IN THE ITAT JODHPUR BENCH
Laxmi Imaging & Medical Research
Assistant Commissioner of Income-tax, Circle-1, Jodhpur
IT Appeal No. 426 (JU) of 2009
[ASSESSMENT YEAR 1994-95]
JULY 16, 2012
N.K. Saini, Accountant Member
This is an appeal by the assessee against the order dated 20-04-2009 of CIT(A), Jodhpur. Following grounds have been raised in this appeal.
1. That the impugned assessment order made by the ld Assessing Officer dated 17.12.2008 is bad in law and is bad in facts, in view of the unlawful and invalid jurisdiction acquired u/s 147/148 of the Act at the initial stage of the proceedings. Since no valid and lawful jurisdiction was at all acquired, therefore, all consequential and resultants action are without jurisdiction, barred by limitation, bad in law and bad in facts. The impugned orders deserve to be quashed and cancelled.
2. Without prejudice to the legal grounds No. 1 above, and in the alternative and as abundant and precautionary measure, the ld Assessing Officer as well as the ld. CIT(A) has erred in law and in facts in –
(i) making and sustaining the addition of Rs. 8,00,000/-in the name of Shri C.P. Mathur and Rs. 4,30,000/- in the name of Shri L.C. Mathur, invoking section 68 of the Act, being admitted investments of capital by the partners of the firm.
(ii) Making and sustaining addition of Rs. 1,00,000/- in the name of DR. S.C. Soni, u/s 68 of the Act, being a deposit infirm made by him.
(iii) Sustaining the levy of various interests by stating and referring as mandatory and compensatory nature thereof, ignoring the facts that such issue was duly settled in the appellant’s case by the ITAT for assessment year 1995-96 in ITA No. 247 therefore, having been accepted the said decision, the levy of interest was wrong.
3. The appellant craves leave to add, alter, amend or delete the grounds herein above taken on or before the hearing.
4. The appellant, therefore, most respectfully prays that its appeal may kindly be allowed.
2. Ground Nos. 3 & 4 are general in nature so do not require any comments on our part while ground No. 1, which is a legal ground relating to validity of the jurisdiction of the Assessing Officer u/s 147/148 of the I.T. Act was not pressed, therefore, no finding is given on this ground.
3. Vide ground No.2(i), the grievance of the assessee relates to sustenance of addition of Rs. 8,00,000/- and Rs. 4,30,000/- in the name of Shri C.P. Mathur and Shri L.C. Mathur respectively.
4. The facts relating to this issue in brief are that the Assessing Officer made the impugned addition by observing that necessary evidence regarding source of investment by cash introduced in the firm had not been furnished, therefore, the same is treated as undisclosed income of the assessee firm u/s 68 of the Income-tax Act, 1961 [hereinafter referred to as “the Act” in short”].
5. The assessee carried the matter to the ld. CIT(A) who confirmed the action of the Assessing Officer by observing that the sole explanation of the creditors regarding the source, being the savings had not been established on the basis of any material evidence but heavily reliance had been placed upon the presumptions and traditions prevailing in the society. He also observed that merely filing of confirmatory letter from the creditor without further establishing the availability of funds at the time the sum was advanced to the assessee did not establish the capacity of the creditor or genuineness of the transactions. Accordingly, the addition made by the Assessing Officer was confirmed by the ld. CIT(A). Now, the assessee is in appeal.
6. The ld. counsel for the assessee submitted that this was the first year of the business of the assessee and that the assessee was in the process of setting up of MRI Scanning machine in association of Soni Hospital in Jaipur and did not start its business. It was further submitted that the assessee required the funds which were contributed by the partners, therefore, the addition should not have been made in the hands of the assessee. Reliance was placed on the following case laws.
(i) CIT v. Kewal Krishan & Partners  18 DTR 121 (Raj.).
(ii) CIT v. Bharat Engineering & Construction Co.  83 ITR 187 (SC).
7. In his rival submissions, the ld DR strongly supported the orders of the authorities below.
8. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is an admitted fact that the partners Shri C.P. Mathur and Shri L.C. Mathur contributed Rs. 8 lacs and Rs. 4,30,000/- respectively as their capital and the Assessing Officer made the addition by invoking the provisions of section 68 of the Income-tax Act. On a similar issue, the Hon’ble Jurisdictional High Court in the case of Kewal Krishan & Partners, Sri Ganganagar (supra) held as under :-
“It was for the partners to explain the source of deposits and if they failed to discharge the onus then, such deposits could be added in the hands of the partners only and not in the hands of assessee firm. In any case, such capital contributions entered into the books of the accounts of the assessee firm prior to the commencement of the business cannot be treated to be the income of the assessee firm. In considered opinion of this Court, such unexplained credits may be added to the income of the partners concerned in terms of section 69 and not u/s 68 of the Act of 1961”.
9. In the present case also, since the amount deposited was from the partners, therefore, by keeping in view the ratio laid down by the Hon’ble Jurisdictional High Court in the aforesaid referred to case, at the most the impugned amount could have been added in the hands of the partners, if they failed to discharge the onus but not in the hands of the assessee firm. Moreover, the contribution of the capital by the partners was prior to the commencement of the business, so it could not have been treated as income of the assessee. In that view of the matter, we delete the addition amounting to Rs. 12,30,000/- (Rs. 8,00,000/- + Rs. 4,30,000/-) made by the Assessing Officer and sustained by the Id. CIT(A).
10. Vide ground No.2 (ii), the grievance of the assessee relates to the sustenance of addition of Rs. 1 lac made by the Assessing Officer on account of deposit in the name of Dr. S.C. Soni.
11. The facts relating to this issue in brief are that during the year under consideration, Dr. S.C. Soni had given loan of Rs. 1 lac by cheque to the assessee on 30.10.1993. The explanation of the assessee before the Assessing Officer was as under:-
“The confirmation could not be received from Dr. S.C. Soni due to some dispute however now we are enclosing the following which is self-explanatory.
1. Bank certificate from Canara Bank regarding deposit of cheque No. 143089 of Rs. 100000/- drawn from Bank of Baroda, M.I. Road, Jaipur on 3.11.93 deposited in firm’s account.
2. Copy of the above referred cheque of Rs. 100000/- showing that the same was issued by Soni Hospital in favour of firm, with above facts it is clear beyond doubt that the amount was received from Dr. S.C. Soni of Soni Hospital only and the same cannot be added in our income. Soni Hospital is famous hospital in Jaipur.
12. The Assessing Officer after considering the above explanation observed that the assessee had filed necessary documentary evidence in the form of bank certificate dated 26.3.2002 from the Canara Bank regarding deposit of cheque given to the assessee by Dr. S.C. Soni but the assessee had not filed any confirmation or any evidence in support of the genuineness of the transactions and creditworthiness of Dr. S.C. Soni. Accordingly, an addition of Rs. 1 lac was made u/s 68 of the Income-tax Act.
13. The assessee carried the matter to the ld. CIT(A) who confirmed the addition made by the Assessing Officer by observing that the copy of the cheque and the certificate from the Canara Bank merely indicated that the transactions had taken place through banking channel, even the basic ingredients to satisfactory explain the sources of the credit namely identity of the creditor, their creditworthiness and genuineness of the transaction remained to set established. Now the assessee is in appeal.
14. The ld. counsel for the assessee reiterated the submissions made before the authorities below and ld. DR supported the order of the authorities below.
15. After considering the submissions of both the parties and material available on record it appears that the assessee could not procure confirmation from Dr. S.C. Soni due to some disputes, at the same time, no efforts were made by the Assessing Officer to collect the same directly from the creditor. The other evidences produced by the assessee in the shape of certificate from Canara Bank had not been disputed. Therefore, we deem it appropriate to remand the matter to the file of the Assessing Officer and if the address of the creditor is correct and the assessee is not able to procure the confirmation due to some dispute with the creditor, the Assessing Officer may collect the same directly by issuing the summon or any other mode, and if the identity is proved, the creditor is having creditworthiness and transactions are genuine, than no addition is to be made. Accordingly, the issue related to the addition of Rs. 1 lac on account of deposit from Dr. S.C. Soni is restored to the Assessing Officer for fresh adjudication in accordance with law after providing due and reasonable opportunity to the assessee.
16. In the result, appeal is partly allowed.