The ACIT,B.K.Circle, Banaskantha V. M/s. Vaishnodevi Refoils & Solvex, Banaskantha

ITA 2778/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9110 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 28-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHI K MADHUSUDAN
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 2778/AHD/2013 (ASSESSMENT YEAR: 2010-11) ASSTT. CIT, B.K. CIRCLE, PALANPUR V/S M/S. VAISHNODEVI REFOILS & SOLVEX 253/03, CHANDISAR GIDC, AT- CHANDISAR- 385510 TAL PALANPUR DIST- BANASKANTHA (N. GUJ) (APPELLANT) (RESPONDENT) PAN: AAGFV8316A APPELLANT BY : SHI K. MADHUSUDAN, SR. D.R . RESPONDENT BY : MS. URVASHI SODHAN, A.R. ( )/ ORDER DATE OF HEARING : 10 -02-201 7 DATE OF PRONOUNCEMENT : 13 -02-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-IV, AHMEDABAD DATED 12.10.2006 PERTAINING TO A.Y. 2005- 06. ITA NO2778/A HD/2013 . A.Y. 2010-11 2 2. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,05,46,160/- MADE ON ACCOUNT OF CAPITAL INTRODUCED BY THE PARTNER OF THE SHRI KANTI LAL JAYRAMDAS THAKKAR U/S. 68 OF THE ACT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT ONE OF THE PARTN ERS SHRI KANTILAL JAYRAMDAS THAKKAR HAS INTRODUCED CAPITAL OF RS. 1,0 5,46,160/-. THE A.O. ASKED THE ASSESSEE TO EXPLAIN THE CREDIT ENTRY IN T HE LIGHT OF SECTION 68 OF THE ACT. THE ASSESSEE FILED A DETAILED REPLY WHICH READS AS UNDER:- ONE OF THE PARTNER OF THE FIRM MR. KANTILAL JAYRAM DAS THAKKAR HAS INTRODUCED NET CAPITAL OF RS. 1,05,46,160/- DURING THE FINANCI AL YEAR 2009-10. WE HAVE ALREADY FURNISHED THE CONTRA ACCOUNT OF VAISHNODEVI REFOILS & SOLVEX FROM THE PERSONAL BOOKS OF ACCOUNT OF SHRI KANTILAL JAYRAMDA S THAKKAR. HE HAS BEEN ASSESSED TO INCOME TAX AT WARD NO. 2 OFPALANPUR OF B.K. RANGE. COPY OF ACKNOWLEDGEMENT RECEIPT OF ITR FILED BY SHRI KANTIL AL JAYRAMDAS THAKKAR IS ALSO FURNISHED. WE HAVE ALSO FURNISHED THE AUDIT REPORT OF THE ABOVE FINANCIAL YEAR OF SHRI KANTILAL JAYRAMDAS THAKKAR. THUS IT IS PROVED THAT ASSESSEE FIRM HAS RECEIVED THE FUND FROM PARTNER SHRI KANTILAL JAYRAMDAS THAKK AR, WHO HAS ALSO SHOWN IN HIS BOOKS OF ACCOUNT THAT THE SAME AMOUNT HAS BEEN INVESTED BY HIM. 4. THE SUBMISSIONS OF THE ASSESSEE DID NOT FIND ANY FA VOUR WITH THE A.O. WHO MADE THE ADDITION OF RS. 1,05,46,160/- U/S. 68 OF T HE ACT. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE ASSESSING OFFICER. RELIAN CE WAS ALSO PLACED ON ITA NO2778/A HD/2013 . A.Y. 2010-11 3 THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT OF GUJARAT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES WHEREIN IT HAS BEEN H ELD THAT NO ADDITION CAN BE MADE WITH REGARD TO THE PARTNERS CAPITAL INTROD UCTION IN THE HANDS OF THE PARTNERSHIPS FIRM. THE FIRST APPELLATE AUTHORIT Y WAS CONVINCED WITH THE CLAIM OF THE ASSESSEE AND DELETED THE IMPUGNED ADDI TION. 6. BEFORE US, THE LD. D.R. STRONGLY SUPPORTED THE FIND INGS OF THE A.O. THE LD. COUNSEL ONCE AGAIN RELIED UPON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT GIVEN IN THE CASE OF PANKAJ D YESTUFF INDUSTRIES IN INCOME TAX REFERENCE NO. 241 OF 1993. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF PANKAJ DYESTUFF INDUSTRIES (SUPRA) HAS RELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF NARAYANDAS KEDARNATH 22 ITR 18 . THE RELEVANT PART READS AS UNDER:- 12. THE BOMBAY HIGH COURT IN CASE OF NARAYANDAS KED ARNATH V. COMMISSIONER OF INCOME TAX, CENTRAL, [1952] 22 ITR 18 HAS, WHILE DE ALING WITH THE QUESTION AS TO WHETHER CERTAIN AMOUNTS STANDING TO THE CREDIT OF S OME OF THE PARTNERS OF THE ASSESSEE FIRM COULD BE TREATED AS UNDISCLOSED PROFI TS OF THE FIRM ITSELF, OBSERVED THUS : LF THE DEPARTMENT WAS SATISFIED THAT MONEYS, ALTHOU GH PAID IN THE NAMES OF THE PARTNERS OR STRANGERS WERE REALLY UNDISCLOSED P ROFITS OF THE FIRM AND WERE NOT INDIVIDUAL CONTRIBUTIONS MADE BY PARTNERS OR ST RANGERS, THEN IT WOULD BE LEGITIMATE FOR THE DEPARTMENT TO DRAW AN INFERENCE THAT THOSE MONEYS REPRESENTED THE UNDISCLOSED PROFITS OF THE FIRM. BU T HERE THE ONLY FINDING WE HAVE FROM THE TRIBUNAL' IS THAT THESE MONEYS WERE BROUGH T IN BY THE PARTNERS FROM THEIR NATIVE PLACE AND THAT NO : ADEQUATE EXPLANATION IS FORTHCOMING FROM THE PERSONS THEMSELVES AS TO WHERE THESE MONEYS CAME FR OM. NOW IT SEEMS TO ME THAT THE ASSESSES FIRM HAS DISCHARGED THE BURDEN WH ICH; WAS UPON IT TO EXPLAIN ITA NO2778/A HD/2013 . A.Y. 2010-11 4 THESE CREDIT ENTRIES AND IT HAS DISCHARGED THE BURD EN BY SATISFYING THE DEPARTMENT THAT THESE ENTRIES REPRESENT GENUINE REM ITTANCES RECEIVED FROM JAIPUR WHICH HAVE GONE INTO THE COFFERS OF THE FIRM .. WHEN THAT BURDEN IS DISCHARGED, IT WOULD BE FOR THE DEPARTMENT TO FIND THAT NOTWITHSTANDING THE FACT THAT THESE; MONEYS WERE ACTUALLY BROUGHT IN THEY DO NOT REPRESENT THE MONEYS OF THE PARTNERS BUT THEY REPRESENT THE UNDISCLOSED PRO FITS OF THE FIRM WHICH LEFT THE FIRM EARLIER AND RETURNED-THROUGH THE INTERMEDIARY OF THE PARTNERS. IF THE DEPARTMENT WAS NOT SATISFIED WITH THE EXPL ANATION GIVEN BY THE PARTNERS THEN IT IS LEGITIMATE FOR THE DEPARTMENT TO DRAW AN INFERENCE THAT THESE AMOUNTS REPRESENT UNDISCLOSED PROFITS OF THE PARTNE RS AND TO ASSESS THEM IN THEIR OWN INDIVIDUAL ASSESSMENT. THE AFORESAID DECISION IN THE CASE OF NARAYANDAS KE DARNATH (SUPRA) RENDERED BY BOMBAY HIGH COURT ON 28 TH MARCH 1952 HAS PRECEDENTIAL VALUE EQUIVALENT TO A DECISION OF THIS COURT AND HENCE, IS EQUALLY BINDIN G ON THIS COURT. THE SAID DECISION THOUGH RENDERED UNDER THE INDIAN INCOME TA X ACT, 1922, WOULD NOT MAKE ANY DIFFERENCE. SECTION 68 OF THE ACT WAS INTR ODUCED FOR THE FIRST TIME IN THE ACT AND THERE WAS NO CORRESPONDING PROVISION IN THE 1922 ACT. HOWEVER, AS PER SETTLED LEGAL POSITION, SECTION 68 OF THE ACT ONLY GIVES' A : STATUTORY RECOGNITION TO THE PRINCIPLE THAT CASH CREDITS WHICH ARE NOT SATIS FACTORILY EXPLAINED MIGHT BE ASSESSED AS INCOME. (SEE CIT V. ORISSA CORPORATION PVT. LTD. [1986] 1 59 ITR 78). 13.APPLYING THE AFORESAID PRINCIPLES TO THE FACTS O F THE PRESENT CASE, IT IS APPARENT THAT THE ASSESSEE HAD FURNISHED THE DETAIL S WHICH WOULD DISCHARGE THE ONUS WHICH LAY ON THE ASSESSEE. .IT IS NOT THE CASE OF THE REVENUE THAT THE PARTNERS OF THE ASSESSEE FIRM ARE FICTITIOUS, THE I NCOME TAX OFFICER HAS NOT DISPUTED THAT THE CREDITS IN THE ACCOUNTS OF THE PA RTNERS WERE NOT DEPOSITS FROM THE PARTNERS. MOREOVER, IT IS AN ADMITTED POSITION THAT THIS WAS THE SECOND YEAR OF THE FIRM, AND THAT IT WAS RUNNING IN LOSS. IT I S TRUE THAT THE INCOME TAX OFFICER DID NOT ACCEPT THE EXPLANATION GIVEN ON BE HALF OF THE ASSESSEE IN RESPECT OF THE NEW DEPOSITS OR CASH CREDITS IN THE ACCOUNTS OF THE PARTNERS. THE MERE NON-ACCEPTANCE OF THAT EXPLANATION DOES N OT, HOWEVER, PROVIDE MATERIAL FOR FINDING THAT THE SAID SUM REPRESENTED I NCOME OF THE ASSESSEE FIRM. AS HELD BY THE ALLAHABAD HIGH COURT IN CASE OF COMMIS SIONER OF INCOME TAX, ALLAHABAD V. JAISWAL MOTOR FINANCE (SUPRA), IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THERE WERE PROFITS OF THE FIRM, THE A MOUNT CREDITED TO THE PARTNERS ACCOUNTS COULD NOT BE ASSESSED IN THE HANDS OF THE FIRM. ONCE THE PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED IN T HEIR ACCOUNTS ARE THEIR OWN, THE INCOME TAX OFFICER IS ENTITLED TO AND MAY PROCE ED AGAINST THE PARTNERS AND ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATIO N IS NOT FOUND SATISFACTORY. ITA NO2778/A HD/2013 . A.Y. 2010-11 5 14.IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CA SE BOTH THE DEPUTY CIT (APPEALS) AND THE TRIBUNAL HAVE FOUND THAT THE ASSE SSEE HAD DISCHARGED THE PRIMARY ONUS WHICH WAS ON IT BY OFFERING EXPLANATIO N, WHICH HAS NOT BEEN FOUND TO BE INCORRECT OR FALSE IN ANY MANNER. THE INTERES T 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 PARTNERS IF HE IS NOT SATISFIED WITH THE SOURCE S OF INVESTMENT OF CASH CREDITS IN THE ACCOUNTS OF THE P ARTNERS. 15.IN THESE CIRCUMSTANCES, IT IS NOT POSSIBLE TO FI ND THAT THE ORDER OF THE TRIBUNAL SUFFERS FROM ANY INFIRMITY WHICH WOULD REQUIRE INTE RFERENCE AT THE HANDS OF THIS COURT, ACCORDINGLY, IT IS HELD THAT THE TRIBUNAL WA S RIGHT IN LAW AND ON FACTS IN. DELETING THE ADDITION OF RS.87,250/- BEING DEPOSITS IN THE ACCOUNTS OF THE PARTNERS. THE QUESTION REFERRED TO THIS COURT IS, A CCORDINGLY, ANSWERED IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE. 16. THE REFERENCE STANDS DISPOSED OF ACCORDINGLY. T HERE SHALL BE NO ORDER AS TO COSTS. 8. RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION, WE DECLINE TO INTERFERE WITH THE FINDINGS OF THE FIRS APPELLATE AUTHORITY. 9. APPEAL BY THE REVENUE IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 02- 20 17 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 13 /02/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD.