M/s. Gajraj Singh, Rohtak V. ITO, Sonepat

ITA 2385/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7994 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 18-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Assessee Lawyers: NAVEEN GUPTA
• Section: 144

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER I TA NO . 2385 /DEL/2012 (ASSESSMENT YEAR: 2008 - 09 ) GAJRAJ SINGH, C/O. NAVIN GUPTA, ADVOCATE, OLD POST OFFICE STREET, ROHTAK PAN:AAIFG0450A VS. ITO, WARD - 3, SONEPAT (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. NAVEEN GUPTA, ADV REVENUE BY: SH. T. VASANTHA N , SR. DR DATE OF HEARING 10/03/ 2016 DATE OF PRONOUNCEMENT 06 /05/2016 O R D E R PER PRASHANT MAHARISHI , A . M . 1. THIS IS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD CIT ( A), ROHTAK, DATED 06.01.2012 FOR THE ASSESSMENT YEAR 2008 - 09 RAISING FOLLOWING GROUNDS : - 1. THAT THE ORDER OF LD. CIT (APPEALS) IS AGAINST LAW AND FACTS. 2. THAT THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS. 1400000/ - ON ACCOUNT OF CAPITAL INTRODUCED BY THE PARTNER BY HOLDING THAT THE PARTNER HAS NO CAPACITY TO INTRODUCE THE CAPITAL, ALTHOUGH THIS ADDITION WAS NOT MADE BY THE LD. AO AND THIS IS A NEW ISSUE RAISE D BY THE LD. AO DURING ASSESSMENT PROCEEDINGS. MOREOVER, CAPITAL WAS RAISED BY THE PARTNERS IN THE BEGINNING OF BUSINESS AND WHICH CAN'T BE ADDED AS PER THE VARIOUS JUDICIAL PRONOUNCEMENTS. 2. GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE AND THE SAME IS DI SMISSED. 3. GROUND NO 2 IS AGAINST THE CONFIRMATION OF ADDITION OF RS 14 LAKHS BY CIT (A) ON ACCOUNT OF SOURCES NOT EXPLAINED FOR PAYMENT OF LICENSE FEES. THE BRIEF FACTS OF THE CASE IS THAT THE APPELLANT IS A PARTNERSHIP FIRM DOING THE BUSINESS OF LIQUOR CONTRACTOR CONSISTING OF FOUR PARTNERS HAVING THE PROFIT SHARING RATIO OF 25% EACH. ASSESSEE FILED RETURN OF INCOME OF RS. 5760/ - ON 30.09.2008. DURING THE ASSESSMENT PROCEEDINGS IT WAS FOUND THAT ASSESSEE HAS PAID A LICENSE FEE OF RS. 2505000/ - BUT SOURCE OF SUCH INVESTMENT WAS NOT MENTIONED THEREFORE THE LD ASSESSING OFFICER PASSED ORDER U/S 144 OF THE INCOME TAX ACT MAKING AN ADDITION OF THIS SUM AND FURTHER DISALLOWED 1/5 OF VARIOUS EXPENSES. THEREFORE AGAINST RETURNED INCOME OF RS. 5760/ - PAGE 2 OF 5 INCOME ASSES SED U/S 144 VIDE ORDER DATED 15.11.2010 WAS OF RS. 2564642/ - . 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE LD CIT (A) . BEFORE LD CIT (A) APPELLANT SUBMITTED THAT LICENSE FEE PAID WAS SOURCED FROM THE SUM RE CEIVED FROM THE PARTNERS AS CAPITAL CONTRIBUTION FROM THEIR OWN SOURCE. IT WAS FURTHER SUBMITTED THAT LICENSE FEE OF RS. 35 0 000/ - EACH HAS BEEN PAI D BY FOUR PARTNERS ON 26.02.2007 AMOUNTING IN ALL TO RS.14 LACS. LD CIT (A) SUSTAINED THE ADDITION OF RS. 14 LACS OUT OF TOTAL ADDITION OF RS. 2505000/ - ON ACCOUNT OF R S 35000/ - DEPOSITED BY THE FOUR PARTNERS AS THEIR CAPITAL CONTRIBUTION . 5. AGGRIEVED BY THE ORDER OF THE LD CIT ( A) THE ASSESSEE IS IN APPEAL BEFORE US. LD AR SUBMITTED THAT LD CIT ( A) DID NOT BELIEVE CAPITAL CONTRIBUTION OF RS.14 LACS BY THE PARTNERS. HE SUBMITTED THAT EACH OF THE PARTNERS HAS CONFIRMED THAT THEY HAVE DEPOSITED RS. 350000/ - AS CAPITAL DURING THE YEAR. ALL OF THEM HAVE ALSO CONFIRMED THAT THEY ARE AGRICULTURIST AND ARE HAVING AGRICULTURAL LAND AT VILLAGE KHWERA. LD AR FURTHER SUBMITTED THAT DURING THE COURSE OF REMAND PROCEEDINGS LD AO HIMSELF HAS STATED THAT HIS INVESTMENT MAY BE VERIFIED IN THE HANDS OF THE PARTNERS AND NOT FROM THE FIRM. IT WAS FURTHER SUBMITTED T HAT THE AMOUNT OF RS. 6 LACS SHOWN AS OPENING BALANCE IN THE BOOKS OF ACCOUNTS AND THE SOURCE OF THE MONEY IS PERTAINING TO PREVIOUS YEAR , WHICH WAS NOT DISBELIEVED BY THE LD AO. HE FURTHER SUBMITTED THAT COMPLETE DETAILS OF AGRICULTURAL LAND HOLDING OF T HE PARTNERS ARE SUBMITTED WHICH PROVES THAT THEY ARE HAVING SUFFICIENT AGRICULTURE LAND FOR DEPOSITING THE ABOVE SUM. LD AR FURTHER ARGUED THAT CAPITAL CONTRIBUTION BY THE PARTNERS CANNOT BE TAXED IN THE HANDS OF THE FIRM AS DEPOSIT BY THE PARTNERS IS ONLY IN FIRST DAYS OR INITIAL DAYS OF THE FIRM; THEREFORE IT CANNOT BE INCOME OF THE FIRM. HE FURTHER STATED THAT THE IDENTITY , CAPACITY AND GENUINENESS OF THE PARTNERS IS PROVED BY CONFIRMATION OF THE PARTNERS SHOWING THEIR AGRICULTURAL LAND HOLDING. ADMITTED LY BEING AN AGRICULTURIST THEY ARE NOT ASSESSED TO TAX. THEREFORE HE SUBMITTED THAT SOURCES OF FUNDS OF RS 14 LAKHS IS FROM THE PARTNERS AND THEIR IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IS PROVED. 6. LD DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ADDI TI ON HAS BEEN RIGHTLY MADE BY THE LD ASSESSING OFFICER U/S 144 OF THE PAGE 3 OF 5 ACT AS NO DETAILS WERE FURNISHED AND FURTHER THE LD CIT ( A) HAS GRANTED SUBSTANTIAL RELIEF AND RETAINED THE ADDITION TO THE EXTENT OF RS.14 LACS ONLY. THEREFORE, SAME MAY BE SUSTAINED. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE AMOUNT OF LOAN FROM THE FOUR PARTNERS IS AS UNDER: - SL. NO. NAME OF THE PARTNER ADDRESS AMOUNT DEPOSITED EVIDENCE OF CREDITWORTHINESS OF THE PARTNERS. 1. GAJRAJ SINGH V.P.O. KHWERA 350000 HE HOLDS 2.5 ACRE AGRICULTURAL LAND AT VILLAGE KHWERA AND IS ALSO ENGAGED IN SALE OF MILK HAVING 3 CATTLE . CONFIRMATION OF THE PARTNER WAS PRODUCED AND THE EVIDENCES OF LAND HOLDING WERE SUBMITTED. PARTNER WAS ALSO PRODUCED BEFORE THE AO IN REMAND PROCEEDING 2. RANDHIR V.P.O. KHWERA 350000 HE HOLDS 2 - ACRE AGRICULTURAL LAND AT VILLAGE KHWERA AND IS ENGAGED IN SALE OF MILK HAVING 4 CATTLE . CONFIRMATION OF THE PARTNER WAS PRODUCED AND THE EVIDENCES OF LAND HOLDING WERE SUBMITTED. PARTNER WAS ALSO PRODUCED BEFORE THE AO IN REMAND PROCEEDING 3. SHEEL KANWAR V.P.O. KHWERA 350000 HE HOLDS 2 - ACRE AGR ICULTURAL LAND AT VILLAGE KHWERA AND IS ENGAGED IN SALE OF MILK HAVING 4 CATTLE . CONFIRMATION OF THE PARTNER WAS PRODUCED AND THE EVIDENCES OF LAND HOLDING WERE SUBMITTED. PARTNER WAS ALSO PRODUCED BEFORE THE AO IN REMAND PROCEEDING 4. JAGDISH KUMAR V.P.O. KHWERA 350000 HE HOLDS 5 - ACRE AGRICULTURAL LAND AT VILLAGE KHWERA AND IS ENGAGED IN SALE OF MILK HAVING 3 CATTLE . PAGE 4 OF 5 CONFIRMATION OF THE PARTNER WAS PRODUCED AND THE EVIDENCES OF LAND HOLDING WERE SUBMITTED. PARTNER WAS ALSO PRODUCED BEFORE THE AO I N REMAND PROCEEDING ON APPEAL BEFORE THE LD CIT ( A) THE CONFIRMATION OF ALL THE PARTNERS WERE FILED ALONG WITH THE DETAILS OF AGRICULTURAL LAND HOLDING OF ALL THE PARTNERS. IN THE REMAND PROCEEDINGS STATEMENT OF ALL THE PARTNERS WERE RECORDED AND WHO IN TURN CONFIRMED THE AMOUNT DEPOSIT WITH THE FIRM, HOWEVER, AS THEY DID NOT HAVE ANY BANK ACCOUNT AND THE AMOUNT IS DEPO S ITED IN CASH THEIR CREDITWORTHINESS WAS NOT BELIEVED. FURTHER AS THEY WERE NOT FILING RETURN OF INCOME. THEIR FORM NO J OF AGRICULTURAL PRODUCE WAS IGNORED. FIRSTLY, ALL THE PARTNERS WHO HAVE DEPOSITED THE M ONEY ARE AGRICULTURIST AND NATURALLY, THEREFORE THEY ARE NOT FILING THE RETURN OF INCOME WITH THE INCOME TAX DEPT. FURTHER, MERELY BECAUSE THEY HAVE DEPOSITED CASH AS THEIR CAPITAL CONTRIBUTION, THEIR CREDITWORTHINESS CANNOT BE DISBELIEVED. FOR CREDITWOR THINESS THEIR LAND HOLDING AND DETAILS OF AGRICULTURAL PRODUCE NEED TO BE VERIFIED. FURTHER, IN PARA 6 OF THE ORDER OF THE LD CIT(A) IT IS MENTIONED THAT FORM J OF THE SOME OF THE PARTNERS ARE FURNISHED BY THE AR ON 03.01.2012 BEFORE THE LD CIT(A), HOWEVE R, IT WAS IGNORED BY THE LD CIT(A). THEREFORE, IT CANNOT BE SAID THAT FORM J WAS NOT AVAILABLE WITH THE ASSESSEE. FURTHER, LD CIT ( A) HAS STATED THAT SINCE SUFFICIENT EVIDENCE HAVE NOT BEEN FURNISHED THE CAPITAL CONTRIBUTION BY THE PARTNERS IS REQUIRED T O BE ADDED. ASSESSEE HAS PRODUCED THE CONFIRMATION OF THE PARTNERS, THEIR AFFIDAVITS SHOWING LAND HOLDING, FORM NO. J SHOWING AGRICULTURAL PRODUCE, WHAT ARE OTHER EVIDENCE WHICH ARE REQUIRED BY LD ASSESSING OFFICER AND LD CIT(A), WHICH WERE NOT PRODUCED BY THE ASSESSEE IS NOT SPECIFIED AND MERELY AS SUFFICIENT EVIDENCE ACCORDING TO LD CIT(A) IS NOT PRODUCED THE ADDITION IS SUSTAINED. WE DO NOT APPROVE SUCH A FINDING WITHOUT SPECIFYING THE NATURE OF EVIDENCES FURTHER REQUIRED BY LD CIT ( A). DURING THE REMAND PROCEEDINGS, ASSESSEE HAS PRODUCED THE PARTNERS BEFORE THE ASSESSING OFFICER AND THEY WERE EXAMINED AND THEY CONFIRMED THAT THE AMOUNT IS INVESTED AS CAPITAL CONTRIBUTION. IT IS NOT THE CASE OF THE REVENUE THAT LAND HOLDING SHOWN BY THE PARTNERS IS INSUFFICIENT. MERELY BECAUSE THE AMOUNT IS DEPOSITED IN CASH PAGE 5 OF 5 AND THEY DO NOT HAVE THE BANK ACCOUNT AND THEY ARE AN AGRICULTURIST AND NOT FILING THE RETURN OF INCOME CANNOT PUT THE IR CREDITWORTHINESS IN DOUBT. IN VIEW OF THIS ASSESSEE HAS SUBSTANTIATED THE SOURCE OF THE FUND OF RS.14 LACS FOR DEPOSITING AS LICENSE FEE BEING CAPITAL CONTRIBUTION OF FOUR PARTNERS WHO ARE AGRICULTURIST AND ARE HAVING SUFFICIENT LAND HOLDINGS. IN THE RE SULT, WE REVERSE THE FINDING OF THE LD CIT ( A) IN CONFIRMING THE ADDITION OF RS.14 LACS ON ACCOUNT OF PAYMENT OF LICENSE FEES. IN THE RESULT GROUND NO. 2 OF THE APPEAL IS ALLOWED. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 6 /05/2016 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 6 /05 / 2016 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI