M/s. Durga Industries, UDHAMPUR V. The Income-tax Officer, UDHAMPUR

ITA 354/ASR/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73262 (ITAT-AMRITSAR)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Assessee Lawyers: P N ARORA
• Keywords: Unexplained cash credit; Gift; Income from undisclosed sources; Additional evidence; Question of law; Corroborative evidences; Onus to prove
• Section: 143(3); 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.354(ASR)/2013 ASSESSMENT YEAR:2008-09 PAN :AAMFM3368D M/S. MAA DURGA INDUSTRIES, VS. INCOME TAX OFFICER, 168/169, IID CENTRE BATTAL UDHAMPUR, BALLIAN, H.O. MOHALLA SUNDER, (J&K). CHANDAUSI, U.P. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. P.N.ARORA, ADVOCATE RESPONDENT BY:SH.AMRIK CHAND, DR DATE OF HEARING:10/02/2014 DATE OF PRONOUNCEMENT:24/02/2014 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JAMMU DATED 22.03.2013 FOR THE ASSESSMENT YEAR 200 8-09. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN LAW, THE ORDERS PASSED BY THE AO AS WELL AS BY THE LD. CIT(A) J & K IS ILLEGAL, INVALI D AND VOID AB- INITO AND BAD IN LAW AND IS LIABLE TO BE CANCELLED. ITA NO.354(ASR)/2013 2 2. THE APPELLANT DENIES IS LIABILITY TO TAX AS DETE RMINED AND COMPUTED AND THE MANNER IN WHICH IT HAS BEEN SO DET ERMINED OR COMPUTED. 3. THAT THE LD. CIT(A) HAS GROSSLY ERRED ON THE FAC TS AND IN LAW THAT THE ASSESSMENT U/S 143(3) IS WITHOUT JURISDICT ION. 4. THAT THE ORDER OF THE CIT(A) IS NON-SPEAKING AND VARIOUS GROUNDS AND SUBMISSIONS MADE HAVE NOT BEEN ADJUDICA TED UPON. 5. THAT CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPH OLDING THE ACTION OF THE AO IN MAKING THE IMPUGNED ADDITION O F RS.22,00,000/- ON ACCOUNT OF UNEXPLAINED CREDITS IN PARTNERS CAPITAL ACCOUNT. 6. THAT THE APPELLANT PRAYS FOR LEAVE TO ADD, ALTER AMEND AND/OR VARY THE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING OF THE APPEAL. 7. THAT THE APPELLANT CRAVES LEAVE AND SANCTION TO FILE ADDITIONAL EVIDENCE, IF SO REQUIRED FOR PROPER PROSECUTION OF THE CASE, BASED ON FACTS AND CIRCUMSTANCES, WHICH HAS NOT BEE N OR COULD NOT BE ADDUCED OR FILED BEFORE THE LOWER AUTHORITIE S EITHER BECAUSE PROPER AND SUFFICIENT OPPORTUNITY/TIME WAS NOT PROVIDED OR BECAUSE IT WAS NOT SOLICITED OR ITS NEE D NOT PROVIDED OR BECAUSE ITS NEED WAS APPRECIATED. 2. THE BRIEF FACTS OF THE CASE AS PER AOS ORDER A RE REPRODUCED AS UNDER FOR THE SAKE OF CONVENIENCE: DURING THE RELEVANT PREVIOUS YEAR THE TWO PARTNERS OF THE FIRM NAMELY, SH. RAJESH GUPTA AND SH. NAVEEN AGGARWAL HA VE ALSO INTRODUCED FRESH CAPITAL OF RS.2,000,000 AND RS.20 ,00,000/- RESPECTIVELY. THE ASSESSEE WAS REQUESTED VIDE THIS OFFICE DETAILED QUESTIONNAIRE DATED 26.05.2010 TO EXPLAIN THE SOUR CE OF CAPITAL INTRODUCED ALONG WITH GENUINE SUPPORTING EVIDENCE. THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE CAPITAL INTR ODUCED DESPITE SUFFICIENT OPPORTUNITIES OF BEING HEARD ALLOWED TO HIM. IN THE CIRCUMSTANCES OF THE CASE, I AM LEFT WITH NO ALTERN ATIVE BUT TO ADD THE ITA NO.354(ASR)/2013 3 SAME TO THE ASSESSEES TAXABLE INCOME AND TREAT THE SAME AS HIS INCOME FROM UNDISCLOSED SOURCES. PENALTY PROCEEDIN GS U/S 271(1)(C) FOR CONCEALMENT OF INCOME ARE ALSO INITIATED. 3. THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO AND D ID NOT ADMIT THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE AND T HE RELEVANT FINDINGS OF THE LD. CIT(A) ARE REPRODUCED AS UNDER FOR THE SAKE OF CONVENIENCE: REGARDING GROUND NO. 5 & 6 RELATING TO THE FACT THA T THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE IN NOT PRESENTING HIS CLAIM WAS BECAUSE THE FACTORY WAS CLOSED AND NO RESPONSIBLE PERSON AVAILABLE OVER THERE. HE PLEADED THAT ADDITION TO CAPITAL FOR RS.22 LAC IN PARTNERS CAPIT AL ACCOUNT MAY BE ACCEPTED. IT WAS STATED THAT ADDITIONS HAVE BEEN MADE FROM THE WITHDRAWALS MADE BY THE PARTNERS FROM THE SAME FIRM. THE A/R OF THE APPELLANT PLEADED FOR ADMITTANCE OF ADDITIONAL EVIDENCE. I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLANT, R EMAND REPORT BY THE AO AND FIND THAT THE AO HAS PUT EVERY EFFORT TO SENT THE NOTICES AT THE CORRECT ADDRESS. THIS HAS B EEN ACKNOWLEDGED BY THE AR OF THE APPELLANT IN HIS SUBM ISSION. THE APPELLANT ARGUED THAT FACTORY WAS CLOSED AND NO RES PONSIBLE PERSON WAS AVAILABLE WHICH LED TO NON REPRESENTATIO N OF THE CASE. FURTHER, THIS HAS CAUSED NON FURNISHING OF SO URCE OF ADDITION TO THE PARTNERS CAPITAL ACCOUNT. I FIND T HIS TO BE A LAME EXCUSE. IF THE FACTORY WAS CLOSED THE APPELLAN T WAS DUTY BOUND TO INFORM THE CORRESPONDENCE ADDRESS TO THE D EPARTMENT WHICH WAS NOT DONE BY HIM. NOW HE IS TRYING TO TAKE BENEFIT OF HIS OWN DEFAULT. THEREFORE, AN Y ADDITIONAL EVIDENC E IS NOT REQUIRED TO BE ENTERTAINED IN VIEW OF RULE 46A. OT HERWISE, ALSO THE ARGUMENTS THAT ADDITION TO PARTNERS CAPITAL ACC OUNT FOR RS.22 LAC WAS OUT OF WITHDRAWAL FROM THE SAME FIRM DESERVE NO CONSIDERATION UNLESS THE PURPOSE OF WITHDRAWAL AND REDEPOSIT IS STATED IN CLEAR TERMS . IN VIEW OF ABOVE THIS GROUN D OF APPELLANT IS REJECTED AND AN ADDITION OF RS.22 LAC IS CONFIRM ED. ITA NO.354(ASR)/2013 4 4. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, ADVOCATE ARGUED AND SUBMITTED SH. RAJESH GUPTA AND SH. NAVEEN AGGA RWAL INTRODUCED FRESH CAPITAL OF RS.2,00,000/- AND RS.20,00,000/- RESPECT IVELY IN THEIR CAPITAL ACCOUNTS. HE FURTHER SUBMITTED THAT IT IS RELEVANT TO POINT OUT THAT THE CASE WAS DECIDED BY THE AO EX-PARTE U/S 144 OF THE ACT. IT IS FURTHER SUBMITTED THAT THE WRITTEN SUBMISSIONS WERE SUBMITTED BEFORE THE L D. CIT(A) WHICH ARE AVAILABLE AT PAGE NOS. 4 TO 14 OF THE PAPER BOO K. IT WAS STATED THAT THE AO DID NOT APPRECIATE THAT THIS IS A CASE OF PARTNE RSHIP FIRM WHICH IS ALTOGETHER A SEPARATE & DISTINCT ENTITY. THE LD. CO UNSEL SUBMITTED THAT COMPLETE COPIES OF ACCOUNTS OF PARTNERS SHOWING THE INTRODUCTION OF CAPITAL IN THEIR RESPECTIVE ACCOUNTS WERE FURNISHED ALONG W ITH THE RETURN OF INCOME. THE AO SHOULD HAVE CONSIDERED THE SAME WHILE MAKING THE ASSESSMENT. IT MAY BE FURTHER SUBMITTED THAT THE POWER TO MAKE ASS ESSMENT ON THE BASIS OF BEST JUDGMENT IS NOT AN ARBITRARY POWER. IT IS AN A SSESSMENT ON THE BASIS OF BEST JUDGMENT AND IN OTHER WORDS THE ASSESSMENT MUS T BE BASED ON SOME RELEVANT MATERIAL. IT IS NOT A POWER THAT CAN BE EX ERCISED UNDER SWEET WILL AND UNDER THE PLEASURE OF THE CONCERNED AUTHORITIES . IN THIS CASE, THE AMOUNT IN QUESTION IS INTRODUCTION OF CAPITAL BY THE PARTN ERS IN THE BOOKS OF FIRM WHICH HAS DULY BEEN DISCLOSED BY THE ASSESSEE-FIRM IN THE RETURN AS WELL AS IN THE AUDIT REPORT FILED WITH THE DEPARTMENT. THE PAR TNERS ARE ALSO BEING ITA NO.354(ASR)/2013 5 SEPARATELY ASSESSED TO TAX. AS SUCH THE ADDITION MA DE BY THE AO IS NOT AT ALL CALLED FOR IN THE CASE OF THE FIRM AND THE SAME MAY BE DELETED. THE LD. COUNSEL SUBMITTED THAT THE LAW IS VERY CLEAR AND SE TTLED THAT THE INTRODUCTION OF CAPITAL BY THE PARTNERS IN FIRM CANNOT BE TREATE D AS INCOME OF THE PARTNERSHIP FIRM AND THAT HAS TO BE ASSESSED SEPARA TELY IN THE HANDS OF THE PARTNERS, IF AT ALL. THUS, IN VIEW OF THESE CIRCUM STANCES, NO ADDITION CAN BE MADE IN THE HANDS OF THE FIRM ON ACCOUNT OF DEPOSIT S IN THE CASES OF THE PARTNERS. THUS, WHERE A CASH CREDIT APPEARS IN THE BOOKS OF ACCOUNT OF THE FIRM ALTHOUGH IN THE NAME OF A PARTNER OF THE FIRM, SEC. 68 CANNOT BE MADE APPLICABLE SO AS TO TREAT SUCH CREDIT AS INCOME OF THE ASSESSEE FIRM. THIS IS SO BECAUSE THE BOOKS OF ACCOUNT OF A FIRM CANNOT BE TREATED AS THOSE OF THE INDIVIDUAL PARTNER. THIS VIEW ALSO FINDS SUPPORT FR OM THE FOLLOWING JUDGMENTS: 1) ITAT, AMRITSAR BENCH IN ITA NO.102(ASR)/1998 DAT ED 30.11.2004 IN THE CASE OF M/S. K.C. COTTON INDUSTRI ES, MANSA. 2. ITAT, AMRITSAR BENCH IN ITA NO.715(ASR)/1993 ORD ER DT. 27.12.2000 IN THE CASE OF ITO WARD-2, MANSA VS. MOH INDRA KOOL DRINKS, BATHINDA. 3. ITAT, AMRITSAR BENCH IN ITA NO.110(ASR)/2002 ORD ER DT. 19.10.2004 IN THE CASE OF M/S. SWASTIK ROSIN INDUS TRIES, HOSHIARPUR VS. ITO WARD-1, HOSHIARPUR. 4. ITAT, AMRITSAR BENCH IN THE CASE OF ITO VS. DHI MAN SYSTEMS REPORTED IN 100 TTJ 466. ITA NO.354(ASR)/2013 6 4.1. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMI TTED THAT THIS VIEW FURTHER FINDS SUPPORT FROM THE FOLLOWING JUDGMENTS: IN ITO VS. CHOHAN CONSTRUCTION CO. (2004) 84 TTJ (JODH) 693, IT WAS HELD THAT WHERE THE IDENTITY OF PARTNER IS NOT IN DOUBT AND HE HAS ADMITTED THE IMPUGNED CASH CREDIT THE ADDITION FOR THE SAME IN THE ASSESSEE-FIRMS HAND WAS NOT JUSTIFIED. IN THE CASE OF CIT VS. METAL & METALS OF INDIA (200 7) 208 CTR (P&H) 457, PARTNER OF FIRM CLAIMED TO HAVE MADE DEP OSIT WITH FIRM OUT OF AMOUNT RECEIVED AS GIFT FROM NRIS , AO REJE CTING CLAIM OF GIFT MADE ADDITION OF THE AMOUNT SO DEPOSITED WITH FIRM EVEN IF GIFT CLAIMED TO HAVE BEEN RECEIVED BY PARTNER HAS BEEN R EJECTED, THE RECIPIENT PARTNER WOULD BE LIABLE TO BE TAXED BY TR EATING THE SAID AMOUNT AS UNDISCLOSED INCOME BUT FIRM COULD NOT BE SUBJECTED TO TAX. THEREFORE, TRIBUNAL WAS JUSTIFIED IN HOLDING THAT A DDITION TO THE INCOME OF FIRM WAS NOT CALLED FOR. THIS VIEW ALSO FINDS SUPPORT FROM THE DECISION OF H ONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. RAMESHWAR DASS SURESH PAL CHEEKA (2007) 16 ITCL 461 (P&H) (2007) 163 TAXM AN 270 (P&H). ( REFER PB 34 TO 37) DECISIONS OF CIT VS. ORISSA CORPORATION (P) LTD. (1 986) 159 ITR 78 (SC), CIT VS. RAM MARAIN GOEL (1997) 224 ITR 180 ( P&H), CIT VS. JAISWAL MOTOR FINANCE (1983) 141 ITR 706 (ALL), NAR AYAN DAS KEDARNATH VS. CIT (1952) 22 ITR 1 (BOM), GIRDHARI L AL NANNE LAL VS. CST (1977) 109 ITR 726 (SC), SHIV RICE & GENERA L MILLS VS. CIT (2007) 208 CTR (P&H) 453. IN CIT VS. KULWANT SINGH & CO. (2008) 299 ITR 53 (P &H), DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICE D THAT IN CAPITAL A/CS OF TWO PARTNERS CERTAIN AMOUNT HAD BEEN CRED ITED. ASSESSEE FIRM FURNISHED TO AO HAVING THE WEALTH TAX STATEMENTS OF THE PARTNERS, COPIES OF THE ASSESSMENT ORDER AND PASS BOOK ETC; A .O. HAVING NOT SATISFIED WITH THE EVIDENCE PRODUCED, ADDED THE AMO UNT SO FOUND CREDITED IN THE RETURN INCOME OF THE FIRM AS UNEXPL AINED & INGENUINE CASH CREDITS. TRIBUNAL DELETED ADDITIONS MADE BY AO . TRIBUNAL HAD RECORDED FINDING THAT AMOUNTS FOUND CREDITED IN THE CAPITAL A/CS OF THE ITA NO.354(ASR)/2013 7 PARTNERS CAME FROM SAVING BANK A/CS OF BOTH PARTNE RS. THE TRIBUNAL HAD RECORDED THAT COPIES OF A/CS WERE ALSO PRODUCE D BEFORE THE A.O. IT WAS HELD THAT FINDING OF THE TRIBUNAL WAS THAT THE ASSESSEE HAS DISCHARGED THE ONUS TO PROVE U/S 68, THE IDENTITY & CREDIT WORTHINESS OF TWO CREDITORS WHO HAPPENED TO BE THE PARTNERS OF THE ASSESSEE-FIRM, FROM SAID FINDINGS NO QUESTION OF LAW ARISES. IT IS RELEVANT TO POINT OUT THAT THE SAME POINT AL SO CROPPED UP IN THE CASE OF M/S. GUPTA KARYANA STORE GURDASPUR AND THE LD. CIT(A) DELETED THE ADDITION. THE ORDER OF THE LD. CIT(A) I S FINAL AS THE DEPARTMENT DID NOT PREFER ANY APPEAL AGAINST THE SA ID ORDER BEFORE THE ITAT, AMRITSAR BENCH. A COPY OF THE ORDER OF THE LD . CIT(A) IS ENCLOSED HEREWITH AND IS AVAILABLE AT PB 53 TO 60 . IN VIEW OF THESE CIRCUMSTANCES, THE WORTHY CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION AND THE ADDITION MADE BY THE AO AND CONFIR MED BY THE LD. CIT(A) MAY KINDLY BE DELETED. 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSMENT IN THE PRESENT CASE HAS BEEN MADE UN DER SECTION 144 OF THE ACT DUE TO NON-COOPERATIVE ATTITUDE OF THE ASSESS EE AS REPRODUCED IN AOS ORDER AND ACCORDINGLY, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE CAPITAL INTRODUCED DE SPITE ADEQUATE OPPORTUNITIES OF BEING HEARD TO THE ASSESSEE WERE A LLOWED AN THEREFORE, THE AO HAD NOT ALTERNATIVE BUT TO ADD THE SAME TO ASSE SSEES TAXABLE INCOME. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED THE A DDITIONAL EVIDENCE AND A PETITION UNDER RULE 46A OF THE I.T. RULES, 1962 TO ADMIT THE SAME SO THAT HE COULD PROVE THE GENUINENESS OF THE INTRODUCTION OF FRESH CAPITAL. THE SAME ITA NO.354(ASR)/2013 8 WAS NOT ADMITTED BY THE LD. CIT(A) FOR THE REASONS MENTIONED IN HIS ORDER HEREINABOVE. IN THE PRESENT CASE, AS MENTION , THE ASSESSMENT HAS BEEN MADE EX-PARTE. IN THE EX-PARTE ASSESSMENT ALSO, THE ASS ESSMENT MUST BE MADE BY THE AO WHICH SHOULD BE A HONEST, INTELLIGENT AND WE LL GROUNDED AND SHOULD BE BASED ON MATERIAL ON RECORD. THE HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF SALES TAX, MADHYA PRADESH VS. H.M. ESUGALI H.M. ABDULALI REPORTED IN (1973) 90 ITR 271 HAS LAID DO WN A LAW AND THE RELEVANT HEAD NOTES AT PAGE 272 OF THE JUDGMENT A RE REPRODUCED FOR THE SAKE OF CLARITY AS UNDER: IN ESTIMATING ANY ESCAPED TURNOVER, IT IS INEVITABL E THAT THERE IS SOME GUESS-WORK. THE ASSESSING AUTHORITY WHILE MAKE THE BEST JUDGMENT ASSESSMENT, NO DOUBT, SHOULD ARRIVE AT HIS CONCLUSI ON WITHOUT ANY BIAS AND ON A RATIONAL BASIS. THAT AUTHORITY SHOULD NOT BE VINDICTIVE OR CAPRICIOUS. IF THE ESTIMATE MADE BY THE ASSESSING A UTHORITY IS A BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASIS, THE FACT THAT THERE IS A NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATE RIAL. PRIMA FACIE, THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SI TUATION. IT IS HIS BEST JUDGMENT AND NOT ANY ONE ELSES. THE HIGH COURT CA NNOT SUBSTITUTE ITS BEST JUDGMENT FOR THAT OF THE ASSESSING AUTHORITY. 6.1. IN THE PRESENT CASE, THE ASSESSEE HAS ATTACHED WITH THE RETURN OF INCOME, THE COPY OF CAPITAL ACCOUNT WHICH HAS NOT B EEN DISPUTED BY ANY OF THE AUTHORITIES BELOW. THE PARTNERS ASSESSED TO INC OME TAX IS ALSO NOT DISPUTED. IF AT ALL, ANY ADDITION HAS TO BE MADE, THAT COULD HAVE BEEN MADE IN THE HANDS OF THE PARTNERS WHICH AT PRESENT IS N OT THE CASE OF THE ASSESSEE OR THE REVENUE. THEREFORE, IN THE FACTS AND CIRCUMS TANCES OF THE CASE AND THE ITA NO.354(ASR)/2013 9 DECISIONS RELIED UPON BY THE LD. CIT(A), THE LD. CI T(A) IS NOT JUSTIFIED IN MAKING THE ADDITION AND THE ADDITION SO MADE IS DIR ECTED TO E DELETED. THUS, ALL THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.354(ASR)/2013 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH FEBRUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24TH FEBRUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. MAA DURGA INDUSTRIES. 2. THE ITO UDHAMPUR 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR