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Income Tax Appellate Tribunal, “ D ” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश / O R D E R
PER SHRI RAJPAL YADAV, JUDICIAL MEMBER : The Revenue is in appeal before us against the order of Ld.Commissioner of Income Tax(Appeals)-3, Ahmedabad [‘CIT(A)’ in short] dated 29/02/2016 passed for Assessment Year (AY) 2011-12.
ITA No.1080 /Ahd/2016 ITO vs. Maruti Foods Industries Asst.Year – 2011-12 - 2 - 2. The Revenue has taken three grounds of appeal, but out of them only Ground No.1 is the substantial ground wherein Revenue has pleaded that the Ld.CIT(A) has erred in deleting the addition of Rs.3,01,40,000/- which was added by the Assessing Officer (AO) with the aid of section 68 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") on account of unexplained credits in partners’ capital account.
Brief facts of the case are that the assessee is a firm engaged in the business of manufacturing of Rice from Paddy. It was filed its e-return on 06/10/2011 declaring total income at Rs.25,37,494/-. The case of the assessee was selected for scrutiny assessment and notice u/s.143(2) was issued and served upon the assessee. On scrutiny, it revealed to the Assessing Officer that three partners have raised capital of Rs.3,01,40,000/- in their capital accounts. The details are as under:
Sl.No. Name of the Party Amount (in Rs.) 1. Shri Ashit P. Amin 87,50,000/- 2. Shri Nilesh P.Amin 1,06,90,000/- 3. Shri Pravinbhai G.Amin 1,07,00,000/-
The Ld.AO has directed the assessee to explain the transaction and source of the amount in credits. The assessee has submitted confirmation from the partners, their PANs and other details from where this amount has come to the assessee. The Ld.AO was not satisfied with the explanation given by the assessee and he added the above amounts on
ITA No.1080 /Ahd/2016 ITO vs. Maruti Foods Industries Asst.Year – 2011-12 - 3 - protective basis. The Ld.AO has observed that substantive additions will be made in the hands of the partners.
Dissatisfied with the finding, the assessee carried the matter before the CIT(A). The Ld.first appellate authority has deleted the addition by observing as under:
“7.2. Decision : I have examined the facts contained in Assessment Order and submission by the appellant through statement of facts on record. The onus has been discharged by the appellant. The confirmations have been filed giving PAN No. of the creditors. The creditworthiness of the creditor(s) cannot be decided by the AO of the appellant. In fact, the AO of appellant can get the matter investigated through the AO of the creditors. The AO of appellant cannot become AO of the creditors. Explanation about ‘source of source’ or ‘origins of origin’ cannot be asked from the appellant while making inquiry under section 68. It is not the case of AO that the impugned amount is appellant’s own money generated out of books of account and the same is brought in through bogus creditor. The AO has to place on record the evidences so collected. Reliance is placed on the ratio laid down in the case of DCIT v. Rohini Builders (2002) 256 ITR 360 (Guj.): “Mere identification of the source of the creditors even without evidence as to the nature of the income could justify acceptance, where the assessee has given the GIR number / PAN of the creditor and also shows that the amounts were received by account payee cheques. It was further held that it is not necessary, that there should be an explanation as to the source of the money on the part of the creditors in every case.” Reliance is also placed on another case i.e. CIT vs. Dharamdev Finance Pvt.Ltd. 43 Taxmann.395 (Guj.) wherein it is held,
ITA No.1080 /Ahd/2016 ITO vs. Maruti Foods Industries Asst.Year – 2011-12 - 4 - “No addition on account of cash credits could be made, where assessee had given PAN of creditors, their confirmations and their bank statements which established their creditability”
The appellant has discharged its onus by submitting particulars including Names/PAN/Copy of RETURN OF INCOME etc. I have gone through various judgments on this issue. I am of the firm view that addition in appellant’s case cannot be sustained. Credits are in the mount of Partners from farmers and if that is decided to be unexplained then Partner’s account is unexplained wherein addition can be made. Appellant is separate assessee has to be kept in mind. In view of facts of the case and the ratio laid down by Hon’ble Gujarat High Court in the cases (Supra), the addition made by the AO of Rs.3,01,40,000/- u/s.68 of the I.T. Act, 1961 is hereby deleted. The ground No.3 is allowed.”
This appeal was earlier heard on 14/02/2018. However, it was refixed for clarification and the Bench has observed that status of substantial addition, whether made in the hands of partners or not is not available on the record, therefore it was refixed for hearing.
The Ld.DR before us submitted that no substantial addition has been made as informed by the Income Tax Officer. No scrutiny assessment has been made in the hands of three partners. Thus, there is no substantive addition.
ITA No.1080 /Ahd/2016 ITO vs. Maruti Foods Industries Asst.Year – 2011-12 - 5 - 7. In response to the notice of hearing, no one has present on behalf of the assessee. With the assistance of Ld.DR, we have gone through the record carefully. Since addition in the present case was made on protective basis and on substantive basis, it was required to be made in the hand of partners but as informed by the Ld.Sr.DR on the basis of the letter of ITO, Ward-3(2)(3), Ahmedabad dated 29/06/2018, no addition on substantive basis was made in the hands of partners. Therefore, the protective basis is not sustainable. The said letter of ITO reads as under:
“OFFICE OF THE INCOME TAX OFFICER WARD 3(2)(3) OM NO A/503, 5™ FLOOR,PRATYAKSHKAR BHAVAN, PANJRAPOLE, AMBAWADI, AHMEDABAD-380015 TELEPHONE: 26304825 Date: 29/06/2018 No. ITO/Wd-3(2)(3)/ITAT-Reports/2018-19
To,
Office of the Senior Departmental representative ‘D’ Bench, (ITAT)-4(1), 2nd Floor, Neptune Towers, Nr. Nehru Bridge Ashram Road, Ahmedabad-380009 Sir, Sub: - Calling for written submission in the case of M/s Maruti Food Industries, ITA No. 1080/And/2016 for A.Y. 2011-12-Reg:- Ref: - Your office letter No.Sr.DR/ITAT-4(l)/Maruti/'D' Bench/2018-19 dated 04/06/2018-19 ------ Please refer to the above - 2. The assessment proceedings in the case of M/s Maruti Foods Industries was completed 21/03/2014. An addition of Rs. 3,01,40,000/- was made in the case of M/s
ITA No.1080 /Ahd/2016 ITO vs. Maruti Foods Industries Asst.Year – 2011-12 - 6 - Maruti Foods Industries on account of unexplained credits in partner's capital accounts along with other additions. This addition was made on protective basis. Now as per your above referred letter MI kind office desires to know the status of additions in the hand of partners. The capital was introduced by following partners as follows-
Shri Asit P.Amin Rs. 87,50,000/- 2. Shri Nilesh P. Amin Rs. 1,06,90,000/- 3. Shri Pravinbhai G. Amin Rs. 1,07,00,000/- From the verification of records it was found that Shri Asit P Amin is assessed with Income Tax Officer Ward- 3(2)(1) Ahmedabad. Information was called for from him vide letter dated 12/06/2018 regarding the addition of above capital introduced by Shri Asit P Amin in Maruti Foods Industries on the substantive basis in the case of Asit P Amin. Income Tax Officer Ward- 3(2)(1) Ahmedabad vide letter dated 18/06/2018 has informed this office that there is no scrutiny assessment passed in the case of Shri Asit P Amin for A.Y. 2011-12. Similarly no scrutiny assessment was passed for A.Y. 2011-12 in the case of Shri Pravinbhai G Amin as informed by ITO Ward-3(2)(4) Ahmedabad. Shri Nilesh P Amin is assessed with this office and from the verification of 1TD and case records available with this office, it was noticed that there is no scrutiny assessment passed for A.Y. 2011-12 in his case. Therefore, it is submitted that no substantive addition in the case of partners were made for A.Y. 2011-12. Tanking You Yours faithfully Sd/- Sanjay Kumar Yadav Income -Tax Officer Ward 3(2)(3) Ahmedabad Copy for information Addl.CIT Range 3(2) Ahmedabad.
Income -Tax Officer Ward 3(2)(3) Ahmedabad”
ITA No.1080 /Ahd/2016 ITO vs. Maruti Foods Industries Asst.Year – 2011-12 - 7 -
7.1. The Ld.CIT(A) has rightly deleted this addition. We do not find any merit in this Revenue’s appeal.
In the result, Revenue’s appeal stands dismissed. Order pronounced in the Court on 22nd January-2019 at Ahmedabad.
Sd/- Sd/- ( WASEEM AHMED ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 22/ 01 /2019 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-3, Ahmedabad �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation .. 19.1.2019(dictation-pad 9- pages attached at the end of this File) 2. Date on which the typed draft is placed before the Dictating Member ..19.1.2019 3. Other Member... 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….22.1.2019 7. Date on which the file goes to the Bench Clerk…………………22.1.2019 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………