M/s. Rajmani Khandshari Udhyog, Dist.Surat V. The Income tax Officer,Ward-5(3), Surat

ITA 954/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6632 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 25-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 02-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: K R GHEEWALA
• Keywords: Unexplained cash credit; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.954/AHD/2007 ASSESSMENT YEAR:2003-04 DATE OF HEARING:25.3.10 DRAFTED:25.3.10 M/S. RAJMANI KHANDSARI YDHYOG AT & POST: MOTA BORASARA, TAL. MANGROL, DIST. SURAT PAN NO.AADFR1790H V/S. INCOME TAX OFFICER, WARD-5(3)/SRT, AAYKAR BHAVAN, MAJURA GATE, SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI K.R.GHEEWALA, AR RESPONDENT BY:- SHRI M.C. PANDIT, SR-DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-III, SURAT IN APPEAL NO.CAS-II I/120/06-07 DATED 20-12-2006. THE ASSESSMENT WAS FRAMED BY THE ITO, WARD-5(3), SU RAT U/S.143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 17-03-2006 FOR THE ASSESSMENT YEAR 2003-04. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFIC ER ON ACCOUNT OF CAPITAL INTRODUCED BY THE PARTNERS IN THE FIRM. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING THREE EFFECTIVE GROUND:- 1. THE LEARNED C.I.T.(A) & THE A.O HAVE FAILED TO APPRECIATE THAT NO ADDITION CAN BE MADE IN THE FIRMS CASE FOR NEW CAPITAL INTR ODUCED BY THE PARTNERS WHEN THE PARTNERS ARE ALSO ASSESSED TO TAX. 2. THE LEARNED C.I.T.(A) HAS ERRED IN CONFIRMING & THE LEARNED A.O HAS ERRED IN MAKING THE ADDITION OF RS.1407335/- BEING THE NE W CAPITAL INTRODUCED BY TWO PARTNERS, AS UNEXPLAINED CASH CREDIT. ITA954.AHD/2007 A.Y.2003 -04 M/S RAJMANI KHANDSARI UDHYOG V. ITO WD-5(3)/SRT PAGE 2 3. THE LEARNED C.I.T.(A) & THE A.O HAVE GROSSLY ERR ED IN UNDERMINING THE DOCUMENTARY EVIDENCES FURNISHED BY THE APPELLANT, I N THE FORM OF, THREE YEARS OF I.T. ACKNOWLEDGEMENTS & PERSONAL BALANCE SHEETS OF PARTNERS & COPIES OF 7/12 & 8A, EVIDENCING AGRICULTURAL LANDHOLDINGS OF THE PARTNERS. 3. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS OF THE CASE, WE FIND THAT BOTH THE PARTNERS ARE ASSESSED TO TAX AND THE ASSESSEE HAS ENCLOSED THE ACKNOWLEDGMENT OF RETURNS FILED WITH THE DEPARTMENT IN THE PAPER BOOK AND ALSO FURNISHED COPIES OF PERSONAL BALANCE-SHEET OF PARTN ERS. IN VIEW OF THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW T HAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE B Y THE DECISION WE FIND THAT THE ISSUE IS DULY COVERED BY THE DECISION OF THIS TRIBU NAL OF AHMEDABAD BENCH C IN ITA NO.3886/AHD/2008 DATED 05-06-2009 IN THE CASE OF ITO V. M/S. EMPIRE TRADE CENTRE , WHEREIN THE TRIBUNAL RELYING ON THE DECISION OF H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. PANKAJ DYESTUFF INDUSTRIES, HELD AS UNDER:- 3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S AND, PERUSED THE MATERIAL ON RECORD. OF THE HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES (SUPRA), IN WHICH IT WAS HELD 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 THE CASE OF THE REVENUE THAT THE PARTNERS OF THE ASSESSEE FIRM ARE FICTITIOUS. THE I NCOME TAX OFFICER HAS NOT DISPUTED THAT E CREDITS IN THE ACCOUNTS OF THE PART NERS WERE DEPOSITS FROM THE PARTNERS. MOREOVER, IT IS AN ADMITTED POSITION THA T THIS AS THE SECOND YEAR OF THE FIRM, AND THAT IT WAS RUNNING IN LOSS, IS TRU E THAT THE INCOME TAX OFFICER DID HOT ACCEPT, THE EXPLANATION GIVEN O N BEHALF OF THE ASSESSEE IN, RESPECT OF THE NEW DEPOSITS OR CASH CREDITS IN THE ACCOUNTS OF' THE PARTNERS. THE MERE NON-ACCEPTANCE OF THAT EXPLANATI ON DOES NOT, HOWEVER, PROVIDE MATERIAL FOR FINDING THAT THE SAID SU M REPRESENTED INCOME OF THE ASSESSEE FIRM. AS HELD BY THE ALLAHABAD HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX, ALLAHABAD 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 PARTNERS1 ACCOUNTS COULD I NOT BE ASSESSED IN THE HANDS OF THE FIRM. ONCE THE' PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED IN THEIR ACCOUNTS ARE THEIR OWN THE INCOME TAX OFFICER IS ENTITLED TO AND MAY PROCEED AGAINST THE PARTNERS AND ASSESS THE SAME IN THEIR HANDS, IF THEIR EXPLANATION IS NOT FOUND SATISFACTORY. 14. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE, .BOTH, THE DEPUTY CIT (APPEALS) AND THE TRIBUNAL HAVE FOUND THAT THE ASSESSEE HAD DISCHARGED THE PRIMARY ONUS, WHICH WAS ON IT BY OFFERING EXPLA NATION, WHICH HAS NOT BEEN FOUND TO BE, INCORRECT OR FALSE IN ANY MANNER. THE INTEREST OF THE REVENUE IS ALSO SAFEGUARDED AS THE INCOME TAX OFFICER HAS BEEN .GIVEN 'THE LIBERTY TO ITA954.AHD/2007 A.Y.2003 -04 M/S RAJMANI KHANDSARI UDHYOG V. ITO WD-5(3)/SRT PAGE 3 CONSIDER THE SAID CREDITS IN THE HANDS OF THE PARTN ERS 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 WAS RIGHT IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.S7.250/- BEING DEPOSITS IN THE ACCOU NTS OF THE PARTNERS. THE QUESTION REFERRED TO THIS COURT IS, ACCORDINGLY, ANSWERED IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH E JURISDICTIONAL HIGH COURT, WE DELETE THE ADDITION MADE BY THE AO IN RESPECT OF CA PITAL INTRODUCED BY THE PARTNERS WITH THE DIRECTION THAT THE AO SHALL BE FREE TO PRO CEED AGAINST THE PARTNERS AND ASSESS THE SAME IN THE HANDS OF THE PARTNERS IF THE IR EXPLANATION IS NOT FOUND SATISFACTORY. THUS, GROUND NO.1 STANDS DISMISSED. 4. THE FACTS BEING EXACTLY IDENTICAL IN THE PRESENT CASE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT AND O F THE TRIBUNAL, WE DELETE THE ADDITION AND THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 5. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWA NCE OF 1/5 TH OF VEHICLE EXPENSES, CAR DEPRECIATION AND TELEPHONE EXPENSES BY HOLDING THE SAME FOR PERSONAL USE. 6. AFTER HEARING BOTH THE SIDES, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY CONFIRMED THE ACTION OF THE ASSESSING OFFICER AS THE ASSESSEE NEITHER BEFORE THE CIT(A) NOR NOW BEFORE US HAS NOT DENIED THAT THERE IS NO ELEMENT OF PERSO NAL USER. ACCORDINGLY, CONFIRMED THE ORDER OF CIT(A) ON THIS ISSUE. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY. ORDER PRONOUNCED IN OPEN COURT ON 09/04/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 09/04/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 4 . THE CIT CONCERNS. 2. THE RESPONDENT. 5. THE DR, ITAT, AHMEDABAD 3. THE CIT(APPEALS)-III, SURAT 6. GUA RD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD