M/s. Shakti Diamonds, Surat V. The Income tax Officer,Ward-9(1), Surat

ITA 3204/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6049 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 30-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Section: 143(3); 68

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI MUKUL KR. SHRAWAT, JM AND A. K. GAROD IA, AM M/S SHAKTI DIAMOND, 16, BHAVANI CIRCLE, A.K. ROAD, SURAT. VS. INCOME-TAX OFFICER, WARD 9(4), SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- NONE (WRITTEN SUBMISSION) RESPONDENT BY:- SHRI S. K. MEENA, SR.DR O R D E R PER MUKUL KR. SHRAWAT, JUDICIAL MEMBER . THIS APPEAL HAS BEEN FILED AT THE BEHEST OF THE AS SESSEE ARSING FROM THE ORDER OF THE LD. CIT(A)-V, SURAT DATED 30.9.200 9, WHEREIN FOLLOWING GROUND HAS BEEN RAISED :- (1) THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON F ACTS IN CONFIRMING THE ADDITION OF RS.1,50,000/- MADE BY AO U/S 68 OF THE ACT ON ACCOUNT OF CAPITAL INTRODUCED BY PARTNER S IN THE FIRM WITHOUT APPRECIATING THE PROVISIONS OF LAW THAT SEC .68 IS NOT APPLICABLE TO CAPITAL INTRODUCED BY PARTNERS. THE A DDITION OF RS.1,50,000/- SHOULD BE DELETED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DIAMOND JOB WORK ON COMM ISSION BASIS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 16.10.2006 D ECLARING TOTAL INCOME ITA NO.3204/AHD/2009 ASST. YEAR 2006-07 ITA NO.3204/AHD/2009 ASST. YEAR 2006-07 2 OF RS.3,30,280/- WHICH WAS PROCESSED U/S 143(1) OF THE IT ACT. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NO TICE U/S 143(2) WAS ISSUED ON 25.7.2007 WHICH WAS SERVED UPON THE ASSES SEE ON 19.08.2007. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 30.12.20 08. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THA T TWO PARTNERS NAMELY SHRI BHARATBHAI SAMJIBHAI AND SHRI YOGESHBHA I LABHUBHAI HAD INTRODUCED CAPITAL OF RS.90,000/- AND RS.60,000/- R ESPECTIVELY DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS REQUIRED TO PRODUCE PROOF AS REGARDS THE SOURCE OF CAPITAL INTRODUCED BUT IT COU LD NOT PRODUCE THE SAME. IN RESPONSE TO SHOW CAUSE NOTICE THE ASSESSEE FILED ITS REPLY VIDE LETTER DATED 17.12.2008 MENTIONING THE COPY OF I.T. RETUR N ACKNOWLEDGEMENT OF SHRI BHARATBHAI SAMJIBHAI JALODARA IS ENCLOSED A FRESH CAPITAL OF RS.90,000/- ON EXAMINATION OF THE REPLY THE AO OBS ERVED THAT THE SOURCE OF INCOME OF THE PARTNERS STILL REMAINED UNE XPLAINED AS NO CONFIRMATION OF PARTNERS IS RECEIVED AND THE COPY O F RETURN OF INCOME OF SHRI YOGESHBHAI LABHUBHAI WAS NOT PRODUCED. ACCORDI NG TO HIM THE CAPITAL WAS INTRODUCED FROM OTHER SOURCE OF INCOME OF THE FIRM. ACCORDINGLY, RELYING ON THE DECISION IN THE CASE OF SUMATI DAYAL VS. CIT 214 ITR 801 (SC) HE MADE THE ADDITION OF RS.1,50,00 0/-. ITA NO.3204/AHD/2009 ASST. YEAR 2006-07 3 3. IN APPEAL, THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE LD. AR AND THE CONTENTION OF THE AO, ON THE BASIS O F REASONING AS GIVEN BY THE AO CONFIRMED THE ADDITION WITH THE FOLLOWING OBSERVATION:- 6. I HAVE GONE THROUGH BOTH THE POSITIONS CAREFULL Y. FROM THE COPY OF COMPUTATION OF INCOME, FILED BY THE A.R. IT CANNOT BE CONCLUDED THAT THE PARTNERS HAVE INTRODUCED CAPITAL WITH THE FIRM. THE FACT REMAINS THAT THE REQUIRED DETAILS, INCLUDING THE CONFIRMATION FROM P ARTNERS WERE NOT PRODUCED BEFORE THE AO FOR WHICH THE ADDITION HAS B EEN MADE. THAT THE PARTNERS HAVE LEFT CITY BECAUSE OF RECESSION AND WE RE NOT AVAILABLE FOR FURNISHING OF DETAILS IS NOT A CREDIBLE EXPLANATION . IN VIEW OF THIS ADDITION MADE BY THE AO IS CONFIRMED AND APPEAL IS DISMISSED . AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE ASSESSE E IS IN APPEAL BEFORE US. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER , AFTER HEARING THE LD. DR, WE ARE OF THE OPINION THAT THE ISSUE BE FORE US IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE G UJARAT HIGH COURT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES IN I.T. REF. NO.241/1993 DECIDED ON 6.7.2005 WHEREIN HONBLE GUJARAT HIGH COURT OBSE RVED IN PARA-13 AS UNDER :- 13. APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF THE PRESENT CASE, IT IS APPARENT THAT THE ASSESSEE HAD FURNISHE D THE DETAILS WHICH WOULD DISCHARGE THE ONUS WHICH LAY ON THE ASS ESSEE. IT IS NOT THE CASE OF THE REVENUE THAT THE PARTNERS OF THE AS SESSEE FIRM ARE FICTITIOUS. THE INCOME TAX OFFICER HAS NOT DISPUTED THAT THE CREDITS IN THE ACCOUNTS OF THE PARTNERS WERE NOT DEPOSITS F ROM 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 IS TRUE THAT THE INCOME TAX OFFICER DID NOT ACCEPT THE EXPLANATION G IVEN ON BEHALF OF THE ASSESSEE IN RESPECT OF THE NEW DEPOSITS OR C ASH CREDITS IN THE ACCOUNTS OF THE PARTNERS. THE MERE NON-ACCEPTANCE O F THAT EXPLANATION DOES NOT, HOWEVER, PROVIDE MATERIAL FOR FINDING THAT THE SAID SUM REPRESENTED INCOME OF THE ASSESSEE FIR M,. AS HELD BY THE ALLAHABAD HIGH COURT IN THE CASE OF COMMISSIONE R OF INCOME ITA NO.3204/AHD/2009 ASST. YEAR 2006-07 4 TAX ALLAHABAD VS. JAISWAL MOTOR FINANCE (SUPRA), IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THERE WERE PROFITS OF THE FIRM, THE AMOUNT 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 THEIR ACCOUNTS ARE THEIR OWN, T HE INCOME TAX OFFICER IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AND ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATIO N IS NOT FOUND SATISFACTORY. ACCORDINGLY, WE ARE OF THE VIEW THAT WHEN THE PART NERS HAVE ADMITTED TO HAVE INTRODUCED THE CAPITAL, THERE IS NO REASON TO MAKE THE ADDITION. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HO NBLE GUJARAT HIGH COURT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES IN I.T. REF.NO.241/1993 DECIDED ON 6.7.2005 THIS ISSUE GOES IN FAVOUR OF TH E ASSESSEE. HOWEVER THE A.O. IS AT LIBERTY TO TAKE APPROPRIATE ACTION I N THE HANDS OF THE PARTNERS, IF DEEM FIT, AS PER LAW. WITH THESE DIREC TIONS THE GROUND IS ALLOWED. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 25 TH JULY, 2011 SD/- SD/- (A. K. GARODIA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 25/07/2011 MAHATA/- ITA NO.3204/AHD/2009 ASST. YEAR 2006-07 5 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, //TRUE COPY// DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 20/7/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 20/7/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 25.7.11. 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 25.7.11. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..