PER: VIKRAM SINGH YADAV, A.M. This is a cross objection filed by the assessee against the order of Ld. CIT(A)-2, Amritsar dated 26.07.2016 for A.Y. 2013-14 which relates to appeal of the Revenue in ITA no. 530/ASR/2016. The appeal of the Revenue has since been dismissed by the Coordinate Bench vide its order dated 5.09.2018 on account of low tax effect in view of CBDT Instruction No.
PER: VIKRAM SINGH YADAV, A.M. This is a cross objection filed by the assessee against the order of Ld. CIT(A)-2, Amritsar dated 26.07.2016 for A.Y. 2013-14 which relates to appeal of the Revenue in ITA no. 530/ASR/2016. The appeal of the Revenue has since been dismissed by the Coordinate Bench vide its order dated 5.09.2018 on account of low tax effect in view of CBDT Instruction No. 3 of 2018 dated 11.07.2018.
2. In its cross objection, the limited issue raised by the assessee relates to addition of Rs. 11,90,000/- u/s 68 of the Act which has been sustained by the ld CIT(A).
3. Briefly stated, the facts of the case are that the assessee is a partnership firm engaged in the business of sale purchase of gold, silver and CO No. 07 /Asr/2017 (A.Y.2013-14) DCIT, Circle- VI, Pathankot vs. M/s Ganpati Jewellers, Gurdaspur diamond jewellery. During the year under consideration, there is introduction of capital by Sh. Tarsem Raj, the partner of the firm amounting to Rs. 64,32,220/- and the assessee firm was asked to explain the source of capital introduced by its partner. In response, the assessee submitted that Rs. 11,90,000/- has been withdrawn by Sh. Tarsem Raj from his proprietary concern M/s Tarsem Raj and Co. and same was transferred to assessee firm as his capital contribution. Further, an amount of Rs. 52,42,220/- has been credited to his capital account on account of sale of gold and silver jewellery. The submissions so filed by the assessee were not found acceptable to the Assessing Officer. As per the Assessing Officer, the assessee has not shown any income from his proprietary concern M/s Tarsem Raj and Co. in his return of income. Further, on perusal of the respective pages of the cash book submitted by the assessee, cash as on 02.04.2012 shown at Rs. 18,16,885/- was found unexplained. Further, the Assessing Officer did not agree to the contentions of the assessee firm regarding the introduction of capital corresponding to sale of gold and silver jewellery to the firm holding that the same is nature of bogus purchase by the firm and bogus sale by the partner. Accordingly, an addition of Rs. 64,32,220/- was made in the hands of the assessee firm towards unexplained share capital introduced in the capital account of the partner of the firm during the financial year relevant to the impugned assessment year.
4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who has given part relief to the assessee in respect of addition amounting to Rs. 52,42,220/- on account of introduction of capital by sale of gold and silver jewellery and balance addition of Rs 11,90,000 has been sustained.
5. As per ld. CIT(A), to verify the withdrawal of Rs. 11,90,000/- from capital account by the partner from his proprietary concern M/s Tarsem Raj CO No. 07 /Asr/2017 (A.Y.2013-14) DCIT, Circle- VI, Pathankot vs. M/s Ganpati Jewellers, Gurdaspur and Co., the Assessing Officer has asked the assessee to produce the cash book of M/s Tarsem Raj and Co. during the assessment proceedings but the assessee only furnished respective pages of cash book on 02.04.2012, 10.05.2012 and 19.02.2013 and not whole of the cash book. Further, the Assessing Officer observed that cash of Rs. 18,16,885/- as on 02.04.2012 was also found unexplained. Accordingly, the ld. CIT(A) observed that since the assessee has failed to produce the complete cash book and justify the cash balance of Rs. 18,16,885/- as on 02.04.2012 and even during the appellate proceedings, the assessee has not rebutted the said observation of the Assessing Officer, the source of Rs. 11,90,000/- introduced by Sh. Tarsem Raj in the assessee firm remained unexplained and the addition was confirmed. Aggrieved with the said findings of the ld. CIT(A), the assessee is now in appeal before us.
6. During the course of hearing, the ld. AR submitted that Sh. Tarsem Raj has withdrawn an amount of Rs. 11,90,000/- from his proprietary concern M/s Tarsem Raj and Co. on 02.04.2012, 10.05.2012 and 09.02.2013. In support, our reference was drawn to the copy of the capital amount of Sh. Tarsem Raj maintained with proprietary concern M/s Tarsem Raj and Co. which shows withdrawals of these amounts on the respective dates. Further, our reference was drawn to the capital amount of Sh. Tarsem Raj in the books of assessee firm wherein the corresponding credits have been shown in the capital amount of the firm. It was accordingly submitted that the source of capital introduced in the assessees firm has been duly demonstrated by way of cash withdrawals from the proprietorship concern of the partner who has introduced the capital in the firm and the onus cast on the assessee firm has been discharged in terms of identity, creditworthiness, and genuineness of the transaction. Regarding observations of the Assessing Officer that the assessee has not shown income from his proprietorship concern in his return of income, our reference was drawn to the computation CO No. 07 /Asr/2017 (A.Y.2013-14) DCIT, Circle- VI, Pathankot vs. M/s Ganpati Jewellers, Gurdaspur of income wherein the assessee has shown net profit of Rs. 609,513/- under the head business/profession from M/s Tarsem Raj Contractor. Further, the ld. AR relied on the decision of Honble Madhya Pradesh High Court in case of CIT vs. Metachem Industries [2002] 245 ITR 160 (MP) for the proposition that where the assessee firm had satisfactorily explained the credits standing in the name of the partner, the responsibility of the assessee firm has been discharged. It was accordingly submitted that the addition so made by the Assessing Officer and confirmed by the ld. CIT(A) should be deleted.
7. Per contra, the ld. DR vehemently argued the matter and relied on the findings of the lower authorities.
8. Heard both the parties and perused the material available on record. It is a case where capital has been introduced by a partner Mr. Tarsem Raj in the assessees firm by way of his cash contributions during the year. The assessee firm has reasonably demonstrated that the partner has contributed the capital by way of cash withdrawals from his sole proprietorship concern M/s Tarsem Raj and Co. Further, Mr. Tarsem Raj has duly reported his income from proprietorship concern in his return of income and the cash withdrawal have been duly reflected in the capital account of the proprietarship concern M/s Tarsem Raj and Co. Therefore, we find that the onus cast on the assessee firm has been duly discharged in the instant case and there is no basis for the Assessing Officer to doubt the genuineness of the transaction so reported by the assessee firm. In the result, the addition made by the Assessing Officer is hereby directed to be deleted. In the result, the cross objection of the assessee is allowed. Order pronounced in the open Court on 24.07.2019. CO No. 07 /Asr/2017 (A.Y.2013-14) DCIT, Circle- VI, Pathankot vs. M/s Ganpati Jewellers, Gurdaspur Sd/- Sd/- (N.K.CHOUDHRY) (VIKRAM SINGH YADAV) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 24.07.2019 Ganesh Kr. PS Copy of the order forwarded to: (1) M/s Ganpati Jewellers, Gurdaspur (2) The Dy. CIT, Circle-VI, Pathankot (3) The CIT(A)-2, Amritsar (4) The CIT concerned (5) The SR DR, I.T.A.T., Amritsar True copy By order CO No. 07 /Asr/2017 (A.Y.2013-14) DCIT, Circle- VI, Pathankot vs. M/s Ganpati Jewellers, Gurdaspur Date Initial Draft dictated on PS/Sr. PS Draft placed before author PS/Sr. PS
3. Draft proposed & placed before the second member JM/AM
4. Draft discussed/approved by Second Member. JM/AM
5. Approved Draft comes to the Sr. PS/PS PS/Sr. PS
6. Kept for pronouncement on PS/Sr. PS
7. File sent to the Bench Clerk PS/Sr. PS Date on which file goes to the Head Clerk.
9. Date on which file goes to the AR
10. Date of dispatch of Order