MOHAMED HAJI ADAM & CO., MUMBAI v. DCIT 13(1), MUMBAI

ITA 4341/MUM/2009 | 2001-2002
Pronouncement Date: 27-01-2010 | Result: Allowed

Appeal Details

RSA Number 434119914 RSA 2009
Assessee PAN AADFM1019Q
Bench Mumbai
Appeal Number ITA 4341/MUM/2009
Duration Of Justice 6 month(s) 10 day(s)
Appellant MOHAMED HAJI ADAM & CO., MUMBAI
Respondent DCIT 13(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 27-01-2010
Assessment Year 2001-2002
Appeal Filed On 17-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: MUMBAI BEFORE SHRI R. S. SYAL ACCOUNTANT MEMBER AND SHRI R. S. PADVEKAR JUDICIAL MEMBER ITA NO.4341/MUM/2009 (ASSESSMENT YEAR:2001-02) MOHD HAJI ADAM & CO 84 SHERIFF DEVJI STREET (CHAKALA STREET) MUMBAI -400 003 PAN: AADFM 1019 Q VS. DCIT -13(1) MUMBAI APPELLANT RESPONDENT APPELLANT BY: SHRI PRAKASH PANDIT RESPONDENT BY: S/SHRI S. M. KESHKAMAT / S. S. RANA O R D E R PER R S PADVEKAR JM THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE IMPUGNED ORDER OF LEARNED CIT (A)-XIII MUMBAI DATED 3.6.2009 FOR THE ASSESSMENT YEAR 2001-02 IN WHICH THE PENALTY LEVIED BY THE ASSESSING OFFICE R U/S 271(1)(C) OF THE ACT HAS BEEN CONFIRMED. THE ASSESSEE HAS TAKEN THE THREE E FFECTIVE GROUNDS WHICH READ AS UNDER :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT APPEALS ERRED IN CONFIRMING THE PENALTY LEVIED BY THE A.O. OF RS 10 58 000/- UNDER SECTION 271(1)(C). 2. REASONS GIVEN BY THE CIT APPEALS FOR CONFIRMING THE PENALTY LEVIED BY THE A.O. OF RS 10 58 000/- UNDER SECTION 271(1)( C) OF THE INCOME TAX ACT 1961 ARE WRONG INSUFFICIENT AND CONTRARY TO TH E FACTS AND EVIDENCE ON RECORD. ITA 4341/M/2009 MOHD HAJI ADAM & CO 2 3. THE LEARNED A.O. OUGHT TO HAVE DROPPED THE PENAL TY PROCEEDINGS INITIATED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 AS IN QUANTUM APPEAL HONBLE HIGH COURT OF BOMBAY ADMITT ED THE APPELLANTS APPEAL ON THE GROUND THAT QUESTION OF LAW OUT OF TH E ORDER OF THE TRIBUNAL. 2. THE FACTS WHICH REVEAL FROM THE RECORD ARE AS U NDER. THE ASSESSEE IS A FIRM WHICH IS ENGAGED IN THE TRADING OF CLOTH AND S HARES AND RETURN OF INCOME WAS FILED BY THE ASSESSEE IN WHICH TOTAL LOSS WAS D ECLARED WHICH WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS FRAMED U/S 143(3). FROM THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2001-02 THE PARTNERS OF THE FIRM NAMELY SMT SOFIA ABDUL KHALIK AND SALMAN ABDUL KHALIK (MINOR) HAVE I NTRODUCED CAPITAL OF RS 25 LAKHS AND 2 LAKHS RESPECTIVELY. THE ASSESSING OFFIC ER SOUGHT THE EXPLANATION OF BOTH THE PARTNERS IN RESPECT OF SOURCE OF THE CAPIT AL INTRODUCED IN THE ASSESSEE FIRM. SMT SOFIA ABDUL KHALIK EXPLAINED THAT SHE HA S RECEIVED THE GIFT FROM SMT AZIZA ABDUL LATIFF. AND OUT OF SAID GIFT SHE INTRO DUCED CAPITAL IN THE ASSESSEE FIRM. SMT SOFIA ABDUL KHALIK FILED THE DETAILS IN RESPECT OF THE BANK ACCOUNT MAINTAINED BY SMT SMT AZIZA ABUDL LATIFF WITH BANK OF BARODA NARIMAN POINT BR. MUMBAI WHICH WAS IN RESPECT OF SB A/C NO 2819 . AS PER THE EXPLANATION OF SMT SOFIA ABDUL KHALIK SHE RECEIVED THE GIFT ON 29. 9.2000 BY CHEQUE NO.67385. AS NOTED BY THE ASSESSING OFFICER SMT SOFIA ABUDL K HALIK HAS NOT PRODUCED THE ENTIRE COPY OF THE BANK ACCOUNT OF MRS AZIZA ABDUL LATIFF THE DONOR BUT ONLY A SINGLE PAGE INDICATING THE TRANSACTION WAS PRODUCED . THE ASSESSING OFFICER OBTAINED THE COPY OF THE BANK ACCOUNT OF MRS AZIZA ABDUL LATIFF DONOR FROM THE BANK. THE ASSESSING OFFICER HAS OBSERVED THAT THE DONOR HAD DEPOSITED THE CASH OF RS 25 LAKHS BEFORE THE DATE OF ISSUING THE CHEQU E TO SMT. SOFIA ABDUL KHALIK. THE ASSESSING OFFICER ALSO ISSUED THE SUMMONS TO TH E DONOR NAMELY MRS AZIZA ABDUL LATIFF U/S 131 OF THE ACT SEEKING EXPLANATION IN RESPECT OF THE SOURCE FOR DEPOSITING THE CASH IN HER ACCOUNT. THE SUMMONS IS SUED BY THE ASSESSING OFFICER COULD NOT BE SERVED ON THE DONOR VIZ SMT AZ IZA ABUDL LATIFF AS THE ITA 4341/M/2009 MOHD HAJI ADAM & CO 3 SUMMONS APPEARS TO BE ISSUED ON THE ADDRESS WRITTEN IN HER BANK ACCOUNT. THE ASSESSEE WAS ASKED TO PRODUCE SMT AZIZA ABUDL LATIF F FOR VERIFICATION SO AS TO VERIFY SOURCE FROM WHICH THE CASH WAS DEPOSITED IN HER ACCOUNT. ONE SHRI D M SHAH HOLDER OF POWER OF ATTORNEY ON BEHALF OF THE M RS AZIZA ABDUL LATIFF APPEARED BEFORE THE ASSESSING OFFICER AND HIS STATE MENT RECORDED ON 17.9.2003. THE A.O. HAS REPRODUCED SOME OF THE QUESTIONS AND A NSWERS GIVEN BY SHRI SHAH ON PAGE 3 OF THE ASSESSMENT ORDER. THE ASSESSING O FFICER HAS STATED THAT AS PER THE REPLY GIVEN BY SHRI D M SHAH DURING THE EXAMINA TION U/S 131 A CASH DEPOSITS WERE OUT OF THE EARLIER CASH WITHDRAWAL. THE ASSES SING OFFICER OBTAINED THE DETAILS FROM BANK OF BARODA AS WELL COPIES OF CHEQU ES AS WELL AS PAYING SLIPS. THE A. O. HAS NOTED THAT ENCASHED CHEQUES ARE SIGN ED BY THE DONOR SMT. AZIZA ABDUL LATIFF AND CASH HAD BEEN HANDED OVER TO ONE S HRI HARSHA PATEL. THERE WERE SOME ENDORSEMENTS IN THE BACKSIDE OF THE CHEQU ES MADE BY THE BANK AUTHORITIES THAT LIKE FAX MESSAGE RECEIVED FROM MR S AZIZA ABDUL LATIFF. THE ASSESSING OFFICER HAS NOTED THAT IN FACT THREE BE ARER CHEQUES OF RS 10 LAKHS EACH WERE ENCASHED BY SHRI HARSHAD PATEL AND CHEQUE S WERE NOT SIGNED BY SHRI D. M. SHAH NOR THE CASH WAS RECEIVED BY THE SON OF THE DONOR. THE ASSESSING OFFICER THEREFORE CONCLUDED THAT THERE WAS NO NEX US BETWEEN THE CASH WITHDRAWALS AND CASH DEPOSITS AND THE SOURCE OF THE CASH DEPOSITS IN DONORS BANK A/C. HAS NOT BEEN CONVINCINGLY EXPLAINED. THE ASSESSING OFFICER THEREFORE MADE THE ADDITION OF RS 25 LAKHS U/S 68 OF THE ACT AND ALSO INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. SAME WAY AS SALAMAN ABDUL KHALIK ALSO CLAIMED THAT HE RECEIVED A GIFT FROM SMT. AZIZA AB DUL LATIFF AND THAT WAS THE SOURCE FOR INTRODUCTION OF CAPITAL OF RS 2 LAKHS. FOR THE REASONS GIVEN IN THE CASE OF SOFIA A. KHALIK BY REJECTING THE EXPLANATIO N THE ASSESSING OFFICER ALSO MADE ADDITION OF RS. 2 LACS THUS MADE TOTAL ADDITI ON OF RS. 27 LAKHS IN THE HANDS OF THE ASSESSEE FIRM UNDER SEC. 68 OF THE ACT. THE ASSESSEE CHALLENGED THE SAID ADDITIONS BEFORE THE LEARNED CIT (A) AND THE ADDITI ONS WERE DELETED. THE REVENUE CHALLENGED THE IMPUGNED ORDER OF LEARNED CI T (A) DATED 12.3.2004 BY WHICH THE SAID ADDITIONS WERE DELETED BEFORE THE T RIBUNAL AND TRIBUNAL ALLOWED ITA 4341/M/2009 MOHD HAJI ADAM & CO 4 REVENUES APPEAL BEING ITA 3476/MUM/2004 VIDE ORDER DATED 31.3.2008 AND REVERSED THE ORDER OF THE LEARNED CIT (A) ACCEPTING THE PLEA OF THE REVENUE AND RESTORE THE ORDER OF THE ASSESSING OFFICER. THE AS SESSING OFFICER PASSED THE ORDER U/S 271(1)(C) OF THE IT ACT ON 21.10.2008 AND LEVIED THE PENALTY OF RS 10 58 000/- ON THE ADDITION OF RS 27 LAKHS MADE BY THE ASSESSING OFFICER WHICH WAS CONFIRMED BY THE TRIBUNAL. 3. THE ASSESSEE CHALLENGED THE PENALTY LEVIED BY T HE A.O. BEFORE THE LEARNED CIT (A) BUT WITHOUT SUCCESS AS THE LEARNED CIT (A) CONFIRMED THE ASSESSING OFFICERS ORDER LEVYING THE PENALTY U/S 2 71(1)(C) BY GIVING THE FOLLOWING REASONS : 2.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE. IN THIS CASE THE PARTNERS RECEIVED THE GIFT FROM NRI DONOR. THE PAR TNERS INTRODUCED THAT AMOUNT OF GIFT OF RS 25 LAKHS AND RS 2 LAKHS AS THE IR CAPITAL IN THE FIRM. THE A.O. HELD THE SAME AS UNEXPLAINED CASH CREDIT U /S 68 OF THE ACT. THOUGH THE CIT (A) DELETED THE ADDITION BUT THE HON BLE ITAT ON FURTHER APPEAL CONFIRMED THE ADDITION MADE BY A.O. U/S 68 O F THE ACT. IN THE FACTS AND CIRCUMSTANCES THE UNDERSIGNED CANNOT ADJ UDICATE ON THE ISSUE AS TO WHETHER THE CAPITAL INTRODUCED BY PARTNERS OF THE FIRM COULD BE CONSIDERED AS CASH CREDITS U/S 68 OF THE ACT IN THE HANDS OF APPELLANTS FIRM. THE HONBLE ITAT BEING HIGHEST FACT FINDING AUTHORITY HAS ALREADY HELD THAT THE CAPITAL INTRODUCED BY PARTNERS WAS UN EXPLAINED CASH CREDITS OF THE APPELLANT FIRM ONLY. THEREFORE THE UNDERSI GNED BEING AN APPELLATE AUTHORITY SUBORDINATE TO ITAT HAS TO PROCEED FURTHE R FROM THE FACT THAT THE APPELLANT FIRM INTRODUCED UNEXPLAINED CASH CRED ITS IN ITS BOOKS OF ACCOUNTS OF RS 25 LAKHS AND RS 2 LAKHS. THOUGHT TH E UNEXPLAINED CASH CREDITS WERE ROUTED THROUGH PARTNERS CAPITAL ACCOU NT BUT IT WAS APPELLANTS OWN UNEXPLAINED CASH CREDITS. SINCE TH E APPELLANT INTRODUCED UNEXPLAINED MONEY/CASH CREDIT IN THE BOOKS OF ACCOU NT THEREFORE IT CONCEALED THE PARTICULARS OF INCOME AND ALSO FILED INACCURATE PARTICULARS OF SUCH INCOME. IN THE FACTS AND CIRCUMSTANCES THE P ROVISIONS OF SECTION 271(1)(C) WERE FULLY APPLICABLE IN THE CASE OF APPE LLANT AND THEREFORE THE A.O. WAS CORRECT IN LEVYING OF RS 10 58 400/- U/S 2 71(1)(C) OF THE ACT. THE APPELLANT HAS ALSO ARGUED THAT IN CASE WHERE TH E HIGH COURT ADMITS QUESTION OF LAW NO PENALTY COULD BE LEVIED U/S 271 (1)(C) OF THE ACT. I AM NOT INCLINED TO AGREE WITH THE APPELLANTS THIS ARG UMENT. THE APPELLANT HAS NOT FILED ANY CASE LAW SUPPORTING ITS ARGUMENT THAT NO PENALTY CAN BE ITA 4341/M/2009 MOHD HAJI ADAM & CO 5 LEVIED IN CASE OF ADMISSION OF QUESTION OF LAW BY T HE HIGH COURT. IN THE FACTS AND CIRCUMSTANCES THE HONBLE HIGH COURT MAY DECIDE THE ISSUE EITHER IN FAVOUR OF APPELLANT OR IN FAVOUR OF DEPAR TMENT. IF THE ISSUE IS DECIDED IN FAVOUR OF APPELLANT THEN ADDITION U/S 68 AS WELL AS PENALTY LEVIED BY A.O. WILL BE CANCELLED/DELETED AUTOMATICA LLY. BUT IN CASE THE HONBLE HIGH COURT DECIDE THE ISSUE IN FAVOUR OF DE PARTMENT THE FACT WILL BE CONFIRMED THAT THE APPELLANT HAD CONCEALED THE P ARTICULARS OF INCOME AND ALSO FILED INACCURATE PARTICULARS OF SUCH INCOM E. THEREFORE IN THE FACTS AND CIRCUMSTANCES THE A.O. WAS CORRECT IN LE VYING PENALTY OF RS 10 58 400/- U/S 271(1)(C) OF THE ACT. 4. NOW THE ASSESSEE HAS CHALLENGED THE IMPUGNED OR DER OF LEARNED CIT (A) BEFORE US. LEARNED COUNSEL FOR THE ASSESSEE VEHEME NTLY ARGUED THAT AS PER THE FACTS ON RECORD THE CAPITAL WAS INTRODUCED BY THE T WO PARTNERS OF THE ASSESSEE FIRM AND IDENTITY OF THE DONOR AS WELL AS SOURCE WA S EXPLAINED. IT IS FURTHER ARGUED THAT IT IS NOT DISPUTED BY THE ASSESSING OFF ICER THAT ASSESSEE RECEIVED THE AMOUNT OF GIFT BY CHEQUE DRAWN ON BANK OF BARODA N ARIMAN POINT BRANCH (S.B. A/C NO. 2819) AND THE SAID BANK ACCOUNT WAS IN THE NAME OF SMT AZIZA ABDUL LATIFF. THE LEARNED COUNSEL TOOK US THROUGH THE ASS ESSMENT ORDER AND SUBMITTED THAT THE DONOR AZIZA ABDUL LATIFF IS A NRI AND SHE IS ALWAYS OUT OF INDIA HENCE THE POWER OF ATTORNEY IS GIVEN TO SHRI D. M. SHAH. IT IS SUBMITTED THAT THE ASSESSEE FILED ALL THE DETAILS IN RESPECT OF SMT AZ IZA ABDUL LATIFF BEFORE THE ASSESSING OFFICER AND ALSO EXPLAINED HOW THE CASH D EPOSIT WAS MADE IN THE ACCOUNT OF SMT AZIZA ABDUL LATIFF. HE FURTHER SUBM ITTED THAT AS PER THE STATEMENT GIVEN BY SHRI D. M. SHAH POWER OF ATTORN EY HOLDER OF SMT. AZIZA ABDUL LATIFF THERE WERE HUGE WITHDRAWALS OF CASH I N THE MONTH OF JULY 2000 AND THERE WAS ALSO THE SALE TRANSACTION OF FLAT OF THE DONOR WHICH WAS AT CUFFE PARADE IN MUMBAI. IT IS ARGUED THAT THOUGH THE ASS ESSING OFFICER MADE ADDITION BUT THE FIRST APPELLATE AUTHORITY DID NOT APPROVE T HE SAME AND DELETED THE ADDITIONS AND THAT SHOWS THAT IT IS DEBATABLE ISSUE . MERELY BECAUSE THE TRIBUNAL HAS CONFIRMED THE ADDITION MADE BY THE A.O. THAT IPSO FACTO CANNOT BE GROUND FOR LEVY OF THE PENALTY U/S 271(1)(C) AS ADMITTEDLY THE ADDITIONS ARE MADE U/S 68 OF THE ACT WHICH IS DEEMING PROVISION. THE LEARNED COUNSEL FOR THE ASSESSEE ITA 4341/M/2009 MOHD HAJI ADAM & CO 6 VEHEMENTLY ASSAILED THE REASONS AND FINDINGS OF THE FIRST APPELLATE AUTHORITY AND SUBMITTED THAT NOTHING IS ON RECORD TO PROVE THAT T HE CAPITAL INTRODUCED BY THE PARTNERS WAS OUT OF THE CASH DEPOSITED BY THE ASSES SEE FIRM IN THE BANK A/C. OF SMT. AZIZ ABDUL LATIF AND SAID FINDING OF THE FIRST APPELLATE AUTHORITY IS NOT ONLY BASELESS BUT ALSO ERRONEOUS. THE LEARNED COUNSEL R EFERRED TO THE PAGE NOS. 39 AND 40 OF THE COMPILATION WHICH THE COPY OF THE GI FT DECLARATION DATED 5.12.2000 AND SUBMITTED THAT THE DONOR HAS IN CLEAR TERMS STATED THAT SHE HAS GIVEN GIFT TO BOTH THE PARTNERS IN THEIR INDIVIDUAL CAPACITY. THE LEARNED COUNSEL ALSO REFERRED TO THE PAGE NO 47 OF THE COMPILATION WHICH IS COPY OF CASH FLOW STATEMENT AND SUBMITTED THAT THE SOURCE OF THE CASH DEPOSIT WAS EXPLAINED. HE ALSO ARGUED THE DONOR NAMELY SMT. AZIZA ABDUL LATIF WHO IS A NRI AND SHE IS ALWAYS OUT OF INDIA AND HENCE THE POWER OF ATTORNE Y IS GIVEN TO SHRI D M SHAH TO LOOK AFTER HER FINANCIAL DEALINGS. IT IS SUBMIT TED THAT ASSESSEE FILED THE DETAILS IN RESPECT OF MRS AZIZA ABDUL LATIFF BEFORE THE ASS ESSING OFFICER AND ALSO EXPLAINED HOW THE CASH DEPOSITS WERE MADE IN THE AC COUNT OF SMT. AZIZA ABDUL LATIFF. THE LEARNED COUNSEL REFERRED TO THE PAGE 3 9 AND 40 OF THE PAPER BOOK WHERE THE COPY OF THE GIFT DECLARATION DATED 5.12.2 000 IS FILED. THE LEARNED COUNSEL ALSO REFERRED TO THE PAGE NO. 47 OF THE PAP ER BOOK (COPY OF CASH FLOW STATEMENT) IN WHICH THE SOURCE OF THE CASH DEPOSITS WAS DULY EXPLAINED. HE ALSO ARGUED THAT THE DONOR NAMELY SMT. AZIZA ABDUL LATIF F WHO IS A NRI RESIDING IN UAE IS KNOWN TO THE PARTNERS OF THE ASSESSEE FIRM S INCE 1982 AND SHE IS CLOSELY RELATED TO THE PARTNERS FAMILY. THE LEARNED COUNS EL ALSO REFERRED TO THE COPY OF THE POWER OF ATTORNEY GIVEN BY THE DONOR TO SHRI D. M. SHAH PAGE NOS. 35 TO 37 OF THE PAPER BOOK AND ARGUED THAT AS PER THE TERMS OF THE POWER OF ATTORNEY SHRI D. M. SHAH WAS EMPOWERED TO OPERATE HER BANK A CCOUNT ALSO. IT IS ARGUED THAT NOWHERE IT IS CASE OF THE REVENUE THAT THE POW ER OF ATTORNEY IS BOGUS. HE ALSO ARGUED THAT THERE IS DIVERGENCE OF OPINION AS PER DIFFERENT JUDICIAL PRONOUNCEMENTS WHETHER ADDITION CAN BE MADE IN HAND S OF THE FIRM IN RESPECT OF CAPITAL INTRODUCED BY THE PARTNERS AND THIS ASPE CT CAN BE CONSIDERED WHILE DECIDING PRESENT ISSUE OF PENALTY. HE THEREFORE PLEADED THAT THERE IS NO REASON ITA 4341/M/2009 MOHD HAJI ADAM & CO 7 SO FAR AS THE FACTS OF THIS CASE ARE CONCERNED TO L EVY THE PENALTY UPON THE ASSESSEE U/S 271(1)(C). THE LEARNED COUNSEL ALSO RE LIED ON THE FOLLOWING PRECEDENTS: (I) CIT VS BALBIR SINGH 304 ITR 125 (P&H) (II) NARAYANDAS KEDARNATH VS CIT 22 ITR 18 (BO M) (III) CIT VS METAL & METALS OF INDIA 208 CTR 457 (P &H) (IV) CIT VS RAMESHWAR DASS SURESH PAL CHEEKA 208 CT R 459 (P&H) (V) CIT VS KULWANT SINGH & CO 299 ITR 53 (P&H) (VI) CIT VS RAJIV GARG & OTHERS 313 ITR 256 (P&H) (VII) CIT VS HARYANA WAREHOUSING CORPORATION 314 I TR 215 (P&H) (VIII) KANBAY SOFTWARE INDIA (P) LTD VS DY CIT 31 SOT 153 (PUNE) (IX) GLORIOUS REALTY (P) LTD VS ITO 29 SOT 292 (MU M) (X) DCIT CENTRAL CIRCLE VS K NATARAJAN 33 SOT 92 (BANG) 5. PER CONTRA THE LEARNED DEPARTMENTAL REPRESENTAT IVE VEHEMENTLY ARGUED THAT THE ADDITIONS HAVE BEEN CONFIRMED BY THE HONB LE TRIBUNAL AND HENCE THE FACTS IN THIS CASE ARE NOT DISPUTED. IT IS ARGUED THAT ASSESSEE TRIED TO CONCEAL THE INCOME AND ALSO FURNISHED INACCURATE PARTICULARS OF INCOME AND HENCE THE ASSESSING OFFICER HAS RIGHTLY LEVIED THE PENALTY. THE LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT SPECIFICALLY RELY ON ANY PRE CEDENT BUT STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE GIVEN ANXIOUS CONSIDERATION TO THE RIVAL SUBMISSIONS OF THE PARTIES. WE HAVE ALSO EXAMINED THE FACTS IN THE BAC KDROP OF THE DIFFERENT LEGAL PRINCIPLES IN THE PRECEDENTS RELIED ON BY THE LEARN ED COUNSEL. IN THE PRESENT CASE THERE IS NO DISPUTE ABOUT THE FACT THAT THE A DDITION MADE BY THE A.O. WAS DELETED BY THE LEARNED CIT (A) BUT ON APPEAL THE TRIBUNAL REVERSED THE ORDER OF THE LEARNED CIT (A) AND RESTORE THE ORDER OF THE ASSESSING OFFICER AND NOW THE SUBJECT MATTER OF THE QUANTUM ADDITION IS BEFO RE THE HONBLE HIGH COURT OF ITA 4341/M/2009 MOHD HAJI ADAM & CO 8 BOMBAY. THE TWO PARTNERS OF THE ASSESSEE FIRM NAME LY SMT. SOFIA ABDUL KHALIK AND SALMAN ABDUL KHALIK (MINOR) HAVE INTRODUCED CAP ITAL OF RS 25 LAKHS AND RS 2 LAKHS RESPECTIVELY. BOTH THE PARTNERS CLAIMED THAT THE SOURCE FOR INTRODUCTION OF CAPITAL WAS THE GIFTS FROM SMT. AZIZA ABDUL LATIFF WHO IS A NRI AND RESIDING IN A UAE. THERE IS NO DISPUTE ABOUT THE FACT THAT THE A MOUNTS WERE RECEIVED BY THE CHEQUES FROM THE ACCOUNT OF SMT. AZIZA ABDUL LATIFF BEING SB A/C NO.2819 OF BANK OF BARODA NARIMAN BRANCH MUMBAI. THE ASSESS ING OFFICER MADE THE ENQUIRES FROM THE BANK AND ALSO OBTAINED THE PAYING SLIPS AND COPIES OF THE CHEQUES. THE ASSESSING OFFICER ISSUED SUMMONS TO T HE DONOR SMT. AZIZA ABDUL LATIFF AND BUT SAME COULD NOT BE SERVED AS SHE WAS NOT RESIDING IN INDIA. THERE WERE CERTAIN CASH DEPOSITS IN THE BANK ACCOUNT OF S MT. AZIZA ABDUL LATIFF. IN RESPECT OF CASH DEPOSITS IN BANK A/C. OF SMT. AZIZA ABDUL LATIF THE ASSESSING OFFICER MADE THE ENQUIRIES WITH MR D. M. SHAH WHO W AS THE POWER OF ATTORNEY HOLDER OF SMT. AZIZA ABDUL LATIFF. SHRI D. M. SHAH EXPLAINED THE SOURCE IN RESPECT OF CASH DEPOSIT IN BANK A/C. OF SMT. AZIZA ABDUL LATIFF BUT THE SAME WAS NOT ACCEPTED. THE ASSESSING OFFICER REJECTED THE CO NTENTION OF THE ASSESSEE BY GIVING THE REASON THAT THE SOURCE OF AMOUNT OF CASH DEPOSIT IN THE ACCOUNT OF SMT. AZIZA ABDUL LATIFF HAS NOT BEEN CONVINCINGLY E XPLAINED. NOWHERE IT IS THE CASE OF THE ASSESSING OFFICER THAT BANK ACCOUNT WAS OPEN BY THE ASSESSEE-FIRM AND THEREFORE SAID BANK ACCOUNT IS BENAMI ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER DID NOT MAKE ANY ENQUIRY IN RESPE CT OF OPENING OF THE SAID BANK ACCOUNT. NOWHERE IT IS THE CASE OF THE ASSES SING OFFICER ALSO THAT SMT. AZIZA ABDUL LATIF WAS BENAMIDAR OF THE ASSESSEE-FIRM. IN OUR HUMBLE OPINION LOT OF QUESTIONS ARE REMAINED UNANSWERED IN THIS CASE. SO FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED THE PRINCIPLES ARE WELL SETTLED THAT IT IS DISTINCT AND SEPARATE FROM THE ASSESSMENT PROCEEDINGS. THOUGH TH E TRIBUNAL HAS CONFIRMED THE ADDITION THAT CANNOT BE SOLE BASIS TO DECIDE A FATE OF THE PENALTY LEVIED BY THE A. O.. THE ADDITIONS MADE BY THE ASSESSING OF FICER WERE DELETED BY LEARNED CIT (A) AND THE LEARNED CIT (A) HAS HELD TH AT THE BANK A/C. WAS NOT BELONGING TO THE ASSESSEE FIRM. WE DO NOT GO INTO THE CONTROVERSY OF THE ITA 4341/M/2009 MOHD HAJI ADAM & CO 9 REASONS GIVEN BY THE TRIBUNAL FOR APPROVING THE ADD ITION MADE BY A. O. UNDER SEC. 68 OF THE ACT. AS ADMITTEDLY IN THIS CASE TH ERE ARE MISSING LINK IN RESPECT OF CERTAIN FACTS WHICH ARE RELEVANT SO FAR AS PENALTY PROCEEDING IS CONCERNED. IT IS ALSO WELL SETTLED THAT EXPLANATION 1 TO SECTION 271 (1)(C) RAISES DEBATABLE PRESUMPTION AND THE ONUS IS SHIFTED ON THE ASSESSEE TO EXPLAIN THE BONA FIDES OF THE CLAIM BUT AT THE SAME TIME MERELY BECAUSE EXPLANATION OF THE ASSESSEE IS NOT ACCEPTED BY THE ASSESSING OFFICER WITHOUT AN Y JUSTIFIED REASONS CAN IT BE SAID THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS PUT ON HIM BY WAY OF EXPLANATION 1 ? THE ANSWER WILL OF COURSE BE NO. I N THE PENALTY ORDER THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE FURNIS HED INACCURATE PARTICULARS OF INCOME ON ACCOUNT OF CASH CREDIT UNDER THE GUISE OF THE INTRODUCTION OF CAPITAL. WE ARE AFRAID THAT SAID FINDING OF THE ASSESSING OF FICER CANNOT BE ACCEPTED MERELY BECAUSE ADDITION MADE U/S 68 HAS BEEN CONFIR MED IN THE APPELLATE PROCEEDINGS WHICH IN OUR OPINION APPEARS TO BE ON LY BASE FOR LEVY OF PENALTY IN THIS CASE. NOW IT IS WELL SETTLED PRINCIPLE THAT S EC. 68 IS IN NATURE OF DEEMING PROVISION AND DEEMING PROVISION IS TO BE INTERPRETE D IN LIMITED CONTEXT FOR WHICH IT IS BROUGHT ON STATUTE BOOK . THOUGH THE ADDITIO N IS CONFIRMED BY THE TRIBUNAL BUT AT THE SAME TIME FOR EXAMINING THE SAID ISSUE UNDER THE PENALTY PROCEEDINGS TWO VIEWS ARE POSSIBLE. MOREOVER AS RI GHTLY SUBMITTED BY THE LD. CONSULE THERE ARE DIVERGENCE OF VIEWS ON THE ISSUE WHETHER ADDITION UNDER SEC. 68 CAN BE MADE IN RESPECT OF CAPITAL INTRODUCED BY A PARTNER IN THE FIRM. IN OUR CONSIDERED OPINION IN LIGHT OF DISCUSSION AND FOR T HE REASONS STATED HEREINABOVE IT CAN NOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME AND HENC E THERE IS NO JUSTIFICATION TO SUSTAIN THE PENALTY LEVIED BY THE ASSESSING OFFICER . WE ACCORDINGLY DELETE THE SAME. 7. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ITA 4341/M/2009 MOHD HAJI ADAM & CO 10 ORDER PRONOUNCED ON 27TH DAY OF JANUARY 2010. SD/- (R S SYAL) ACCOUNTANT MEMBER SD/- (R S PADVEKAR) JUDICIAL MEMBER MUMBAI DATE: 27TH JANUARY 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) XIII MUMBAI. 4) THE CIT -13 MUMBAI. 5) THE D.R. B BENCH ITAT MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR *CHAVAN I.T.A.T. MUMBAI ITA 4341/M/2009 MOHD HAJI ADAM & CO 11 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 19/20.01.2010 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 21.01.2010 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER