M/s Janatha Jewellery, Thrissur V. DCIT, Thrissur

ITSSA 128/COCH/2004

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8161 (ITAT-COCHIN)
• Duration Of Justice: 7 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 01-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 03-12-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: JOSE POTTOKKARAN
• Section: 132

Judgement Text

1 IT(SS)A NO. 17/COCH/2005 IT(SS)A NO.128/COCH/2004 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(SS)A NO. 17/COCH/2005 (BLOCK PERIOD 01-04-1995 TO 20-11-2001) DY.CIT, CENT.CIR. VS M/S JANATHA JEWELLERY THRISSUR M.O. ROAD, THRISSUR PAN : AADFP1083C (APPELLANT) (RESPONDENT) I.T(SS)A NO. 128/COCH/2004 (BLOCK PERIOD 01-04-1995 TO 20-11-2001) M/S JANATHA JEWELLERY VS DY.CIT, CENT.CIR. THRISSUR THRISSUR REVENUE BY : SMT. S VIJAYAPRABHA ASSESSEE BY : SHRI JOSE POTTOKKARAN DATE OF HEARING : 18-04-2012 DATE OF PRONOUNCEMENT : 01-06-2012 O R D E R PER N.R.S. GANESAN (JM) BOTH THE APPEAL OF THE REVENUE AND THE ASSESSEE AR E DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- I, KOCHI DATED 25-10-2004 AND PERTAINS TO BLOCK PERIOD 01-04-1995 TO 20-11-2001. SINCE BOTH THE APPEAL OF THE REVENUE AND THE ASSESSEE ARISE OUT OF THE SAME ORDE R OF THE COMMISSIONER OF INCOME- TAX(A), WE HEARD THEM TOGETHER AND ARE DISPOSING OF THE SAME BY THIS COMMON ORDER. 2 IT(SS)A NO. 17/COCH/2005 IT(SS)A NO.128/COCH/2004 2. LET US FIRST TAKE THE DEPARTMENTAL APPEAL IN ITS S NO.17/COCH/2005. THE ONLY ISSUE ARISES FOR CONSIDERATION IN THIS APPEAL IS DE LETION OF ADDITION MADE BY THE ASSESSING OFFICER WHICH WAS CREDITED IN THE NAMES OF THE PART NERS OF THE FIRM. 3. SMT. S VIJAYAPRABHA, THE LD.DR SUBMITTED THAT TH ERE WAS SEARCH IN THE PREMISES OF THE ASSESSEE FIRM U/S 132 OF THE INCOME-TAX ACT ON 20-11-2001. DURING THE COURSE OF SEARCH OPERATION DIFFERENCE IN STOCKS OF GOLD JEWEL LERY AND CREDITS IN THE ACCOUNTS OF THE FIRM WERE FOUND. ACCORDING TO THE LD.DR, THE ASSES SEE COULD NOT EXPLAIN THE INCOME OF THE INDIVIDUAL PARTNERS TO ADVANCE MONEY TO THE FIR M. IN THE ABSENCE OF ANY MATERIAL, ACCORDING TO THE LD.DR, THE ASSESSING OFFICER HELD THAT THE INCOME OF THE FIRM WAS DIVERTED TO THE PARTNERS. THEREFORE, THE CREDITS F OUND IN THE NAMES OF THE PARTNERS IN THE BOOKS OF ACCOUNT WERE TREATED AS UNDISCLOSED IN COME FOR THE BLOCK PERIOD. ACCORDING TO THE LD.REPRESENTATIVE, IN THE ABSENCE OF ANY MATERIAL, THE ASSESSING OFFICER HAS RIGHTLY TREATED THE SAME AS UNDISCLOSED INCOME. 4. ON THE CONTRARY, SHRI JOSE POTTOKKARAN, THE LD.R EPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT ALL THE PARTNERS HAVE FILED THEIR RE TURNS OF INCOME IN THE REGULAR COURSE BEFORE THE DATE OF SEARCH DISCLOSING THE INCOME. R EFERRING TO THE PAPER BOOK, THE LD.REPRESENTATIVE SUBMITTED THAT FOR THE ASSESSMENT YEAR 1996-97, THE PARTNER SHRI M.C. CHINNAN HAS INVESTED RS.10 LAKHS WHICH WAS DISCLOSE D TO THE DEPARTMENT BY FILING THE RETURN OF INCOME. FOR THE ASSESSMENT YEAR 1997-98, THE PARTNER, SHRI M.C. CHINNAN HAS RETURNED TOTAL INCOME OF RS.10,72,000. THE COPY OF THE RETURN IS AVAILABLE AT PAGE 2 OF THE PAPER BOOK. OUT OF THIS, A SUM OF RS.35,000 WA S INVESTED IN THE ASSESSEE FIRM. FOR THE ASSESSMENT YEAR 1998-99, THE PARTNER, SHRI M.C. CHINNAN HAS FILED THE RETURN OF INCOME DISCLOSING TOTAL INCOME OF RS.1,34,000. FRO M THE ACCUMULATED INCOME FROM THE ASSESSMENT YEAR 1996-97 TO 1998-99, THE ASSESSEE HA S ADVANCED A SUM OF RS.90,50,000 ON 31-03-1998. FOR THE ASSESSMENT YEAR 2000-01, SH RI M.C. CHINNAN HAS RETURNED TOTAL INCOME OF RS.13,20,000. OUT OF THIS, THE ADVANCE O F RS.1 LAKH WAS GIVEN TO THE ASSESSEE FIRM. ACCORDING TO THE LD.REPRESENTATIVE, ONCE THE RESPECTIVE PARTNERS HAVE DECLARED THE 3 IT(SS)A NO. 17/COCH/2005 IT(SS)A NO.128/COCH/2004 AMOUNT IN THE REGULAR COURSE OF RETURN FILED BEFORE THE DATE OF SEARCH WHICH WAS ACCEPTED BY THE DEPARTMENT AND THERE WAS A NEXUS BE TWEEN THE DEPOSITS AND CREDITS FOUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THER E CANNOT BE ANY UNDISCLOSED INCOME IN THE HANDS OF THE FIRM. THE LD.REPRESENTATIVE HA S PLACED RELIANCE ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF DY.CIT VS M/S CHINANSO NS JEWELLERS IN ITA NO.396/COCH/2006 & ORS ORDER DATED 16 TH JANUARY, 2008 AND SUBMITTED THAT ON IDENTICAL CIRC UMSTANCES, THIS BENCH OF THE TRIBUNAL FOUND THAT WHEN THERE WA S A SPEAKING NEXUS IN RESPECT OF THE SOURCE AND APPLICATION OF MONEY THERE CANNOT BE ANY ADDITION AS UNDISCLOSED INCOME. REFERRING TO THE CREDITS FOUND IN THE NAME OF SHRI M.C. ROY , SHRI M.C. MARTIN, SHRI M.C. VINOD, SMT. MARY CHENNAN AND SMT. RANI ROY, ALL THE PEOPLE HAVE FILED THEIR RETURNS OF INCOME DISCLOSING SUFFICIENT INCOME FOR MAKING ADVA NCES TO THE ASSESSEE FIRM. THE LD.REPRESENTATIVE SUBMITTED THAT THE COPIES OF THE RETURNS FILED BY THE RESPECTIVE CREDITOR ARE AVAILABLE IN THE PAPER BOOK. THEREFOR E, ACCORDING TO THE LD.REPRESENTATIVE, THERE CANNOT BE ANY ADDITION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD.DR, THE ASSESSING OFFICER MADE ADDITION WITH REGARD TO THE CREDITS FOUND IN T HE NAME OF THE PARTNERS AND OTHERS AS THE ASSESSEE COULD NOT PRODUCE SUBSTANTIAL MATER IAL TO PROVE THE ADVANCES RECEIVED. HOWEVER, ON APPEAL BY THE ASSESSEE, THE COMMISSIONE R OF INCOME-TAX(A) FOUND THAT IN RESPECT OF THE CREDITS FOUND IN THE NAME OF RESPECT IVE PARTIES, THE IDENTITY IS DISCLOSED, THE RESPECTIVE PARTIES HAVE CONFIRMED THEIR CREDITS AND THE CREDITWORTHINESS WERE ALSO PROVED. ACCORDINGLY, THE COMMISSIONER OF INCOME-TA X(A) DELETED THE ADDITION. AS FOUND BY THE COMMISSIONER OF INCOME-TAX(A), THE IDE NTITY OF THE PARTIES ARE NOT IN DISPUTE. THE GENUINENESS OF THE TRANSACTION IS ALS O NOT IN DISPUTE. THE CONTENTION OF THE LD.DR IS THAT THE ASSESSEE COULD NOT PRODUCE MA TERIAL TO SUBSTANTIATE THE CREDITS FOUND IN THE BOOKS OF ACCOUNT. THE ASSESSEE NOW PR ODUCED THE COPIES OF THE RETURNS FILED BY THE RESPECTIVE PERSON IN WHOSE NAME THE CR EDITS WERE FOUND TO SHOW THAT THEY HAVE DISCLOSED SUFFICIENT INCOME IN THE REGULAR COU RSE BEFORE THE DATE OF SEARCH AND 4 IT(SS)A NO. 17/COCH/2005 IT(SS)A NO.128/COCH/2004 FROM AND OUT OF THE INCOME DISCLOSED TO THE DEPARTM ENT CREDITS WERE GIVEN TO THE ASSESSEE FIRM. THEREFORE, WHEN THE CREDITORS HAVE SUFFICIENT BALANCE AS PER THE RETURNS FILED IN THE DEPARTMENT BEFORE THE DATE OF SEARCH, THIS TRIBUNAL IS OF THE OPINION THAT THE CREDITS FOUND IN THE NAME OF THE CREDITORS CANNOT B E DOUBTED. THIS BENCH OF THE TRIBUNAL IN THE CASE OF CHINNANSONS JEWELLERS (SUP RA) HAD AN OCCASION TO CONSIDER AN IDENTICAL CIRCUMSTANCE. THIS TRIBUNAL AFTER CONSID ERING THE FACTUAL CIRCUMSTANCES FOUND THAT WHEN THERE WAS A SPEAKING NEXUS BETWEEN THE SO URCE AND APPLICATION OF MONEY, THERE CANNOT BE ANY PROVOCATION TO GO BEYOND THAT A ND TO MAKE HYPOTHESIS THAT THE PARTNERS HAVE NO KNOWN SOURCE OF INCOME TO CONTRIBU TE. IN FACT, AT PARAGRAPH 6 OF THE ORDER, THE TRIBUNAL HAS OBSERVED AS FOLLOWS: 6. WE CONSIDERED THE MATTER. THE PARTNERS OF THE ASSESSEE-FIRM HAD OFFERED UNEXPLAINED INCOME IN THEIR OWN HANDS AND T HOSE INCOME HAVE BEEN BROUGHT TO TAX AFTER DUE PROCESS OF LAW CULMIN ATING IN ASSESSMENTS IN THEIR HANDS. ONCE THE AVAILABILITY OF INCOME IN THEIR HANDS ARE ACCEPTED BY WAY OF LAWFUL ASSESSMENTS, THE DEPARTME NT HAS TO ACCEPT THE SOURCE TO THAT EXTENT AS SOURCE AVAILABLE IN TH EIR HANDS, WHICH HAVE ALREADY BEEN OFFERED FOR ASSESSMENT. THERE IS A SP EAKING NEXUS BETWEEN THE INCOME OFFERED BY THE PARTNERS IN THEIR INDIVID UAL ASSESSMENTS AND THE VALUE OF THE GOLD BROUGHT IN BY THEM TO THE COM MON STOCK OF THE PARTNERSHIP. IT SHOWS THAT THERE IS A CORRESPONDIN G NEXUS BETWEEN THE CREDITS REFLECTED IN THE ACCOUNTS OF THE PARTNERS I N THE BOOKS OF ACCOUNT OF THE FIRM AND THE RESPECTIVE INCOME ASSESSED IN T HE INDIVIDUAL ACCOUNTS OF THE PARTNERS. WHEN SUCH A SPEAKING NEXUS IS AVA ILABLE IN RESPECT OF THE SOURCE AND THE APPLICATION OF MONEY, THERE IS NO PR OVOCATION TO GO BEYOND THAT AND TO MAKE A HYPOTHESIS THAT THE PARTN ERS HAVE NO KNOWN SOURCE OF INCOME TO CONTRIBUTE TO THAT MUCH OF GOLD TO THE BUSINESS OF THE FIRMS. THAT IS ONLY A LOGICAL ARGUMENT. SINCE IN THE IDENTICAL CIRCUMSTANCE IN THE ASSESSEE S GROUP OF CASES THIS TRIBUNAL FOUND THAT THERE CANNOT BE ANY ADDITION WHEN THERE WAS A SPEAKING NEXUS, WE ARE OF THE OPINION THAT THE OBSERVATION MADE BY THE TRIBUNAL I S EQUALLY APPLICABLE FOR THE PRESENT ASSESSEE ALSO. BY FOLLOWING THE ORDER OF THIS TRIB UNAL IN M/S CHINNANSONS JEWELLERY 5 IT(SS)A NO. 17/COCH/2005 IT(SS)A NO.128/COCH/2004 (SUPRA) AND FOR THE REASONS STATED THEREIN, WE UPHO LD THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A). 6. NOW COMING TO THE ASSESSEES APPEAL IN ITSS 128/ COCH/2004, THE ONLY ISSUE ARISES FOR CONSIDERATION IS CONFIRMATION OF ADDITIO N TO THE EXTENT OF RS. 73,885 FOR THE BLOCK PERIOD. 7. WE HEARD THE LD.REPRESENTATIVE FOR THE ASSESSEE AND THE LD.DR. THE VOUCHERS PRODUCED BY THE ASSESSEE FOR PURCHASE OF JEWELLERY DID NOT CONTAIN THE FULL PARTICULARS OF THE PARTIES FROM WHOM THE PURCHASES WERE EFFECTED. THEREFORE, THE DEPARTMENT COULD NOT FIND OUT THE IDENTITY OF THE PARTIES. THE ASSE SSEE ALSO COULD NOT EXPLAIN THE REASONS FOR NOT RECORDING THE PURCHASES IN THE BOOKS OF ACC OUNT AS ON 19-11-2001. THE FACT REMAINS IS THAT THE ASSESSEE HAS RECORDED SALES AND EXPENSES FOR 19-11-2001; HOWEVER, THE PURCHASES WERE NOT RECORDED. THEREFORE, THE CO MMISSIONER OF INCOME-TAX(A) FOUND THAT TO THE EXTENT OF 175 GMS WHICH WAS FOUND EXCES S WAS UNDISCLOSED INCOME. ADOPTING THE VALUE OF JEWELLERY AT RS.421 GMS. THE COMMISSIONER OF INCOME-TAX(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R TO THE EXTENT OF RS.73,885. SINCE THE PURCHASES WERE NOT RECORDED IN THE BOOKS OF ACC OUNT AS ON 19-11-2001 AND THE SALES AND OTHER EXPENSES WERE RECORDED, THIS TRIBUN AL IS OF THE OPINION THAT THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY CONFIRMED THE ADDITION. THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY. 8. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AN D THE APPEAL OF THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01 ST JUNE, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 01 ST JUNE, 2012 PK/- 6 IT(SS)A NO. 17/COCH/2005 IT(SS)A NO.128/COCH/2004 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