TaxTMI 
TaxTMI 
TaxTMI 
2016 (4) TMI 660
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....eel Corporation and Metal Trading Corporation are genuine, but for the lapse of more than 15 years and due to the internal quarrel in the family, the proper accounts/documents could not be produced. Hence, the Ld. CIT(A) erred in confirming the addition made by the AO and the same may kindly be deleted." At the time of hearing, ld. Counsel for the assessee stated that this unexplained credits are actually the credits raised by partners in their capital account and for this, he requested for reframing the issue as under: "The issue in this appeal of assessee is against the order of CIT(A) confirming the action of AO in adding the partners' capital in the firm's hand as unexplained cash credits appearing in the name of Kona Udyog Steel Corporation and Metal Trading Corporation." 3. Briefly stated facts are that the original assessment was completed by the AO u/s. 143(3)/147 of the Act on 04.01.1999 which was set aside by CIT(A) vide his order dated 16.02.2001. Subsequently, the AO made assessment in response to the order of CIT(A) u/s. 144/251 on 22.03.2002, which was confirmed by CIT(A) vide his order dated 07.01.2005. Subsequently, ITAT vide its order dated 30.08.2005 set asi....
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....claiming that they were not able to produce these parties after a lapse of so many years and were misguiding the AO. Had credits been genuine? The partners of the firm would have come forward and would have offered the explanation regarding genuineness of the credits. Thus, the facts and circumstances prove that these deposits were, in fact, unexplained money of the partners of the firm. In view of the above facts of the case, please explain as to why the credits introduced by the partners of the firm should not be treated as unexplained cash credit and added to the income of the firm u/s.68 of the I.T Act. 4. It is a well known fact that all the partners of the firm were misguiding the Department and giving false statement about the three creditors and were willfully evading the tax payable on the alleged credits. Therefore, it may please be explained as to why prosecution proceedings should not be initiated against the firm and the partners of the firm U/s.276C and 277 of the I.T. Act. Your reply should reach the undersigned by 4th of October 2006. The assessee was required to send his reply by 4-10-06. No compliance was however made. On 28- 9-06, a letter was received from....
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....rom assessment year 1994-95 onwards and at least till assessment year 2003-04, it is found that the liability of the sundry creditors remains almost the same or a little more right from assessment year 1993-94 onwards. Therefore, it can be concluded that the assessee never supplied any good to the alleged creditors. It is a fact that no creditor will like not to recover the credit for such a long time. If these creditors were other than the partners of the assessee themselves they would have certainly tried to recover the advances or at least would have filed suit for recovery of the same: In fact, as mentioned above, since the unaccounted money of the firm and its partners was credited in the name of three alleged creditors, the claim for recovering the advance given was never made. On this fact also, it is established that the money deposited in the firm belonged to the firm and the partners acting on behalf of the firm. The source of these deposits remain unexplained, therefore, it is presumed to be unexplained income of the assessee firm for the year under consideration in terms of Sec.68 of the LT. Act. (iii) The assessee had given confirmatory letters along with the GIR No....
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....en if the gift claimed to have been received by Suresh Bhandari is to be rejected, the said Suresh Bhandari may be liable to be taxed by treating the said amount as undisclosed income, but the firm cannot be subjected to tax on that ground. 6. We may also refer to the judgments relied upon by the Tribunal. In CIT v. Jaiswal Motoi Finance (supra), it was observed as under: ...It appears to be well settled that if there are cash credit entries in the books of the firm in which the accounts of the individual partners exist and it is found as a fact that cash was received by the firm from its partners, then in the absence of any material to indicate that they were profits of the firm, it could not be assessed in the hands of the firm. 7. In Narayandas Kedamath v. CIT (supra), it was observed as under: There may be a genuine case where a partner or a stranger may bring in moneys to the credit of the firm and the partner or the stranger may have come into those moneys by thoroughly dishonest means, but it is not for the firm which is being assessed to satisfy the Department that the moneys which it received from the partner or the stranger were moneys which the partner or the....
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....ney would not, in the absence of anything more, lead to the inference that the said sum represents the income of firm accruing from undisclosed sale transactions." 6. Further, ld. Counsel for the assessee also relied on the decision of Hon'ble Allahabad High Court in the case of CIT Vs. Jaiswal Motor Finance (1983) 141 ITR 706 (All), wherein the similar proposition was that no addition of unexplained cash credit can be made wherein the partners have introduced capital in the hands of the firm and in that eventuality addition cannot be made in the hands of the firm. 7. We have heard rival contentions and gone through facts and circumstances of the case. We find from the facts of the case that AO while making enquiry from the Bank, he made it clear in the remand report and as mentioned in para - 3 of the show-cause notice dt.13-09-2006, that the money in fact belonged to the partners of the assessee firm. The partners of the assessee firm deposited their unaccounted money in the name of M/s. Kona Udyog, M/s. Steel Corporation and M/s. Metal Trading Corporation. This fact was certainly in the knowledge of all the partners of the assessee firm since they had put their signature on t....
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....0(2) from the date of the Regular Assessment being assessment made in the first round on 27.3.1997 when the said assessment set aside and the assessee cannot be treated to be a defaulter from the said date." 9. We have heard rival contentions and gone through facts and circumstances of the case. We have perused the case records and find that brief facts relating to this issue are that the original assessment was completed by the AO u/s. 143(3)/147 of the Act on 04.01.1999 which was set aside by CIT(A) vide his order dated 16.02.2001. Subsequently, the AO made assessment in response to the order of CIT(A) u/s. 144/251 on 22.03.2002, which was confirmed by CIT(A) vide his order dated 07.01.2005. Subsequently, ITAT vide its order dated 30.08.2005 set aside the order of CIT(A) dated 07.01.2005 and again the AO gave appeal effect to the order of ITAT and framed fresh assessment u/s. 143(3)/147/251 of the Act vide dated 15.11.2006 (the impugned order now). The CIT(A) passed appellate order vide dated 20.09.2007 which is the impugned order before us now. In such circumstances, when the interest u/s. 220(2) of the Act has been charged by AO from the date of original assessment framed u/s....
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....uld make no difference to this position. (3) The foregoing legal position will apply mutatis mutandis to the proceedings under other direct taxes also." In view of the Circular No.334 Dt.3.4.1982 of CBDT, in case, the assessment is set aside by CIT(A) and setting aside become final, interest under section 220(2) of the Act has to be charged only after expiry of 35 days from the date of service of demand notice pursuant to the fresh assessment order. But in case the order of CIT(A) is subject matter of further appeal and the Tribunal has restored the order of Assessing Officer either in part or wholly, the interest payable under section 220(2) of the Act will be computed with reference to the due date reckoned from original demand notice and with reference to the tax finally determined in the assessment. In the present case, the original order of assessment was confirmed by CIT(A) but on further appeal, the Tribunal set aside the order of CIT(A) and the issue restored to the Assessing Officer. Therefore in terms of the Circular of CBDT, the interest under section 220(2) of the Act has to be charged only in respect of demand raised as per the fresh assessment order. In the facts....