DARSHIT DEVELOPERS ,VALSAD vs. INCOME TAX OFFICER, WARD-5, VALSAD

raised by the assessee are as follows: “1. Ld. CIT[A], NFAC, DELHI has erred in law and on facts to upheld A.O’s reopening u/s 147 and issue of notice u/s 148 of the Act ignoring the fact and law that incorrect information received from DDIT[Inv.] does not give jurisdictional to the A.O for invoking reassessment proceedings us/ 147 of the Act.

First I shall take Ground No.2 raised by the assessee, which relates to addition of Rs.12,50,000/- in the hands of assessee-firm. Brief facts qua ground No.2 are that assessee is a partnership- firm and filed its return of income for assessment year (A.Y.) 2010-11 on 26.03.2011, declaring Nil income. The DDIT (Inv.), Valsad had intimated to the assessing officer that Smt. Kashmira Shailesh Shah had purchased non-agricultural land of Rs.2,05,00,000/- at Gundlav, Valsad, in financial year 2009-10 and she is a partner in the firm “M/s Darshit Developers” (assessee-firm). During the year, Smt. Kashmira Shailesh Shah had withdrawn a sum of Rs.24.50 lakh from M/s Darshit Developers and source of the said investment were not explained before the DDIT (Inv.) Valsad, therefore the said information was passed to Assessing Officer. Accordingly, assessee`s case was re- opened u/s 147 of the Act and notice u/s 148 was issued on 30.03.2017. In response to this notice, assessee-firm has filed reply on 26.04.2017 in which it was requested to treat the return of income for A.Y 2010-11, filed on 26.03.2011, vide receipt No.202904450260311. In this letter, it was requested to supply the reasons recorded. The reason recorded was provided by Assessing Officer, vide letter, dated 02.05.2017. The notices u/s 142(1) and 143(2) of the Act were issued to the assessee. In response to these notices, the assessee has filed objections letter on 19.06.2017 and said objection was disposed of by Assessing Officer, vide letter dated 23.06.2017.

Thereafter, the Assessing Officer issued a notice to the assessee to explain the transaction. In response, the assessee has filed the written submission before the assessing officer on 29.09.2017, which are reproduced below: “(9) Details as stated in Sr.No.8, in respect of Nipaben B. Shah cannot be supplied as such details are not available with us. Although, her name, address, PAN areas under: Name: Nipaben Bhavinbhai Shah

However, the Assessing Officer rejected the contention of the assessee and observed that the assessee has not provided the details regarding capital introduced by Nipaben shah and Shilpaben Shah in the partnership- firm, therefore, a letter u/s 133(6) of the Act was issued on 06.10.2017 to both the partners. In response to the same a reply u/s 133(6) of the Act, were received by the Assessing Officer, from above both the partners on 23.10.2017. In reply, both the partners have given details of capital introduced during the year. The details of the same are as under: Date of cash/cheque Amount Date of cheque given to the Amount deposited firm 15.10.2009 5,00,000 (cash) 16.10.2009 5,00,000 03.11.2009 3,00,000 (cash) 04.11.2009 3,00,000 05.11.2009 5,00,000 (cheque transfer) 05.11.2009 4,50,000 From the above details, it was observed by the Assessing Officer that in the above bank account Nipaben Shah partner of the firm had deposited total cash of Rs.8,00,000/- and received cheque from others of Rs.5,00,000/-, out of which she has introduced the capital of Rs.12,50,000/- in M/s Darshit Developers, in which she is a partner. The assessing officer held that assessee has not provided sufficient explanation, therefore Assessing Officer made addition to the tune of Rs.12,50,000/- as undisclosed capital of the partnership firm (M/s Darshit Developers).

Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before NFAC/Ld. CIT(A) who has confirmed the action of Assessing Officer, observing as follows:

Aggrieved by the order of NFAC/Ld. CIT(A) the assessee is in further appeal before this Tribunal.

I have heard both the sides and gone through the relevant material on record. Shri Rajesh Upadhyay, Learned Counsel for the assessee, begins by pointing out that addition was made in the hands of partnership firm, in respect of capital introduced by one of the partners, (Nipaben B Shah) in the partnership -firm, namely M/s Darshit Developers. The Ld. Counsel argued that the capital contribution made by one of the partners, (Nipaben B Shah), has been examined by the Assessing Officer in her personal assessment (vide page 73 of paper book). In the personal assessment of partner, (Nipaben B Shah), which was framed by the Assessing Officer under section 143(3) r.w.s. 147 of the Act, wherein the Assessing Officer made addition stating cash deposit Rs.8,00,000/-, capital introduced in partnership firm, which was also treated by the Assessing Officer, as unexplained in the hand of the assessee-partner (Nipaben B Shah). Therefore, ld Counsel contended that amount of Rs.8,00,000/- has already been suffered tax in the hands of partner (Nipaben B Shah), therefore, it should not be taxed again in the hands of partnership -firm (M/s Darshit Developers). Besides, the amount of Rs.4,50,000/- was given by Nipaben B Shah, to the partnership-firm (M/s Darshit Developers) by cheque, therefore the genuineness of the said amount should not be doubted. The ld Counsel, therefore contended that when the addition was made in the hands of Nipaben B Shah, partner of M/s Darshit Developers, then for the same amount, the addition should not be made again, in the hands of partnership firm, (M/s Darshit Developers) which has resulted into double addition/double taxation of the same amount.

The Ld. Counsel took me through paper book page-6 and contended that Assessing Officer has not made addition in the hands of other partners, namely, Shilpaben S Shah. The Shilpaben S Shah has also contributed an amount of Rs.12 lakh to partnership firm, (M/s Darshit Developers). However, the Assessing Officer has not made addition in the hands of the partner Shilpaben S Shah. Therefore Ld. Counsel contended that it is the discrimination made by the Assessing Officer, which is not acceptable.

The Ld. Counsel also argued that the partners have contributed the amount to the partnership- firm (M/s Darshit Developers) and therefore capital contribution cannot be taxable in the hands of partnership-firm, (M/s Darshit Developers). That is, the capital contribution made by the respective partners should not be taxable in the hands of the partnership- firm (M/s Darshit Developer), however, it can be taxed in the hands of individual partners. For that, Ld. Counsel relied on the judgment of Hon'ble jurisdictional High Court in the case of CIT vs. Pankaj Dyestuff Industries in Income Tax Reference No.241 of 1993 dated 18.01.2010, wherein it was held as follows: “We have considered the reasoning of the Tribunal on this issue and we have also gone through the decision of this Court in the case of CIT vs. Pankaj Dyestuff Industries (supra). This court has observed in the said decision that both the appellate authorities have found that the assessee had discharged the primary onus which was on it by offering explanation, which has not been found to be incorrect or false in any manner. The Court further observed that the interest of the Revenue is also safeguarded as the Income Tax Officer has been given the liberty to consider the said credits in the hands of the partners if he is not satisfied with the sources of investment of cash credits in the accounts of the partners. Afte observing this, this Court held that, it is not possible to find that the order of the Tribunal suffers from any infirmity, which would require interference at the hands of this Court. The Court, therefore, held that the Tribunal was right in law and on facts in deleting the addition of Rs.87,250/- being deposits in the accounts of the partners. This decision is squarely applicable in the facts of the present assessee and, hence, we are of the view that the Tribunal was justified in confirming the order of CIT(A) in deleting the addition of Rs.20 lacs in the hands of the respondent assessee. We, however, make it clear that it is open for the Revenue to consider the said credits of Rs.20 lacs in the hands of Smt. Paraptiben Choksi, if the Assessing Officer is not satisfied with the sources of investment of cash credit in the account of said Smt.

In the result, the Appeal is summarily dismissed.”

On the other hand, Learned Sr.DR for the Revenue reiterated the findings of the lower authorities. The Ld. Sr-DR for the Revenue also argued that assessment has been re-opened based on the information received from the Investigation Wing, therefore reasons recorded by the Assessing Officer is based on the report of the Investigation Wing, which is a valid information, hence there is no any infirmity in the reasons so recorded by the Assessing Officer.

I note that Assessing Officer has made the addition in respect of capital contribution made by one of the partners and said amount has already been taxed in the hands of the individual partner Nipabem B Shah. I also note that since the ownership of the money remains with the individual partner, therefore addition should not have been made in the hands of the partnership firm (M/s Darshit Developers). I observe that there are three partners in the firm, out of which, two partners, namely Nipaben B Shah and Shilpaben Shah have contributed Rs.12.50 lakh each in the firm during financial year 2009-10. However, in the hand of Shilpaben S. Shah, in her individual assessment, no addition was made by Assessing Officer, whereas, in the hands of other partner, namely Nipaben B Shah, the Assessing Officer made addition and the same amount was added in the hands of partnership firm (M/s Darshit Developers), which is not tenable, as the impugned amount has already been taxed in the hands of individual partner.

I have also observed that based on the above facts the issue is squarely covered in favour of assessee by the order of the Co-ordinate Bench of ITAT Delhi, in the case of ACIT Circle-51(1) New Delhi vs. M/s Ambika Enterprises in wherein the Tribunal had laid down the following ratio:

It is abundantly clear from the above judgment of Co-ordinate Bench of ITAT Delhi, in the case of M/s Ambika Enterprises (supra) that if the amount has not proved in the hands of partner, the Assessing Officer may make addition in the hands of concerned individual partner and not in the hands of partnership- firm. Therefore, based on this fact and legal precedent applicable to the fact of the assessee, I delete the addition made by Assessing Officer.

As the entire addition has been deleted by me, therefore ground No.1 raised by the assessee, challenging re-assessment proceedings u/s 147 r.w.s. 148 is rendered academic and infructuous, hence does not require adjudication.