The ITO, Ward-1, Patan V. UIma Cotton Industries, Patan

ITA 446/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80366 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Assessee Lawyers: PRANALI V THAKORE
• Keywords: Unexplained cash credit
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMB ER ITO, WARD-1, PATAN (APPELLANT) VS UMA COTTON INDUSTRIES, KULKARANA ROAD, AT & PO HARIJ PAN: AACFU2172P (RESPONDENT) REVENUE BY: SRI ROOPCHAND, SR. D.R. ASSESSEE BY: SRI PRANALI V. THAKORE, A.R. DATE OF HEARING : 22-09-2014 DATE OF PRONOUNCEMENT : 25-09-20 14 / ORDER PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A), GANDHINAGAR DATED 30-11-2010 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATER IAL ON RECORD ARE AS UNDER. ITA NO. 446/AHD/2011 ASSESSMENT YEAR 2007-08 I.T.A NO. 446/AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. UMA COTTON INDUSTRIES 2 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGA GED IN THE BUSINESS OF GINNING AND PRESSING OF COTTON. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2007-08 ON 28-03-2008 DECLARING TOTAL INCOME O F RS. 1,52,192/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE A SSESSMENT WAS FRAMED U/S. 143(3) VIDE ORDER DATED 24-12-2009 AND THE TOT AL INCOME WAS DETERMINED AT RS. 1,16,59,498/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) V IDE ORDER DATED 30-11- 2010 GRANTED PARTIAL RELIEF TO THE ASSESSEE. 4. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GR OUNDS. 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,11,87,000/- MADE U/S. 68 OF THE ACT ON ACC OUNT OF UNEXPLAINED CASH CREDITS. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON V ERIFICATION OF THE BALANCE SHEET, AO NOTICED THAT PARTNERS OF THE FIRM NAMELY, SRI ALPESHBHAI THAKKAR AND SRI VINODKUMAR THAKKAR HAD INTRODUCED N EW CAPITAL OF RS. 22,00,000/- AND RS. 89,87,000/- RESPECTIVELY. ASSES SEE WAS ASKED TO EXPLAIN THE CASH CREDITS. FROM THE DETAILS SUBMITT ED, AO NOTICED THAT THE AMOUNTS WERE RECEIVED BY THE PARTIES FROM VILLAGERS AND FARMERS AND THE AMOUNT SO RECEIVED WAS INTRODUCED AS THEIR CAPITAL. AO WAS OF THE VIEW THAT ASSESSEE HAD TRIED TO ESTABLISH CAPACITY OF TH E FARMERS/VILLAGERS BUT HAD FAILED TO ESTABLISH THE SAME AS NO FARMER/VILLA GER WAS HAVING HUGE AGRICULTURAL LANDS. HE FURTHER NOTICED THAT THE AM OUNTS WERE ACCEPTED IN CASH. AO THEREFORE CONCLUDED THAT THE GENUINENESS OF THE TRANSACTION REMAINED UNEXPLAINED AND ASSESSEE HAD FAILED TO EXP LAIN THE NATURE AND SOURCE OF CASH CREDITS. HE ACCORDINGLY CONSIDERED THE AGGREGATE AMOUNT I.T.A NO. 446/AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. UMA COTTON INDUSTRIES 3 OF CAPITAL AMOUNTING TO RS. 1,11,87,000/- AS UNEXPL AINED CASH CREDIT AND ADDED TO THE INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UND ER:- 5.2 I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS THE ASSESSMENT ORDER. THE CONTENTIONS OF THE ASSESSEE B EFORE ME ARE TWOFOLD- A) THE ASSESSEE HAS DISCHARGED ITS DUTY UNDER SECTI ON 68 BY PRODUCING CONFIRMATIONS, NAME AND ADDRESS AND PROOF , OF AGRICULTURAL LAND BEING OWNED BY THE CREDITORS OF T HE PARTNERS. IT WAS THE DUTY OF THE ASSESSING OFFICER TO MAKE FURTH ER ENQUIRIES IF HE WAS NOT SATISFIED. THE CREDITS ARE THEREFORE EXPLAI NED. B) THE CREDITS IN THE BOOKS OF ACCOUNT OF THE FIRM ARE IN THE NAME OF PARTNERS. IT IS NOT THE CASE OF THE ASSESSING OFFIC ER THAT THE PARTNERS ARE NOT GENUINE. ADDITION CANNOT BE MADE IN THE CA SE OF THE FIRM.' LOOKING TO THE FACTS OF THE CASE, ALTHOUGH THERE MI GHT HAVE BEEN REASONS FOR THE ASSESSING OFFICER NOT TO BE SATISFI ED WITH THE EXPLANATION FURNISHED UNDER SECTION 68 OF THE IT ACT, HOWEVER I T IS TO BE SEEN THAT THE ASSESSING OFFICER HIMSELF HAS STATED THAT THE PARTN ERS HAVE INTRODUCED NEW CAPITAL. IT IS THE FIRST YEAR OF BUSINESS OF THE AS SESSEE FIRM. THE BUSINESS IS STARTED ONLY IN THE DECEMBER. ALMOST THE ENTIRE CAP ITAL HAS BEEN INTRODUCED TILL THEN. IT IS NOT ANYBODY'S CASE THAT SUCH INCOME COULD HAVE BEEN EARNED BY THE FIRM ON THE DATE OF CAPITAL INTR ODUCTION. THE PARTNERS ARE ASSESSED TO TAX AND THEIR IDENTITY IS FIRMLY ES TABLISHED. ANY UNEXPLAINED CAPITAL INTRODUCTION HAS TO BE EXAMINED IN THE CASE OF PARTNERS ONLY IN SUCH CIRCUMSTANCES. THE AR STATED THAT THIS CASE IS SQUARELY COVERED BY THE JURISDICTIONAL HIGH COURT D ECISION IN THE CASE OF CIT V PANKAJ DYESTUFF INDUSTRIES IN IT REFERENCE NU MBER 241 OF 1993 ORDER DATED 06-07-2006. THE JUDICIAL HIGH COURT IN THE CASE REFERRED ABOVE HAS DISCUSSED AND DECIDED ON SIMILAR FACTS AS UNDER: '13. APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF THE PRESENT CASE, APPARENT THAT THE ASSESSEE HAD FURNISHED THE DETAILS WHICH WOULD DISCHARGE THE ONUS WHICH LAY ON THE ASSSESSEE . IT IS NOT THE CASE OF THE REVENUE THAT THE PARTNERS OF THE ASSESS EE FIRM ARE FICTITIOUS. THE INCOME TAX OFFICER HAS NOT DISPUTE D 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 IF WAS RUNNING IN LOSS. IT IS TR UE THAT THE INCOME TAX OFFICER DID NOT ACCEPT THE EXPLANATION GIVEN ON BEHALF OF THE ASSESSEE IN RESPECT OF THE NEW DEPOSITS OR CASH CRE DITS IN THE ACCOUNTS OF THE PARTNERS. THE MERE NON-ACCEPTANCE O F THAT, I.T.A NO. 446/AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. UMA COTTON INDUSTRIES 4 EXPLANATION DOES NOT, HOWEVER, PROVIDE MATERIAL, FO R, FINDING THE SAID SUM REPRESENTED INCOME OF THE ASSESSEE FIRM. A S HELD BY THE ALLAHABAD HIGH COURT IN CASE OF COMMISSIONER OF INC OME TAX, ALLAHABAD V. 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 ASS ESSED IN THE HANDS OF THE FIRM. ONCE THE PARTNERS HAVE OWNED THA T 'THE MONIES DEPOSITED IN THEIR ACCOUNTS ARE THEIR OWN, THE INCO ME TAX OFFICER IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AN D ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATION IS NOT FO UND SATISFACTORY. 14. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE, BOTH THE DEPUTY CIT (APPEALS) AND THE TRIBUNAL HAVE FOUND TH AT THE ASSESSEE HAD DISCHARGED 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 P ARTNERS IF HE IS NOT SATISFIED WITH THE SOURCES OF INVESTMENT OF CASH CR EDITS IN THE ACCOUNTS OF THE PARTNERS. 15. IN THESE CIRCUMSTANCES, IF IS NOT POSSIBLE TO F IND THAT THE ORDER OF THE TRIBUNAL SUFFERS FROM ANY INFIRMITY WHICH WOULD REQUIRE INTERFERENCE AT THE HANDS OF THIS COURT. ACCORDINGL Y, IT IS HELD THAT THE TRIBUNAL WAS RIGHT IN LAW AND ON FACTS IN DELET ING THE ADDITION OF RS.87.250/- BEING DEPOSITS IN THE ACCOUNTS OF THE P ARTNERS. THE QUESTION REFERRED TO THIS COURT, IS, ACCORDINGLY, A NSWERED IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE.' I, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE J URISDICTIONAL HIGH COURT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES (SUPRA), HOL D THAT NO ADDITION U/S.68 OF THE ACT CAN BE MADE IN CASE THE PARTNER INTRODUC ES CAPITAL IN FIRM AND HE IS ASSESSED TO TAX SEPARATELY. IN THAT CASE, THE FUND HAS TO BE EXPLAINED ONLY IN HIS INDIVIDUAL CASE AND NOT IN TH E CASE OF FIRM. THE AO IS FREE TO TAKE ANY ACTION AS PER LAW, IN THE HANDS OF INDIVIDUAL PARTNERS. 6. AGGRIEVED BY THE ORDER OF AO, REVENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, LD. DR RELIED ON THE ORDER OF AO. ON THE OTHER HAND, LD. AR SUPPORTED THE ORDER OF LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS I.T.A NO. 446/AHD/2011 A.Y. 2007-08 PAGE NO ITO VS. UMA COTTON INDUSTRIES 5 NOTED THAT IT WAS FIRST YEAR OF BUSINESS OF THE ASS ESSEE AND THE PARTNERS OF THE FIRM WERE ASSESSED TO TAX AND THEIR IDENTITY WA S ESTABLISHED AND HAD DISCHARGED THE PRIMARY ONUS. HE FURTHER RELYING ON THE DECISION IN THE CASE OF CIT VS. PANKAJ DYESTUFF INDUSTRIES IN IT RE FERENCE NO. 241 OF 1993 ORDER DATED 06-07-2006 HAD HELD THAT ONCE PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED IN THEIR ACCOUNTS ARE THEIR OWN, T HE ITO IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTIES AND ASSESS THE SAME IN THEIR HANDS IF THEIR EXPLANATION IS NOT FOUND SATISFACTORY. BEFOR E US, REVENUE HAS NOT BROUGHT ON RECORD ANY CONTRARY BINDING DECISION IN ITS SUPPORT. WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDE R OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 25/09/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,