Kirti Corporation, Bharuch V. The Income tax Officer,Ward- & TDS, Bharuch

ITA 4469/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8674 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 19-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDHAN
• Assessee Lawyers: M K PATEL
• Keywords: Income from undisclosed sources; Onus to prove
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 25/03/2010 DRAFTED ON: 25/ 03/2010 ITA NOS.4469/AHD/2007 ASSESSMENT YEAR : 2001-02 M/S.KIRTI CORPORATION PRITAM SOCIETY-2 BHARUCH VS. THE ITO, WARD-1 & TD BHARUCH PAN/GIR NO. : AACFK 8361 J (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI M.K. PATEL, ADV. RESPONDENT BY: SHRI K.MADHUSUDHAN, SR.D.R. O R D E R PER SHRI T.K.SHARMA, JUDICIAL MEMBER :- THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER DATED 12/09/2007 OF THE LEARNED CIT(APPEALS)-VI, BARODA CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT, 1961 IN RESPECT OF ADDITION OF RS.20,00,000/- MADE U/S.68 OF THE I.T. ACT, 1961 FOR ASSESSMENT YEAR 2001-02. 2. BRIEFLY STATED THE FACTS ARE THAT FOR ASSESSMENT YEAR UNDER APPEAL THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S.143 (3) ON 25/02/2004 AT TOTAL INCOME OF RS.38,82,601/- WHICH INTER ALIA INC LUDED THE ADDITION OF RS.20 LACS CASH CREDITS. THIS ADDITION REPRESENTS CAPITAL OF RS.10 LACS EACH INTRODUCED BY TWO PARTNERS OF THE ASSESSEE-FIR M; NAMELY, SMT.KIRTIBEN KOTIA AND SHRI UMESH KOTIA. IN RESPEC T OF THIS ADDITION ITA NO.4469/AHD /20087 M/S.KIRTI CORPORATION VS. ITO ASST.YEAR - 2001-02 - 2 - MADE, THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT, 1961 WERE ALSO INITIATED. 3. SUBSEQUENTLY, THE ASSESSING OFFICER LEVIED PENAL TY IN RESPECT OF THIS ADDITION AND IN THE IMPUGNED ORDER, THE LEARNE D CIT(APPEALS) UPHELD THE ACTION OF THE ASSESSING OFFICER CONFIRMI NG PENALTY ON THIS ADDITION OF RS.20 LACS. THE REASON GIVEN IN PARAG RAPH NOS.5.3 & 5.3.1 OF HIS ORDER READS AS UNDER:- 5.3. I HAVE CAREFULLY CONSIDERED THE VARIOUS SUBMI SSIONS OF THE APPELLANT, THE ASSESSMENT ORDER, THE QUANTUM APPEAL ORDER AND THE PENALTY ORDER. THE FIRST ARGUMENT OF THE APPELL ANT IS THAT THE ADDITION U/S. 68 OF RS.20 LAKH WAS EFFECTED BY ASSE SSING OFFICER AND SUSTAINED BY CIT(A) WITHOUT GIVING SUFFICIENT O PPORTUNITY. THOUGH THE MATTER BEFORE ME IS NOT THE ADDITION U/S . 68 HOWEVER FROM THE RECORDS AVAILABLE IT IS SEEN THAT NUMBER O F OPPORTUNITIES WERE PROVIDED DURING ASSESSMENT AND REMAND PROCEEDI NGS TO THE APPELLANT TO JUSTIFY ITS CLAIM AND PROVE THE BO NAFIDE OF THE TRANSACTIONS. IT IS ALSO NOTED FROM THE STATEMENT O F MANAGER OF THE LENDING SOCIETY THAT; 'Q.NO.7 IN RESPECT OF QUESTION NO. 6, YOU SAID IT IS THE SIGNATURE OF YOUR CLERK WHEREAS ON ALL OTHER PAGES, THERE IS A SEAL OF THE MANAGER OF THE VADALI VIBHAGIYA AGRICULTURAL PRODUC T CO.OP. SOCIETY. IN THAT CASE, WHY WILL THE CLERK SIGN? DO YOU HAVE ANY IDENTITY PROOF OF BEING MANAGER AT PRESENT? ANS. AT PRESENT, I DON'T HAVE ANY PROOF OF IDENTI TY AS MANAGER. THIS IS NOT MY SIGNATURE ON THESE PAPERS. I MUST H AVE GONE SOMEWHERE. THE CLERK MUST HAVE SIGNED. Q.NO.8 IN RESPECT OF THE ABOVE PAGE NO. 1 TO 5, DO YOU HAVE ANY PROOF, BOOKS OF ACCOUNTS, VOUCHERS IN ORIGINAL AT P RESENT? ANS. AT PRESENT, I DON'T HAVE ANY SORT OF PROOF, B OOKS OF ACCOUNTS, VOUCHERS, BANK STATEMENT IN ORIGINAL THOUGH THEY WE RE CALLED FOR. I CANNOT MAKE ANY CLARIFICATION IN THIS REGARD. THE A BOVE QUESTION NO. 1 TO 5 IN RESPECT OF KIRTI CORPORATION CAN NOT BE CLARIFIED BY ME. ITA NO.4469/AHD /20087 M/S.KIRTI CORPORATION VS. ITO ASST.YEAR - 2001-02 - 3 - Q.NO.9 ON THE PAN NO. THE NAME IS VADALI CO-O P. SOCIETY LTD. WHEREAS ON YOUR CONFIRMATION LETTER, IT IS THE VADALI VIBHAGIYA CO-OP. AGRICULTURAL PRODUCT AND SALE LTD. DO YOUR HAVE ANY IDEA ABOUT THAT? ANS. I CANNOT SAY ANYTHING ABOUT THAT. I DON'T HAVE ANY IDEA ABOUT THAT MATTER. Q.NO.10 YOU HAVE NOT BEEN ABLE TO MAKE ANY SORT O F CLARIFICATION REGARDING ANY SORT OF EVIDENCE ON THE BASIS OF WHIC H YOU HAVE GRANTED A CASH CREDIT OF RS.10,00,000 EACH TO MRS. KIRTI KOTIA AND MR. UMESH KOTIA. YOU WERE GIVEN FREQUENT OPPORTUNIT IES (ON 28.01.2004 AND ON 08.11.2004) IN SPITE OF WHICH YOU HAVE NOT BEEN ABLE TO PRODUCE ANY EVIDENCES. WILL YOU MAKE A NY CLARIFICATION? ANS. ON BOTH OF THE ABOVE DATES, I COULD NOT PR ODUCE THE EVIDENCE TO YOU FOR SOME UNAVOIDABLE CAUSES.' 5.3.1. EVEN THOUGH CONFIRMATION AND DETAILS OF CHEQ UE NUMBER WERE FILED BY' THE APPELLANT IN QUANTUM APPEAL THE GENUI NENESS OF TRANSACTION COULD NOT BE ESTABLISHED AND THEREFORE THE ADDITION WAS SUSTAINED. AFTER APPRAISING ALL THE FACTS AND CONSI DERING THE PROVISION OF SECTION 271(L)(C) IN MY VIEW THE APPEL LANT HAS NOT BEEN ABLE TO SUBSTANTIATE ITS CLAIM. NEITHER IT HAS BEEN ABLE TO ESTABLISH THE BONAFIDE AND ALL THE DETAILS NEITHER IT HAS BE EN ABLE TO ESTABLISH THE BONAFIDE AND ALL THE DETAILS RELATING TO THE TRANSACTIONS COULD NOT BE PRODUCED BEFORE THE ASSESSING AND APPE LLATE AUTHORITIES. THUS PENALTY IS EXIGIBLE ON ADDITION OF RS.20 LAKH MADE UNDER SECTION 68. 4. AGGRIEVED BY THE ORDER OF THE LD.CIT(APPEALS), T HE ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING, ON BEHALF OF ASSESSEE, S HRI M.K. PATEL, LD. COUNSEL FOR THE ASSESSEE APPEARED AND FAIRLY ADMITT ED THAT ADDITION OF RS.20 LAKHS MADE BY THE ASSESSING OFFICER U/S.68 OF THE I.T. ACT, 1961 IS CONFIRMED BY THE LEARNED CIT(APPEALS). HE SUBMITTE D THAT TWO PARTNERS ITA NO.4469/AHD /20087 M/S.KIRTI CORPORATION VS. ITO ASST.YEAR - 2001-02 - 4 - INTRODUCED A SUM OF RS.10 LAKHS EACH IN THEIR RESPE CTIVE CAPITAL ACCOUNT/FIRM. THE LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT BOTH THE PARTNERS HAVE ADMITTED THAT THEY HAVE INTRODUCED R S.10 LAKHS EACH, THEREFORE, ADDITION U/S.68 CANNOT BE MADE IN THE HA NDS OF PARTNERSHIP- FIRM. IN SUPPORT OF THIS, RELIANCE WAS PLACED ON T HE JUDGEMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PANKAJ DY ESTUFF INDUSTRIES IN INCOME TAX REFERENCE NO.241 OF 1993 DATED 06/07/200 5. IN VIEW OF THIS, IT WAS SUBMITTED THAT THERE IS NO JUSTIFICATI ON WHATSOEVER FOR LEVYING THE PENALTY U/S.271(1)(C) OF THE I.T. ACT, 1961 IN RESPECT OF ADDITION OF RS.20 LAKHS. 6. ON THE OTHER HAND, SHRI K.MADHUSUDHAN, LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE SUPPORTED THE ORDER OF THE LEARNED CIT(APPEALS). HE SUBMITTED THAT ADDITION MADE BY T HE ASSESSING OFFICER U/S.68 OF THE I.T. ACT, 1961 IS CONFIRMED BY THE LE ARNED CIT(APPEALS) IN QUANTUM APPEAL, THEREFORE, THE ORDER OF THE LEARNED CIT(APPEALS) BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GON E THROUGH THE ORDERS OF THE LOWER AUTHORITIES AS WELL AS THE DECI SION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PA NKAJ DYESTUFF INDUSTRIES(SUPRA) RELIED UPON BY THE LD. COUNSEL FO R THE ASSESSEE. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. KISHORILAL SANTOSHILAL (1995) 216 ITR 9, HELD IN THE CASE OF CASH CREDITS IN ACCOUNTS OF FIRM, THE FOLLOWING POINTS NEED BE NOTE D: (I) THERE IS NO ITA NO.4469/AHD /20087 M/S.KIRTI CORPORATION VS. ITO ASST.YEAR - 2001-02 - 5 - DISTINCTION BETWEEN THE CASH CREDIT EXISTING IN THE BOOKS OF THE FIRM, WHETHER IT IS OF A PARTNER OR OF A THIRD PARTY; (II ) THE BURDEN TO PROVE THE IDENTITY, CAPACITY AND GENUINENESS HAS TO BE ON THE ASSESSEE; (III) IF THE CASH CREDIT IS NOT SATISFACTORILY EXPLAINED, THE IT O WILL BE JUSTIFIED TO TREAT IT AS INCOME FROM UNDISCLOSED SOURCES; (IV) T HE FIRM HAS TO ESTABLISH THAT THE AMOUNT WAS ACTUALLY GIVEN BY THE LENDER; ( V) THE GENUINENESS AND REGULARITY IN THE MAINTENANCE OF THE ACCOUNT HA S TO BE TAKEN INTO CONSIDERATION BY THE TAXING AUTHORITIES; (VI) IF TH E EXPLANATION IS NOT SUPPORTED BY ANY DOCUMENTARY OR OTHER EVIDENCE, THE N THE DEEMING FICTION CREATED BY SECTION 68 CAN BE INVOKED; (VII) SIMPLY BECAUSE THE AMOUNT IS CREDITED IN THE BOOKS OF THE FIRM IN THE PARTNERS CAPITAL ACCOUNT, IT CANNOT BE SAID THAT IT IS NOT THE UNDIS CLOSED INCOME OF THE FIRM AND THAT IN ALL CASES IT HAS TO BE ASSESSED AS AN U NDISCLOSED INCOME OF THE PARTNER ALONE. 8. IN THE PRESENT CASE, BOTH THE PARTNERS HAVE CON FIRMED THAT THEY HAVE INTRODUCED RS.10 LACS IN THEIR RESPECTIVE FIRM (S). DESPITE THIS, THE ASSESSING OFFICER MADE THE ADDITION AND THE LEARNED CIT(APPEALS) CONFIRMED THE SAME. IT IS WELL SETTLED LAW THAT P ENALTY PROCEEDINGS ARE SEPARATE PROCEEDINGS. FINDING IN THE ASSESSMENT P ROCEEDINGS, FOR THE PURPOSE OF LEVYING THE PENALTY ARE NOT CONCLUSIVE. BEFORE PENALTY CAN BE IMPOSED, THE ENTIRETY OF CIRCUMSTANCES MUST REAS ONABLY POINT OUT TO THE CONCLUSION THAT DISPUTED AMOUNT OF REPRESENTED INCOME AND THAT THE ASSESSEE CONSCIOUSLY CONCEALED THE INCOME OF THE AS SESSEE. IN THE PRESENT CASE, ONE OF THE VIEWS IS THAT IF ONE PARTN ER CONFIRMS THAT HE MADE THE INVESTMENT IN THAT CASE, ADDITION U/S.68 OF THE I.T. ACT, 1961, IF ANY, ITA NO.4469/AHD /20087 M/S.KIRTI CORPORATION VS. ITO ASST.YEAR - 2001-02 - 6 - CAN BE MADE IN HIS INDIVIDUAL ASSESSMENT. IN OUR CONSIDERED OPINION, THIS IS SUFFICIENT TO HOLD THAT THE ASSESSEE-FIRM H AS NOT CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME. WE ARE, THEREFORE, OF THE VIEW THAT THIS IS NOT A FIT CASE TO LEVY THE PENALTY U/S.271(1)(C) OF THE I.T. ACT, 1961. 9. IN VIEW OF ABOVE, THE PENALTY U/S.271(1)(C) OF T HE I.T. ACT, 1961 IN RESPECT OF ADDITION OF RS.20 LACS CONFIRMED BY THE LEARNED CIT(APPEALS) IN THE IMPUGNED ORDER IS CANCELLED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 26/03/2010. SD/- SD/- ( D.C. AGRAWAL ) ( T.K.SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 26 / 03 /2010 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT 3. THE CIT CONCERNED. 4. THE L D. CIT(APPEALS)-VI, BARODA 5. THE DR, AHMEDABAD BENCH. 6. THE GUARD FI LE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD