M/s Lucky Wines, Fatehbad V. DCIT, Sirsa

ITA 527/CHANDI/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8817 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 22-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND SUDERSHAN JCIT
• Keywords: Unexplained cash credit; Unexplained investment; Gift
• Section: 143(1); 131; 68; 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH .., ! '# #$ %, & '( BEFORE: SHRI. N.K.SAINI, VP & SHRI , SANJAY GARG, J M ITA NO.527/CHD/2019 ASSESSMENT YEAR : 2010-11 M/S LUCKY WINES C/O SHRI. K.L. GROVER, ADVOCATE, STREET KHAZANCHAIN, BHADRA BAZAR, SIRSA, HARYANA THE DCIT HUDA, SIRSA HARYANA PAN NO: AADFL3137A APPELLANT RESPONDENT !' ASSESSEE BY : SHRI. M.R. SHARMA, ADVOCATE #!' REVENUE BY : SHRI ARVIND SUDERSHAN, JCIT $ %! & DATE OF HEARING : 07/01/2020 '()*! & DATE OF PRONOUNCEMENT : 07/01/2020 ')/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DT. 25/03/2019 OF LD. CIT(A), HISAR. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS), HI SAR ERRED IN CONFIRMING THE ADDITION, IN HANDS OF PARTNERSHIP FIRM, FOR CAP ITAL CONTRIBUTIONS OF RS. 11, 00,000/- (COMPRISING OF RS. 1,50,000 & 9,50,000/-) BY MANOJ KUMAR PARTNER. THE ADDITION WAS LIABLE TO BE DELETED CONSIDERING THE E VIDENCE AND SETTLED PRINCIPLES OF LAW RELIED UPON BY THE APPELLANT. 1.1 THAT THE ADDITION CONFIRMED IS BASED ON MERE AS SUMPTIONS AND CONJECTURES AS THE FACTS AND EVIDENCE RECORDED ON O ATH, BASED ON THE VERIFIED BANK ACCOUNTS BY THE ASSESSING OFFICER, HAVE NOT BE EN PROPERLY APPRECIATED AND CONSIDERED FOR THE ASSUMED ADDITION OF RS. 9,50 ,000/-. 1.2 THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) C OULD NOT INFER AND INDICATE AN IOTA OF EVIDENCE THAT THE SAID CAPITAL CONTRIBUT ION BY PARTNER RELATED TO THE FUNDS OF PARTNERSHIP FIRM. THUS, THE DECISIONS OF H ON'BLE JURISDICTIONAL HIGH COURT & OTHER HON'BLE HIGH COURTS RELIED UPON BY APPELLANT WERE FULLY IGNORED. 2. THAT THE APPELLANT CRAVES LEAVES TO AMEND, ADD T HE GROUNDS OF APPEAL WITH THE KIND PERMISSION OF INCOME TAX APPELLATE TR IBUNAL, TILL THE SAME IS FINALLY HEARD AND DISPOSED OFF. 2 3. FROM THE AFORESAID GROUNDS IT IS NOTICED THAT TH E ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 11,00,000/- MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF CAPITAL CONTRIBUTED BY ONE O F THE PARTNER NAMELY SHRI MANOJ KUMAR. 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE E-FILED THE RETURN OF INCOME ON 14/09/2010 DECLARING AN INCOME OF RS. 10, 76,750/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX AC T, 1961 (HEREINAFTER REFERRED TO AS ACT). LATER ON THE CASE WAS SELECTE D FOR SCRUTINY. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT A SUM OF RS. 9,50,000/- HAD BEEN CREDITED IN THE ACCO UNT OF SHRI MANOJ KUMAR, PARTNER ON 26/05/2009 IN THE BOOKS OF THE ASSESSEE FIRM WHICH WAS CLAIMED TO HAVE BEEN RECEIVED FROM SHRI JAGDISH CHANDER THROUG H RTGS. THE A.O. RECORDED THE STATEMENT OF SHRI JAGDISH CHANDER UNDE R SECTION 131 OF THE ACT THE A.O. OBSERVED THAT SHRI JAGDISH CHANDER CATEGOR ICALLY DENIED HAVING GIVEN ANY LOAN TO SHRI MANOJ KUMAR AND THAT THE ASS ESSEE HAD NOT BEEN ABLE TO CONTROVERT THE STATEMENT GIVEN BY SHRI JAGDISH C HANDER. HE THEREFORE TREATED THE SAID AMOUNT OF RS. 9,50,000/- AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES AND MADE THE ADDITION IN THE HA NDS OF THE ASSESSEE. THE A.O. ALSO NOTICED THAT SHRI MANOJ KUMAR, PARTNER HA D INTRODUCED CASH AMOUNTING TO RS. 1,50,000/- ON 01/04/2009 IN HIS CA PITAL ACCOUNT WHICH WAS CLAIMED TO HAVE BEEN INTRODUCED OUT OF CASH AVAILAB LE FROM SALARY AND OTHER RECEIPTS. THE SAID CLAIM WAS ALSO NOT ACCEPTE D AND THE ADDITION OF RS. 1,50,000/- WAS MADE IN THE HANDS OF THE ASSESSEE UN DER SECTION 68 OF THE ACT. 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT SUM OF RS. 9,50,000/- WAS ADVANCED F ROM SYNDICATE BANK THROUGH RTGS ON 25/05/2009 BY SHRI JAGDISH CHANDER S/O SHRI RAM NIWAS HAVING PAN-AASPC2464L TO SHRI MANOJ KUMAR, COPY OF BANK ACCOUNT WAS ALSO FURNISHED. 3 7. IT WAS ALSO STATED THAT THE STATEMENT OF SHRI JA GDISH CHANDER WAS RECORDED BEHIND THE BACK OF THE ASSESSEE UNDER SECT ION 131 OF THE ACT AND OPPORTUNITY FOR HIS CROSS EXAMINATION WAS SOUGHT. T HE LD. CIT(A) PROVIDED THE COPY OF THE STATEMENT OF SHRI JAGDISH CHANDER TO TH E ASSESSEE. IN RESPONSE, THE ASSESSEE SUBMITTED THAT SHRI JAGDISH CHANDER SE EMS TO HAVE INADVERTENTLY MENTIONED THAT THE LOAN OF RS. 9,50,0 00/- WAS GIVEN TO M/S LUCKY WINES AND ACTUALLY IT WAS GIVEN TO SHRI MANOJ KUMAR WHICH WAS VERIFIABLE FROM HIS COPY OF SYNDICATE BANK ACCOUNT. THE LD. CIT(A) ASKED THE REMAND REPORT FROM THE A.O. THE ASSESSEE ALSO FURNI SHED THE WRITTEN SUBMISSION WHICH HAD BEEN INCORPORATED IN PARA 4.2 AND 4.3 OF THE ASSESSMENT ORDER, FOR THE COST OF REPETITION THE SA ME IS NOT REPRODUCED HEREIN. THE LD. CIT(A) AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE SUSTAINED THE ADDITION MADE BY THE A.O. HE ALSO DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE THAT IF ANY ADDITION WAS TO BE MADE THE SAME SHOULD HAVE BEEN MADE IN THE INCOME OF THE PARTNER AND NOT THE ASSESSEE FIRM BY OBSERVING THAT THE A.O. HAD NOT ACCEPTED TH E SUBMISSION OF THE ASSESSEE AND CONTENDED THAT THE SAME WAS ACTUALLY U NACCOUNTED MONEY OF THE FIRM AND IT WAS GIVEN THE GARB OF GENUINENESS B Y ROUTING IT THROUGH BANKING CHANNELS. THE LD. CIT(A)ACCORDINGLY SUSTAIN ED THE ADDITION MADE BY THE A.O. 8. NOW THE ASSESSEE IS IN APPEAL. 9. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT TH E ASSESSEE FURNISHED THE COPY OF BANK ACCOUNT OF SHRI MANOJ KUMAR (PARTNER) AS WELL AS THE COPY OF BANK ACCOUNT OF SHRI JAGDISH CHANDER I.E; THE PERSO N FROM WHOM HE RECEIVED THE LOAN THEREFORE THE ADDITION MADE IN TH E HANDS OF THE ASSESSEE FIRM WAS NOT JUSTIFIED. IT WAS FURTHER SUBMITTED TH AT THE ASSESSEE HAD GIVEN EXPLANATION ABOUT THE SOURCE OF THE CONTRIBUTION BY THE PARTNER WHO HIMSELF WAS AN ASSESSEE AND ADMITTED HAVING MADE THE DEPOSI T WITH THE ASSESSEE 4 FIRM, THEREFORE THE ADDITION MADE IN THE HANDS OF T HE ASSESSEE WAS NOT JUSTIFIED, RELIANCE WAS PLACED ON THE FOLLOWING CAS E LAWS: CIT VS. METACHEM INDUSTRIES REPORTED AT [2001] 116 TA XMAN 572 (MP) CIT VS. JAISWAL MOTOR FINANCE REPORTED AT [1983] 141 ITR 706(ALL) CIT VS. METAL & METALS OF INDIA REPORTED AT [2007] 2 08 CTR 457 (P&H) CIT VS. BURMA ELECTRO CORPORATION REPORTED AT [2003] 126 TAXMAN 533 (P&H) 10. IN HIS RIVAL SUBMISSIONS THE LD. SR. DR STRONGL Y SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESEN T CASE IT IS AN ADMITTED FACT THAT THE PARTNER OF THE ASSESSEE FIRM MADE THE CONTRIBUTION TOWARDS HIS CAPITAL ACCOUNT AND EXPLAINED THE SOURCE FOR THE SA ME. 11.1 ON A SIMILAR ISSUE THE HON'BLE MADHYA PRADESH HIGH COURT IN CASE OF CIT VS. METACHEM INDUSTRIES (SUPRA) HELD AS UNDER: ONCE IT IS ESTABLISHED THAT THE AMOUNT HAS BEEN INV ESTED BY A PARTICULAR PERSON, BE HE A PARTNER OR AN INDIVIDUAL, THEN THE RESPONSI BILITY OF THE ASSESSEE-FIRM IS OVER. THE ASSESSEE-FIRM CANNOT ASK THAT PERSON WHO MAKES INVESTMENT, WHETHER THE MONEY INVESTED IS PROPERLY TAXED OR NOT. THE ASSESS EE IS ONLY TO EXPLAIN THAT THE INVESTMENT HAS BEEN MADE BY THE PARTICULAR INDIVIDU AL AND IT IS THE RESPONSIBILITY OF THAT INDIVIDUAL TO ACCOUNT FOR THE INVESTMENT MA DE BY HIM. IF THAT PERSON OWNS THAT ENTRY, THEN THE BURDEN OF THE ASSESSEE-FIRM IS DISCHARGED. IT IS OPEN FOR THE ASSESSING OFFICER TO UNDERTAKE FURTHER INVESTIGATIO N WITH REGARD TO THAT INDIVIDUAL WHO HAS DEPOSITED THIS AMOUNT. SO FAR AS THE RESPON SIBILITY OF THE ASSESSEE IS CONCERNED, IT IS SATISFACTORILY DISCHARGED. WHETHER THAT PERSON IS AN INCOME-TAX PAYER OR NOT OR FROM WHERE HE HAD BROUGHT THIS MONE Y, IS NOT THE RESPONSIBILITY OF THE FIRM. THE MOMENT THE FIRM HAS GIVEN A SATISFACT ORY EXPLANATION AND PRODUCED THE PERSON WHO HAS DEPOSITED THE AMOUNT, THEN THE B URDEN OF THE FIRM IS DISCHARGED AND IN THAT CASE THAT CREDIT ENTRY CANNO T BE TREATED TO BE THE INCOME OF THE FIRM FOR THE PURPOSES OF INCOME-TAX. IT IS OPEN FOR THE ASSESSING OFFICER TO TAKE APPROPRIATE ACTION UNDER SECTION 69 AGAINST THE PERSON WHO HAS NOT BEEN ABLE TO EXPLAIN THE INVESTMENT. IN THE PRESENT CASE, THERE WAS THE CONCURRENT FINDI NG OF BOTH THE COMMISSIONER (APPEALS) AS WELL AS OF THE TRIBUNAL THAT THE FIRM HAD SATISFACTORILY EXPLAINED THE AFORESAID ENTRIES. THEREFORE, NO ADDITION IN THE IN STANT CASE COULD BE MADE IN THE 5 HANDS OF THE ASSESSEE-FIRM ON ACCOUNT OF THE CASH C REDITS IN THE NAMES OF ITS PARTNERS. 11.2 SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE ALL AHABAD HIGH COURT IN THE CASE OF CIT VS. JAISWAL MOTOR FINANCE(SUPRA) HELD A S UNDER: IT THERE ARE CASH CREDIT ENTRIES IN THE BOOKS OF THE FIRM IN WHICH THE ACCOUNTS OF THE INDIVIDUAL PARTNERS EXIST AND IT IS FOUND AS A FACT THAT CASH WAS RECEIVED BY THE FIRM FROM ITS PARTNERS THEN IN THE ABSENCE OF A NY MATERIAL TO INDICATE THAT THEY WERE PROFITS OF THE FIRM, IT COULD NOT BE ASSESSED IN THE HANDS OF THE FIRM. THEREFORE, THE TRIBUNAL DID NOT COMMIT ANY ERROR OF LAW AND RIGHTLY HELD THAT THE DEPOSITS SHOWN IN ITS ACCOUNTS WERE SATISFACTORILY EXPLAINED AND THAT THE ONUS PLACED ON THE ASSESSEE BY SECTION 68 HAD BEEN DULY DISCHARGED. 11.3 SIMILARLY THE HON'BLE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT VS. METAL & METALS OF INDIA (SUPRA) HELD AS UNDER: THAT THE FIRM HAD GIVEN EXPLANATION ABOUT THE SOU RCE, NAMELY, PARTNER, WHO HIMSELF WAS AN ASSESSEE. THE SAID PARTNER HAD ADMIT TED HAVING MADE DEPOSIT WITH THE FIRM. THUS, AS FAR AS THE FIRM WAS CONCERN ED, EVEN IF THE GIFT CLAIMED TO HAVE BEEN RECEIVED BY THE PARTNER WAS TO BE REJECTE D, THE SAID PARTNER MIGHT BE LIABLE TO BE TAXED BY TREATING THE SAID AMOUNT AS U NDISCLOSED INCOME, BUT THE FIRM COULD NOT BE SUBJECTED TO TAX ON THAT GROUND. THEREFORE, THE ADDITION IN THE HANDS OF THE FIRM WAS TO BE DELETED. 11.4 SIMILARLY THE HON'BLE PUNJAB & HARYANA HIGH CO URT IN THE CASE OF CIT VS. BURMA ELECTRO CORPORATION (SUPRA) HELD AS UNDER: THE ASSESSEE WAS A PARTNERSHIP CONCERN. THE ASSESSI NG OFFICER MADE ADDITIONS TO THE RETURNED INCOME ON ACCOUNT OF UNEXPLAINED CASH CREDITS IN THE CAPITAL ACCOUNTS OF THE PARTNERS. THE COMMISSIONER (APPEALS ) CONFIRMED THE ADDITIONS. ON SECOND APPEAL, THE TRIBUNAL FOUND THAT IT COULD NOT BE ESTABLISHED THAT THE PARTNERS HAD SUFFICIENT FUNDS IN THEIR POSSESSION T O PROVE THAT SAID INVESTMENTS WERE MADE FROM THAT FOUND IN THE CAPITAL ACCOUNTS. THE CONCERNED PARTNERS, HOWEVER, ADMITTED TO HAVE MADE THOSE INVESTMENTS. T HE TRIBUNAL FINALLY DELETED THE ADDITIONS ON THE GROUND THAT THE REVENUE AND FA ILED TO ESTABLISH THE AVAILABILITY OF FUNDS AT THE TIME OF INVESTMENT WIT H THE ASSESSEE AND FURTHER TO BRING ON RECORD ANY MATERIAL TO INDICATE THAT THOSE UNEXPLAINED INVESTMENTS WERE THE PROFITS OF THE ASSESSEE. IT HELD THAT AS S UCH SAID CREDITS COULD NOT BE ASSESSED AS THE INCOME OF THE ASSESSEE IN TERMS OF SECTION 68 BUT MIGHT BE ASSESSED IN THE INDIVIDUAL HANDS OF THE PARTNERS, I F IT IS PERMISSIBLE UNDER SECTION 69. 12. WE THEREFORE BY KEEPING IN VIEW THE RATIO LAID DOWN IN THE AFORESAID REFERRED TO CASES ARE OF THE VIEW THAT WHEN THE PAR TNER OF THE ASSESSEE FIRM ACCEPTED THAT HE DEPOSITED THE AMOUNT IN THE ASSESS EE FIRM AS A SHARE OF HIS CAPITAL CONTRIBUTION AND ALSO EXPLAINED THE SOURCE OF THE DEPOSITS THEN THE 6 ADDITION MADE IN THE HANDS OF THE ASSESSEE FIRM WAS NOT JUSTIFIED AND IF AT ALL THE A.O. WAS NOT SATISFIED FROM THE EXPLANATION / S OURCE OF THE PARTNER, THEN THE ADDITIONS COULD HAVE BEEN MADE IN THE INDIVIDUA L HANDS OF THE PARTNER IF IT WAS PERMISSIBLE UNDER SECTION 69 OF THE ACT. IN THAT VIEW OF THE MATTER THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) IS DELETED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. (ORDER PRONOUNCED IN THE OPEN COURT ON 07/01/2020 ) SD/- SD/- #$ % .., (SANJAY GARG ) ( N.K. SAI NI) & '(/ JUDICIAL MEMBER ! / VICE PRESIDENT AG DATE: 07/01/2020 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE (+ $ BY ORDER, ; # ASSISTANT REGISTRAR