RELIED UPON IN EVIDENCE, AND DESPITE ABUNDANT OPPORTUNITY PROVIDED TO DO SO. NEEDLESS TO ADD, THE AO, IN THE EVENT OF THE ASSESSEE BEING NOT COOP ERATIVE, SHALL BE AT LIBERTY TO DRAW ALL PERMISSIBLE INFERENCES IN LAW. HE SHALL AD JUDICATE AFRESH PER A SPEAKING ORDER, IN ACCORDANCE WITH LAW, TAKING INTO ACCOUNT ALL THE EXPLANATIONS AND MATERIALS FURNISHED BY THE ASSESSEE BEFORE HIM. 8.3 I DECIDE ACCORDINGLY. 9. SH. SETH ALSO MADE AN ORAL PLEA FOR ALLOWANCE OF INTEREST TO PARTNERS, DISALLOWED IN ASSESSMENT. THE SAME IS INDEFENSIBLE IN VIEW OF THE CLEAR, NOT DISPUTED, APPLICATION OF SEC. 144 (ALSO REFER PARA 5.1), SO THAT A FIRM, THOUGH ITA NO. 19/JAB/2020 (AY 2005-06) ASIT DIXIT V. ITO 14 ASSESSABLE AS A FIRM, IS YET NOT ENTITLED TO DEDUCT ION, INTER ALIA , IN RESPECT THEREOF (S. 184(5) R/W S. 185). THIS IS IRRESPECTIVE OF THE FACT THAT THE ASSESSEE-FIRM, DESPITE NOT HOLDING THE LICENCE, MAY YET BE VALIDLY CARRYING ON THE LIQUOR BUSINESS, AS SOUGHT TO BE CANVASSED WITH REFERENCE TO THE PROVISIONS OF THE AKBARI RULES AS APPLICABLE FOR F.Y. 2004-05 (PB PGS . 84-91). ANOTHER ASPECT OF THE MATTER, WHICH THEREFORE NEEDS TO BE CLARIFIED, IS THAT TO THE EXTENT THE FIRMS CAPITAL IS REGARDED AS UNEXPLAINED AND, THUS, AS IT S INCOME, NO CLAIM QUA INTEREST ON PARTNERS CAPITAL WOULD EVEN OTHERWISE SURVIVE THEREON. 10. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 07, 2 021 SD /- (SANJAY ARORA) A CCOUNTANT MEMBER DATED: 07/10/2021 AKS/ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT: M/S. ASIT DIXIT C/O KARTIK HOTEL, NA PIER TOWN, JABALPUR (M.P.) 2. THE RESPONDENT: INCOME TAX OFFICER, WARD-2(2), JABA LPUR (M.P.) 3. THE PR. CIT-1, JABALPUR 4. THE CIT(APPEALS), JABALPUR 5. THE SR. DR, ITAT, JABALPUR 6. GUARD FILE // TRUE C OPY //