DCIT, Trichur V. Chinnansons jewellery, Perinthalmanna

ITA 634/COCH/2005

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61491 (ITAT-COCHIN)
• Duration Of Justice: 7 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-04-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 27-05-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: JOSE POTTOKKARAN
• Keywords: Competent authority
• Section: 132

Judgement Text

1 ITA NO. 634/COCH/2005 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 634/COCH/2005 (ASSESSMENT YEAR 2001-02) DY.CIT, CENT.CIR. VS M/S CHINNANSONS JEWELLERY THRISSUR CALICUT ROAD, PERINTHALMANNA PAN : ACHPM4073E (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. S VIJAYAPRABHA RESPONDENT BY : SHRI JOSE POTTOKKARAN DATE OF HEARING : 18-04-2012 DATE OF PRONOUNCEMENT : 08-06-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX(A)-I, KOCHI DATED 08-02-2005 AND PERTAIN S TO ASSESSMENT YEAR 2001-02. 2. SMT. VIJAYAPRABHA, THE LD.DR SUBMITTED THAT THE ASSESSEE IS A PARTNERSHIP FIRM IN THE BUSINESS OF GOLD JEWELLERY. THE ASSESSING OFFI CER MADE ADDITION OF RS.2,21,53,425 BEING THE GOLD PURCHASED FROM THE PARTNERS AND LOAN FROM PARTNERS AND OTHERS. THE CIT(A) HOWEVER DELETED THE ADDITION MADE BY THE ASS ESSING OFFICER ON THE GROUND THAT THE PARTNERS COULD NOT EXPLAIN THE SOURCE FOR PURCH ASE OF GOLD JEWELLERY AND GIVING CREDIT TO THE FIRM. ACCORDING TO THE LD.DR, IN THE ABSENCE OF ANY MATERIAL TO SUGGEST THAT THE PARTNERS AND OTHERS HAVE SUFFICIENT SOURCE OF I NCOME FOR PURCHASE OF JEWELLERY AND GIVING LOAN TO THE FIRM, ACCORDING TO THE LD.DR, TH E COMMISSIONER OF INCOME-TAX(A) IS NOT CORRECT IN DELETING THE ADDITION MADE BY THE LOWER AUTHORITY. 2 ITA NO. 634/COCH/2005 3. ON THE CONTRARY, SHRI JOSE POTTOKKARAN, THE LD.R EPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS PURCHASED GOLD JEWELLERY FROM THE PART NERS TO THE EXTENT OF RS.58,50,000. SIMILARLY GOLD WAS PURCHASED FROM SHRI M.C. CHINNAN TO THE EXTENT OF RS.27,30,000. THE CREDIT IN THE NAME OF PARTNER IS RS.1,10,51,545. T HE ASSESSEE HAS ALSO RECEIVED LOAN FROM SHRI M.C. CHINNAN, SMT. MARY CHINNAN AND MR. R ANI ROY. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSING OFFICER MADE ADDIT ION ON PROTECTIVE BASIS. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT ALL THE PA RTNERS AND OTHERS, WHO SOLD GOLD AND GAVE LOAN TO THE ASSESSEE HAVE RETURNED SUFFICIENT INCOME IN THE REGULAR COURSE. THE DEPARTMENT HAS ASSESSED THE INCOME BY ACCEPTING THE RETURNS FILED BY THE RESPECTIVE PARTNER. AFTER THE SEARCH OPERATION U/S 132 OF THE INCOME-TAX ACT, THE VERY SAME INCOME WHICH WAS ASSESSED HERE WAS ASSESSED AS UNDI SCLOSED INCOME FOR THE BLOCK PERIOD ALSO. ACCORDING TO THE LD.REPRESENTATIVE, S INCE THE PARTNERS HAVE SUFFICIENT INCOME FOR PURCHASE OF GOLD AND GIVING LOAN TO THE FIRM, THERE CANNOT BE ANY ADDITION EITHER IN THE HANDS OF THE PARTNERS OR THE ASSESSEE . 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING THE YEAR UNDE R CONSIDERATION THE BOOKS OF ACCOUNT OF THE ASSESSEE SHOWED A PURCHASE OF 3,000 GMS OF J EWELLERY VALUING RS.11,70,000 EACH FROM FIVE PARTNERS, VALUING AGGREGATELY RS.58,50,00 0. THE CONTENTION OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES AND BEFORE THIS TRIBUN AL IS THAT THE PARTNERS PURCHASED GOLD OUT OF THE RETURNED INCOME AND SOLD IT TO THE FIRM. IT IS NOT IN DISPUTE THAT THE PARTNERS HAD RETURNED INCOME AND PAID TAXES. FROM THE ORDER OF THE COMMISSIONER OF INCOME- TAX(A), IT APPEARS THAT THE PARTNERS AND SHRI M.C. CHINNAN, WHO IS NONE OTHER THAN THE FATHER OF THE PARTNERS OF THE FIRM HAD DECLARED GOL D UNDER VDIS, 1997 SCHEME. THE RESPECTIVE PARTNERS CONFIRMED THAT THEY HAVE SOLD T HE GOLD AND ALSO GAVE LOAN TO THE ASSESSEE FIRM. THE REVENUE IS DOUBTING THE CREDITW ORTHINESS OF THE PARTNERS AND THE GENUINENESS OF THE TRANSACTION. THE IDENTITY OF TH E PARTNERS IS NOT IN DISPUTE. NO DOUBT, THE ASSESSEE IS EXPECTED TO PROVE THE GENUINENESS O F THE TRANSACTION AND THE 3 ITA NO. 634/COCH/2005 CREDITWORTHINESS. THE COMMISSIONER OF INCOME-TAX(A ) FOUND THAT THERE IS NO MATERIAL TO SUGGEST THAT THE CREDIT REPRESENTS THE ASSESSEES I NCOME. WHEN THE PARTNERS FILED THEIR RETURNS OF INCOME IN THE REGULAR COURSE DISCLOSING THE INCOME AND PAID TAXES, THE DEPARTMENT NOW CANNOT CONTEND THAT THE PARTNERS HAV E NO SUFFICIENT FUNDS FOR PURCHASING GOLD AND GIVING LOAN. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) DELETING THE ADDI TION OF RS.58,50,000 WITH REGARD TO PURCHASE OF GOLD JEWELLERY FROM THE PARTNERS. IN T HE CASE OF SHRI M.C. CHINNAN ALSO, THE CREDIT RELATES TO VALUE OF THE GOLD PURCHASED BY TH E FIRM. THE FACT REMAINS IS THAT SHRI M.C. CHINNAN CONFIRMED THE FACT OF SELLING THE GOLD TO THE FIRM WHICH WAS DECLARED TO THE DEPARTMENT UNDER VDIS. WHEN SHRI M.C. CHINNAN DECLARED THE GOLD UNDER VDIS AND THE COMPETENT AUTHORITY ACCEPTED THE DECLARATION IT MAY NOT BE CORRECT NOW TO DOUBT THE CREDITWORTHINESS OF SHRI M.C. CHINNAN TO SELL G OLD JEWELLERY TO THE ASSESSEE FIRM. THEREFORE, WE FIND THAT THE COMMISSIONER OF INCOME- TAX(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. WITH REGAR D TO THE CREDIT FOUND IN THE NAME OF PARTNERS, AS DISCUSSED EARLIER, THE RETURNED INCOME BY THE RESPECTIVE PARTNER IN THE REGULAR COURSE WAS USED FOR GIVING LOAN TO THE FIRM . AS RIGHTLY OBSERVED BY THE COMMISSIONER OF INCOME-TAX(A), THERE IS NO MATERIAL AVAILABLE ON RECORD TO SUGGEST THAT THE UNACCOUNTED PROFIT OF THE ASSESSEE WAS DIVERTED TO THE PARTNERS FOR MAKING SUCH CREDIT. THE PARTNERS CONFIRMED THE CREDIT GIVEN TO THE FIRM. THEREFORE, THIS TRIBUNAL FINDS NO INFIRMITY IN THE ORDER OF LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 5. IN RESPECT OF OTHER ADDITIONS IN THE NAME OF SHR I M.C. CHINNAN TO THE EXTENT OF RS.8,56,680 AND SMT. MARY CHINNAN RS.8,32,600 AND M RS. RANI ROY RS.8,32,600, ALL THE THREE HAVE FILED THEIR REGULAR RETURNS OF INCOME AN D CONFIRMED THE LOAN GIVEN TO THE FIRM. MRS. RANI ROY DECLARED AN INCOME OF RS.12 LA KHS FOR THE ASSESSMENT YEAR 2000-01. THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT AFTER PAYMENT OF INCOME-TAX RS.8,32,600 WAS AVAILABLE FOR GIVING TO THE ASSESSEE FIRM. SIM ILARLY, SMT. MARY CHINNAN ALSO FILED HERE REGULAR RETURNS OF INCOME AND HAS SOURCE FOR G IVING LOAN TO THE FIRM. IN THIS FACTUAL ASPECT AND IN THE ABSENCE OF ANY OTHER MATERIAL TO CONTRADICT THE FINDINGS RECORDED BY 4 ITA NO. 634/COCH/2005 THE COMMISSIONER OF INCOME-TAX(A), THIS TRIBUNAL HA S NO HESITATION TO CONFIRM THE ORDER OF COMMISSIONER OF INCOME-TAX(A). ACCORDINGLY THE ORDER OF COMMISSIONER OF INCOME- TAX(A) IS CONFIRMED AND THE APPEAL OF THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 08 TH JUNE, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 08 TH JUNE, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH