M/s. Satpal And Partners, SRIGANGANAGAR V. ITO, SRIGANGANAGAR

ITA 265/JODH/2014

• Counselvise Citation: 26523314 RSA 2014
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-09-2014
• Assessment Year: 1992-1993
• Appeal Filed On: 23-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SINGH
• Assessee Lawyers: U C JAIN
• Keywords: Unexplained cash credit
• Section: 143(3); 68; 92

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JODHPUR BENCH: J ODHPUR ( BEFORE SHRI H ARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER ) I.T.A. NO. 265 /JODH/201 4 (A.Y. 1992 - 93 ) M/S. SATPAL AND PARTNERS VS ITO, WARD - 3, 3 - E - 18, JAWAHAR NAGAR, SRIGANGANAGAR. SRIGANGANAGAR. PAN NO. ABLFS4150P (APPELLANT) (RESPONDENT) ASSESSEE BY : - SHRI U.C. JAIN . DEPARTMENT BY : - SHRI JAI SINGH - D.R. DATE OF HEARING : 22 /0 9 /201 4 DATE OF PRONOUNCEMENT : 24 / 0 9 /2014 O R D E R P E R HARI OM MARATHA, J.M. : THIS APPEAL OF THE ASSESSEE, FOR A.Y. 1992 - 93, IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), BIKANER, DATED 28.01.2014. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM. FOR A.Y. 1992 - 93, T HE ASSESSEE - FIRM FILED ITS RETURN OF INCOME (ROI) ON 29.10.2003, DECLARING TOTAL INCOME OF RS. 1,02,090/ - . 2 THE A.O. COMPLETED ASSESSMENT U/S 143(3) OF THE I.T. ACT., 1961 (THE ACT FOR SHORT) ON 19.11.2007, AT RS. 11,21,680/ - BY MAKING ADDITION OF RS. 9, 95,000/ - ON ACCOUNT OF UNEXPLAINED CASH CREDITS UNDER THE PROVISIONS OF SECTION 68 OF THE ACT. THESE CREDITS WERE RECEIVED BY THE FIRM FROM ITS PARTNERS AS SHOWN UNDER: - 1. PREM SUKH RS. 1,00,000/ - 2. SATPAL RS. 4,95,000/ - 3. DAULAT RAM RS. 50,00 0/ - 4. SUBASH CHAND RS. 50,000/ - 5. KEWAL KISHAN RS. 3,00,000/ - TOTAL RS. 9,95,000/ - 2.1 AGGRIEVED, THE ASSESSEE - FIRM FILED APPEAL ORDER AND LD. CIT(A) VIDE HIS ORDER DATED 09.06.2008 DELETED THE ENTIRE ADDITION OF RS. 9,95,000/ - . AGAINST THE ORD ER THE DEPARTMENT WENT IN APPEAL BEFORE ITAT WHO VIDE ITS ORDER DATED 13.07.2009 RESTORED THE MATTER BACK TO CONSIDER AND DECIDE THE ISSUES BY PASSING A SPEAKING ORDER. IN COMPLIANCE, THE A.O. SENT NOTICE TO THE ASSESSEE - FIRM AND IT WAS STATED ON BEHALF O F THE ASSESSEE - FIRM THAT IN THE FIRST ROUND ITSELF AND MORE SPECIFICALLY IN THE SECOND ROUND WHATEVER EVIDENCES WERE PRODUCED THESE ARE RELIED UPON AND THE ASSESSEE - FIRM WAS UNABLE TO PRODUCE THE PARTNERS IN PERSON. THE A.O. HAS REPEATED THE SELF SAME ADDI TION AND 3 IN APPEAL LD. CIT(A) HAS ALSO CONFIRMED THIS ADDITION. THE ASSESSEE HAS COME BEFORE THE APPELLATE TRIBUNAL THIRD TIME. 2.2 IT WAS ARGUED WITH THE HELP OF PAPER BOOK AND WRITTEN SUBMISSIONS BY THE LD. A.R. THAT IT IS THE THIRD TIME BEFORE THE AP PELLATE TRIBUNAL THAT THE ASSESSEE HAS CAME IN APPEAL. HE NARRATED AS TO WHAT HAPPENED IN EARLIER TWO ROUNDS. THE LD. A.R. ARGUED THAT FROM THE VERY BEGINNING THE CASE OF THE ASSESSEE - FIRM IS THAT THESE CREDITS REPRESENT THE CAPITAL CONTRIBUTION BY THE PAR TNERS OF THE FIRM MADE DURING THE A.Y. 1990 - 91 AND 1991 - 92. HE STATED THAT THE ASSESSEE - FIRM DECIDED ITS INCOME FROM THE SALE OF LIQUOR ON THE BASIS OF LICENSE OBTAINED FROM THE GOVERNMENT OF RAJASTHAN IN THE MONTH OF FEBRUARY / MARCH, OF 1991 IN WHICH SHR I SATPAL WAS A PARTNER WITH 60% SHARE IN THE PROFIT / LOSS. IT WAS EXPLAINED THAT THE BUSINESS OF THE ASSESSEE - FIRM, ACTUALLY, STARTED FROM 1 ST APRIL, 1991. THE FIRST YEAR, THUS, BEING FROM 01.04.1991 TO 31.03.1992. IT WAS STATED THAT ON 1 ST APRIL, 1991, T HE CAPITAL ACCOUNTS OF THE PARTNERS WERE CREDITED BY DEBITING THE ACCOUNT OF PARTNER SHRI SATPAL IN RESPECT OF AMOUNT INVESTED PRIOR TO 31.03.1991 FOR THE PURPOSE OF DEPOSITING LICENSE - FEES. FURTHER STATED THAT ON 01.04.1991 ONLY A SUM OF RS. 2,50,000/ - HA D BEEN RECEIVED FROM THE PARTNER SHRI KEWAL KRISHAN. HE STATED THAT FOR 4 WIN N ING A LIQUOR CONTRACT EARNEST MONEY IS REQUIRED TO BE DEPOSITED BEFORE 31 ST MARCH AND IN THIS CASE IT WAS DEPOSITED BEFORE 31 ST MARCH, 1991. SINCE SHRI SATPAL SINGH DID NOT POSSESS SUFFICIENT CAPITAL AND THAT IS WHY THE OTHER PARTNERS JOINED THE FIRM IN THE MONTH OF FEBRUARY / MARCH, 1991. THE CAPITAL CONTRIBUTION BY THE FIVE PARTNERS, BEFORE 31 ST MARCH, 1991, WAS AS UNDER: - SR. NO. NAME OF PARTNER AMOUNT DEPOSITED DATE OF DEPO SIT P.B. PAGE A. SATPAL 600000.00 07/03/1991 3 - PARA(B) B. PREM SUKH 100000.00 19/03/1991 2 - PARA(A) C. DAULAT RAM 50000.00 21/02/1991 3 - PARA(C) D. SUBHASH CHAND 50000.00 18/03/1991 3 - PARA(D) E. KEWAL KISHAN 50000.00 13/02/1991 3 - PARA(E) 850000.00 FURTHER STATED THAT ON 01.04.1991 I.E., DURING THE F.Y. RELEVANT TO THE ASSESSMENT YEAR 1992 - 93 ONLY SHRI KEWAL KISHAN, PARTNER, HAD CONTRIBUTED A SUM OF RS. 2,50,000/ - IN THE FIRM AND DURING THE YEAR NO BUSI NESS WAS CARRIED OUT IN THIS YEAR. AS PER LD. A.R. SHRI U.C. JAIN, ADVOCATE, DURING THE ORIGINAL ASSESSMENT PROCEEDINGS THE ASSESSEE - FIRM PRODUCED DOCUMENTARY EVIDENCES AND ALSO DULY ATTESTED AFFIDAVITS TO PROVE THE IDENTITY, THE CREDITWORTHINESS OF THE PA RTNERS AND THE GENUINITY OF THE DEPOSITS. ACCORDING TO HIM DURING THE F.Y. 1990 - 91, RELEVANT TO THE A.Y. 1991 - 92 WHEN THE SECURITY WAS DEPOSITED WITH THE 5 GOVERNMENT OF RAJASTHAN AT THE TIME OF AWARDING CONTRACT. HE EXPLAINED THE CHRONOLOGY OF EVENTS. IN TH E BACK DROP OF THE ABOVE FACTS LD. COUNSEL VEHEMENTLY ARGUED THAT THE PROVISIONS OF SECTION 68 CANNOT BE INVOKED IN THIS CASE. MOREOVER THE CONFIRMATION OF THE ADDITION OF RS. 7,40,000/ - (OUT OF RS. 9,90,000/ - ) IS TOTALLY ERRONEOUS. THE LD. COUNSEL EXPLAIN ED THE PROOF OF THE THREE INGREDIENTS OF SECTION 68 OF THE ACT IN RESPECT OF PARTNERS CONTRIBUTION OF RS. 2,50,000/ - BY SHRI KEWAL CHAND ON 01.04.1991 I.E., ON THE FIRST DAY OF THE COMMENCEMENT OF BUSINESS BY THE FIRM. HE ARGUED THAT IN THE CASE OF KEWAL KISHAN AND PARTNERS VS ITO, SIMILAR FACTS THE PLEA OF THE ASSESSEE WAS ACCEPTED AND EVEN CONFIRMED BY THE HONBLE RAJASTHAN HIGH COURT AND THE DECISION IS REPORTED AS 18 DTR (RAJ.) 121 (COPY ENCLOSED AT PAPER BOOK PAGE 35 TO 37). 2.3 P ER CONTRA, LD. D.R . SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE HAS STATED THAT NON PRODUCTION OF CASH CREDITORS IN PERSON IS A SERIOUS DEFECT WHICH DISENTITLES THE ASSESSEE - FIRM FROM CLEARING THE BENEFIT OF EXPLANATION THERETO. THEREFORE, HE HAS PLEADED FOR THE CONFI RMATION OF THE IMPUGNED ADDITION BY READING REPEATING THE REASONS GIVEN BY THE A.O. AND BY THE LD. CIT(A). 6 2.4 WE HAVE CAREFULLY COGITATED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE OBTAINING FACTS OF THIS CASE AS WELL AS THE ENTIRE MATERIAL AVAILABLE ON RECORD. 2.5 WE HAVE FOUND IT FOR A FACT THAT THIS TOTAL AMOUNT OF RS. 9,95,000/ - REPRESENTED CAPITAL CONTRIBUTION BY PARTNERS IN THE ASSESSEE - FIRM PRIOR TO THE COMMENCEMENT OF BUSINESS BY THE ASSESSEE - FIRM. IN FACT, THIS IS A 3 RD ROUND BEFORE THE APPEL LANT TRIBUNAL AND IT IS A TRAVESTY OF PROCEDURE. HOW, AN APPELLANT CAN BE LEFT TO SUFFER LIKE THAT. THE FOLLOWING TABLE EXPLAINS THE CHRONOLOGICAL EVENTS OF THE ENTIRE PROCEEDINGS UNDERTAKEN IN THIS CASE : SR. NO. DATE EVENT P.B. PAGE NO. 1 29/10/1993 RE TURN OF INCOME FILED 15 2 ASSESSMENT WAS COMPLETED U/S 143(3) IN WHICH ADDITION OF RS. 9,95,000/ - ON ACCOUNT OF CONTRIBUTION OF CAPITAL WAS MADE U/S 68 15 , 3 31/03/1997 CIT (A) SET ASIDE THE ASSESSMENT ORDER (1ST ROUND BEFORE CIT (A)) 15 7 IN THE FIRST ROUND AFTER CONSIDERING THE EXPLANATION WITH REGARD TO THESE CREDITS THE A.O. WANTED T HE ASSESSEE - FIRM TO PRODUCE THE PARTNERS IN PERSON. ONE OF THE PARTNER S HAD ALREADY EXPLAINED AND OTHERS WERE NOT AVAILABLE AS LEGAL FIRM TO CARRY ON LIQUOR BUSINESS HAVE A LIMITED LIFE OR TENURE OF 2 YEARS, AT THE MOST. THEREFORE, NON 4 02/04/1998 AO PASSED FRESH ORDER (ILND ROUND & MADE THE SAME ADDITION) 15 5 18/06/2001 CIT (A) IN 2 ND ROUND DELETED THE ADDITION MADE U/S 68 9 - 14 6 19/05/2006 APPEAL FILED BY REVENUE AGAINST THE ORDER OF CIT (A) THE HONBLE TRIBUNAL SET ASIDE THE ORDER OF CIT (A ) AND RESTORED THE MATTER TO THE AO 16 7 09/11/2007 AO PASSED THE ASSESSMENT ORDER FOR THE 3 RD TIME AND REPEATED THE SAME ADDITION 15 - 18 8 09/06/2008 THE CIT (A) IN 3 RD ROUND OF APPEAL AGAIN DELETED THE ADDITION MADE BY AO 19 - 26 9 13/07/2009 THE REV ENUE AGAIN PREFERRED THE APPEAL BEFORE HONBLE TRIBUNAL AND IN EX - PARTY ORDER THE HONBLE TRIBUNAL AGAIN SET ASIDE THE ORDER OF THE CIT (A) AND RESTORED THE MATTER TO THE FILE OF AO 27 - 30 10 21/11/2011 THE AO AGAIN REPEATED THE ADDITION IN THE 4 TH ROUND WITHOUT DUE REGARD TO THE MATERIAL AVAILABLE ON RECORD UNDER APPEAL 11 19/03/2013 THE ASSESSEE FILED THE DETAILED SUBMISSION AND ALSO RELIED ON THE DECISION OF HONBLE IT AT IN THE CASE OF KEWAL KISHAN & PARTNERS IN ITA NO. 408/JDPR/2004 FOR THE A.Y. 199 0 - 91 DATED 30/10/2007. 1 - 8 12 28/01/2014 THE CIT (A) DISMISSED THE APPEAL EVEN THOUGH HIS PREDECESSOR ON TWO OCCASION DELETED THE ADDITION UNDER APPEAL 8 PRODUCTION OF CREDIT ORS, PARTICULARLY IN THIS CASE, IS NOT AND CANNOT BE FATAL. FOR READY REFERENCE, WE EXTRACT THE PROOF OF CASH CREDITORS PRODUCED BY THE ASSESSEE - FIRM, WHICH READS AS UNDER : - THE ADDITION MADE BY THE ASSESSING OFFICER IS WHOLLY UNJUSTIFIED FOR THE FOLLO WING REASONS: - A) CREDIT IN THE NAME OF SHRI P REM SUKH OFRS. 100000/ - AMOUNT WAS DEPOSITED ON 19.3.1991 WHICH FALLS IN THE A.Y 1991 - 92, HENCE ADDITION IN A.Y 1992 - 93 IS INCORRECT. SHRI PREM SUKH HAS FILED AFFIDAVIT AND CONFIRMATIO N INDICATING THAT HE HAS 2 1.5 BI GHA OF LAND AND DEPOSIT OF RS. 100000/ - IS OUT OF AGRICULTURAL INCOME. THUS HIS C REDITWORTHINESS IS ESTABLISHED. (3) HE HAS SOLD PART OF HIS AGRICULTURAL PRODUCE THROUGH M/S SHAKTI TRADING CO. FROM WHERE HE WITHDRAWN RS. 141000/ - UPTO 8.1.199 1 IN THE FIN ANCIAL YEAR 1990 - 91 . THUS HIS CAPACITY AND CREDITWORTHINESS IS EVIDENT. (4) THE ASSESSEE FIRM DID NOT CARRY OUT ANY BUSINESS ACTIVITY . THE FIRM WAS FORMED TO SH ARE THE 60% SHARE OF PROFIT OF S HRI SATPAL IN M/S SATPAL GURUCHARN SINGH & PARTY. FOR THIS THE PAR TNER HAVE CONTRIBUTED THE FUND. HENCE ADDITION IN HANDS OF THE ASSESSEE FIRM IS UNJUSTIFIED. IT IS CONSIDERED UNEXPLAINED, ADDITION CAN BE MADE IN THE HANDS OF INDIVIDUAL PARTNERS & NOT IN THE CASE OF ASSESSEE FIRM AS FIRM HAS NO BUSINESS ACTIVITY. 9 FOR THE PURPOSE RELIANCE IS PLACED IN FOLLOWING CASES : - CI T VS. JAISWAL MOTOR FINANCE : 141 ITR 706 (ALL) IF THERE ARE CASH CREDITS IN THE BOOKS OF A FIRM, IN WHICH THE ACCOUNTS OF THE INDIVIDUAL PARTNERS EXIST, AND IT IS FOUND AS A FACT THAT THE CASH WAS RECEI VED BY THE FIRM FROM ITS PARTNERS, THEN IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THESE WERE THE PROFITS OF THE FIRM, IT COULD NOT BE ASSESSED IN THE HAND OF THE FIRM. NARAYANDASS KEDARNATH V. CIT 22 ITR 18 (BOM.) CASH CREDIT IN THE BOOKS .OF THE FIR M WHICH ARE PROVED TO HAVE BEEN BROUGHT BY THE PARTNERS CANNOT BY ASSESSED AS UNDISCLOSED INCOME OF FIRM.' - 3 - (B) CREDIT IN THE NAME OF SHRI SATPAL OF RS. 490000/ - (1) HE CONTRIBUTED RS. 600000/ - ON 7.3.1991 I.E PRIOR TO 1.4.1991 OUT OF WHICH RS. 110000/ - WA S ACCEPTED BY THE ASSESSING OFFICER AND BALANCE OF RS. 490000/ - WAS ADDED. SINCE CREDIT WAS RECEIVED IN A.Y 1991 - 92 ADDITION IN THE A.Y. 1992 - 93 IS UNJUSTIFIED. (2) THE DETAILS OF LOANS RAISED BY SHRI SATPAL AND AFFIDAVIT OF PERSON FROM WHOM SHRI SATPAL RAISE D THE LOANS ARE ENCLOSE D . FROM THE AFFIDAVIT OF THE CREDITORS OF SHRI SATPAL IT IS EVIDENT THAT THEY PROVIDED LOAN TO SHRI SATPAL IN F.Y. 1990 - 91, HENCE THE CREDITS DO NOT FALL IN A.Y. 1992 - 93 10 (3) THE SOURCE OF CREDITORS IS FILED. THE ASSESSING OFFICER HAS ACCEPTED THE LOANS PROVIDED BY FIVE PERSONS NAMELY SHRI SATISH KUMAR, SHRI JAGJEET SINGH, SHRI KAKA SINGH , SHRI BALVINDER SINGH AND SHRI VEER CHAND BUT WITHOUT ANY VALID REASON HAD NOT ACCEPTED THE REMAINING CREDITORS EVEN WHEN THE PAYMENT OF SALE PROCEEDS OF AGRICULTURAL PRODUCE FROM CONCERNED PARTIES WERE FILED. (4) THE FOLLOWING CASE CAN BE RELIED HERE : THE CASE LAWS RELIED AT PARA 4 IN CASE OF SHRI P REM SUCH IS ALSO APPLICATION HERE. (C) CREDIT IN THE NAME OF SHRI DAULAT RAM OF RS. 50000/ - (1) AMOUNT WAS D EPOSITED OF 21.2.1991 THUS CREDIT DO NOT FALL INTO A.Y. 1992 - 93. (2) AFFIDAVIT OF SHRI DAULAT RAM INDICATING SUBSTANTIAL AGRICULTURAL LAND HOLDING IE. 10 BIGHAS WAS FILED. THUS THE CREDITWORTHINESS IS ESTABLISHED. (3) THE CASE LAWS RELIED AT PARA 4 IN CASE OF SH RI PREM SUCH IS ALSO APPLICABLE HERE. (D) CREDIT IN THE NAME OF SHRI SUBHASH CHAND OF RS. 50000/ - (1) AMOUNT WAS DEPOSITED ON 18.3.1991 BY SHRI SUBHASH CHAND THUS CREDIT DO NOT FALL IN TO A.Y. 1992 - 93 (2) AFFIDAVIT OF SHRI SUBHASH CHAD INDICATING SUBSTANTIAL AG RICU LTURAL LAND HOLDING IE. 30 BI GHAS WAS FILED. THUS THE 11 CREDITWORTHINESS IS ESTABLISHED. (3) THE CASE LAWS RELIED AT PARA 4 IN CASE OF SHRI PREM SUCH IS ALSO APPLICABLE HERE. (E) CREDIT IN THE NAME OF SHRI KEWAL KRISHAN OF RS. 300000/ - (1) HE DEPOSITED RS. 50000/ - ON 13.2.1991 WHICH FALLS IN THE A.Y 1991 - 92 AND RS. 250000/ - ON 1.4.1991. HE IS ASSESSED TO TAX AT GIR NO. K - 1402/III AT SRI GANGANAGAR. (2) THE ABOVE DEPOSIT WAS MADE OUT OF WITHDRAWALS FROM M/S KEWAL KRISHAN & PARTNERS IN WHICH HE IS PARTNER. HENCE ADDITION I S UNJUSTIFIED. (3) IN CASE OF M/S KEWAL KRISHAN & PARTNERS ADDITION OF RS. 50000/ - WAS MADE IN THE A.Y 1990 - 91 IN RESPECT OF DEPOSIT MADE BY HIM ON 1.4.1989, COPY OF ORDER IS ENCLOSE. THIS AMOUNT WAS WITHDRAWN FROM THAT FIRM AND ON DEPOSIT IN ASSESSEE FIRM HA S AGAIN BEEN ADDED RESULTING DOUBLE ADDITION, OTHERWISE ALSO WHEN THE AMOUNT IS WITHDRAWN FROM CAPITAL ACCOUNT OF THE ASSESSEE IN M/S KEWAL KRISHAN & PARTNERS AND DEPOSITED IN THE ASSESSEE FIRM ADDITION CANNOT BE MADE SECONDLY THE ADDITION OF RS. 50000/ - W HICH WAS MADE IN THE FIRM M/S KEWAL KRISHAN AND PARTNERS IS ACCEPTED BY THE HONABLE ITAT JODHPUR BENCH JODHPUR VIDE ORDER DT. 30.10.2007. 12 3. THEREFORE, IN THE INTEREST OF JUSTICE, WE ARE OF THE CONSIDERED OPINION IN THE LIGHT OF OUR ABOVE OBSERVATIONS, NO ADDITION U/S 68 OF THE ACT IS JUSTIFIED AT ALL. THE MAIN ISSUE STANDS COVERED BY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KEWAL SINGH AND PARTNERS (SUPRA) WHICH HAS BEEN OVERLOOKED BY THE AUTHORITIES. 4. ACCORDINGLY, WE ORDER D ELETION OF THE ENTIRE ADDITION AND ALLOW THE APPEAL OF THE ASSESSEE - FIRM . 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 24 TH SEPTEMBER, 2014. SD/ - SD/ - (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24 TH SEPTEMBER, 2014 VL/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR SENIOR PRIVATE SECRETARY ITAT, JODHPUR