DCIT, Panchkula V. M/s Rajinder Singh & Co., Pinjore

ITA 258/CHANDI/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8486 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Unexplained investment; Gift; Source of fund; Non compliance
• Section: 143(3); 208; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 258/CHD/2010 ASSESSMENT YEAR: 2006-07 THE DCIT, VS. M/S RAJINDER SINGH & CO., CIRCLE, PINJORE (HARYANA) PANCHKULA PAN NO. AAIFR8345M (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JAI SHREE SHARMA RESPONDENT BY: SHRI AJAY JAIN ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF CIT(A),PANCHKULA DATED 29.12.2009 RELATING TO ASSESSMENT YEAR 2006- 07-, AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 10 LAKHS MADE BY THE ASSESSING OFFI CER ON ACCOUNT OF CAPITAL INVESTMENT BY THE PARTNERS DESPITE THE FACT THAT THE ASSESSEE FIRM OR PARTNERS FAILED TO PROVE THE CREDITWORTHINESS BEFORE THE ASSESSING OFFICER OR THE CIT(A). 2. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN RES PECT OF THE INVESTMENT MADE BY THE PARTNERS TOTALING RS. 40 LAC S. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN DELETING TH E ADDITION OF RS. 10 LACS. 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS CARRYING ON THE BUSINESS OF QUARRY CONTRACTOR AND THE YEAR UNDER AP PEAL IS ITS FIRST YEAR OF BUSINESS. THE ASSESSEE HAD 14 PARTNERS WHO HAD MAD E CAPITAL INTRODUCTION IN ASSESSEE FIRM TO THE EXTENT OF RS. 25 LACS. THE LIST OF THE PARTNERS OF THE ASSESSEE FIRM, THEIR PERCENTAGE OF SHARE HOLDING AND THE AMOUNT OF CAPITAL INTRODUCTION BY THEM IS TABULATED AT PAGES 3 & 4 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER IN ORDER T O VERIFY THE IDENTITY AND CREDITWORTHINESS OF THE SAID PARTNERS ISSUED SU MMONS U/S 131 OF THE INCOME TAX ACT WHICH WERE EITHER RECEIVED BACK OR N ONE APPEARED IN RESPONSE TO THE SAID SUMMONS AND IN CASE WHERE SUMM ONS WERE SERVED AS PER THE ASSESSING OFFICER, NO EVIDENCE WAS FURNISHE D REGARDING CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S OR THE SOURCES OF INCOME AVAILABLE WITH SAID PARTNERS. IN REPLY, T HE ASSESSEE VIDE REPLY 31.10.2008 EXPLAINED THAT MAJORITY OF THE MEMBERS W HO HAD ADVANCED LOANS TO THE ASSESSEE FIRM AS WELL AS THE PARTNERS OF THE ASSESSEE FIRM WERE FROM DIFFERENT PARTS OF HARYANA AND THEY COULD NOT BE CONTACTED. THE ASSESSING OFFICER ALLOWED OPPORTUNITY TO THE AS SESSEE TO PRODUCE THE PARTNERS WHO HAD MADE INVESTMENTS IN THE ASSESSEE F IRM. HOWEVER, NONE ATTENDED ON THE SAID DATE NOR ANY INFORMATION WAS F ILED. THE ASSESSING OFFICER HAD DURING THE COURSE OF ASSESSMENT PROCEED INGS, RECORDED THE STATEMENTS OF FIVE PERSONS WHICH ARE INCORPORATED A S PART OF THE ASSESSMENT ORDER AND ON ANALYSIS OF THE STATEMENTS RECORDED, THE INVESTMENT MADE BY THE SAID PARTNERS WERE TREATED A S UNEXPLAINED INVESTMENT BY THE ASSESSEE FIRM. THE ASSESSING OFF ICER FURTHER OBSERVED THAT THE PERSONS WERE MERE MAIN LENDERS AND THE CAP ITAL INTRODUCED IN THE PARTNERSHIP FIRM WERE UNEXPLAINED INVESTMENT OF THE FIRM ITSELF AND HENCE AN ADDITION OF RS. 25 LACS WAS MADE TO THE IN COME OF THE ASSESSEE. 3 BEFORE THE CIT(A), THE ASSESSEE VIDE WRITTEN SUBMIS SIONS CONTENDED AS UNDER:- (I) THIS WAS FIRST YEAR OF BUSINESS, 14 PARTNERS HAD CONTRIBUTED CAPITAL IN FIRM AMOUNTING TO RS. 25,00, 000/-. THE ASSESSEE VIDE LETTER DATED 16.12.2008 AND 22.12.2008 FILED DETAILED CHART SHOWING NAME, AMOUN T INTRODUCED WITH SOURCE OF INVESTMENT, IDENTITY PROO F, PAN AND CONFIRMATIONS BEFORE THE ASSESSING OFFICER. OUT OF THE 14 PARTNERS, SOME PARTNERS ARE AGRICULTU RISTS AND THEIR LAND PROOF HAS BEEN FILED TO SHOW THE SOU RCE OF CAPITAL. ALL THE PARTNERS ARE IDENTIFIABLE AND VER IFIABLE. OUT OF 14 PARTNERS, 5 PARTNERS HAD ATTENDED OFFICE ON 23.10.2008 AND THEIR STATEMENTS WERE RECORDED BY TH E ASSESSING OFFICER. SUMMONS ISSUED U/S 131 TO 8 PARTNERS WERE SERVED, HOWEVER, NONE ATTENDED AND ON LY IN THE CASE OF ONE PARTNER SHRI SATBIR KUMAR, SUMMO NS ISSUED U/S 131 WERE RETURNED UNSERVED. (II) IN THE CASE OF ALL THE 5 PARTNERS (NAMELY RAJESH CH IKARA, MUKESH KUMAR, RAJESH KUMAR S/O SHRI SURAT SINGH, DEEPAK KUMAR AND RAJIV PURI) ) WHO HAD ATTENDED AND GIVEN STATEMENT, THEY ALL STATED THAT THEY HAD INVE STED IN THE FIRM. (III) AS REGARDS OTHER 9 PARTNERS, THE ASSESSEE FIL ED THEIR NAMES, LATEST AVAILABLE ADDRESS, PAN, CONFIRMATION AND SOURCE OF INVESTMENT. THE ASSESSING OFFICER HAD ISS UED SUMMONS U/S 131 AND OUT OF 9 PARTNERS SUMMONS WERE DULY SERVED ON 8 AND ONLY 1 SUMMON WAS RETURNED UNSERVED. (IV) RELIANCE WAS PLACED ON THE RATIO IN CIT VS. JAISWAL GRAIN STORES (2004) 272 ITR 136 (ALL) FOR THE PROPOSITION THAT WHERE DEPOSITS ARE MADE BY THE PARTNERS ON THE FIRST DAY OF BUSINESS, IT CANNOT BE ASSUMED BY ANY STRETCH OF IMAGINATION THAT THE ASSESSEE OR A FIRM HAD UNEXPLAINED INCOME ON THE FI RST DAY OF BUSINESS. (V) IN THE CASE OF THE ASSESSEE, PARTNERSHIP FIRM WAS FORMED ON 10.5.2005 AND ALL THE FOURTEEN PARTNERS H AD MADE THEIR CAPITAL CONTRIBUTION ON 10.5.2005. 4. THE CIT(A) CALLED FOR A REMAND REPORT AND IT WAS REPORTED THAT INITIALLY THERE WAS REPEATED NON COMPLIANCE BY THE ASSESSEE, HOWEVER, ALMOST WHOLE OF THE MATERIAL / EVIDENCE ON WHICH TH E ASSESSEE WAS RELYING WAS PRODUCED ON 16.12.2008, 22.12.2008 AND 24.12.20 08 AND THE 4 ASSESSING OFFICER HAD NO TIME TO VERIFY THE VOLUMIN OUS MATERIAL / EVIDENCE FILED. THE CIT(A) OBSERVED THAT THE CONT ENTION OF THE ASSESSEE THAT FIVE PARTNERS HAD APPEARED BEFORE THE ASSESSIN G OFFICER AND CONFIRMED TO HAVE INVESTED THE CAPITAL IN THE ASSES SEE FIRM IS CORRECT AND NO ADDITION COULD BE MADE IN THE HANDS OF THE FIRM IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. METAL & METALS OF INDIA 208 CTR 457 (P&H) AND C IT VS. RAMESHWAR DASS SURESH PAL CHEEKA 208 CTR 459(P&H). WITH REG ARD TO OTHER NINE PERSONS, THE ADDITIONS WERE CONFIRMED. THE CIT(A) ACCORDINGLY DELETED THE ADDITION IN RESPECT OF FIVE PARTNERS SHRI RAJES H CHIKARA, SHRI MUKESH KUMAR, SHRI RAJESH KUMAR, SHRI DEEPAK KUMAR AND SHR I RAJEEV PURI WHO ALL HAD INVESTED RS. 2 LACS EACH IN THE ASSESSEE FI RM TOTALING RS. 10 LACS. THE CIT(A) DELETED THE ADDITION OF RS. 10 LACS IN R ESPECT OF THE SAID PARTNERS AGAINST WHICH REVENUE IS IN APPEAL. 5. THE LEARNED DR PLACED RELIANCE ON THE ORDER OF T HE CIT(A) AND LEARNED AR FOR THE ASSESSEE PLACED RELIANCE ON THE ORDER OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. RAMESHHWA R DASS SURESH PAL CHEEKA (2007) 163 TAXMAN 270 (P&H) . 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE FIRM WAS CONSTITUTED ON 10 TH MAY 2005 COMPRISING OF 14 PARTNERS. THE SAID PARTNERS HAD INTRODUCED CAPITA L IN THE ASSESSEE FIRM TO THE EXTENT OF RS. 25 LACS. THE ASSESSING OFFICER AT PAGES 3 & 4 OF THE ASSESSMENT ORDER HAS TABULATED THE LIST OF PARTNERS ALONG WITH THEIR SHARE PROFIT RATIO AND CAPITAL INTRODUCED BY EACH ONE OF THE SAID PARTNERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER VERIFIED THE SAID CAPITAL INTRODUCTION MADE BY THE PARTNERS AND OUT OF 14 5 PARTNERS, FIVE PARTNERS APPEARED BEFORE THE ASSESSI NG OFFICER AND CONFIRMED TO HAVE MADE THE CAPITAL INTRODUCTION IN THE ASSESSEES FIRM AT THE START OF THE PARTNERSHIP BUSINESS. THE FIVE P ARTNERS I.E. NAMELY RAJESH CHIKARA, MUKESH KUMAR, RAJESH KUMAR S/O SHRI SURAT SINGH, DEEPAK KUMAR AND RAJIV PURI HAD CONTRIBUTED RS. 2 L ACS EACH I.E. TOTAL OF RS. 10 LACS AS THEIR CAPITAL CONTRIBUTION. IN THE STATEMENT RECORDED BY THE ASSESSING OFFICER, THE SAID PARTNERS CONFIRMED TO HAVE MADE THE CAPITAL INTRODUCTION AND HAD ALSO FURNISHED EVIDENC E IN RESPECT THEREOF. THE ASSESSING OFFICER WITHOUT CONSIDERING THE EVIDE NCE FILED ON RECORD, HELD THE SAID PERSONS TO BE NAME LENDERS ONLY. TH E CIT(A) DURING THE APPELLATE PROCEEDINGS CALLED FOR THE REMAND REPORT IN WHICH THE ASSESSING OFFICER CONFIRMED THE ASSESSEE TO HAVE FURNISHED TH E DETAILS. THE CIT(A) RELYING ON THE RATIO LAID DOWN BY JURISDICTIONAL HI GH COURT IN THE CASE OF CIT VS. METAL & METALS OF INDIA (SUPRA) AND CIT VS. RAMESHWAR DASS SURESH PAL CHEEKA (SUPRA) HAD DELETED THE ADDITION TO THE EXTENT OF RS. 10 LACS. 7. THE HON'BLE HIGH COURT IN CIT V RAMESHWAR DASS S URESH PAL CHEEKA (SUPRA) HAD CONFIRMED THE ORDER OF TRIBUNAL WHEREIN THE TRIBUNAL HAD ACCEPTED THE PLEA OF THE ASSESSEE THAT ONCE THE PARTNERS HAS ACCEPTED HAVING MADE THE DEPOSIT, NO ADDITION CAN BE MADE IN THE INCOME OF THE FIRM. THE HIGH COURT FURTHER HELD THAT NO CASE WA S MADE OUT FOR ADDITION TO THE INCOME OF THE FIRM EVEN IF DEPOSITS MADE WIT H THE FIRM BY THE PARTNERS WERE UNEXPLAINED INCOME OF THE PARTNERS. THE JURISDICTIONAL HIGH COURT IN CIT V METAL & METALS OF INDIA (SUPRA) HAD HELD THAT WHERE THE PARTNERS HAD ADMITTED HAVING MADE THE DEPOSITS WITH THE FIRM, AS FAR AS THE FIRM IS CONCERNED, EVEN IF THE GIFT CLAIMED TO HAVE BEEN RECEIVED BY THE PARTNERS IS TO BE REJECTED, THE SAID PARTNERS MAY BE LIABLE TO BE TAXED 6 BY TREATING THE SAID AMOUNT AS UNDISCLOSED INCOME, BUT THE FIRM CANNOT BE SUBJECTED TO TAX ON THAT GROUND. 8. IN THE FACTS OF THE PRESENT CASE, THE FIVE PARTN ERS OF THE PARTNERSHIP FIRM, WHO INDIVIDUALLY CONTRIBUTED RS. 2 LACS EACH AS THEIR CAPITAL CONTRIBUTION ON THE START OF THE PARTNERSHIP BUSINE SS HAS ADMITTED TO HAVE INTRODUCED THE SAID CAPITAL AND THE STATEMENTS OF T HE SAID PERSONS WERE ALSO RECORDED BY THE ASSESSING OFFICER. NO ADDITIO N IS JUSTIFIED IN THE HANDS OF THE PARTNERSHIP FIRM IN VIEW OF THE ACCEPT ANCE OF THE DEPOSITS BY THE PARTNERS AND THERE IS NO MERIT IN THE ORDER OF ASSESSING OFFICER IN REJECTING THE CLAIM OF THE ASSESSEE FIRM AS THE CRE DITWORTHINESS OF THE PARTNERS WERE NOT PROVED. RESPECTFULLY, FOLLOWI NG THE RATIO LAID BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE AFORESAI D JUDGMENTS, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROU NDS OF APPEAL RAISED BY THE REVENUE. 9. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF SEPTEMBER, 2010. SD/- SD/- (G.S.PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 7 TH SEPTEMBER, 2010 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 7