The ITO, Ward-12(1), Ahmedabad V. M/s. Naigra Industries, Ahmedabad

ITA 361/AHD/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9300 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 04-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: N O N E
• Keywords: Unexplained cash credit
• Section: 143(3); 68; 69; 6; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABA D (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON' BLE SHRI A.N. PAHUJA, A.M. ) I.T.A. NO. 361/AHD./2009 ASSESSMENT YEAR : 2005-2006 INCOME TAX OFFICER, WARD-12(1), AHMEDABAD VS.- M/ S. NAIGRA INDUSTRIES, AHMEDABAD (PAN : AADFN 9512 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.K. DHANESTA, SR. D.R. RESPONDENT BY : N O N E O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 03.10.2008 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XX, AHMEDABAD IN DELETING THE ADDITION OF RS.19,54,350/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF UNEXPLAINED CASH CREDITS FOR THE ASSESSM ENT YEAR 2005-06. 2. IN THIS CASE, NOTICE FIXING THE DATE OF HEARING ON 03.11.2010, WAS ISSUED, WHICH WAS DULY SERVED ON THE ASSESSEE. THE ACKNOWLEDGMENT CARD IS PLACED ON RECORD. DESPITE THE SERVICE OF NOTICE, ON THE DATE OF HEARING NEITHER ANYBODY APPE ARED FROM THE SIDE OF THE ASSESSEE NOR AN APPLICATION OF ADJOURNMENT RECEIVED. WE, THEREFORE, DECIDED TO DISPOSE OF THIS APPEAL AFTER HEARING THE LD. D.R. AND THE MATERIAL AVAILABLE ON RECORD. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF SUBMERSIBLE PUMP SET USED FOR AGRI CULTURAL AND DOMESTIC PURPOSES. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN O F INCOME DECLARING TOTAL INCOME OF RS.61,130/-. THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER S ECTION 143(3) ON 28.12.2007, WHEREIN HE MADE THE ADDITION OF RS.19,54,350/- UNDER SECTION 6 8 OF THE INCOME TAX ACT, 1961 IN RESPECT OF CASH CREDITS OF RS.18,23,600/- IN THE CAPITAL ACCOU NT OF PARTNER SHRI GUNVANTBHAI J. PATEL AND CASH CREDITS OF RS.1,30,750/- IN THE ACCOUNT OF PAR TNER SMT. ASHABEN P. PATEL. THE REASONING WAS GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT OR DER. THE ASSESSEE HAS NOT FURNISHED THE 2 ITA NO. 361/AHD/2009 CONFIRMATIONS IN RESPECT OF CASH CREDITS IN THE ACC OUNTS OF PARTNERS OF THE ASSESSEE-FIRM FROM WHICH THE ASSESSEE CONTRIBUTED FRESH CAPITAL IN THE FIRM. ON THIS BASIS, THE ASSESSING OFFICER ABRUPTLY CAME TO THE CONCLUSION THAT FRESH CAPITAL REMAINED UNEXPLAINED AND ADDED THE SAME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. 4. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS), THE ASSESSEE CONTENDED THAT PROVISION OF SECTION 68, WHICH IS A DEEMING PROVISION, IS APPLICABLE WHERE IN ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE MAINTAINED FOR THE RELEVANT PREVIOUS YEAR AND THE ASSESSEE HAS OFFERED NO EXPLANATION ABOUT THE N ATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT FOUND SATISFACTORILY BY THE ASSESSING OFFICER. IT WAS ALSO SUBMITTED THAT IN THE PRESENT CASE, BOTH THE PARTNERS, VIZ. S HRI GUNVANTBHAI J. PATEL AND SMT. ASHABEN A. PATEL MAINTAINED SEPARATE BOOKS OF ACCOUNTS AND THE Y WERE INDEPENDENTLY ASSESSED TO TAX. THE LOANS RAISED BY THE PARTNERS WERE FIRST CREDITED IN THEIR BOOKS OF ACCOUNTS AND THEREAFTER THEY MADE FRESH CAPITAL CONTRIBUTION AND THE IMMEDIATE S OURCE WAS SUCH LOANS TAKEN INDEPENDENTLY BY THE PARTNERS. IT WAS ALSO SUBMITTED THAT IN SUCH A SITUATION, THE ONUS CAST UPON THE ASSESSEE-FIRM, IS DULY DISCHARGED WHEN COMPLETE DETAILS WERE FILED BEFORE THE ASSESSING OFFICER REGARDING LOANS RAISED BY THE PARTNERS. IN CASE, ASSESSING OFFICER WAS HAVING ANY DOUBT, HE COULD HAVE MADE NECESSARY INQUIRIES IN THE CASE OF THE PARTNERS AND IN THEIR CASE HE WAS ENTITLED TO INVOKE PROVISION OF SECTION 68 OR ALTERNATIVELY SECTION 69 IN THE CASE OF THE PARTNERS. IN SO FAR AS THE ASSESSEE-FIRM IS CONCERNED, THIS IS WHOLLY UNJUSTIF IED. FOR THIS, RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SUNDARLAL JAIN VS.- COMMISSIONER OF INCOME TAX REPORTED IN 117 ITR 316, WHERE THE HO N'BLE ALLAHABAD HIGH COURT HELD THAT WHERE UNEXPLAINED CASH CREDIT IS FOUND IN THE BOOKS OF A FIRM CREDITED IN THE NAME OF A PARTNER, IT MAY BE ADDED TO THE INCOME OF THE PARTNER CONCERNED UNDER SECTION 69 AND SECTION 68 DOES NOT APPLY TO THE FIRMS CASE. IT WAS ALSO SUBMITTED THA T THE ASSESSEE HAD FURNISHED COPIES OF ACCOUNTS OF THE PARTNERS AND THEIR CONTRA ACCOUNT DULY SIGNE D BY THE PARTNERS, WHO HAVE INTRODUCED THE CAPITAL IN THE FIRM. IT WAS ALSO STATED THAT BOTH T HE PARTNERS ARE ASSESSED TO TAX AND THEIR P.A. NUMBERS ARE GIVEN AS PER FOLLOWING DETAILS :- GUNVANTBHAI PATEL AGDPP 1210 A ASHABEN PATEL AJGPP 4769 A 3 ITA NO. 361/AHD/2009 5. THE COPIES OF THEIR INCOME-TAX RETURNS WERE ALSO FILED. ON THIS BASIS, IT WAS CONTENDED THAT BURDEN CAST ON THE ASSESSEE UNDER SECTION 68 I S DULY DISCHARGED AND CREDIT ENTRY CANNOT BE TREATED AS INCOME OF THE FIRM FOR THE PURPOSE OF IN COME-TAX. IN SUPPORT OF THIS, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS :- (A) METACHEM INDUSTRIES 245 ITR 160 (MADHYA PRADESH) (B) ITO VS.- CHOHTAN CONSTRUCTION CO. (2004) 84 TTJ 69 3 (JODH. TRIBUNAL) (C) JAISWAL MOTOR FINANCE 141 ITR 706 (ALLAHABAD) (D) CIT VS.- RAMESHWAR DAS SURESH DAS SURESH PAL CHEEK A 208 CTR 459 (P&H) (E) NARAYAN KEDARNATH 22 ITR 18 (BOM.) (F) CIT VS.- METAL & METALS OF INDIA 208 CTR 459 (20 07) (P&H) 6. AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITION FOR THE DETAILED REASONS GIVEN IN PARA 4.2, WHICH READS AS UNDER :- 4.2. I HAVE CONSIDERED THE ASSESSMENT ORDER AND TH E ABOVE SUBMISSIONS. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE APPEL LANT HAD FURNISHED THE REQUIRED DETAILS RELATING TO THE CREDITS IN THE ACC OUNT OF GUNVANTBHAI PATE L AND ASHABEN PATEL WHO ORE PARTNERS AND THE AMOUNTS ARE CREDITED TO THEIR CAPITAL ACCOUNT. THE APPELLANT ALSO FURNISHED SOURCES OF TH E AMOUNTS SO INTRODUCED BY THE PARTNERS. THE A.O. HAS HIGHLIGHTED THE FACT THAT TH E PARTNERS RECEIVED C A SH FROM VARIOUS PERSONS AND THEY INTRODUCED CAPITAL INTO TH E FIRM BY WAY OF CHEQUES. HOWEVER, O N TH E OTHER HAND THE APPELLANT HAS SHOWN THAT WHEN THE PARTNERS HAVE CONFIRMED THEIR CREDIT IN THE CAPITAL ACCOUNT WITH THE F I RM BY WAY O F CONTRA ACCOUNT, IT CANNOT BE REGARDED AS UNEXPLAINED CREDI TS IN THE HANDS OF THE FIRM MERELY ON THE GROUND THAT THE PARTNERS RECEIVED LOA NS FROM OTHERS. THE BOOKS OF ACCOUNT OF THE FIRM ARE DIFFERENT FROM THE BOOKS OF ACCOUNT OF THE PARTNERS AND HENCE EVEN IF CASH IS RECEIVED BY THE PARTNERS IN T HEIR HANDS, THE ADDITION U/S 63 M THE HANDS OF THE FIRM I S NOT JUSTIFIED ONLY ON THAT GROUND THE APPELLANT H AS ALSO PRODUCED DETAILS OF RETURNS FILED AND PA NUMBERS OF THE PARTNERS. IN THE CIRCUMSTANCES, THE CAPITAL CONTRIBUTION MADE BY THE PARTNERS OF THE FIRM CANNOT BE CONSIDERED AS UNEXPLAINED U/S 63 M THE HANDS OF THE FIRM . THIS VIEWS ARE SUPPORTED BY THE DECISIONS CITED IN THE APPELLANT'S SUBMISSIO N AND THE ORDER OF THE CIT(A)- III DATED 30-3-2006 M THE CASE OF RAJESHKUMAR RAMESHKUM AR & CO REFERRED TO ABOVE. IN THE CIRCUMSTANCES, I AGREE WITH THIS EXPLANATION AND HOLD THAT T HE ADDITION MADE U/S.68 IN THE HANDS OF THE FIRM ON ACCOUNT OF CAPITAL INTRODUCED IN TH E ACCOUNT OF PARTNERS IS NOT JUSTIFIED AND THE SAME IS DELETE D. AGGRIEVED WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4 ITA NO. 361/AHD/2009 7. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF R EVENUE SHRI R.K. DHANESTA, LD. SR. D.R. APPEARED AND CONTENDED THAT UNDER SECTION 68 OF THE INCOME TAX ACT, THE ADDITION CAN BE MADE IN THE HANDS OF THE FIRM WHEN EXPLANATION OF THE PA RTNERS REGARDING THE SOURCE OF CREDIT APPEARING IN THEIR ACCOUNTS WAS NOT SATISFACTORY. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE IMPUGNED ORDER ERRED IN NOT FOLLOWING THE RATIO OF THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS.- KAPOOR BROTHERS REPORTED IN 118 ITR 741 AND THE DECISION OF THE HON'BLE PATNA HIGH COURT IN THE CASE OF CIT VS .- ANUPAM UDYOG REPORTED IN 142 ITR 133, IN WHICH THE HON'BLE HIGH COURTS HAS HELD THAT THE CASH CREDITS STANDING IN THE NAMES OF THE PARTNERS IN THE BOOKS OF THE FIRM WILL BE TREATED A S INCOME OF THE FIRM IF THE EXPLANATION OF T5HE PARTNER REGARDING THE SOURCE OF CREDITS WAS NOT FOU ND SATISFACTORY. 8. AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIV E, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOT E THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH CONFIRMATIONS IN RESPECT OF CASH CREDITORS INTRODUCED UNDER THE GUISE OF FRESH CAPITAL IN CAPITAL ACCOUNTS OF P ARTNERS NAMELY GUNVANTBHAI J. PATEL AND ASHABEN P. PATEL WITH COMPLETE ADDRESSES OF PARTIES AND TO FURNISH THE DETAILS OF THEIR CREDITWORTHINESS. THIS CLEARLY INDICATES THAT THE A SSESSING OFFICER IS SATISFIED THAT THE AMOUNTS IN QUESTION ARE INTRODUCED BY THE PARTNERS IN THE BOOK S OF THE ASSESSEE-FIRM. IT IS WELL SETTLED LAW THAT IF THERE ARE CASH CREDITS IN THE BOOKS OF THE FIRM IN THE ACCOUNTS OF INDIVIDUAL PARTNER AND IT I S FOUND AS A FACT THAT CASH WAS RECEIVED BY THE FIRM FROM ITS PARTNERS, IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THESE ARE PROFITS OF THE FIRM, THEY CANNOT BE ASSESSED IN THE HANDS OF PARTNERS THOUGH THEY MAY BE ASSESSED IN THE HANDS O F INDIVIDUAL PARTNER. IN SUPPORT OF THIS, RELIANCE CAN BE PLACED ON THE VARIOUS DECISIONS, WH ICH ARE RELIED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (SUPRA). IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THE FACT THAT ONCE IT IS ESTABLISHED THA T THE AMOUNT HAS BEEN INVESTED BY A PARTICULAR PERSON, WHO IS A PARTNER, THEN THE BURDEN OF THE FI RM IS DISCHARGED AND IN THAT CASE THAT CREDIT ENTRY CANNOT BE TREATED TO BE THE INCOME OF THE FIR M FOR THE PURPOSE OF INCOME-TAX. LOOKING TO THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS LEGALLY AND FACTUALLY CORRECT IN DELETING THE ADDITION 5 ITA NO. 361/AHD/2009 OF RS.19,54,350/- MADE BY THE ASSESSING OFFICER UND ER SECTION 68 OF THE INCOME TAX ACT, 1961. WE, THEREFORE, INCLINE TO UPHOLD THE ORDER OF LEARN ED COMMISSIONER OF INCOME TAX (APPEALS). 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 19.11.20 10 SD/- SD/- (A.N. PAHUJA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19/ 11 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, (4) CIT CONCERNED, (5) D.R. , ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR, ITAT, AHMEDABAD LAHA/SR.P.S.