The ITO, Ward-4, Mehsana V. M/s. Samir Finance, Dist.Mehsana

ITA 565/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5826 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-06-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 14-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDHAN SRDR
• Assessee Lawyers: S N DIVETIA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.565/AHD/2008 ASSESSMENT YEAR:2002-03 DATE OF HEARING:30.6.10 DRAFTED:30.6.10 INCOME TAX OFFICER, WARD-4, MEHSANA V/S. M/S. SAMIR FINANCE, AT & POST SATLASANA, DIST. MEHSANA PAN NO.AXXFS0032R (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI K. MADHUSUDHAN,SR-DR RESPONDENT BY:- SHRI S.N, DIVETIA, AR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE O RDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-GANDHINAGAR IN APPEAL NO. CIT(A )/GNR/135/2006-07 DATED 21-11-2007. THE ASSESSMENT WAS FRAMED BY THE ITO, W ARD-4, MEHSANA U/S.143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 21-12-2006 FOR THE ASSESSMENT YEAR 2002 -03. 2. THE TWO INTER-CONNECTED ISSUES IN THIS APPEAL OF REVENUE ARE AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION OF RS.15,,64, 500/- ON ACCOUNT OF UNEXPLAINED CAPITAL INTRODUCED BY THE PARTNERS IN THE FIRM AND CONSEQUENTIAL DISALLOWANCE OF INTEREST MADE BY ASSESSING OFFICER. 3. AT THE OUTSET, THE LD. COUNSEL FOR ASSESSEE, SHR I S.N. DIVETIA STATED IN REGARD TO THE DELETION OF ADDITION OF CAPITAL INTRODUCED B Y THE PARTNERS IN THE FIRM THAT BOTH THE PARTNERS ARE REGULARLY ASSESS TO TAX AND THE CA PITAL OF RS.13.10 LAKHS AND RS.2,54,500/- RESPECTIVELY BY BOTH THE PARTNERS INT RODUCED ON VARIOUS DATES STAND CREDITED IN THE BOOKS OF ACCOUNT OF THE FIRM AND EV EN BOTH THE PARTNERS ARE MAINTAINING REGULAR BOOKS OF ACCOUNT. IT WAS STATE D BY THE LD. COUNSEL THAT ASSESSEE HAS FILED THE CONFIRMATION OF BOTH THE PAR TNERS, COPIES OF RETURN OF INCOME, ITA NO.565/AHD/2008 A.Y. 2002-03 ITO WD-4 MSN V. M/S. SAMIR FINANCE PAGE 2 PROFIT & LOSS A/C. BALANCE SHEET, CAPITAL ACCOUNTS OF BOTH THE PARTNERS ALONG WITH COPIES OF THE RELEVANT PAGES FROM THEIR INDIVIDUAL CASH BOOKS. IN VIEW OF THESE FACTS, LD. COUNSEL FOR THE ASSESSEE STATED THAT ISSUE IS S QUARELY COVERED BY THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT V. PANKAJ DYESTUFF INDUSTRIES IN IT REFERENCE NO.241 OF 1993 ORDER DATED 06-07-2005. ON THE OTHER HAND LD.SR-DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 4. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES (SUPRA) HAS LAID DOWN THE PRINCIPLE IN RESPECT TO THE PARTNERS CAPITAL INTRODUCED IN FIRM, AS UNDER:- 13.APPLYING THE AFORESAID PRINCIPLES TO THE FACTS OF THE PRESENT CASE, IT IS APPARENT THAT THE ASSESSEE HAD FURNISHED THE DETAIL S WHICH WOULD DISCHARGE THE ONUS WHICH LAY ON THE ASSESSEE. IT IS NOT THE CASE OF THE REVENUE THAT THE PARTNERS OF THE ASSESSEE FIRM ARE FICTITIOUS. THE INCOME TAX OFFICER HAS NOT DISPUTED THAT THE CREDITS IN THE ACCOUNTS OF THE PARTNERS WERE NO T DEPOSITS FROM THE PARTNERS. MOREOVER, IT IS AN ADMITTED POSITION THAT THIS WAS THE SECOND YEAR OF THE FIRM, AND THAT IT WAS RUNNING IN LOSS. IT IS TRUE THAT THE IN COME TAX OFFICER DID NOT ACCEPT THE EXPLANATION GIVEN ON BEHALF OF THE ASSESSEE IN RESPECT OF THE NEW DEPOSITS OR CASH CREDITS IN THE ACCOUNTS OF THE PARTNERS. TH E MERE NON-ACCEPTANCE OF THAT EXPLANATION DOES NOT, HOWEVER, PROVIDE MATERIA L FOR FINDING THAT THE SAID SUM REPRESENTED INCOME OF THE ASSESSEE FIRM. A S HELD BY THE ALLAHABAD HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX, A LLAHABAD 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' A CCOUNTS COULD NOT BE ASSESSED IN THE HANDS OF THE FIRM. ONCE THE PARTNER S HAVE OWNED THAT THE MONIES DEPOSITED IN THEIR ACCOUNTS ARE THEIR OWN, T HE INCOME TAX OFFICER IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AN D ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATION IS NOT FOUND SATISFACTO RY. 14. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE, BOTH THE DEPUTY CIT (APPEALS) AND THE TRIBUNAL HAVE FOUND THAT THE ASSE SSEE HAD DISCHARGED THE PRIMARY ONUS WHICH WAS ON IT BY OFFERING EXPLANATIO N, WHICH HAS NOT BEEN FOUND TO BE INCORRECT OR FALSE IN ANY MANNER. THE INTEREST O F THE REVENUE IS ALSO SAFEGUARDED AS THE INCOME TAX OFFICER HAS BEEN GIVE N THE LIBERTY TO CONSIDER THE SAID CREDITS IN THE HANDS OF THE PARTNERS IF HE IS NOT SATISFIED WITH THE SOURCES OF INVESTMENT OF CASH CREDITS IN THE ACCOUN TS OF THE PARTNERS. 15. IN THESE CIRCUMSTANCES, IT IS NOT POSSIBLE TO F IND THAT THE ORDER OF THE TRIBUNAL SUFFERS FROM ANY INFIRMITY WHICH WOULD REQUIRE INTE RFERENCE AT THE HANDS OF THIS COURT. ACCORDINGLY, IT IS HELD THAT THE TRIBUNAL WA S RIGHT IN LAW AND ON FACTS IN ITA NO.565/AHD/2008 A.Y. 2002-03 ITO WD-4 MSN V. M/S. SAMIR FINANCE PAGE 3 DELETING THE ADDITION OF RS.87,250/- BEING DEPOSITS IN THE ACCOUNTS OF THE PARTNERS. THE QUESTION REFERRED TO THIS COURT IS, A CCORDINGLY, ANSWERED IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE. WE FURTHER FIND THAT THE CIT(A) DELETED THE ADDITIO N BY GIVING FOLLOWING REASONING IN PARA-3.2 OF HIS APPELLATE ORDER:- . 3.2 THEREFORE, KEEPING ALL THINGS IN MIND, THE ADD ITION OF RS.15,64,500/- IS DELETED ON ACCOUNT OF CAPITAL INTRODUCED BY THE PAR TNERS IN THE HANDS OF FIRM. IT IS HOWEVER CLARIFIED THAT THIS IS NOT TO BE TREATED AS COMMENT, POSITIVE OR NEGATIVE, ON THE ISSUE WHETHER THE FUNDS HAD EXPLAI NED OR UNEXPLAINED SOURCES. FURTHER IT DOES NOT PRECLUDE ASSESSING OFF ICER TO TAKE ANY ACTION, AS PER LAW, IN THE HANDS OF THE INDIVIDUAL PARTNERS. WE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES (SUPRA), STATE THAT NO ADDITION U/S.68 OF THE ACT CAN BE MADE IN CASE THE PARTNER INTRODUCES CAPITAL IN FIRM AND HE IS ASSESSED TO TAX SEPARATELY. IN THAT CASE, THE FUND HAS TO BE EXPLAI NED ONLY IN HIS INDIVIDUAL CASE AND NOT IN THE CASE OF FIRM. ACCORDINGLY, THIS INTER-C ONNECTED ISSUE OF REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30/06/2010 SD/- SD/- (A.N.PHAUJA) (MAHAVIR S INGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED :30/06/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-GNR 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD