ITO, Gwalior v. M/s R.P.S. and Co, Morena

ITA 654/AGR/2008 | 2001-2002
Pronouncement Date: 25-05-2010 | Result: Dismissed

Appeal Details

RSA Number 65420314 RSA 2008
Assessee PAN AAOFM7655F
Bench Agra
Appeal Number ITA 654/AGR/2008
Duration Of Justice 1 year(s) 6 month(s) 28 day(s)
Appellant ITO, Gwalior
Respondent M/s R.P.S. and Co, Morena
Appeal Type Income Tax Appeal
Pronouncement Date 25-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 25-05-2010
Date Of Final Hearing 22-04-2010
Next Hearing Date 22-04-2010
Assessment Year 2001-2002
Appeal Filed On 27-10-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI P.K. BANSAL ACCOUNTANT MEMBER ITA NO.654/AGR/2008 ASST. YEAR: 2001-02 INCOME-TAX OFFICER WARD 2(2) VS. M/S. R.P.S. & COMPANY GWALIOR. PORSA ROAD AMBAH DISTT. MORENA. (PAN : AAOFM 7655 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. MISHRA SR. D.R. RESPONDENT : SHRI RAJENDRA SHARMA ADVOCATE ORDER PER P.K. BANSAL A.M.: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) DATED 11.07.2008. 2. THE ONLY ISSUED RAISED BY THE REVENUE IN THIS AP PEAL RELATES TO THE DELETION OF THE ADDITION MADE BY THE A.O. AMOUNTING TO RS.87 00 000/-AGAINST CAPITAL CONTRIBUTION MADE BY THE PARTNERS AS INCOME OF THE FIRM. 3. THE BRIEF FACTS ARE THAT THE A.O. NOTED THAT DUR ING THE YEAR THE PARTNERS HAD MADE THE CAPITAL CONTRIBUTION TO THE EXTENT OF RS.87 00 000/ - AS DETAILED AT PAGES 1 & 2 OF THE ASSESSMENT ORDER IN THE FIRM. WHEN ENQUIRED THE ASSESSEE SU BMITTED THAT THE PARTNERS WERE HAVING INDEPENDENT AGRICULTURAL HOLDING AND THEY HAVE INVE STED IN THE FIRM OUT OF THEIR AGRICULTURAL 2 INCOME. FOR THAT AFFIDAVITS WERE DULY SUBMITTED I N RESPECT OF EACH OF THE PARTNERS. THE A.O. ASKED THE ASSESSEE TO PRODUCE THE PARTNERS WHICH TH E ASSESSEE FAILED TO PRODUCE. HE ACCORDINGLY ADDED A SUM OF RS.87 00 000/- IN THE HANDS OF THE F IRM. WHEN THE MATTER WENT BEFORE THE CIT(A) THE CIT(A) DELETED THE ADDITION HOLDING THA T THE CAPITAL CONTRIBUTION MADE BY THE PARTNERS IS REASONABLY EXPLAINED BEFORE THE A.O. AN D THE CAPITAL CONTRIBUTION WAS MADE BEFORE THE COMMENCEMENT OF THE BUSINESS. 4. BEFORE US THE LD. D.R. VEHEMENTLY CONTEND THAT THE A.O. ASKED THE ASSESSEE TO PRODUCE EACH OF THE PARTNERS SO THAT THE IDENTITY CREDITWO RTHINESS AND GENUINENESS OF THE TRANSACTION COULD BE APPROVED. THE ONUS IS ON THE ASSESSEE TO PROVE THE CASH CREDIT. THE CIT(A) HAS ACCEPTED THE EXPLANATION OF THE ASSESSEE WITHOUT BR INGING ANY EVIDENCE ON RECORD ABOUT THE SOURCES OF THE INVESTMENT. THE A.O. HAS EVEN NOT G IVEN ANY OPPORTUNITY TO CROSS-EXAMINE THE DEPONENTS I.E. THE PARTNERS. 5. THE LD. A.R. ON THE OTHER HAND VEHEMENTLY CONT ENDED RELAYING ON THE FOLLOWING DECISION THAT NO ADDITION CAN BE MADE IN THE HANDS OF THE FIRM WHEN THE DEPOSITS ARE MADE BY THE PARTNERS :- I) INDIA RICE MILL VS. CIT 218 ITR 508 (ALLD) II) SURENDRA MAHAN SETH VS. CIT 221 ITR 239 (ALLD) III) CIT VS. JAISWAL MOTOR FINANCE 141 ITR 706 (AL LD.) 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD ALONGWITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE CASE LAW AS RELIED UPON BY THE LD. A.R. IN THE CASE OF INDIA RI CE MILL VS. CIT 218 ITR 508 (ALLD) WHEREIN IT WAS HELD :- 3 ON THE FACTS AND THE CIRCUMSTANCES OF THIS CASE W E ARE OF THE CONSIDERED VIEW THAT THE TRIBUNAL HAS FALLEN INTO SERIOUS ERRO R. THE TRIBUNAL SHOULD HAVE TAKEN NOTE OF THE FACT THAT ALL THE DEPOSITS AGGREG ATING TO RS.1 43 000/- REPRESENTED THE CAPITAL CONTRIBUTION OF THE PARTNER S IN THE FIRM AND THEY WERE MADE BEFORE THE FIRM STARTED ITS BUSINESS. IT WAS FOR THE PARTNERS TO EXPLAIN THE SOURCE OF THE DEPOSITS AND IF THEY FAILED TO DISCHA RGE THE ONUS THEN SUCH DEPOSITS COULD BE ADDED IN THE HANDS OF THE PARTNERS ONLY. THE TRIBUNAL ERRONEOUSLY CAME TO THE CONCLUSION THAT THE DEPOSITS REPRESENTED THE UNDISCLOSED INCOME OF THE ASSESSEE FIRM. THE APPROACH OF THE CIT(A) IN THIS CASE SEEMS TO BE CORRECT WHO CLEARLY HELD THAT UNEXPLAINED DEPOSITS IN NO CASE COULD BE THE INCOME OF THE ASSESSEE-FIRM BECAUSE THE FIRM STARTED ITS BUSINESS ONLY AFTER THE CREDITS HAD BEEN MADE IN ITS BOOKS. IT WAS HELD : 7. IN THE CASE OF SURENDRA MAHAN SETH VS. CIT 221 ITR 239 (ALLD) IT WAS HELD :- FROM A PERUSAL OF THE STATEMENT OF THE CASE IT CL EARLY APPEARS THAT THE DEPOSITS HAD BEEN MADE BY THE PARTNERS ON THE VERY FIRST DAY WHEN THE PARTNERSHIP FIRM CAME INTO EXISTENCE. THE QUESTION FOR CONSIDE RATION IS WHETHER SUCH DEPOSITS CAN BE TAKEN TO BE THE INCOME OF THE ASSESSEE-FIRM. A SIMILAR QUESTION CAME UP FOR CONSIDERATION BEFORE THIS COURT IN IT. REF. NO. 152 OF 1990 INDIA RICE MILLS VS. CIT (1996) 218 ITR 508 (ALL) AND THEN THIS COU RT HELD THAT THE ONUS WAS ON THE PARTNERS TO EXPLAIN THE SOURCE OF THE DEPOSITS MADE ON THE VERY FIRST DAY WHEN THEY ENTERED INTO PARTNERSHIP AND IF THEY FAILED T HE AMOUNT COULD HAVE BEEN ADDED IN THEIR HANDS ONLY AND NOT IN THE HANDS OF T HE ASSESSEE-FIRM. 8. IN THE CASE OF CIT VS. JAISWAL MOTOR FINANCE 14 1 ITR 706 (ALLD.) IT WAS HELD :- IF THERE ARE CASH CREDIT ENTRIES IN THE BOOKS OF T HE FIRM IN WHICH THE ACCOUNTS OF THE INDIVIDUAL PARTNERS EXIST AND IT IS FOUND AS A FACT THAT CASH WAS RECEIVED BY THE FIRM FROM ITS PARTNERS THEN IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT THEY WERE PROFITS OF THE FIRM IT COU LD NOT BE ASSESSED IN THE HANDS OF THE FIRM. 9. IN VIEW OF THE SAID DECISIONS IT IS SETTLED POS ITION OF LAW THAT IN CASE THE PARTNERS CONTRIBUTE TO THE CAPITAL OF THE FIRM NO ADDITION CAN BE MADE IN THE HANDS OF THE FIRM. THE ADDITION IF ANY CAN BE MADE ONLY IN THE HANDS OF THE PARTNER. THE BURDEN IS ON THE PARTNER TO EXPLAIN THE SOURCE OF THE INVESTMENT. WE ACCORDIN GLY RESPECTFULLY FOLLOWING THE AFORESAID 4 DECISIONS OF THE ALLAHABAD HIGH COURT HOLD THAT TH E A.O. WAS NOT CORRECT IN LAW IN MAKING THE ADDITION IN THE HANDS OF THE FIRM. IF ANY ADDITION HAS TO BE MADE THAT THAT CAN BE MADE ONLY IN THE HANDS OF THE PARTNERS. THE A.O. IS FREE TO TAK E ACTION IN THE HANDS OF INDIVIDUAL PARTNERS WHO HAS CONTRIBUTED THE CAPITAL. WE ACCORDINGLY DISM ISS THE APPEAL FIELD BY THE REVENUE. 10. IN THE RESULT APPEAL OF THE REVENUE STANDS DIS MISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 25.05.2010) . SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 25 TH MAY 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY