The ITO, Ward-9(4),, Surat v. M/s. Sunil Dyeing & Printing Mills, Surat

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.1995/AHD/2010 ASSESSMENT YEAR:2004-05 DATE OF HEARING:4.2.11 DRAFTED:7.2.11 INCOME TAX OFFICER WARD-9(4) ROOM NO.419 4 TH FLOOR AAYKAR BHAVAN MAJURA GATE SURAT V/S . SUNIL DYEING & PRINTING MILLS 4 MADHAV BAUG SUMUL DAIRY ROAD SURAT PAN NO.AAJFS9043C (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI D.S CHAUDHRY DR RESPONDENT BY:- NONE 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)-V SURAT IN APPEAL NO.CAS-V/08 /09-10 DATED 19-03-2010. THE ASSESSMENT WAS FRAMED BY ITO WARD-9(4) SURAT U/S14 3(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HI S ORDER DATED 26-12-2006 FOR ASSESSMENT YEAR 2004-05. THE PENALTY UNDER DISPUTED WAS LEVIED BY ASSESSING OFFICER U/S 271(1) OF THE ACT VIDE HIS ORDER DATED 27-03-2009. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DELETING THE PENALTY LEVIED BY ASSESSING OFFICER U/ S.271(1)(C) OF THE ACT FOR UNEXPLAINED CAPITAL INTRODUCED BY PARTNERS. FOR THI S REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY RS.2 60 09 4/- IMPOSED ON THE ASSESSEE U/S.271(1)(C) OF THE I.T. ACT ON THE CONFI RMED PORTION OF THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED CAPITAL INTRODUCED B Y PARTNERS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PROVE THE SOURCES GENUINENESS AND CREDITWORTHINESS OF THE PARTNERS TO INTRODUCE FRESH CAPITAL. ITA NO.1995AHD/2010 A.Y 2004-05 ITO WD-9(4) SURAT V. SUNIT DYEING & PRINTI NG MILLS PA GE 2 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ASSESSING OFFICER COMPLETED ASSESSMENT U/S.143(3) OF THE ACT WHEREBY AN AMOUNT OF RS.9.85 LAKH WAS ADDED AS CAPITAL INTRODUCED BY THE PARTNERS. TH E AO INITIATED PENALTY PROCEEDINGS IN RESPECT OF CAPITAL INTRODUCED BY SH RI SUNILKUMAR KANTILAL LUNGIWALA AMOUNTING TO RS.6.20 LAKH AND SHRI HITESHKUMAR KANT ILAL LUNGIWALA AMOUNTING TO RS.3.65 LAKH. THE AO LEVIED THE PENALTY IN RESPECT OF CAPITAL INTRODUCED BY THE PARTNERS IN THE FIRM AMOUNTING TO RS.7.25 LAKH. ACC ORDING AO LEVIED MINIMUM PENALTY OF RS.2 60 094. AGGRIEVED ASSESSEE PREFERR ED APPEAL BEFORE CIT(A). THE CIT(A) DELETED THE PENALTY LEVIED BY ASSESSING OFFI CER BY GIVING FOLLOWING FINDINGS IN PARA-5 OF HIS APPELLATE ORDER:- 5. I HAVE PERUSED THE SUBMISSION OF THE APPELLANT AND THE FINDINGS OF THE ASSESSING OFFICER. THE ISSUE OF CAPITAL INTRODUCED BY THE PARTNERS WHETHER TO BE ADDED IN THE CASE OF THE FIRM OR IN THE HANDS OF THE PARTNERS IS TO BE DECIDED BY THE ITAT BEFORE WHOM THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF THE CIT(A). HOWEVER ON THIS ISSUE THERE ARE NUM BER OF JUDGMENTS INCLUDING THE JUDGMENT REFERRED TO BY THE APPELLANT IN THE CA SE OF M/.S VISION BUILDERS (SUPRA) WHEREIN THE TRIBUNAL HAS HELD THAT THE UNEX PLAINED CAPITAL INTRODUCED BY THE PARTNERS CANNOT BE ADDED IN THE HANDS OF THE FIRM UNDER SECTION 68 OF THE ACT IN THIS CASE THE PENALTY PROCEEDINGS HAVE BEEN INITIATED IN RESPECT OF THE ADDITION OF CAPITAL INTRODUCED BY THE PARTNERS OF THE FIRM. THEREFORE THERE IS A PRIMA FACIE CASE FOR NOT LEVYING PENALTY IN RE SPECT OF SUCH ADDITION IN THE CASE OF THE FIRM. EVEN PRESUMING FOR A MOMENT THAT THE ADDITION IS EVENTUALLY CONFIRMED IN APPEAL BY THE ITAT IT REMAINS A LEGAL ISSUE. IT IS NOT A CASE WHERE THE ASSESSEE HAS WITHHELD THE RELEVANT INFORM ATION OR PRODUCED INACCURATE PARTICULARS OF INCOME BEFORE THE ASSESSI NG OFFICER. AS MENTIONED BY THE A.R. HE HAS PRODUCED THE NAMES ADDRESSES C ONFIRMATION COPY OF ACKNOWLEDGEMENT OF IT RETURN IN RESPECT OF THE PART NERS BEFORE THE ASSESSING OFFICER. THEREFORE THE PRIMARY ONUS OF FURNISHING THEE RELEVANT INFORMATION HAS BEEN DISCHARGED BY THE ASSESSEE. IN VIEW OF THIS I AGREE WITH THE SUBMISSIONS MADE BY THE APPELLANT AND HOLD THAT THE PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE IN THIS CASE. THE PENALTY LEVIED IS THEREFORE DIRECTED TO BE DELETED. AGGRIEVED NOW REVENUE CAME IN APPEAL BEFORE THE TR IBUNAL. 4. WE FIND THAT THIS ISSUE EVEN OTHERWISE IS COVERE D IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PANKAJ DYESTUFF INDUSTRIES IN IT REFEREN CE NO.241 OF 1993 WHEREIN THE HON. HIGH COURT HAS HELD THAT IF PARTNERS OWN THAT THE MONEY DEPOSITED IN THEIR ACCOUNTS ARE THEIR OWN THEN THE ITO IS ENTITLED TO PROCEED AGAINST THE PARTNERS AND ITA NO.1995AHD/2010 A.Y 2004-05 ITO WD-9(4) SURAT V. SUNIT DYEING & PRINTI NG MILLS PA GE 3 ASSESSEE THE SAME IN THEIR HANDS IF THE EXPLANATION IS NOT FOUND SATISFACTORY. IN THIS REGARD HE REFERRED TO PARA 13 AND 14 FROM THAT ORDE R 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 C ASE OF THE REVENUE THAT THE PARTNERS OF THE ASSESSEE FIRM ARE FICTITIOUS. THE I NCOME TAX OFFICER HAS NOT DISPUTED THAT THE CREDITS IN THE ACCOUNTS OF THE PA RTNERS WERE NOT DEPOSITS FROM THE PARTNERS. MOREOVER IT IS AN ADMITTED POSI TION THAT THIS WAS THE SECOND YEAR OF THE FIRM AND THAT IT WAS RUNNING IN LOSS. IT IS TRUE THAT THE INCOME TAX OFFICER DID NOT ACCEPT THE EXPLANATION G IVEN ON BEHALF OF THE ASSESSEE IN RESPECT OF THE NEW DEPOSITS OR CASH CRE DITS IN THE ACCOUNTS OF THE PARTNERS. THE MERE NON-ACCEPTANCE OF THAT EXPLANATI ON DOES NOT HOWEVER PROVIDE MATERIAL FOR FINDING THAT THE SAID SUM REPR ESENTED 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 PARTNERS' ACCOUNTS COULD NOT BE ASSESSED IN THE HANDS OF THE FIRM. ONCE THE PARTNERS HAVE OWNED THAT THE MONIES DEPOSITED I N 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 THE IR 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 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 I NTEREST OF THE REVENUE IS ALSO SAFEGUARDED AS THE INCOME TAX OFFICER HAS BEEN GIVEN THE LIBERTY TO 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 AC COUNTS OF THE PARTNERS. FROM THE ABOVE DECISION OF HONBLE JURISDICTIONAL H IGH COURT WE ARE OF THE VIEW THAT THE PARTNERS CAPITAL CANNOT BE ADDED IN THE HANDS OF THE FIRM RATHER IT CAN BE VERIFIED IN THE HANDS OF PARTNER AND ADDITION IN ANY CASE IS TO BE MADE IN THE HAND OF PARTNER ONLY. ACCORDINGLY WE ARE OF THE VIEW THAT PENALTY LEVIED BY ASSESSING OFFICER HAS RIGHTLY BEEN DELETED BY CIT(A) AND WE CONFIRM T HE SAME. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 04/02/2011 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 04/02/2011 ITA NO.1995AHD/2010 A.Y 2004-05 ITO WD-9(4) SURAT V. SUNIT DYEING & PRINTI NG MILLS PA GE 4 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-V SURAT 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD