DCIT, New Delhi v. Sh. Sanjay Kumar Aggarwal, New Delhi

ITA 495/DEL/2010 | 2006-2007
Pronouncement Date: 16-04-2010 | Result: Dismissed

Appeal Details

RSA Number 49520114 RSA 2010
Assessee PAN ACTPA6039Q
Bench Delhi
Appeal Number ITA 495/DEL/2010
Duration Of Justice 2 month(s) 13 day(s)
Appellant DCIT, New Delhi
Respondent Sh. Sanjay Kumar Aggarwal, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 16-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 16-04-2010
Assessment Year 2006-2007
Appeal Filed On 03-02-2010
Judgment Text
ITA NO. 495/DEL/2010 A.Y. 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 495/DEL/2010 A.Y. 2006-07 DY. COMMISSIONER OF INCOME TAX VS. SHRI SA NJAY KUMAR AGGARWAL CENTRAL CIRCLE-09 58 EKTA MARKET KATRA BHARIYA N ROOM NO. 357 ARA CENTRE FATEH PURI DELHI 110 006 JHANDEWALAN NEW DELHI (PAN: ACTPA6039Q) [APPELLANT] (RESPONDENT) ASSESSEE BY : SH. VED JAIN RANO JAIN CA DEPARTMENT BY : SH. B.K. RAO SR. DR ORDER PER SHAMIM YAHYA AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) DATED 27.11.2009 A ND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF I NCOME TAX(A) ERRED IN DELETING THE ADDITION OF RS. 1 30 00 000/- MADE BY THE ASSESSING OFFICER BY TREATING THE ASSESSEES CLAIMED WITHDRAWALS FROM THE FIRM M/S KASHMIR WIRES AS HIS OWN MONEY TAKEN BACK THE GENUINENESS OF THE SE WITHDRAWALS HAVING BEEN DOUBTED EVEN BY THE LD. COMMISSIONER OF INCOME TAX (A). ITA NO. 495/DEL/2010 A.Y. 2006-07 2 3. IN THIS CASE THE ASSESSEE IS AN INDIVIDUAL AND FILED RETURN OF INCOME AT RS. 1 73 000/- ON 13.4.2007. THE CASE WAS SELEC TED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD WITHDRAWN A SUM OF RS. 1.30 CRORE FROM A FIRM IN WHICH HE WAS A PARTNER. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD BECOME PARTNER IN T HE SAID FIRM M/S KASHMIR WIRE JAMMU W.E.F. 1.4.2005 WITH 25% SHARE OF PROFI TS BY CONTRIBUTING ONLY 1.84% IN THE CAPITAL. AFTER SEEKING ASSESSEES EXPLANAT ION IN THIS REGARD THE ASSESSING OFFICER OBSERVED AS UNDER:- 1. THE ASSESSEE BECAME PARTNER IN M/S KASHMIR WIR ES JAMMU IN WHICH ASSESSEE HAD NO PREVIOUS REFERENCE RELATION OR ANY QUALIFICATION TO BECAME PARTNER IN A UNIT WHICH IS ENJOYING DEDUCTION U/S 80IB OF THE IT ACT 1961. 1.1 THE FIRM M/S KASHMIR WIRES HAD STARTED ITS REGU LAR PRODUCTION ONLY IN THE F.Y. 2005-06 OBVIOUSLY BEING A NEW UNI T THE FIRM WAS IN NEED OF FUNDS AND EXPERTISE. THE ASSESSEE HAS NONE OF THESE INPUTS FOR THE FIRM. 2. THE ASSESSEE HAS IN FACT WITHDRAWN RS. 40 00 000 /- ON 3 RD AND 4 TH OCTOBER 2005 EVEN WHEN ASSESSEE HAD NOT INTRODU CED A SINGLE PENNY TOWARDS HIS CAPITAL FOR BECOMING PARTN ER IN THE FIRM M/S KASHMIR WIRES JAMMU. 3. THE ASSESSEE HAS FAILED TO JUSTIFY HIS WITHDRAWAL S OF RS. 1 30 00 000/- FROM THE FIRM WHERE HE BECAME PARTNER ONLY IN ITA NO. 495/DEL/2010 A.Y. 2006-07 3 THE RELEVANT PERIOD I.E. F.Y. 2005-06 BY INTRODUCIN G JUST RS. 3 00 000/- ON 25.10.2008. 4. THE ASSESSEE HAS NOT GIVEN ANY SATISFACTORY EXPL ANATION AS TO WHY HE HAS GOT A PAY ORDER OF RS. 40 50 000/- ISSUE D FROM HIS BANK A/C ON 8.10.2005 WHICH IS CLAIMED TO HAVE BEEN MADE FOR OPENING A NEW A/C. IT IS NO WHERE REQUIRED THA T FOR OPENING A BANK A/C ASSESSEE WOULD WITHDRAW A HUGE SUM OF R S. 40 50 000/- WHICH HAS ULTIMATELY NOT BEEN USED FOR THE ALLEGED PURPOSE OF OPENING BANK A/C. 5. THE ASSESSEE HAS WITHDRAWN A SUM OF RS. 1 30 00 000/- AND MADE INVESTMENTS WITH THE FOLLOWING: DEPOSIT WITH GRAND PANYAN TRADERS RS. 51 00 000/ - DEPOSIT WITH SMS IT SOLUTION RS. 30 00 000/- DEPOSIT WITH AR PLANTATION PVT. LTD. RS. 20 00 0 00/- IN A WAY ASSESSEE HAD USED THE FIRM M/S KASHMIR WIRES JAMMU WHO WAS ENJOYING DEDUCTION U/S 80IB TO TAKE ACCOMMODATION ENTRY IN THE FORM OF NET WITHDRAWALS OF RS. 1 27 00 000/- (1 30 00 000-3 00 000). CONCLUSION:- FROM THE ABOVE FACTS AND CIRCUMSTANCES AND INFER ENCES IT IS CLEAR THAT ASSESSEE HAS TAKEN ACCOMMODATION E NTRIES TO THE MAGNITUDE OF RS. 1 27 00 000/- BY TAKING THE ROUTE OF ITA NO. 495/DEL/2010 A.Y. 2006-07 4 WITHDRAWALS AS A PARTNER WITH LITTLE CONTRIBUTION O F RS. 3 00 000/- ONLY. SO THIS AMOUNT OF RS. 1 27 00 000/ - IS TREATED AS ASSESSEES OWN MONEY TAKEN BACK AS ACCOMMODATION ENTRIES. THIS UNEXPLAINED SUM OF RS. 1 27 00 000/- IS ADDED TO THE ASSESSEES INCOME AS CONCEALED INCOME. PENALTY PROCEEDINGS IS INITIATED FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX(A) T HE ASSESSEE FILED SUBMISSIONS AND ORAL ARGUMENTS. IT WAS PLEADED BEFORE HIM THAT ASSESSING OFFICER HAS DISREGARDED THE FOLLOWING EVIDENCES FI LED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. (A) COPY OF THE PARTNERSHIP DEED OF M/S KASHMIR W IRES (JAMMU) (B) COPY OF CAPITAL ACCOUNT OF THE APPELLANT. (C) DETAIL OF WITHDRAWAL MADE BY THE APPELLANT FROM M/S KASHMIR WIRES (JAMMU) CORRELATED WITH THE RECEIPT IN THE BANK ACC OUNT OF THE APPELLANT. (D) COPY OF ACKNOWLEDGEMENT OF FILING INCOME TAX RE TURN OF THE FIRM M/S KASHMIR WIRES (JAMMU) (E) CERTIFICATE FROM OTHER PARTNERS OF THE FIRM M/S KASHMIR WIRES (JAMMU) CERTIFYING THE PROFIT SHARING RATIO AND THE FACT OF THE APPELLANT BEING A PARTNER IN THE FIRM AS DESIRED B Y THE ASSESSING OFFICER. ITA NO. 495/DEL/2010 A.Y. 2006-07 5 4.1 WITH REGARD TO THE ASSESSING OFFICERS OBSERVAT IONS THE ASSESSEE SUBMITTED THAT THERE WAS NO REQUIREMENT OF PREVIOUS QUALIFICA TION OR REFERENCE FOR BECOMING A PARTNER. THE CONTENTION OF THE ASSESSI NG OFFICER THAT ASSESSEE DID NOT HAVE FUNDS AND EXPERTISE FOR UNIT LIKE KASHM IR WIRE JAMMU WAS IRRELEVANT. THE ISSUE OF WITHDRAWAL WAS GOVERNED BY THE UNDER STANDING MADE BY THE PARTNERS OF THE PARTNERSHIP DEED AND THE LAW HAS NO T PUT ANY RESTRICTION ON WITHDRAWALS MADE BY THE PARTNERS FROM PARTNERSHI P FIRM. CONSIDERING THE ABOVE LD. COMMISSIONER OF INCOME TAX(A) OBSERVED TH AT ASSESSING OFFICERS CONCLUSION WAS PURELY BASED ON PRESUMPTIONS AND NO EVIDENCE IN THIS REGARD WAS BROUGHT ON RECORD. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE PARTNERSHIP FIRM WAS DULY CONSTITUTED AS PER THE PARTNERSHIP ACT. THE GENUINENESS OF THE FIRM HAS NOT BEEN DOUBTED NOR TH E PARTNER IS TREATED AS FAKE ONE. REMAINING PARTNERS HAVE ALSO GIVEN CONFIRMAT IONS THROUGH DOCUMENTS WHICH WERE FILED BEFORE THE ASSESSING OFFICER AND T HE GENUINENESS OF THE SAID DOCUMENTS HAS NOT BEEN DISPUTED BY THE ASSESSING OF FICER. THEREAFTER THE COMMISSIONER OF INCOME TAX (A) NOTED THAT THE FIRM HAD ACTUALLY DONE BUSINESS DURING THE YEAR AND OBTAINED A TURN OVER OF RS. 37 34 82 244/- AND THE NET PROFIT OF RS. 3 52 35 531/-. HE NOTED THAT A COPY OF TH E ASSESSMENT ORDER OF THE FIRM WAS ALSO PRODUCED. 4.2 THEREAFTER THE LD. COMMISSIONER OF INCOME TAX ( A) OBSERVED THAT IF THE ASSESSING OFFICER WAS HAVING DOUBT ABOUT THE GENUIN ENESS OF THE PARTNERSHIP FIRM HE COULD HAVE GOT THE PARTNERS EXAMINED BY THEIR ASSESSING OFFICERS OR THOUGH THE ASSESSING OFFICER OF THE FIRM AS TO WHETHER THE RE IS ANY IRREGULARITY IN CONSTITUTING THE FIRM AND AS TO WHETHER THE OTHER PARTNERS UNDER ANY DURESS MISREPRESENTATION OR UNDUE INFLUENCE AGREED TO ALLO W THE APPELLANT TO ENTER INTO ITA NO. 495/DEL/2010 A.Y. 2006-07 6 PARTNERSHIP FIRM WITH SUCH A LOW CAPITAL CONTRIBUTI ON AND HIGH PROFIT AND LOSS SHARING RATIO. BUT HE HAS NOT TAKEN ANY SUCH ACTI ON. ON THE CONTRARY THE APPELLANT HAS BROUGHT A CERTIFICATE FROM ALL THE PA RTNERS CONFIRMING THE REASONS WHY THE APPELLANT WAS ALLOWED SUCH A HIGH PROFIT AN D LOSS SHARING RATIO. THE ASSESSING OFFICER HAS ALSO NOT BROUGHT ANY MAT ERIAL ON RECORD EVEN TO SUGGEST THAT APPELLANT HAS USED ITS CASH OR UNACCO UNTED MONEY TO GET THIS AMOUNT BACK BY WAY OF CHEQUE AS WITHDRAWAL FROM TH E FIRM. HE NOTED THAT ASSESSING OFFICER HAS NOT BROUGHT OUT ON RECORD T O SHOW EVEN THAT APPELLANT IS HAVING SUFFICIENT SOURCES OF EARNING SUCH A HUGE UN ACCOUNTED MONEY SPECIALLY WHEN HIS RETURNED INCOME IS ONLY OF RS. 1 73 000/- DURING THE YEAR. THE CIRCUMSTANCES MENTIONED BY THE ASSESSING OFFICE R MAY CREATE A GENUINE DOUBT IN THE MIND OF ANYBODY TO THINK WHETHER THIS TRANSACTION IS GENUINE OR NOT. BUT SIMPLY BY THAT DOUBT ADDITION OF CONCEALED INCO ME CANNOT BE MADE OR THE TRANSACTIONS CANNOT BE TREATED AS ACCOMMODATION EN TRY. THE ASSESSING OFFICER COULD HAVE BROUGHT SOME MORE MATERIAL ON RECORD AND THEN PROBABLY COULD HAVE TRIED TO ESTABLISH THAT WHAT IS APPARENT IS NOT R EAL. BUT HE HAS NOT BROUGHT ANY MATERIAL ON RECORD. SIMPLY BASED ON A DOUBT IN HIS MIND HE HAS MADE THIS ADDITION. THE REASONS GIVEN FOR MAKING THIS ADDITI ON ARE TOTALLY IRRELEVANT AND NOT HAVING ANY LEGAL BACKING. IN VIEW OF THESE DISCUSSIONS IT IS HELD THAT ASSE SSING OFFICER WAS NOT CORRECT IN HOLDING THAT AMOUNT WITHDRAWN FROM THE FIRM IS A N ACCOMMODATION ENTRY. THE ADDITION SO MADE IS THEREFORE DELETED (RELIEF RS. 1 30 00 000/-). 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. ITA NO. 495/DEL/2010 A.Y. 2006-07 7 6. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND CLAIMED THAT IT WAS BEYOND THE PREPONDERANCE OF THE PROBABILITY THAT A PARTNER JOINING THE FIRM AND CONTRIBUTING ONLY RS. 3 LACS WI LL BE GRANTED WITHDRAWAL IN HIS CAPITAL ACCOUNT OF RS. 1.30 CRORES BY THE FIRM. HE NCE HE CLAIMED THAT IT WAS THE ASSESSEES OWN MONEY IN THE GARB OF WITHDRAWAL. 6.1 LD. COUNSEL OF THE ASSESSEE ON THE OTHER HAND S UBMITTED THAT LD. COMMISSIONER OF INCOME TAX (A) HAS PASSED A REASONA BLE ORDER. ASSESSEE HAS GIVEN ALL THE NECESSARY EXPLANATIONS. THE PARTNERS HIP ACT DOES NOT MANDATE THAT THERE HAS TO BE A COMPULSORY INTEREST ON PARTNERS C APITAL ACCOUNT OR OVER DRAWING. HE FURTHER CLAIMED THAT AS PER THE PARTN ERS CAPITAL ACCOUNT IN THE FIRM PARTNERS ALSO HAVE SUBSTANTIAL PROFITS AND ALL PAR TNERS HAS ALSO MADE DRAWINGS. HE CLAIMED THAT THE DRAWINGS HAVE BEEN MADE FROM FI RMS FUNDS. HE PRODUCED COPY OF FIRMS BALANCE-SHEET IN THIS REGARD. HENCE HE CLAIMED THAT ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A) BE UPHELD. 6.2 WE HAVE CAREFULLY CONSIDERED THE ISSUE. IT IS C LEAR THAT ASSESSEE IN THIS CASE HAS JOINED THE PARTNERSHIP FIRM M/S KASHMIR WIRES (J AMMU) ON 1.4.2005. HE HAS 25% SHARE IN PROFIT AND LOSS OF THE FIRM AND HAS CO NTRIBUTED RS. 3 LACS AS CAPITAL IN THE PARTNERSHIP FIRM AND HAS DRAWN 1.30 CORRES FRO M THE FIRM. THERE IS NO PROVISION IN THE PARTNERSHIP FIRM FOR ANY INTEREST ON CAPITAL ACCOUNT AS STATED IN THE ORDERS OF THE AUTHORITIES BELOW. THE FIRM H AS DONE BUSINESS DURING THE YEAR AND HAS ACHIEVED A TURNOVER OF RS. 37 34 82 244/- AND EARNED NET PROFIT OF RS. 3 52 35 531/-. ASSESSMENT OF THE FIRM HAS BEEN COM PLETED U/S 143(3). THE ITA NO. 495/DEL/2010 A.Y. 2006-07 8 STATEMENT OF PARTNERS CAPITAL A/C AS PER FIRMS BALANCE SHEET AS ON 31.3.2006 IS AS BELOW:- SCHEDULE OF PARTNERS CAPITAL ACCOUNT AS ON 31.3.20 06 PARTICULARS ..AS ON 1.4.2005 ADDITION WITHDRAWALS SUB-TOTAL DEWAN CHAND 1385490.00 NIL 2000000.00 614510.0 0 RAHUL BANSAL 30000.00 60000.00 5000000.00 49100 00.00 HUKAM CHAND 7500000.00 NIL 9500000.00 2000000. 00 SANJAY AGGARWAL NIL 300000.00 13000000.00 1270000 0.00 VARSHA BANSAL NIL 15000.00 3559900.00 3544900.00 KARAN MITTAL NIL 2700000.00 4300000.00 1600000.00 NIKHIL MITTAL NIL 4300000.00 4600000.00 300000.00 TOTAL 8915490.00 7375000.00 41959900.00 (-)2566941 0.00 PARTICUALRS SUB-TOTAL PROFIT BALANCE AS ON 31.3.2006 DEWAN CHAND 614510.00 1761776.60 1147266.60 RAHUL BANSAL 4910000.00 3523553.19 (-)1386446.81 HUKAM CHAND 2000000.00 8808882.96 6808882.96 SANJAY AGGARWAL 12700000.00 8808882.96 (-)3891117.04 VARSHA BANSAL 3559900.00 3523553.19 (-) 21346.81 KARAN MITTAL 1600000.00 4404441.48 2804441.48 NIKHIL MITTAL 300000.00 4404441.48 4104441.48 (-) 25684410.00 35235531.86 9566121.86 6.3 FROM THE PERUSAL OF FIRMS BALANCE SHEET IT IS CLEAR THAT THE FIRM HAS FAIRLY LARGE TURNOVER AND PROFITS. OTHER PARTNERS OF THE FIRM HAVE ALSO MADE SUBSTANTIAL DRAWINGS AND IN SOME CASES MORE THAN THEIR CAPITAL AND SHARE OF PROFIT. UNDER SUCH CIRCUMSTANCES THE DRAWINGS BY THE ASSESSEE I .E. RS. 1.30 CRORES AGAINST CAPITAL OF RS. 3 LACS AND SHARE OF PROFIT OF RS. 88 08 882.96 CANNOT BE SAID TO BE A ITA NO. 495/DEL/2010 A.Y. 2006-07 9 VERY UNUSUAL PHENOMENON. THE FIRM HAS SUFFICIENT FUNDS IN THE BUSINESS WHICH ARE MANY TIMES MORE THAN THE DRAWINGS BY THE ASSE SSEE. HENCE THE THEORY OF PREPONDERANCE OF PROBABILITY CANNOT BE INVOKED TO C LAIM THAT THE ASSESSEE HAS INTRODUCED HIS OWN MONEY IN THE FORM OF DRAWINGS. 6.4 THAT THE PARTNERSHIP DEED DID NOT PROVIDE FOR C HARGING OF INTEREST ON PARTNERS DRAWINGS AND THAT THE ASSESSEE WAS GIVEN 25% SHARE PROFITS IS SOMETHING ON WHICH THE ASSESSING OFFICER CANNOT SE T INTO JUDGEMENT. MOREOVER NO CASE HAS BEEN MADE OUT THAT PARTNERSHIP WAS BOGU S OR THAT THERE WAS VIOLATION OF PARTNERSHIP ACT. MOREOVER THERE IS NO ADVERSE FINDING ON THE ISSUE OF PARTNERSHIP AGREEMENT; TERMS OF PARTNERSHIP OR D RAWINGS OF PARTNERSHIP IN THE ASSESSMENT ORDER OF THE FIRM COMPLETED U/S 143(3) O F THE ACT. OTHER PARTNERS HAVE DULY CONFIRMED THE FACTS OF PARTNERSHIP. 6.5 THUS THE IDENTITY OF THE SOURCE OF THE DRAWALS OF THE FUNDS BY THE ASSESSEE IS CLEARLY THE PARTNERSHIP FIRM. THE HUGE TURNOVER AND PROFIT OF THE FIRM CLEARLY JUSTIFIED THE CREDITWORTHINESS. THE BALANCESHEET OF THE FIRM AND THE ASSESSMENT THEREOF CLEARLY DEMONSTRATE THE GENUINENESS OF THE TRANSACTIONS. IN THIS BACKGROUND IN OUR CONSIDERED OPINION THERE IS NO C ASE THAT THE ASSESSEE INTRODUCED HIS OWN FUNDS IN THE FORM OF DRAWINGS. UNDER SUCH CIRCUMSTANCES WE ITA NO. 495/DEL/2010 A.Y. 2006-07 10 DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDE R OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY WE UPHOLD THE S AME. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/04/201 0. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 16/04/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGIST RAR ITAT DELHI BENCHES