Appeal details
Counselvise Citation
[2009] 114 COUNSELVISE.COM (IT) 8079 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-06-2009
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
D
Next Hearing Date
30-06-2009
Assessment Year
2003-2004
Appeal Filed On
24-09-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `D: NEW DELHI BEFORE SHRI R.P. TOLANI, JM AND SHRI A.K. GORAD IA, AM I.T.A. NO.2981/DEL OF 2008 ASSESSMENT YEAR: 2003-04 M/S LMS DREAMS INN RESORT, INCOME-TAX OFFICER, KALASH MANDAP, HARI FLOUR MILL VS KASHIPUR. COMPOUND, MORADABAD, KASHIPUR. APPELLANT RESPONDENT APPELLANT BY: SHRI S.C. AGARWAL RESPONDENT BY: SHRI S. REHMAN ORDER PER R.P. TOLANI, JM: THIS IS ASSESSEES APPEAL. FOLLOWING TWO GROUNDS ARE RAISED: 1. THE CIT(A) HAS ERRED IN FACTS AND IN LAW, IN CONFORMING THE ADDITION OF RS.1,50,000/- IN INCOME U/S 68 OF THE INCOME-TAX ACT IN THE HANDS OF THE FIRM AS THIS WAS THE CONTRIBUTION OF CAPITAL BY THE PARTNERS WHO WERE INCOME TAX ASSESSEE HAVING THEIR OWN PAN AND EVEN THE FIRM DID NOT COMMENCE THE BUSINESS ACTIVITY. 2. THE CIT(A) HAS ERRED IN FACTS AND IN LAW, IN CONFORMING THE ADDITION OF RS.7,60,053/- IN INCOME U/S 68 OF THE INCOME-TAX ACT IN THE HAND OF THE FIRM AS THIS WAS THE CONTRIBUTION OF CAPITAL BY THE PARTNERS WHO WERE INCOME TAX ASSESSEE HAVING THEIR OWN PAN, AND EVEN THE FIRM DID NOT COMMENCE THE BUSINESS ACTIVITY. 2 2. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT T HE ASSESSEE IS A PARTNERSHIP FIRM. TWO OF THE DIRECTORS INTRODUCED C APITAL FROM TIME TO TIME, WHICH WAS CREDITED IN THEIR RESPECTIVE BOOKS OF ACC OUNTS. THE CAPITAL OF THE PARTNERS ALONG WITH BANK LOANS WAS UTILIZED FOR THE CONSTRUCTION OF THE RESORT, WHICH IS OWNED AND OPERATED BY THE ASSESSEE FIRM. AO, HOWEVER, REFERRED THE MATTER OF THE COST OF CONSTRUCTION TO THE DVO, WHICH WAS SUBMITTED AT A HIGHER FIGURE. AO WHILE FRAMING THE ASSESSMENT ADD ED THE DIFFERENCE BETWEEN THE COST OF CONSTRUCTION OF ASSESSEE AND DV O BESIDES FURTHER ADDED THE CAPITAL INTRODUCED BY BOTH THE PARTNERS. 3. AGGRIEVED ASSESSEE PREFERRED FIRST APPEAL WHERE THE ADDITION ON ACCOUNT OF DIFFERENCE IN COST OF CONSTRUCTION WAS D ELETED. HOWEVER, THE ADDITIONS IN RESPECT OF PARTNERS CAPITAL WERE CONF IRMED IN THE HANDS OF THE FIRM AS UNEXPLAINED CASH CREDITS, WHICH ARE AGITATE D BEFORE US. 4. LEARNED COUNSEL CONTENDS THAT THE ISSUE ABOUT AD DITION OF PARTNERS CAPITAL U/S 68 HAS BEEN DECIDED BY HONBLE PATNA HI GH COURT IN THE CASE OF CIT VS MOHD. PARVEZ AHMED AND ORS, 268 ITR 381 HOLD ING THAT INTRODUCTION OF CAPITAL BY THE PARTNERS SHOULD BE A SSESSED IN THE HANDS OF THE PARTNERS AND NOT THE FIRM. SIMILAR VIEW WAS HELD IN THE CASE OF CIT VS. BURMA ELECTOR CORPORATION, 252 ITR 344. THE FIRM W AS CONSTITUTED IN THIS YEAR ONLY. IT CANNOT BE ASSUMED THAT THE FIRM WITH OUT BUSINESS OPERATIONS 3 COULD EARN ANY UNEXPLAINED MONEY TO BE ADDED AS UNE XPLAINED CASH CREDITS MORE SO WHEN THE SAME IS INTRODUCED BY THE PARTNERS , WHO ARE IDENTIFIABLE AND GENUINENESS OF THE TRANSACTION IS NOT DOUBTED. IN CASE OF CIT VS SUNDER LAL JAIN, 170 ITR 316, SIMILAR VIEW AS TAKEN. IT W AS PLEADED THAT THESE ADDITIONS CANNOT BE MADE IN THE HANDS OF THE FIRM. 5. LEARNED DR, ON THE OTHER HAND, RELIES ON THE ORD ER OF LOWER AUTHORITIES. ALTERNATIVELY, IT WAS SUBMITTED THAT I N CASE CONTENTION OF THE ASSESSEE IS ACCEPTED, THE COURTS HAVE TO BE DIRECTE D TO EXAMINE THE CASH CREDIT IN THE HANDS OF THE PARTNERS. ACCORDINGLY, T HE DIRECTIONS MAY BE GIVEN. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND MERIT IN THE ARGUMENT OF LEARNED C OUNSEL. THE ABOVE JUDGMENTS HAVE HELD THAT IF THE PARTNERS INTRODUCE THE CAPITAL, THE SAME CANNOT BE ADDED IN THE HANDS OF THE FIRM AS UNEXPLA INED CASH CREDIT BECAUSE THE EXPLANATION OF THE PARTNER IS NOT HELD SATISFAC TORY IN THE ASSESSMENT OF THE FIRM. IN OUR VIEW, SUCH CREDITS CAN BE EXAMINED IN THE HANDS OF PARTNERS, WHO ARE IDENTIFIABLE INASMUCH AS THE FIRMS PARTNER SHIP DEED IS ACCEPTED AND GENUINENESS OF THE TRANSACTION IS NOT IN QUESTION. IN OUR VIEW, THEREFORE, THESE ADDITIONS CANNOT BE MADE IN THE HANDS OF THE FIRM. HOWEVER, WE FIND MERIT IN THE ALTERNATE PLEA OF THE LEARNED DR. THE AO WILL BE AT LIBERTY TO INITIATE APPROPRIATE PROCEEDINGS IN THE HANDS OF TH E PARTNERS. 4 7. IN THE RESULT, ASSESSEE APPEAL IS ALLOWED ON THE SE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2009. (A.K. GORADIA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH JUNE, 2009 VIJAY COPY TO: 1. APPELLANT 2. RESPONDENT. 3. CIT 4. CIT(A)-II, DEHRADUN. 5. DR ASSISTANT REGISTRAR
