CHAKAN PETROL DEPOT,PUNE vs. INCOME-TAX OFFICER,

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ITA 2682/PUN/2016Status: DisposedITAT Pune27 April 2018AY 2010-114 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had established the identity, genuineness, and creditworthiness of the source of capital. The authorities below erred by going into the 'source of source', which is not permissible under Section 68.

What were the facts?

The assessee, a partnership firm, introduced capital of Rs. 5 lakhs. The assessee explained this capital as withdrawals from another partnership firm, M/s. Hrishikesh Auto Spares (Diesel). The Assessing Officer rejected this explanation and made an addition under Section 68 of the Income Tax Act.

What were the issues?

Whether the addition of Rs. 5 lakhs under Section 68 was justified when the assessee provided a plausible source for the capital introduction, and whether penalty proceedings under Section 271(1)(c) were warranted.

Which sections of the Income-tax Act were involved?

Section 68,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE

For Appellant: Shri Pramod Jadhav
For Respondent: Shri Mukesh Jha
Hearing: 18.04.2018Pronounced: 27.04.2018

आदेश / ORDER

PER SUSHMA CHOWLA, JM:

The appeal filed by the assessee is against the order of CIT(A)-9, Pune, dated 10.08.2016 relating to assessment year 2010-11 against order passed under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).

2.

The assessee has raised the following ground of appeal:-

ITA No.2682/PUN/2016 2 M/s. Chakan Petrol Depot

1.

The learned CIT Appeal has erred in confirming the addition made by the learned AO of Rs.5,00,000/- u/s 68 of the IT Act. 2. The learned AO as well as the learned CIT Appeal has failed to appreciate the fact that the capital was introduced by the partner in the appellant firm by way of withdrawal by the same partner from another partnership firm namely M/s Hrishikesh Auto Spares (Diesel). 3. The learned CIT Appeal as well as learned AO has failed to appreciate the fact that the firm M/s Hrishikesh Auto Spares (Diesel) has been carrying on the business and has maintained regular books of account and has been drawing financial statements containing various Assets and Liabilities. Therefore, in the facts and circumstances of the case invoking section 68 in the appellants case to deny the source of Rs.5,00,000/- is contrary to the provisions of the law. 4. The order passed by the learned AO and confirmed by the CIT Appeal is contrary to the provisions of the law and therefore is unsustainable. The addition of Rs.5,00,000/- may kindly be deleted. 5. The learned AO has erred in initiating the penalty proceedings u/s 271(1)(c) of the IT Act.

3.

The present appeal is filed after the delay of ten days. The assessee has filed affidavit in this regard and has stated that due to change in Consultant, there was delay in filing the appeal late by ten days. In view thereof, there is merit in the plea of assessee and the delay of 10 days is condoned.

4.

The issue raised on merits is against the addition of ₹ 5 lakhs under section 68 of the Act.

5.

Briefly, in the facts of the case, the assessee was a dealer of Hindustan Petroleum Corporation Ltd. The assessee was partnership concern, wherein one of the partners had introduced capital of ₹ 5 lakhs during the year. The assessee explained the source of same. In respect of sum of ₹ 5 lakhs, it was stated that same was withdrawn from M/s. Hrishikesh Auto Spares (Diesel). The said concern was partnership firm, which was doing negligible business. It was submitted by the assessee that the return of income for assessment year 2010-11 was not filed because of smallness of business. However, later the

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assessee produced cash book, sale book and also return of income which was filed on 21.03.2013. The Assessing Officer however, rejected the same on the ground that return of income was filed only to authenticate the source of cash capital introduction. Addition of ₹ 5 lakhs was made in the hands of assessee under section 68 of the Act.

6.

The CIT(A) upheld the addition made by the Assessing Officer as the source of capital introduction of ₹ 5 lakhs remained unexplained.

7.

The assessee is in appeal against the order of CIT(A).

8.

The learned Authorized Representative for the assessee submitted that the assessee had furnished explanation of source of capital introduction which has been rejected by the Assessing Officer and hence, addition in the hands of assessee. However, he further stated that there was no merit in asking for source of source of said capital contribution.

9.

The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below.

10.

On perusal of record and after hearing both the learned Authorized Representatives, the issue which arises in the present appeal is against addition of ₹ 5 lakhs. The assessee had made capital contribution of ₹ 5 lakhs during the year. The assessee explained that the said sum was out of withdrawals from another partnership firm, wherein since the business receipts were less, the return of income was not filed initially. However, the same was filed during the course of assessment proceedings and books of account of the

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said concern were produced before the Assessing Officer. However, the contention of assessee was rejected on one premise or the other. The requirement of section 68 of the Act is, for the assessee to establish the identity, genuineness and creditworthiness of creditor. The assessee has established the same and has explained the source of making the said capital contribution. The authorities below however, have gone into source of source, which is not permitted under law and hence, there is no merit in the aforesaid addition made in the hands of assessee. The addition is deleted under section 68 of the Act. The grounds of appeal raised by the assessee are thus, allowed.

11.

In the result, appeal of assessee is allowed.

Order pronounced on this 27th day of April, 2018.

Sd/- (SUSHMA CHOWLA) न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक Dated : 27th April, 2018. GCVSR आदेश की प्रयिलऱपप अग्रेपषि/Copy of the Order is forwarded to : अऩीऱाथी / The Appellant; 1. प्रत्यथी / The Respondent; 2. आयकर आयुक्त(अऩीऱ) / The CIT(A)-9, Pune; 3. 4. The Pr.CIT-5, Pune; ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे, एक-सदस्य 5. मामऱा / DR ‘SMC’, ITAT, Pune; गार्ड पाईऱ / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune

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