M/s. Dhara Fashion, Surat V. The Income tax Officer,Ward-9(1), Surat

ITA 2054/AHD/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0514 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-07-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 14-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: M K PAEL
• Keywords: Unexplained cash credit; Additional evidence
• Section: 68; 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2054/AHD/2010 / ASSTT. YEAR: 2006-2007 M/S.DHARA FASHION 1 ST FLOOR, 33, PATEL NAGAR A.K. ROAD, SURAT. PAN : AAEFD 8864 R VS ITO, WARD - 9(1) SURAT. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI M.K. PAEL REVENUE BY : SHRI O.P. MEENA, SR.DR / DATE OF HEARING : 21/07/2016 / DATE OF PRONOUNCEMENT: 23/09/2016 $%/ O R D E R ASSESSEE IS IN APPEAL AGAINST ORDER OF THE LD.CIT(A )-V, SURAT DATED 30.3.2010 PASSED FOR THE ASTT.YEAR 2006-07. 2. ASSESSEE HAS TAKEN FIVE GROUNDS APPEAL, BUT ITS GRIEVANCE REVOLVED AROUND TWO ISSUES VIZ. (A) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.3,18,954/- ON ACCOUNT OF UNEXPLAINED CASH CRE DIT FOUND IN THE BOOKS OF THE ASSESSEE, AND (B) THE LD.CIT(A) HAS ERRED IN CO NFIRMING THE ADDITION OF RS.10,37,000/- WHICH WAS ON ACCOUNT OF ALLEGED UNEX PLAINED CONTRIBUTION INTRODUCED BY THE PARTNERS IN THEIR CAPITAL ACCOUNT . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM. IT HAS FILED ITS RETURN OF INCOME ON 26.2.2007 SHOWING TOT AL INCOME AT RS.8,080/-. DURING THE SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS RECEIVED UNSECURED LOANS AGGREGATING TO RS.3,18,954 /- FROM EIGHT PERSONS. ITA NO.2054/AHD/2010 2 THE AO HAS CONFRONTED THE ASSESSEE AS TO WHY SUCH L OANS SHOULD NOT BE ADDED AS INCOME OF THE ASSESSEE. IN RESPONSE TO THE QUER Y OF THE AO, THE ASSESSEE HAS FILED DETAILS WHICH ARE TABULATED IN PARA 3-1 O F THE ASSESSMENT ORDER. THEY READ AS UNDER: NO. NAME OF THE DEPOSITORS PROOF OF PHOTO IDENTITY DETAILS OF AGRICULTURE LAND SIZE OF LAND 1 ANANDBHAI ODHABHAI ADROJA VOTING CARD MATIRAZA 0-80-94 2. GUNVATBHAI RANCHHODBHAI GADASARA VOTING CARD MATIRAZA 0-30-35 0-62-73 3. MUKESHBHAI RANCHHODBHAI GODASARA DRIVING LICENSE OF L.M.V. MATIRAZA 0-30-35 0-62-73 4. RANCHHODBHAI SHYAMJIBHAI GODASARA VOTING CARD MATIRAZA 0-30-35 0-62-73 5. UKABHAI LAKHABHAI BORSANIA RATION CARD MATIRAZA 3-65-23 6. JAGDISHBHAI UKABHAI BORSANIA NOT GIVEN NOT GIVEN 7. KANTIBHAI - RANCHHODBHAI GADASARA NOT GIVEN NOT GIVEN 8. VASRAMBHAI GORDHANBHAI GODASARA NOT GIVEN NOT GIVEN 4. THE LD.AO WAS NOT SATISFIED WITH THE NATURE OF E VIDENCE FOR DISCHARGING BURDEN CAST UPON THE ASSESSEE BY VIRTUE OF SECTION 68 OF THE INCOME TAX ACT. ACCORDINGLY, HE MADE ADDITION. ON APPEAL, THE ASSE SSEE HAS FILED CERTAIN ADDITIONAL EVIDENCE AND THE LD.CIT(A) HAS CALLED FO R REMAND REPORT FROM THE AO. HOWEVER, THE LD.CIT(A) WAS ALSO NOT SATISFIED WITH THE NATURE OF EVIDENCE PRODUCED BY THE ASSESSEE FOR DISCHARGING O NUS PUT UPON IT BY SECTION 68 OF THE ACT. ACCORDINGLY, THE LD.CIT(A) HAS ALSO CONFIRMED THE ADDITION. 4. BEFORE ME, THE LD.COUNSEL FOR THE ASSESSEE HAS S UBMITTED THAT THE ASSESSEE HAS PRODUCED VOTER-CARD, DRIVING LICENCE A ND OTHER DETAILS OF THE ITA NO.2054/AHD/2010 3 CREDITORS. THEREFORE, IT HAS PROVED THEIR IDENTITY . SIMILARLY, THE ASSESSEE HAS PRODUCED DETAILS OF AGRICULTURE LAND HOLDING OF THE CREDITORS, AND IT HAS DISCHARGED ITS BURDEN OF PROVING CREDIT-WORTHINESS OF THE CREDITORS. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 5. I HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GON E THROUGH THE RECORD. SECTION 68 OF THE INCOME TAX ACT CONTEMPLATES THAT WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF, OR THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT, IN THE OPINION OF THE AO SATISFACTORY, THEN THE SUM SO CREDITED IN THE ACCOU NTS MAY BE TREATED AS INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. A PER USAL OF THE DETAILS SUBMITTED BY THE ASSESSEE WOULD INDICATE THAT FOUR PERSONS WERE SAID TO BE HOLDING ONE COMMON PIECE OF LAND. THE LD.CIT(A) HA S RECORDED A SPECIFIC FINDING THAT THIS PIECE OF LAND WAS CULTIVATED BY O NE SHRI RANCHHODBHAI SHYAMJIBHAI GODASARA. OTHERS HAVE NO CONCERN WITH THIS LAND HOLDING. THE AO HAS CONDUCTED AN INQUIRY IN THE REMAND PROCEEDIN GS. THEREFORE, COGNIZANCE OF THE LAND HOLDING, WHOSE DETAILS HAVE BEEN GIVEN CANNOT BE TAKEN FOR THE PURPOSE OF ESTABLISHING CREDIT-WORTHI NESS OF THE ALLEGED CREDITORS. MAIN THRUST OF THE AO THAT THE ASSESSEE FAILED TO PROVE CREDIT- WORTHINESS OF THE CREDITOR. SIMILARLY, WITH REGARD TO PERSONS MENTIONED AT SR.NO.6 TO 8, THE ASSESSEE FAILED TO GIVE ANY EVIDE NCE, THEREFORE, I AM OF THE VIEW THE LD.CIT(A) HAS APPRECIATED THE CONTROVERSY IN RIGHT PERSPECTIVE, AND HAS RIGHTLY CONFIRMED THE ADDITION. THIS GROUND OF APPEAL IS THEREFORE REJECTED. 6. AS FAR OTHER ADDITION OF RS.10,37,000/- IS CONCE RNED, TWO PARTNERS, VIZ. SHRI CHANDUBAHI M. VIRAPRA AND DIPAKBHAI HARJIBHAI VIRAMGAMA HAVE INTRODUCED CAPITAL OF RS.4,43,000/- AND RS.5,94,000 /- RESPECTIVELY IN THEIR ITA NO.2054/AHD/2010 4 CAPITAL ACCOUNT. THE AO HAS TREATED THIS CAPITAL C ONTRIBUTION AS UNEXPLAINED CREDITS AND MADE ADDITION. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. THE LD.COUNSEL FOR THE ASSESSEE RELI ED UPON THE ORDER OF THE ITAT IN CASE OF DCIT VS. G.K. PATEL & CO., RENDERED IN ITA NO.2938/AHD/2009, WHEREIN THE TRIBUNAL AFTER PUTTIN G RELIES UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT H ELD THAT CAPITAL CONTRIBUTION MADE BY THE PARTNER OUGHT NOT TO BE TR EATED AS UNEXPLAINED CASH CREDIT. THE FINDING RECORDED BY THE TRIBUNAL IN TH IS CASE READ AS UNDER: 17. THE THIRD GROUND OF THE CROSS OBJECTION RELATE S TO CONFIRMATION OF ADDITION OF RS.2,90,000/- MADE BY THE AO ON ACCOUNT OF CASH DEPOSITS BY THE PARTNERS BY INVOKING PROVISIONS OF SECTION 6 8 OF THE ACT. THIS ACTION OF THE AO WAS CONFIRMED BY THE LD. CIT(A). 18. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH CO URT IN THE CASE OF CIT VS. PANKAJ DYESTUFF INDUSTRIES IN INCOME-TAX RE FERENCE NO.241 OF 1993 DATED 06/07/2005 AND SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE SAID DECISION. 19. ON THE OTHER HAND, THE LD. DR RELIED ON THE DEC ISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. KISHORI LAL SANTOSHILAL (1995) 216 ITR 9 (RAJ) AND SUBMITTED THAT THE ISSUE BE DECIDED IN ACCORDANCE WITH THIS DECISION. 20. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL PLACED ON RECORD, WE ARE OF THE VIEW THAT THE ISSUE IS DIRECT LY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT VS. PANKAJ DYESTUFF INDUSTRIES (SUP RA) WHEREIN IT WAS OBSERVED AS UNDER:- 13. APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF THE PRESENT CASE, IT IS APPARENT THAT THE ASSESSEE HAD FURNISHE D THE DETAILS WHICH WOULD DISCHARGE THE ONUS WHICH LAY ON THE ASS ESSEE. IT IS NOT THE CASE OF THE REVENUE THAT THE PARTNERS OF TH E ASSESSEE FIRM ARE FICTITIOUS. THE INCOME TAX OFFICER HAS NOT DISP UTED THAT THE CREDITS IN THE ACCOUNTS OF THE PARTNERS WERE NOT DE POSITS FROM THE PARTNERS. MOREOVER, IT IS AN ADMITTED POSITION THAT THIS WAS THE ITA NO.2054/AHD/2010 5 SECOND YEAR OF THE FIRM, AND THAT IT WAS RUNNING IN LOSS. IT IS TRUE THAT THE INCOME TAX OFFICER DID NOT ACCEPT THE EXPL ANATION GIVEN ON BEHALF OF THE ASSESSEE IN RESPECT OF THE NEW DEP OSITS OR CASH CREDITS IN THE ACCOUNTS OF THE PARTNERS. THE MERE N ON-ACCEPTANCE OF THAT EXPLANATION DOES NOT, HOWEVER, PROVIDE MATE RIAL FOR FINDING THAT THE SAID SUM REPRESENTED INCOME OF THE ASSESSEE FIRM,. AS HELD BY THE ALLAHABAD HIGH COURT IN THE C ASE OF COMMISSIONER OF INCOME TAX ALLAHABAD VS. JAISWAL MO TOR FINANCE (SUPRA), IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THERE WERE PROFITS OF THE FIRM, THE AMOUNT CREDITED TO THE PARTNERS ACCOUNTS COULD NOT BE ASSESSED IN THE HAN DS OF THE FIRM. ONCE THE PARTNERS HAVE OWNED THAT THE MONIES DEPOSI TED IN THEIR ACCOUNTS ARE THEIR OWN, THE INCOME TAX OFFICER IS E NTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AND ASSESS THE SAM E IN THEIR HANDS, IF THEIR EXPLANATION IS NOT FOUND SATISFACTO RY. 14. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE, BOTH THE DEPUTY CIT(APPEALS) AND THE TRIBUNAL HAVE FOUND THA T THE ASSESSEE HAD DISCHARGED THE PRIMARY ONUS WHICH WAS ON IT BY OFFERING EXPLANATION, WHICH HAS NOT BEEN FOUND TO B E INCORRECT OR FALSE IN ANY MANNER. THE INTEREST OF THE REVENUE IS ALSO SAFEGUARDED AS THE INCOME-TAX OFFICER HAS BEEN GIVE N THE LIBERTY TO CONSIDER THE SAID CREDITS IN THE HANDS OF THE PA RTNERS IF HE IS NOT SATISFIED WITH THE SOURCES OF INVESTMENT OF CAS H CREDITS IN THE ACCOUNTS OF THE PARTNERS. 15. IN THESE CIRCUMSTANCES, IT IS NOT POSSIBLE TO F IND THAT THE ORDER OF THE TRIBUNAL SUFFERS FROM ANY INFIRMITY WHICH WO ULD REQUIRE INTERFERENCE AT THE HANDS OF THIS COURT. ACCORDINGL Y, IT IS HELD THAT THE TRIBUNAL WAS RIGHT IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.87,250/- BEING DEPOSITS IN THE ACCOU NTS OF THE PARTNERS. THE QUESTION REFERRED TO THIS COURT IS, A CCORDINGLY, ANSWERED IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE A SSESSEE AND AGAINST THE REVENUE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION IN T HE CASE OF CIT VS. PANKAJ DYESTUFF INDUSTRIES (SUPRA) WE DELETE THE AD DITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A). THIS GROUND OF ASSESSEE IS ALLOWED. ITA NO.2054/AHD/2010 6 7. IN THE LIGHT OF THE ABOVE, IF I EXAMINE THE FACT S OF THE PRESENT CASE, THEN, IT WOULD REVEAL THAT IDENTITY OF THE PARTNERS IS NO T IN DISPUTE. THEY ARE NOT FICTITIOUS PARTNERS. NO OTHER PERSON HAS INTRODUCE D FUND IN THEIR NAME. IF ANY INQUIRY WAS REQUIRED TO BE MADE, THEN IT COULD BE M ADE IN THE HANDS OF THE PARTNERS. THE LD.CIT(A) WAS NOT JUSTIFIED IN CONFI RMING THIS ADDITION. I ALLOW THIS GROUND OF APPEAL AND DELETE THE ADDITION. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 23 RD SEPTEMBER, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 23/09/2016