M/s Amrik Singh BKO, Ludhiana V. ITO, Ludhiana

ITA 885/CHANDI/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2300 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 27-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Assessee Lawyers: LALIT TAKIAR
• Keywords: Income from undisclosed sources; Additional evidence; Corroborative evidences; Procedural lapse
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH SMC, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.885/CHD/2012 (ASSESSMENT YEAR : 2006-07) M/S AMRIK SINGH BKO, VS. THE INCOME TAX OFFICER, VILLAGE KARIMPURA, WARD III(2), LUDHIANA. LUDHIANA. PAN: AAMFA1834C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI LALIT TAKIAR RESPONDENT BY : SHRI J.S.NAGAR, DR DATE OF HEARING : 27.05.2013 DATE OF PRONOUNCEMENT : 29.05.2013 O R D E R THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, LUDHIANA DA TED 12.06.2012 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORD ER PASSED U/S 143(3) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE ONLY EFFECTIVE GROUND OF APPEAL RAISED BY TH E ASSESSEE READS AS UNDER: 2. THAT THE APPLICATION FILED UNDER RULE 46(A) OF INCOME TAX RULES, FOR CONSIDERING CERTIFIED COPY OF THE PARTNERSHIP DEED AND SOURCE OF THE NEW CREDIT IN THE ACCOUNT OF THE PARTNER S.BALJIT SINGH RS.70000/- AND ACHINT BAWEJA RS.50000/-, HAS BEEN WRONGLY REJECTED BY THE LEARNED CIT(A). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM CONSTITUTED ON 7.12.2005, WHICH CONSISTS OF TW O PARTNERS S/SHRI BALJIT SINGH AND ACHINT BAWEJA. THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY AND DAY-TO-DAY QUESTIONNAIRES AND SHOW CAUSE NOTICES WERE 2 ISSUED TO THE ASSESSEE. THE ASSESSING OFFICER NOTI CED THE ASSESSEE TO HAVE DEBITED INTEREST TO PARTNERS OF RS.22,432/- AN D SALARY OF RS.16,000/- THE ASSESSEE WAS REQUIRED TO FILE CERTIFIED COPY OF THE INSTRUMENT OF PARTNERSHIP DEED ALONGWITH RETURN OF INCOME AS PER THE PROVISIONS OF SECTION 184 OF THE ACT. THE ASSESSING OFFICER NOTE D THAT NO CERTIFIED COPY OF THE PARTNERSHIP DEED WAS FILED ALONGWITH TH E RETURN OF INCOME. THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE SALARY A ND INTEREST PAID TO THE PARTNERS MAY NOT BE DISALLOWED IN THE ABSENCE O F THE CERTIFIED COPY OF THE PARTNERSHIP DEED HAVING BEEN NOT FILED. THE ASSESSEE FAILED TO FILE REPLY TO THE SAID NOTICE. THE ASSESSING OFFIC ER APPLYING THE PROVISIONS OF SECTION 185 OF THE ACT DISALLOWED THE AMOUNT OF INTEREST AND SALARY PAID TO THE PARTNERS TOTALING RS.38,432/ -. FURTHER THE PARTNERS OF THE ASSESSEE FIRM HAD INTRODUCED RS.17,51,896/- AND RS.50,000/- BY S/SHRI BALJIT SINGH AND ACHINT BAWEJA RESPECTIVELY. THE EXPLANATION OF THE ASSESSEE IN RESPECT OF THE INVESTMENT MADE BY S HRI BALJIT SINGH BEFORE THE ASSESSING OFFICER WAS AS UNDER: (I) RS.10,31,895/- ON ACCOUNT OF ASSETS OF M/S AMRI K SINGH BK (PROPRIETORSHIP CONCERN) (II) RS.6,50,000/- WITHDRAWN FROM M/S JAGDAMBA BRI CK KILN (III) RS.70,000/- OUT OF CASH OF M/S AMRIK SINGH BK O (PROPRIETORSHIP CONCERN) 4. THE ASSESSING OFFICER ACCEPTED THE INVESTMENT OF RS.1031,895/- AND RS.6,50,000/- AS THE ASSESSEE HAS FLED SUPPORTI NG EVIDENCE. HOWEVER, THE ASSESSEE FAILED TO FURNISH ANY INFORMA TION IN RESPECT OF CASH INTRODUCTION OUT OF WITHDRAWAL FROM THE PROPRI ETARY CONCERN. THE ASSESSING OFFICER FURTHER NOTED THAT THE BUSINESS W AS TAKEN OVER BY THE ASSESSEE FIRM ON 7.12.2005, WHEREAS THE CASH AMOUNT WAS INVESTED ON 14.2.2006 OF RS.50,000/- AND ON 18.2.2006 OF RS.20, 000/-. IN THE ABSENCE OF THE EXPLANATION OF THE ASSESSEE, THE SAI D AMOUNT WAS ADDED AS 3 INCOME OF THE ASSESSEE. IN RESPECT OF THE CASH INT RODUCTION OF RS.50,000/- BY SHRI ACHINT BAWEJA AS NO SUPPORTING EVIDENCE WAS FILED BY THE ASSESSEE, THE SAID SUM OF RS.50,000/- WAS AD DED AS INCOME FROM UNDISCLOSED SOURCES IN THE HANDS OF THE ASSESSEE FI RM. 5. BEFORE THE CIT (APPEALS), THE ASSESSEE HAD FILED APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE I.E. BY WAY OF CER TIFIED COPY OF PARTNERSHIP DEED IN SUPPORT OF THE CLAIM OF EXPENDI TURE ON ACCOUNT OF INTEREST AND SALARY PAID TO THE PARTNERS. FURTHER THE ASSESSEE HAD ALSO FURNISHED VARIOUS EVIDENCES IN SUPPORT OF THE CAPIT AL INTRODUCTION BY BOTH THE PARTNERS. THE PERUSAL OF THE APPELLATE OR DER REFLECTS THAT THOUGH THE CIT (APPEALS) ACKNOWLEDGES THAT THE ASSESSEE HA D SUBMITTED AN APPLICATION FOR ADDITIONAL EVIDENCE ALONGWITH CERTI FIED COPY OF THE PARTNERSHIP DEED BUT HAD REJECTED THE SAME AS THE S AID EVIDENCE WAS NOT FURNISHED BEFORE THE ASSESSING OFFICER. THE ADDITI ON MADE BY THE ASSESSING OFFICER IN RELATION TO THE SALARY AND INT EREST PAID TO THE PARTNERS WAS CONFIRMED BY THE CIT (APPEALS). THE A SSESSEE ALSO FURNISHED ADDITIONAL EVIDENCE IN RESPECT OF THE ADD ITION TO THE CAPITAL ACCOUNT OF SHRI BALJIT SINGH BUT THE SAME WAS ALSO NOT ACCEPTED BY THE CIT (APPEALS) AND THE ADDITION OF RS.1,30,000/- WAS CONFIRMED. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE CIT (APPEALS). SHRI LALIT TAKIAR APPEARED FOR THE ASSESSEE AND SHR I J.S.NAGAR PUT IN APPEARANCE ON BEHALF OF THE REVENUE AND PUT FORWARD THEIR CONTENTIONS. 7. ON THE PERUSAL OF THE RECORD AND VARIOUS EVIDENC ES FILED BY THE ASSESSEE, IT IS APPARENT THAT THE ASSESSEE FIRM WAS CONSTITUTED BY THE INSTRUMENT OF PARTNERSHIP DEED DATED 7.12.2005. TH IS WAS THE FIRST YEAR OF ASSESSMENT IN THE HANDS OF THE ASSESSEE FIRM. T HE ASSESSEE WAS ENGAGED IN THE BUSINESS OF BRICK KILN. THE FIRST I SSUE ARISING IN THE 4 PRESENT APPEAL IS IN RELATION TO THE ALLOWABILITY O F SALARY AND INTEREST PAID TO THE PARTNERS. THE ASSESSEE FIRM HAD ENCLOS ED PHOTOCOPY OF THE PARTNERSHIP DEED ALONGWITH RETURN OF INCOME BUT HAD FAILED TO FILE CERTIFIED COPY OF THE PARTNERSHIP DEED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, THE SAID CERTIFIED COPY WAS FILED BEFORE THE CIT (APPEALS) BY WAY OF ADDITIONAL EVIDENCE AND AN APPL ICATION WAS MADE FOR ADMISSION OF THE SAID ADDITIONAL EVIDENCE. THE SAI D APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE MOVED BY THE ASSES SEE WAS REJECTED BY THE CIT (APPEALS) AS THE ASSESSEE HAD FAILED TO FUR NISH CERTIFIED COPY OF PARTNERSHIP DEED IN RESPONSE TO THE SHOW CAUSE NOTI CE ISSUED BY THE ASSESSING OFFICER. I FIND NO MERIT IN THE SAID STA ND OF THE CIT (APPEALS) ESPECIALLY IN THE CIRCUMSTANCES WHERE PHOTOCOPY OF THE DOCUMENTS WAS AVAILABLE ON RECORD. THE PHOTO COPY OF PARTNERSHIP DEED WAS FILED ALONGWITH RETURN OF INCOME. NON-FILING OF CERTIFIE D COPY OF PARTNERSHIP DEED IN SUCH CASES WHERE PHOTOCOPY OF THE INSTRUMEN T OF PARTNERSHIP DEED HAD ALREADY BEEN FILED ALONGWITH RETURN OF INC OME, WAS A PROCEDURAL IRREGULARITY AND COULD BE RECTIFIED BY M ERE FILING OF THE DOCUMENT. THE ASSESSEE HAD FILED SUCH DOCUMENTS BE FORE THE CIT (APPEALS) AS AN ADDITIONAL EVIDENCE AND THE SAME ME RITS TO BE ACCEPTED. THE PERUSAL OF THE ASSESSMENT ORDER REFLECTS THE AS SESSING OFFICER TO HAVE ACCEPTED THE STATUS OF THE ASSESSEE AS FIRM. NO ORDER IN ASSESSING THE INCOME UNDER THE STATUS OF AOP HAS BEEN PASSE D BY THE ASSESSING OFFICER IMPLYING THEREBY ONLY SALARY AND INTEREST P AID TO THE PARTNERS WAS NOT ALLOWED AS DEDUCTION BUT THE ASSESSEE WAS A SSESSED UNDER THE STATUS OF FIRM. ONCE THE CERTIFIED COPY OF THE I NSTRUMENT OF PARTNERSHIP DEED HAS BEEN SO FILED BY THE ASSESSEE FIRM, THE DEDUCTION ON ACCOUNT OF SALARY AND INTEREST PAID TO THE PARTN ERS AS EVIDENCED BY THE PARTNERSHIP DEED IS TO BE ALLOWED IN THE HANDS OF T HE ASSESSEE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALL OW THE CLAIM OF SALARY 5 AND INTEREST PAID TO THE PARTNERS AS DEDUCTION WHIL E COMPUTING THE INCOME OF THE ASSESSEE FIRM FOR THE CAPTIONED ASSES SMENT YEAR. 8. THE SECOND PART OF THE ISSUE ARISING IN THE PRES ENT APPEAL IS IN RELATION TO THE INVESTMENT MADE BY THE PARTNERS. S HRI BALJIT SINGH, ONE OF THE PARTNERS HAD INVESTED RS.17,51,896/- AS HIS CAPITAL INVESTMENT DURING THE YEAR UNDER CONSIDERATION AND ONLY INVEST MENT OF RS.70,000/- WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE EXP LANATION OF THE ASSESSEE IN THIS REGARD WAS THAT EARLIER THE BUSINE SS OF BRICK KILN WAS BEING CARRIED OUT IN THE SOLE PROPRIETARY CONCERN O F S/SHRI BALJIT SINGH. THE SAID BUSINESS WAS TAKEN OVER ON 7.12.2005 BY TH E ASSESSEE FIRM. THE ASSESSEE HAS PLACED ON RECORD COPY OF LEDGER ACCOUN T OF SHRI BALJIT SINGH, PARTNER IN THE BOOKS OF ACCOUNT OF THE ASSES SEE FIRM AND THERE WAS CASH DEPOSIT OF RS.50,000/- ON 14.2.2006 AND RS.20, 000/- ON 18.2.2006, IN ADDITION TO VARIOUS OTHER ENTRIES WHICH HAVE BEE N ACCEPTED BY THE ASSESSING OFFICER. THE EXPLANATION OF THE ASSESSEE WAS THAT IT HAD WITHDRAWN THE SAID AMOUNT FROM ANOTHER SOLE PROPRIE TARY CONCERN I.E. M/S JAGDAMBA BRICK TRADER, BILASPUT. THE COPY OF A CCOUNT OF THE SAID CONCERN IS ALSO PLACED IN THE PAPER BOOK AND THERE IS WITHDRAWAL OF RS.20,000/- ON 10.2.2006 AND RS.50,000/- ON 11.2.20 06 IN ADDITION TO CONSTANT WITHDRAWAL OF RS.20,000/- PER MONTH. EVEN ANOTHER SUM OF RS.20,000/- WAS WITHDRAWN ON 17.2.2006. THE ABOVE SAID EVIDENCES WERE FILED BEFORE THE ASSESSING OFFICER AS IS EVIDE NT FROM THE ASSESSMENT ORDER. IN THE TOTALITY OF THE FACTS AND CIRCUMSTAN CES OF THE CASE, NO ADDITION IS WARRANTED ON ACCOUNT OF THE AFORESAID I NVESTMENT OF RS.70,000/- BY ONE OF THE PARTNERS SHRI BALJIT SING H. ACCORDINGLY, ADDITION OF RS.70,000/- MADE BY THE AUTHORITIES BEL OW IS HEREBY DELETED. THE SECOND PARTNER IN THE ASSESSEE FIRM SHRI ACHINT BAWEJA HAD INTRODUCED A SUM OF RS.50,000/- ON 7.12.2005 AS HIS CAPITAL CONTRIBUTION. 6 HE WAS ALSO CARRYING ON THE BUSINESS OF BRICK WORKS AS SOLE PROPRIETARY CONCERN OF M/S OM BRICK WORKS. THE SAID BUSINESS W AS CARRIED ON FOR QUITE SOME TIME AND THE AVAILABILITY OF CASH OF RS. 50,000/- IN THE HANDS OF THE SAID PERSON COULD NOT BE DOUBTED IN THE SAID FACTS AND CIRCUMSTANCES OF THE CASE. THERE IS NO MERIT IN TH E SAID ADDITION OF RS.50,000/- BEING CASH INTRODUCED BY THE PARTNER OF THE ASSESSEE FIRM. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE SAI D ADDITION OF RS.50,000/-. THE GROUND NO.2 RAISED BY THE ASSESSE E IS ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF MAY, 2013. SD/- (SUSHMA CHOWLA) JUDICIAL MEMBER DATED 29 TH MAY , 2013 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH