M/s Naresh Singh Controctor, Firozabad V. Dy. C.I.T.-5, Firozabad

ITA 361/AGR/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0261 (ITAT-AGRA)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-01-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 23-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Keywords: Gift; Opportunity of being heard; Onus to prove
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 361/AGRA/2012 ASSTT. YEAR : 2006-07 M/S. NARESH SINGH CONTRACTOR, VS. DY. C.I.T., CI RCLE 5, 42-A, FRIENDS COLONY, FIROZABAD. ETAWAH. (PAN: AAEFN 4791 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANURAG SINHA, ADVOCATE RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 11.01.2013 DATE OF PRONOUNCEMENT OF ORDER : 18.01.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-II, AGRA DATED 19.03.2012 FOR THE ASSESSMENT YEAR 2006- 07. 2. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS G ROUND NO. 1. THEREFORE, THE SAME IS ACCORDINGLY DISMISSED. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FIRM WAS CARRYING ON THE BUSINESS OF CIVIL CONTRACTOR. NO BOOKS OF ACCOUNT A ND DOCUMENTS HAVE BEEN ITA NO. 361/AGRA/2012 2 PRODUCED BEFORE THE AO AT THE ASSESSMENT STAGE. THE BOOK RESULTS WERE ACCORDINGLY REJECTED. THE SAME IS THE POSITION BEFO RE THE LD. CIT(A) BECAUSE THE ASSESSEE DESPITE GIVING OPPORTUNITY OF BEING HEARD DID NOT APPEAR BEFORE THE AO AND THE GROUNDS OF APPEAL WERE NOT SUBSTANTIATED. T HEREFORE, IN THE ABSENCE OF ANY CHALLENGE TO THE ASSESSMENT ORDER, THE LD. CIT(A) D ISMISSED THE APPEAL OF THE ASSESSEE. IN THE BACKGROUND OF THESE FACTS, WE TAKE UP THE REMAINING GROUNDS FOR THE PURPOSE OF DISPOSAL OF APPEAL. 4. ON GROUND NO. 2, THE ASSESSEE CHALLENGED DISALLO WANCE OF RS.1,00,000/- OUT OF EXPENSES. THE AO NOTED THAT SINCE BOOKS OF ACCOU NT HAVE NOT BEEN PRODUCED FOR VERIFICATION, THEREFORE, GENUINENESS OF THE EXPENDI TURE IS NOT VERIFIABLE AND ACCORDINGLY, DISALLOWANCE WAS MADE OF RS.1,00,000/- . BEFORE THE LD. CIT(A), NOTHING WAS PRODUCED AND EVEN THE ASSESSEE WAS EXPA RTE, THEREFORE, THE LD. CIT(A) CONFIRMED THE ADDITION. EVEN BEFORE US, NO MATERIAL IS PRODUCED TO CONTRADICT THE FINDINGS OF THE AUTHORITIES BELOW IN THE ABSENCE OF PRODUCTION OF BOOKS OF ACCOUNTS, VOUCHERS AND MATERIAL TO JUSTIFY DEDUCTION OF THE E XPENDITURE, WE HAVE NO OPTION EXCEPT TO CONFIRM THE ADDITION OF RS.1,00,000/- BEI NG DISALLOWANCE OUT OF EXPENSES. GROUND NO. 2 OF THE APPEAL OF THE ASSESSE E IS ACCORDINGLY DISMISSED. ITA NO. 361/AGRA/2012 3 5. ON GROUND NO. 3 & 4, THE ASSESSEE CHALLENGED THE ADDITION OF RS.1,50,000/- ON ACCOUNT OF CAPITAL INTRODUCED BY THE PARTNER SHR I NARESH SINGH. THE AO FOUND THAT CAPITAL OF RS.1,50,000/- HAS BEEN INTRODUCED I N THE CAPITAL ACCOUNT OF SHRI NARESH SINGH, PARTNER. THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE SOURCE OF CAPITAL INTRODUCED WITH THE DOCUMENTARY EVIDENCE. I N RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE FURNISHED THE EXPLANATION THAT THREE PERSONS NAMELY, SMT. VIDYAWATI, SMT. SUMAN AND SMT. SEEMA TOMAR HAVE GIV EN RS.50,000/- EACH THROUGH THEIR BANK ACCOUNT TO THE PARTNER. THE AO, HOWEVER, DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE BECAUSE IT WAS NOT CLAR IFIED WHETHER THE AMOUNT IN QUESTION GIVEN TO THE NARESH SINGH PARTNER WAS BY W AY OF LOAN OR GIFT AND THAT BEFORE ISSUE OF CHEQUES IN FAVOUR OF THE PARTNER, T HERE WERE CASH DEPOSITS IN THE ACCOUNTS OF THESE THREE LADIES. THEREFORE, SOURCE O F AMOUNT OF RS.50,000/- EACH GIVEN BY THREE LADIES IS NOT EXPLAINED. THE AO, THE REFORE, NOTED THAT THE ASSESSEE FIRM INTRODUCED ITS OWN FUNDS IN THE CAPITAL ACCOUN T OF SHRI NARESH SINGH PARTNER. THE SUM HAS BEEN CREDITED IN THE BOOKS OF ACCOUNT O F THE ASSESSEE. THEREFORE, THE ADDITION WAS MADE U/S. 68 OF THE IT ACT. SINCE THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE OR MATERIAL BEFORE THE LD. CIT(A), THEREFO RE, THE ADDITION WAS CONFIRMED AND APPEAL OF THE ASSESSEE WAS DISMISSED. ITA NO. 361/AGRA/2012 4 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND SUBMITTED THAT ALL THE THREE LADIES HAVE GIV EN AMOUNT OF RS.50,000/- EACH TO THE PARTNER WHICH HAVE BEEN INTRODUCED AS CAPITA L IN THE ASSESSEE FIRM. ALL DOCUMENTARY EVIDENCES FILED BEFORE THE AO HAVE BEEN FILED IN THE PAPER BOOK. THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, ADMITTED THA T THERE ARE CASH DEPOSITS IN THE BANK ACCOUNT OF ALL THESE THREE LADIES PRIOR TO ISS UE OF CHEQUES IN FAVOUR OF THE PARTNER. IN THE ALTERNATE CONTENTION, HE HAS SUBMIT TED THAT SINCE THE PARTNER ADMITTED TO HAVE INTRODUCED THE CAPITAL IN THE ASSESSEE FIRM , THEREFORE, NO ADDITION COULD BE MADE IN THE CASE OF ASSESSEE FIRM AND REFERRED TO B ALANCE SHEET OF THE ASSESSEE FIRM, IN WHICH IT IS SPECIFICALLY SHOWN THAT THE PARTNER SHRI NARESH SINGH INTRODUCED CAPITAL OF RS.1,50,000/- (PB-16). IN SUPPORT OF THE CONTENTION HE HAS RELIED UPON THE FOLLOWING DECISIONS : (I). JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN C ASE OF CIT VS. JAISWAL MOTOR FINANCE (1983) 141 ITR 706, IN WHICH IT HAS B EEN HELD IF THERE ARE CASH CREDIT ENTRIES IN THE BOOKS OF A FIRM, IN WHICH THE ACCOUNTS OF THE INDIVIDUAL PARTNERS EXISTS, AND IT IS FOUND AS A FACT THAT CASH WAS RECEIVED BY THE FIR FROM ITS PARTNERS , THEN, IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THEY WERE THE PROFITS OF THE FIRM, IT COULD NOT BE ASSESSED IN THE HANDS OF THE FIRM ITA NO. 361/AGRA/2012 5 (II). DECISION OF HONBLE MP HIGH COURT IN CASE OF CIT VS. METACHEM INDUSTRIES (2000) 245 ITR 160, IN WHICH IT WAS HELD ONCE THE FIRM HAS SATISFACTORILY EXPLAINED THAT TH E CREDIT ENTRIES IN THE NAME OF ITS PARTNERS REPRESENT THE A MOUNT INVESTED BY THEM THE BURDEN OF PROOF STOOD DISCHARGED AND THE A MOUNT CANNOT BE TREATED AS INCOME OF THE FIRM UNDER S. 68. (III). DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. RAMESHWAR DASS SURESH PAL CHEEKA, 208 CTR 459, IN W HICH IT WAS HELD ONCE A PARTNER OF THE FIRM HAS ACCEPTED HAVING ADVA NCED AMOUNT TO THE FIRM, NO ADDITION COULD BE MADE IN TH E HANDS OF FIRM UNDER S. 68. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER S OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT THE STATUS OF THE ASSESSEE IS OF FIRM, WHICH IS HAVING SEVERAL PARTNERS INCLUDING PARTNER NARESH SINGH. SHRI NARESH SINGH PARTNER INTRODUCED FRESH CAPITAL OF RS.1,50,000/- IN THE ASSESSEE FIRM, WHICH FACT IS ALSO MENTIONED IN THE PARTNERS CAPITAL ACCOUNT OF THE ASSESSEE FIRM (PB-16). THE AO WANTED TO EXAMINE THE SOURCE OF THE CAPITAL INTRODUCED BY THIS PARTNER THROUGH DOCUMENTARY EVID ENCE. THE ASSESSEE SUBMITTED THAT THE PARTNER HAS RECEIVED THE AMOUNT OF RS.50,0 00/- EACH FROM THREE LADIES AND ITA NO. 361/AGRA/2012 6 IT WAS FOUND FROM EXAMINATION OF THEIR BANK ACCOUNT S THAT CASH HAS BEEN DEPOSITED IN THEIR BANK ACCOUNTS BEFORE ISSUING CHEQUES IN FA VOUR OF THE PARTNER. APPARENTLY SOURCE OF THESE THREE LADIES TO ADVANCE AMOUNT OF R S.1,50,000/- TO THE PARTNER SHRI NARESH SINGH IS NOT EXPLAINED. IN SUCH CIRCUMSTANCE S, ITAT, AGRA BENCH CONFIRMED THE ADDITION U/S. 68 OF THE IT ACT IN THE CASE OF SMT. SUMAN GUPTA VS. ITO, 138 ITD 153 WHICH IS CONFIRMED BY HONBLE ALLA HABAD HIGH COURT IN ITA NO. 680 OF 2012 DATED 07.08.2012. HOWEVER, THE ALTE RNATE CONTENTION OF THE ASSESSEE SHALL HAVE TO BE CONSIDERED IN FAVOUR OF T HE ASSESSEE DESPITE NO EVIDENCES WERE FURNISHED TO EXPLAIN THE SOURCE OF CAPITAL INT RODUCED BUT NO ADDITION CAN BE MADE IN THE CASE OF ASSESSEE FIRM. THE FIRM AND THE PARTNERS HAVE DISTINCT STATUS UNDER THE IT ACT. ONCE, THE PARTNERS HAVE ACCEPTED THAT HE HAS INTRODUCED CAPITAL IN THE ASSESSEE FIRM, SUCH ADDITION COULD NOT BE MADE IN THE HANDS OF THE ASSESSEE FIRM AND OUR VIEW IS SUPPORTED BY THE DECISION IN T HE CASES OF JAISWAL MOTOR FINANCE (SUPRA), METACHEM INDUSTRIES (SUPRA) AND RA MESHWAR DASS SURESH PAL CHEEKA (SUPRA). THEREFORE, ON THE BASIS OF THE ABOV E JUDGMENTS, WE ARE OF THE VIEW THAT THE ADDITION COULD NOT BE MADE IN THE HANDS OF THE ASSESSEE FIRM. ADDITION OF RS.1,50,000/- IS ACCORDINGLY DELETED IN THE CASE OF ASSESSEE FIRM. HOWEVER, THE AO IS DIRECTED TO LOOK INTO THE ISSUE OF UNEXPLAINED C APITAL IN THE CASE OF PARTNER SHRI NARESH SINGH AND AO IS FREE TO TAKE NECESSARY ACTIO N IN ACCORDANCE WITH LAW. IN ITA NO. 361/AGRA/2012 7 THE RESULT, GROUNDS NOS. 3 & 4 OF APPEAL OF THE ASS ESSEE ARE ALLOWED SUBJECT TO THE ABOVE DIRECTIONS. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY