ACIT Vs. M/s Kiran Pal Singh (ITAT Delhi)- In this case also before the Assessing Officer, the assessee had stated that all the partners are assessed to income tax and they have also furnished the acknowledgement of the returns filed by all the partners. Therefore, if the Assessing Officer had any doubt about the credit worthiness of the partners, he could have verified either from their individual income tax files or could have asked those partners to explain the source of credit. In view of the above, respectfully following the above decision of the Hon’ble Apex Court in the case of Orissa Corporation P.Ltd., we uphold the order of the learned CIT(A) and dismiss the appeal filed by the Revenue.
INCOME TAX APPELLATE TRIBUNAL, DELHI
ITA No. 2831/Del/2011 Assessment Year : 2003- 04
Assistant Commissioner of Income Tax
M/s Kiran Pal Singh
PER G.D.AGRAWAL, VP:
In this appeal filed by the Revenue, following grounds are raised:-
“1. Whether the ld. Commissioner of Income Tax (Appeals) has erred in law and facts in deleting the addition of Rs.12,03,000/- in the partner’s capital account u/s 68 of the I.T.Act, 1961 ignoring the fact that the assessee had no evidence to prove the identity, genuineness of transaction and credit worthiness of the partners before the Assessing Officer.
2. In the facts and circumstances of the case, the order of the Commissioner of Income Tax (Appeals) may be set aside and that of the A.O. restored.”
2. On the date of hearing, none appeared on behalf of the assessee though the notice was served upon it by registered post. Therefore, we proceed to decide the appeal of the Revenue ex parte qua the assessee.
3. The only ground raised in this appeal by the Revenue is against the deletion of addition of Rs. 12,03,000/- made by the Assessing Officer for unexplained credit in the partners’ capital account.
4. We have heard the learned DR and perused the material placed before us. The learned CIT(A) deleted the addition with the following finding:-
“The six partners introduced capital o f Rs.12,30,000/- as under:
i. Kiran Pal Singh 2,25,000/-
ii. Resham Pal Singh 1,80,000/-
iii. Dharam Vir Singh 1,85,000/-
iv. Hari Singh 1,80,000/-
v. Ram Prasad Singh 2,30,000/-
vi. Manveer Singh 2,30,000/-
The AO was not satisfied about the source of the money introduced as capital. He, therefore, added the same to income. During the remand proceedings, the appellant produced all the five partners before the AO for examination. One partner had expired for which a death certificate was filed. The AO recorded their statements herein they affirmed having introduced their capital as above. They are all Income-tax assessees and they filed acknowledgements of their Income-tax returns for A.Y. 2003-04. All the six partners are agriculturists. They produced evidence of owning agricultural land, which has not been disputed. The AO’s only doubt is about their capacity to have the money introduced as capital. In view of partner’s affirmations before the AO and the fact of their being engaged in agricultural operations for years, their living standards not warranting substantial expenditure, in my considered view, the amounts varying between 1,80,000/- to Rs.2,30,000/- by each one of them can be believed to have been contributed from their earnings. In any case it is seen that the partnership was constituted on 12.3.2002 and F.Y. 2002-03 was the first year of the business of the firm and all the partners have contributed the initial capital to commence the business and by no means it can be assumed that the appellant firm could have earned that amount even before the commencement of business so as to warrant assessment in its hand u/s 68. This also finds support from the pronouncement of the Hon’ble Supreme Court in the case of Noorjahan (Smt.P.K.), 237 ITR 570. Considering this and the fact that the appellant has declared income @5% (approx), no further addition in the hands of the appellant is justifiably warranted. The addition is deleted. Ground is allowed.”
5. After considering the facts of the case and the arguments of the learned DR, we do not find any infirmity in the order of the learned IT(A). The partnership firm came into existence vide deed of partnership dated 12.03.2002 and financial year 2002-03 was effectively the first year of the business of the assessee firm. All the partners have contributed initial capital to commence the business. All the partners are assessed to income tax and they have filed acknowledgements of filing of their income tax returns for AY 2003- 04. They have filed the confirmation affirming the amount advanced to the assessee firm. On these facts, in our opinion, the decision of Hon’ble Apex Court in the case of Commissioner of Income Tax, Orissa Vs. Orissa Corporation P.Ltd.– 159 ITR 78 would be squarely applicable wherein their Lordships held as under:-
“Held, that in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so- called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case.”
6. In this case also before the Assessing Officer, the assessee had stated that all the partners are assessed to income tax and they have also furnished the acknowledgement of the returns filed by all the partners. Therefore, if the Assessing Officer had any doubt about the credit worthiness of the partners, he could have verified either from their individual income tax files or could have asked those partners to explain the source of credit. In view of the above, respectfully following the above decision of the Hon’ble Apex Court in the case of Orissa Corporation P.Ltd., we uphold the order of the learned CIT(A) and dismiss the appeal filed by the Revenue.
7. In the result, the appeal filed by the Revenue is dismissed. Decision pronounced in the open Court on 20th December, 2011.