The ITO, Ward-1,S.K.Range, V. M/s. Jay Varudi Construction Co.,

ITA 3123/AHD/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50946 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-11-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 02-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: U S BHATI
• Keywords: Unexplained cash credit; Unexplained investment
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.3123 & 3124 / AHD/208 (ASSESSMENT YEAR 2003-04 &2004-05) ITO, WARD-1, S.K. RANGE HIMATNAGAR VS. M/S. JAY VARUDI CONSTRUCTION CO., AT & PO, DOBHADA, TA. VADALI, DISTT. SABARKANTHA, I.T.A.NO. 3125 & 3126/AHD/2008 (ASSESSMENT YEAR 2002-03 & 2003-04) ITO, WARD 1, VS. M/S. VARUDI ENTERPRISES, S. K. RANGE, AT. & P.O. DOBHADA, HIMATNAGAR TA. VADALI, DISTT. SABARKANTHA PAN/GIR NO. : AADFJ4795J / AAFCV8130E (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI RAKESH AGRAWAL, SR. DR RESPONDENT BY: SHRI U S BHATI, AR DATE OF HEARING: 03.11.2011 DATE OF PRONOUNCEMENT: 18.11.2011 O R D E R PER BENCH:- OUT OF THIS BUNCH OF FOUR APPEALS, ALL THESE FOUR APPEALS ARE FILED BY THE REVENUE IN THE CASE OF TWO DIFFERENT ASSESSEES I.E. M/S. JAY VARUDI CONSTRUCTION CO. FOR THE ASSESSMENT YEARS 2003-04 & 2004-05 AND IN THE CASE OF M/S. VARUDI ENTERPRISES FOR THE ASSESSMENT YEAR 2002-03 AND 2003-04 RESPECTIVELY AND ALL THESE FOUR APPEALS ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LD. CIT(A) - X, AHMEDABAD ALL DA TED 09.06.2008. I.T.A.NO.3123_3126 /AHD/2008 2 THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DIS POSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE APPEAL OF THE REVENUE IN T HE CASE OF M/S. JAY VARUDI CONSTRUCTION CO. FOR THE ASSESSMENT YEAR 200 3-04 I.E. I.T.A.NO. 3123/AHD/2008. THE GROUNDS RAISED BY THE REVENUE A RE AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.26,50,0007- MADE U/S.6 8, BEING UNEXPLAINED CASH CREDITS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OF FICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 2.1 THE BRIEF FACTS OF THE PRESENT CASE ARE THAT TH E TOTAL AMOUNT OF CAPITAL BROUGHT IN BY THE PARTNERS OF THE ASSESSEE FIRM WAS RS.26.50 LACS AND THE A.O. WAS NOT SATISFIED WITH REGARD TO THE E XPLANATION OF THE ASSESSEE REGARDING THE SOURCE OF THE CAPITAL INTROD UCED BY THE PARTNERS AND HE MADE ADDITION OF THE SAME BY INVOKING THE PROVIS ION OF SECTION 68 OF THE ACT. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO HAS DELETED THIS ADDITION BY FOLLOWI NG THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE C ASE OF CIT VS PANKAJ DYESTUFF INDUSTRIES IN I.T.A.NO. 241/1993 WHICH HAS BEEN FOLLOWED BY AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF SHRE E CAPITAL GUEST HOUSE VS ITO IN I.T.A.NO. 2102/AHD/2004. NOW, THE REVENUE IS IN APPEAL BEFORE US. 2.2 LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMEN T ORDER WHEREAS THE LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A) AND PLACED RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH CO URT RENDERED IN THE I.T.A.NO.3123_3126 /AHD/2008 3 CASE OF CIT VS PANKAJ DYESTUFF INDUSTRIES IN INCOME TAX REFERENCE NO.241 OF 1993 AS PER JUDGMENT DATED 06.07.2005. H E SUBMITTED COPY OF THIS JUDGEMENT OF HONBLE GUJARAT HIGH COURT AND SU BMITTED THAT AS PER THIS JUDGEMENT, WITH REGARD TO THE CAPITAL INTRODUC ED BY THE PARTNERS IN THE FIRM, NO ADDITION CAN BE MADE IN THE HANDS OF THE F IRM ALTHOUGH THE A.O. IS ENTITLED TO PROCEED AGAINST THE PARTNERS IF FOR THE ASSET IN THEIR HANDS THEIR EXPLANATION IS NOT FOUND SATISFACTORY. 2.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FI ND THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDE RED IN THE CASE OF CIT VS PANKAJ DYESTUFF INDUSTRIES (SUPRA) AND RESPE CTFULLY FOLLOWING THE SAME, WE DECLINE TO INTERFERE IN THE ORDER OF LD. C IT(A). 2.4 IN THE RESULT, THIS APPEAL OF THE REVENUE IS DI SMISSED. 3. NOW, WE TAKE UP THE 2 ND APPEAL OF THE REVENUE IN THE CASE OF JAY VARUDI CONSTRUCTION CO. IN I.T.A.NO. 3124/AHD/2008 FOR THE ASSESSMENT YEAR 2004-05. THE GROUNDS RAISED BY THE REVENUE I N THIS YEAR ARE AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING ADDITION OF RS. 16,20,0507- MADE U/S.68 OF THE ACT, BEING UNEXPLAINED CASH CREDITS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 3.1 THE BRIEF FACTS OF THE CASE FOR THIS YEAR ARE T HAT THE A.O. MADE ADDITION U/S 68 OF RS.11.10 LACS IN RESPECT OF CAPI TAL BROUGHT IN BY THE PARTNERS OF THE ASSESSEE FIRM AND IN ADDITION TO TH IS, ONE MORE ADDITION I.T.A.NO.3123_3126 /AHD/2008 4 WAS MADE BY HIM U/S 68 OF RS.5,20,046/- IN RESPECT OF SUNDRY CREDITORS FOR WHICH THE CONFIRMATION FURNISHED BY THE ASSESSE E BEFORE THE A.O. WERE WITHOUT SIGNATURES OF THE CONCERNED CREDITORS. ON BOTH THESE ISSUES, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CI T(A) WHO HAS DELETED BOTH THE ADDITIONS AND NOW, THE REVENUE IS IN APPEA L BEFORE US. 3.2 LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMEN T ORDER WHEREAS THE LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). REGARDING THE DELETION OF THE ADDITION MADE BY THE A.O. OF RS.11.10 LACS IN RESPECT OF THE FRESH CAPITAL BROUGHT IN BY THE P ARTNERS OF THE ASSESSEE FIRM, IT WAS SUBMITTED THAT THIS ISSUE IS COVERED I N FAVOUR OF THE ASSESSEE BY THE UNREPORTED DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS PANKAJ DYESTUFF INDUSTRIES (SUPRA. REGARDING THE 2 ND ADDITION OF RS.5,20,046/- IN RESPECT OF SUNDRY CRED ITORS, IT WAS SUBMITTED THAT IN THE REMAND PROCEEDINGS, ONE OF THE CREDITOR S WAS PRODUCED BEFORE THE A.O. INVOLVING AN AMOUNT OF RS.1,61,880/- AND F OR THE REMAINING CREDITORS, CONFIRMATION WITH THE SIGNATURES OF THE CREDITORS ALONG WITH THEIR PAN DETAILS WERE FURNISHED AND HENCE, THE ORD ER OF LD. CIT(A) SHOULD BE CONFIRMED ON THIS ASPECT ALSO. 3.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. REGARDING THE ADDITION MADE BY THE A.O. FOR RS.11.10 LACS IN RESPECT OF FRESH CAPITAL BROUGHT IN BY THE PARTNERS OF THE ASSESSEE FIRM, WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE J UDGEMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS P ANKAJ DYESTUFF INDUSTRIES (SUPRA). BY RESPECTFULLY FOLLOWING THE SAME, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ASPECT . I.T.A.NO.3123_3126 /AHD/2008 5 3.4 THE SECOND ASPECT HAS BEEN DECIDED BY THE LD. C IT(A) AS PER PARA 4.5 OF HIS ORDER WHICH IS REPRODUCED BELOW: 4.5 I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R. CAREFULLY. I HAVE CONSIDERED THE REMAND REPORT OF THE A.O. AND T HE SUBSEQUENT REPLY OF THE A.R. DURING THE REMAND PROCEEDINGS, TH E APPELLANT PRODUCED THE CREDITOR, PROPRIETOR OF M/S. JANTA CEM ENT COMPANY, FROM WHOM A STATEMENT WAS RECORDED BY THE A.O. AND THE A.O. HAS CONFIRMED THE BALANCE OUTSTANDING AMOUNT OF RS.1,61 ,880/- OUTSTANDING IN THE NAME OF THE SAID CREDITOR AND FO R THE OTHER CREDITORS, THE APPELLANT HAD SUBMITTED CONFIRMATION S WITH THE SIGNATURES OF CREDITORS AND THEIR PAN DETAILS. THE A.R. HAS ALSO CONTENDED THAT THE BOOKS OF ACCOUNTS OF THE FIRM AR E AUDITED AND THE AUDITOR HAS ACCEPTED THE BOOK RESULTS AND HAS N OT GIVEN ANY QUALIFYING REMARK REGARDING BALANCES OF SUNDRY CRED ITORS. THE A.R. HAS SUBMITTED CONFIRMATIONS OF ALL THE PARTIES WHIC H WERE FORWARDED TO THE A.O. AND THE A.O. HAS NOT MADE ANY ADVERSE REMARK IN THE REMAND REPORT, THEREFORE, ADDITION MA DE BY THE A.O. CAN NOT BE SUSTAINED. AS CONFIRMATIONS HAVE BEEN FI LED BY GIVING PAN DETAILS, THE ADDITION IS DELETED. 3.5 FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT OUT OF THE TOTAL ADDITION MADE BY THE A.O. IN RESPECT OF C REDITORS OF RS.5,20,046/-, ONE CREDITOR I.E. M/S. JANTA CEMENT COMPANY WAS PRODUCED BEFORE THE A.O. AND HIS STATEMENT WAS RECO RDED BY THE A.O. AND THE A.O. HAS CONFIRMED THE OUTSTANDING BALANCE AMOU NTING TO RS.1,61,880/- IN THE NAME OF THIS CREDITOR. FOR TH E REMAINING CREDITORS, ASSESSEE HAD FURNISHED CONFIRMATIONS WITH THE SIGNA TURES OF THE CREDITORS AND THEIR PAN DETAILS. IN THE ASSESSMENT ORDER, AD DITION WAS MADE BY THE A.O. SIMPLY ON THIS BASIS THAT THE CONFIRMATION FUR NISHED BY THE ASSESSEE WERE WITHOUT SIGNATURES OF THE CREDITORS. SINCE TH E SIGNED CONFIRMATION ALONG WITH PAN DETAILS ARE DULY FURNISHED IN THE RE MAND PROCEEDINGS, THE BASIS ADOPTED BY THE A.O. FOR MAKING ADDITION IN TH E ASSESSMENT ORDER DOES NOT SURVIVE. THERE IS NO OTHER REASONING GIVE N BY THE A.O. FOR I.T.A.NO.3123_3126 /AHD/2008 6 MAKING THE ADDITION AND HENCE, FOR THIS ADDITION AL SO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). 3.6 IN THE RESULT, THIS APPEAL OF THE REVENUE IS AL SO DISMISSED. 4. NOW, WE TAKE UP THE REVENUES APPEAL IN THE CASE OF VARUDI ENTERPRISES IN I.T.A.NO. 3125/AHD/2008 FOR THE ASSE SSMENT YEAR 2002-03. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DELETING THE ADDITION OF RS.2,40,000/- MADE BY THE A 0 U/S.68 OF THE ACT BEING UNEXPLAINED CASH CREDITS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.5,00,000/- MADE BY THE A 0 U/S.69 OF THE ACT, BEING UNEXPLAINED INVESTMENT IN MACHINERIE S. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EFFECT. 4.1 THE BRIEF FACTS OF THE CASE ARE THAT IT IS NOTE D BY THE A.O. IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS SHOWN UNSECU RED LOANS OF RS.2 LACS, IN THE NAME OF SHRI DALJEET SINGH B VAGHELA R S. 1 LACS AND IN THE NAME OF SHRI SHAILESH P. VAGHELA RS.1 LACS AND THE ASSESSEE COULD NOT SATISFY THE A.O. REGARDING THESE TWO UNSECURED LOAN S AND THE SAME WERE ADDED BY THE A.O. UNDER SECTION 68 OF THE ACT. IN ADDITION TO THIS, THE A.O. ALSO MADE ADDITION OF RS.40,000/- U/S 68 IN RE SPECT OF THE CREDITORS SHRI KISHORE D DODIA BECAUSE AS PER THE CONFIRMATIO N OF THIS CREDITOR, THERE WAS OPENING BALANCE OF RS.81,526/- AS ON 01.0 4.2001 AND CLOSING BALANCE AS ON 31.03.2002 WAS ONLY RS.41,526/- AND A S PER THE SAME, IN THIS YEAR, THE ASSESSEE HAS PAID RS.40,000/- ON 01. 11.2001 VIDE CHEQUE I.T.A.NO.3123_3126 /AHD/2008 7 NO.450433 BUT IN THE ASSESSEES BOOK, SUCH PAYMENT OF RS.40,000/- WAS NOT SHOWN AND A CLOSING BALANCE OF THIS CREDITOR WA S SHOWN AT RS.81,526/- AND ON THIS BASIS, THE A.O. HELD THAT THE ASSESSEE HAS CREATED A BOGUS LIABILITY OF RS.40,000/- AND MADE ADDITION THEREOF. THE A.O. ALSO MADE ADDITION OF RS.5 LACS BY INVOKING THE PROVISIONS OF SECTION 69 OF THE INCOME TAX ACT, 1961 IN RESPECT OF MACHINERY PURCHA SED FOR RS.5 LACS. THE A.O. HAS STATED IN PARA 4 OF THE ASSESSMENT ORD ER THAT COPY OF CASH VOUCHERS SUBMITTED BY THE ASSESSEE APPEARS TO BE BO GUS AND NON GENUINE BECAUSE NO DETAILS WERE FURNISHED FROM THE CASH BOO K. AGAINST ALL THESE ADDITIONS, ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE LD. CIT(A) AND ALL THESE ADDITIONS WERE DELETED BY THE LD. CIT(A) AND NOW, THE REVENUE IS IN APPEAL BEFORE US. 4.2 THE LD. D.R. OF THE REVENUE SUPPORTED THE ASSES SMENT ORDER WHEREAS, THE LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). 4.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDER OF AUTHORITI ES BELOW. REGARDING THE ADDITION OF RS.40,000/- MADE BY THE A.O., THE S AME WAS DELETED BY LD. CIT(A) AS PER PARA 4.6 OF HIS ORDER, WHICH IS R EPRODUCED BELOW: 4.6 I HAVE CONSIDERED THE SUBMISSIONS OF AR CAREFU LLY. FROM THE REMAND REPORT OF THE A.O., IT IS FOUND THAT RS. 40,000/- HAS BEEN PAID BY THE APPELLANT IN THE SUBSEQUENT YEAR I.E. 1 .11.2002 AND BY MISTAKE THE APPELLANT HAD SUBMITTED THE CONFIRMATIO N FOR THE PERIOD F.Y.2002-03 WHICH IS NOT RELEVANT FOR THE YEAR UNDE R CONSIDERATION AND THEREFORE, THE OPENING BALANCE AS ON 01.04.2002 OR THE CLOSING BALANCE AS ON 31.03.2002 IS OF RS.81,526/- WHICH IS FOUND TO BE CORRECT AND THERE IS NO DISCREPANCY, THEREFORE, THE ADDITION OF RS.40,000/- IS HELD TO BE NOT JUSTIFIED AND THE ADD ITION IS DELETED. 4.4 WE FIND THAT THE ADDITION WAS MADE BY THE A.O. ON THIS BASIS THAT THE ASSESSEE HAD MADE PAYMENT OF RS.40,000/- ON 01. 11.2001 BUT IN FACT, THE PAYMENT WAS MADE ON 01.11.2002 AND THIS PARTY H AD WRONGLY GIVEN I.T.A.NO.3123_3126 /AHD/2008 8 CONFIRMATION IN RESPECT OF THE PERIOD FROM 01.04.20 02 TO 31.03.2003 AND HENCE, THE VERY BASIS OF MAKING ADDITION BY THE A.O . WAS DEFECTIVE AND HENCE, ON THIS ASPECT, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). 4.5 THE ADDITION MADE BY THE A.O. OF RS.2 LACS TOWA RDS UNEXPLAINED CASH CREDIT IN THE NAME OF SHRI DALJEET SINGH B VAG HELA AND SHRI SHAILESH P VAGHELA OF RS.1 LACS EACH, WE FIND THAT THIS ADDITION WAS DELETED BY LD. CIT(A) AS PER PARA 5.5 OF HIS ORDER WHICH IS REPRODUCED BELOW: 5.5 I HAVE CONSIDERED THE SUBMISSION OF THE A.R. A ND I HAVE GONE THROUGH THE REMAND REPORT OF THE A.O. THE A.O HAS SUBMITTED THE REMAND REPORT AND HE HAS RECORDED THE STATEMENT S OF SHRI DALJITSINH VAGHELA AND SHRI SHAILESH VAGHELA AND TH EIR IDENTITY PROOFS WERE SUBMITTED AND SOURCE OF INCOME WERE STA TED TO BE FROM AGRICULTURAL INCOME OF THEIR HUFS, THEREFORE, THE S OURCE OF THE DEPOSITS IS TREATED AS EXPLAINED. IT WAS ALSO STATE D, THAT DALJITSINH VAGHELA'S PAN WAS GIVEN AND HE HAS AGRICULTURAL INC OME FOR LAST MORE THAN 12 YEARS AND THE A.R. HAD FILED COPIES OF 7/12 EXTRACTS SHOWING LAND HOLDINGS OF THEIR FAMILY MEMBERS. THE APPELLANT HAD ALSO FILED CERTIFICATE OF TALATI CUM MANTRI INDICAT ING SHRI DALJITSINH VAGHELA HAD LAND OF 1 ACRE AND 29 GUNTHAS AND HE HA S DERIVED APPROXIMATELY AGRICULTURAL INCOME OF RS. 1,40, 0007 - TO 1,65,000/- PER YEAR DURING THE LAST FIVE FINANCIAL YEARS AND S HRI SHAILESH VAGHELA IS THE PERSON ENGAGED IN AGRICULTURAL ACTIV ITIES BESIDES TAKING TUITIONS. IN VIEW OF THE ABOVE, THE SOURCE O F DEPOSITS OF RS.2 LAKHS FROM THESE TWO PERSONS IS TREATED AS EXPLAINE D AND THE ADDITION OF RS.2 LAKHS IS DELETED. 4.6 FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT THE A.O. HAS SUBMITTED REMAND REPORT AND HE HAS RECORDE D THE STATEMENT OF BOTH THESE LOAN CREDITORS AND THEY HAVE FURNISHED T HEIR IDENTITY, AND PROOF OF SOURCE OF INCOME ETC. UNDER THESE FACTS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ASPECT ALSO AND ACCORDINGLY GROUND NO.1 OF THE REVENUE IS REJECTED. I.T.A.NO.3123_3126 /AHD/2008 9 4.7 REGARDING GERUND NO.2 OF THE REVENUE, WE FIND T HAT THIS ADDITION OF RS.5 LACS WAS DELETED BY LD. CIT(A) AS PER PARA 6.6 OF HIS ORDER WHICH IS REPRODUCED BELOW: 6.6 I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R. CAREFULLY. I HAVE ALSO CONSIDERED THE REMAND REPORT OF THE A.O. AND THE REPLY OF THE A.R. I FIND THAT THE MACHINERIES HAVE BEEN PURC HASED OUT OF THE CASH BALANCE IN CASH BOOK AND FROM THE AGRICULTURAL INCOME OF THE PARTNERS AND MILK INCOME AS CONFIRMED BY THE A.O. T HE OBSERVATION OF THE A.O. THAT OUT OF 23 PERSONS FROM WHOM MACHINERIES WERE PURCHASED ONLY FOUR PERSONS WERE P RODUCED AND THE BALANCE PERSONS WERE NOT PRODUCED. HOWEVER IN M Y VIEW THE MATTER SHOULD BE APPRECIATED IN THE LIGHT OF THE FA CT THAT IT IS A VERY OLD MATTER AND THE APPELLANT HAD OFFERED TO PRODUCE ALL THE PERSONS AT THE TIME OF ASSESSMENT PROCEEDINGS. AS THE MACHI NERIES ARE EXISTING AND THE SOURCE HAS BEEN EXPLAINED, NO ADVE RSE CONCLUSION CAN BE DRAWN. THUS, THE SOURCE OF PURCHASE OF MACHI NERY IS EXPLAINED, THEREFORE, THE ADDITION OF RS.5 LAKHS IS DELETED. 4.8 WE FIND THAT ASSESSMENT YEAR INVOLVED IS THE AS SESSMENT YEAR 2002- 03 AND EVEN IN FINANCIAL YEAR 2007-08, THE ASSESSEE HAS PRODUCED FOUR PERSONS OUT OF THREE PERSONS FROM WHOM MACHINERY WA S PURCHASED. IT IS ALSO NOTED BY LD. CIT(A) THAT IN THE COURSE OF ASSE SSMENT PROCEEDINGS, THE ASSESSEE HAD OFFERED TO PRODUCE ALL THE PERSONS BUT THE A.O. DID NOT ASK FOR IT AND SINCE THE MACHINERY IS EXISTING AND THE SOURCES ARE EXPLAINED, NO ADDITION IS CALLED FOR. CONSIDERING THE FACTS OF THE PRESENT CASE, WE FEEL THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. 4.9 IN THE RESULT, THIS APPEAL OF THE REVENUE IS AL SO DISMISSED. 5. NOW, WE TAKE UP THE REVENUES APPEAL IN THE CASE OF ITO VS VARUDI ENTERPRISES IN I.T.A.NO. 3126/AHD/2008 FOR THE ASSE SSMENT YEAR 2003-04. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: I.T.A.NO.3123_3126 /AHD/2008 10 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DIRECTING TO DELETE THE ADDITION OF RS.6,33,6407-, IN AGGREGATE, MADE BY THE A 0 U/S.68 OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EFFECT. 5.1 IT WAS ADMITTED BY BOTH THE SIDES THAT THIS ONL Y ISSUE INVOLVED IS THE ADDITION MADE BY THE A.O. OF RS.6,33,640/- IN RESPE CT OF FRESH CAPITAL INTRODUCED BY THE PARTNERS. THIS ADDITION HAS BEE N DELETED BY LD. CIT(A) AS PER PARA 8 OF HIS ORDER BY FOLLOWING THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS P ANKAJ DYESTUFF INDUSTRIES (SUPRA). THE RELEVANT PORTION OF THE OR DER OF CIT(A) IS REPRODUCED BELOW: 8. THE 6 TH GROUND OF APPEAL IS A GROUND ALTERNATIVE TO THE GR OUNDS NO.2 TO 5, SAYING THAT THE A.O. OUGHT NOT TO HAVE M ADE ADDITIONS OF RS.6,33,6407- IN THE HANDS OF THE APPELLANT FIRM IN STEAD OF CONSIDERING THE ABOVE CREDITS IN THE HANDS OF THE R ESPECTIVE PARTNERS PARTICULARLY WHEN THE FIRM CAME INTO EXISTENCE ONLY W.E.F. 11.11.2002 AND THERE WAS NO BUSINESS TRANSACTION DU RING A.Y.2003-04. I HAVE CONSIDERED THE SAID GROUND. THE A.R. HAS RELIED UPON THE UNREPORTED DECISION OF GUJARAT HIGH COURT IN PANKAJ DYE STUFFS INDUSTRIES AND DECISION OF ITAT, AHMEDABAD BENCH IN THE CASE OF SHREE CAPITAL GUEST HOUSE VS. ITO DATED 24.2.2006 IN ITA NO.2102/AHD/2004 IN WHICH IT HAS B EEN ' HELD THAT WHEN THE PARTNERS HAVE OWNED UP HAVING INTRODU CED CAPITAL IN THE FIRM, NO ADDITION CAN BE MADE IN THE HANDS OF T HE FIRM AS UNEXPLAINED CASH CREDIT. THE CASH CREDITS SHOULD BE CONSIDERED IN THE HANDS OF PARTNERS ONLY. EVEN ON THIS ALTERNATIV E GROUND, THE ADDITION OF RS.6,33,640/- NEEDS TO BE DELETED. HOWE VER THE ADDITIONS HAVE BEEN DELETED AS ABOVE IN PARAS 4.6, 5.3 AND 6.3. I.T.A.NO.3123_3126 /AHD/2008 11 5.2 SINCE THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS PANKAJ DYESTUFF INDUSTRIES (SUPRA), WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). 5.3 IN THE RESULT, THIS APPEAL OF THE REVENUE IS AL SO DISMISSED. 6. IN THE COMBINED RESULT, ALL THE FOUR APPEALS OF THE REVENUE ARE DISMISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (G.C. GUPTA) (A. K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD; SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 11.11.11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14/11/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 16/11 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 18/11 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 18/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 18/11/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..