M/s. Sarker Marine Service, Kolkata V. ITO, Ward - 28(3), Kolkata, Kolkata

ITA 329/KOL/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7235 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 23-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MALAKAR
• Keywords: Unexplained cash credit
• Section: 143(3); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! . '# . ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SHR I C. D. RAO, AM] $ $ $ $ / I.T.A NO. 329/KOL/2011 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2005-06 M/S. SARKER MARINE SERVICE VS. INCOME-TAX OFFICE R, WD-28(3), KOLKATA (PAN-ABFFS 2644 J) (*+ /APPELLANT ) (,-*+/ RESPONDENT ) FOR THE APPELLANT: SHRI SOMNATH GHOSH FOR THE RESPONDENT: SHRI S. K. MALAKAR . / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XIV, KOLKATA IN APPEAL NO.474/CIT(A)-XIV/07-08 DATED 17.09.2010. ASSESSMEN T WAS FRAMED BY ITO, WARD-28(3), KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2005-06 VIDE HIS ORDER DATED 28.12. 2007. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) CONFIRMING ADDITION OF UNEXPLAINED CREDITS ADDED BY ASSESSING OFFICER ON ACCOUNT OF INTRODUCTION OF CAPITAL IN CAPITAL ACCOUNT OF PARTNERS OF ASSESSEE FIRM. FOR THIS, ASSESSEE HAS RAISED FOLLOWING TWO MODIFIED GROUNDS: 1.FOR THAT THE LD. CIT(A)-XIV, KOLKATA FAILED TO A PPRECIATE THAT NONE OF THE CONDITIONS PRECEDENT EXISTED AND/OR HAVE BEEN COMPLIED WITH AN D/OR FULFILLED FOR THE LD. ITO, WARD- 28(3), KOLKATA FOR INVOKING THE PROVISIONS OF S. 68 OF THE INCOME TAX ACT, 1961 IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE AND THE SPECI OUS ACTION ON THAT BEHALF IS ALTOGETHER ARBITRARY, UNREASONABLE AND PERVERSE. 2. FOR THAT THE LD. CIT(A)-XIV, KOLKATA ERRED IN UP HOLDING THE ADDITION MADE U/S. 68 OF THE INCOME TAX ACT, 1961 IN THE SUM OF RS.6,20,000/ - ON ACCOUNT OF ALLEGED UNEXPLAINED CASH CREDITS IN THE HANDS OF THE APPELLANT BY THE L D. INCOME TAX OFFICER, WARD 28(3), KOLKATA WITHOUT CONSIDERING THAT THE SAID AMOUNT HA S BEEN INTRODUCED BY THE PARTNER SHRI NARAYAN CHANDRA SARKAR IN THE FIRM AS HIS CAPI TAL AND THEREFORE HIS PURPORTED FINDING ON THAT BEHALF IS WHOLLY CAPRICIOUS, UNWARR ANTED AND ERRONEOUS. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS OF THE CASE ARE THAT DURING FINANCIAL Y EAR 2004-05 RELEVANT TO ASSESSMENT YEAR 2005- 06, ASSESSING OFFICER NOTICED THAT ASSESSEE FIRMS PARTNER SHRI N. C. SARKAR HAS INTRODUCED CAPITAL OF RS.6.20 LAC FOR WHICH IT COULD NOT EXPLA IN THE SOURCES AND ADDED THIS AMOUNT IN THE 2 ITA 329/K/2011 M/S.SARKER MARINE SERVICE A.Y.05-0 6 HANDS OF FIRM. AGGRIEVED, ASSESSEE PREFERRED APPEA L BEFORE CIT(A). THE CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY HO LDING AS UNDER: I HAVE CONSIDERED THE ABOVE SUBMISSION OF THE A/R. IT IS SEEN THAT THE SOURCE OF THIS AMOUNT HAS BEEN CLAIMED AS RETIREMENT BENEFITS RECE IVED AT THE TIME OF RETIREMENT, PAST SAVINGS AND SALE OF IMMOVABLE PROPERTY. FROM THE SU PPORTING DOCUMENTS SUBMITTED I FIND THAT SHRI N. C. SARKAR RETIRED IN 1993 AND THE RETI REMENT BENEFITS WERE RECEIVED AT THAT TIME WHICH WAS ABOUT 11 YEARS BEFORE THE INTRODUCTI ON OF ABOVE CASH OF RS. 6,20,000/-. SIMILARLY, THE HOUSE PROPERTY WAS SOLD IN 2001 AND THE PAYMENT FOR THE SAME WAS RECEIVED BY DRAFT AND CHEQUE IN JANUARY/FEBRUARY 20 01. THIS RECEIPT WAS ALSO ABOUT THREE AND HALF YEARS PRIOR TO THE CASH INTRODUCTION OF RS.6,20,000/- IN THE ASSESSEE FIRM. FROM THIS IT CAN BE SEEN THAT THE ASSESSEE HAS FAIL ED TO EXPLAIN THE IMMEDIATE SOURCE OF THIS CASH. IT IS AN ADMITTED FACT THAT FOR ASSESSME NT YEAR 2005-06 AND FEW EARLIER ASSESSMENT YEARS SHRI N C SARKAR HAS NOT FILED HIS PERSONAL RETURN. THEREFORE, THE SO CALLED CAPITAL INTRODUCTION IS NOT GETTING VERIFIED WITH THE I T RECORDS ALSO THE A/R OF THE ASSESSEE PRODUCED A BANK ACCOUNT OF SHRI N C SARKAR IN BANK OF INDIA, SOUTH SUBURBS (BEHALA BRANCH) FOR FINANCIAL YEAR 2004-05. IT IS S EEN THAT CASH OF ABOUT RS.4,07,000/- HAS BEEN WITHDRAWN FROM THIS ACCOUNT DURING FINANCI AL YEAR 2004-05. HOWEVER, DURING THIS PERIOD CASH HAS BEEN DEPOSITED ALSO IN THIS AC COUNT. IN FACT, JUST AFTER THE END OF FINANCIAL YEAR 2004-05 ON 28.04.2005 CASH OF RS. 8, 48,000/- IS DEPOSITED IN THIS ACCOUNT. FROM THIS IT CAN BE SEEN THAT IT IS NOT CLEAR IF TH E CASH WITHDRAWN FROM THIS BANK ACCOUNT WAS DEPOSITED IN THE ASSESSEE FIRM OR WAS RE-DEPOSI TED IN THE SAME BANK ACCOUNT OF SHRI N C SARKAR. IN VIEW OF THE ABOVE DISCUSSION I AM O F THE OPINION THAT THE SOURCE OF THE ABOVE AMOUNT OF RS. 6,20,000/- IS NOT EXPLAINED. TH EREFORE, I CONFIRM THIS ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 4) WE FIND THAT THIS ISSUE OF INTRODUCTION OF CAPIT AL BY PARTNERS IS COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS . PANKAJ DYESTUFF INDUSTRIES IN IT REFERENCE NO.241 OF 1993 WHEREIN THE HONBLE HIGH C OURT HAS HELD AS UNDER: 13, APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF THE PRESENT CASE, IT IS APPARENT THAT THE ASSESSEE HAD FURNISHED THE DETAILS WHICH WOULD DISC HARGE 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 INCOME TAX OFFICER HAS NOT DISPUTED THAT THE CREDITS IN TH E ACCOUNTS OF THE PARTNERS WERE NOT DEPOSITS FROM THE PARTNERS. MOREOVER, IT IS AN ADMITTED POSI TION THAT THIS WAS THE SECOND YEAR OF THE FIRM, AND THAT IT WAS RUNNING IN LOSS. IT IS TRUE THAT TH E INCOME TAX OFFICER DID NOT ACCEPT THE EXPLANATION GIVEN ON BEHALF OF THE ASSESSEE IN RESP ECT OF THE NEW DEPOSITS OR CASH 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 REPR ESENTED INCOME OF THE ASSESSEE FIRM. AS HELD BY THE ALLAHABAD HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX, ALLAHABAD V. JAISWAL MOTOR FINANCE (SUPRA), IN THE ABSENCE OF ANY MATERI AL 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, THE INCOME TAX OFFICER IS ENTITLED TO AND MAY PROC EED AGAINST THE PARTNERS AND ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATION IS NOT FOUND S ATISFACTORY. 14. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE, BOTH THE DEPUTY CIT (APPEALS) AND THE TRIBUNAL HAVE FOUND THAT THE ASSESSEE HAD DISCHARGE D THE PRIMARY ONUS WHICH WAS ON IT BY OFFERING EXPLANATION, WHICH HAS NOT BEEN FOUND TO B E INCORRECT OR FALSE IN ANY MANNER. THE INTEREST OF THE REVENUE IS ALSO SAFEGUARDED AS THE INCOME TAX OFFICER HAS BEEN GIVEN THE LIBERTY TO CONSIDER THE SAID CREDITS IN THE HANDS OF THE PA RTNERS IF HE IS NOT SATISFIED WITH THE SOURCES OF INVESTMENT OF CASH CREDITS IN THE ACCOUNTS OF THE P ARTNERS. 3 ITA 329/K/2011 M/S.SARKER MARINE SERVICE A.Y.05-0 6 WE FURTHER FIND THAT THE ISSUE IS ALSO COVERED BY T HE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. JAISWAL MOTOR FINANCE (1983) 144 ITR 358 (ALL), WHEREIN IT HAS BEEN HELD THAT IF THERE ARE CASH CREDIT ENTRIES IN THE B OOKS OF A FIRM, IN WHICH THE ACCOUNTS OF THE INDIVIDUAL PARTNERS EXIST, AND IT IS FOUND AS A FAC T THAT THE CASH WAS RECEIVED 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 HANDS OF THE FIRM. THIS IS SO BECAUSE IN SUCH A CASE THE ONUS PLACED ON THE ASSESSEE FIRM BY SECTION 68 SHOULD BE DEEMED TO HAVE BEEN DISCHARGED BY IT. WHERE CERTAIN DEPOSITS ARE FOUND IN THE BOOKS OF TH E FIRM IN THE NAMES OF ITS PARTNERS AND SUCH DEPOSITS ARE TREATED AS INCOME OF THE RESPECTIVE PA RTNERS, IT IS NOT OPEN TO TREAT AGAIN SUCH DEPOSITS AS INCOME OF THE FIRM. IN VIEW OF THE ABOVE SETTLED LEGAL POSITION, WE ARE OF THE FIRM VIEW THAT CAPITAL INTRODUCED BY THE PARTNER IN THE ABSENCE OF FINDING THAT THESE ARE INTRODUCED OUT OF PROFIT OF FIRM, ADDITION CANNOT BE MADE IN THE HANDS OF FIRM. ACCORDINGLY, WE DELETE THE ADDITION AND REVERSE THE ORDERS OF LOWER AUTHORITIES. APPEAL OF THE ASSESSEE IS ALLOWED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . 6. ORDER PRONOUNCED IN OPEN COURT ON 02.09.2011 SD/- SD/- . '# '#'# '# . ! , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( #! #! #! #!) )) ) DATED 2 ND DAY OF SEPTEMBER, 2011 /0 %12 3 JD.(SR.P.S.) . 4 ,5 6 5'7- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT M/S. SARKER MARINE SERVICE, 77/25, BECH ARAM CHATTERJEE ROAD, KOLKATA-34. 2 ,-*+ / RESPONDENT, ITO, WARD-28(3), KOLKATA 3 . .% ( )/ THE CIT(A), KOLKATA 4. .% / CIT, KOLKATA 5 . >? ,% / DR, KOLKATA BENCHES, KOLKATA -5 ,/ TRUE COPY, .%@/ BY ORDER, 2 /ASSTT. REGISTRAR .