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2019 (6) TMI 1122
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....143(3) of the Act. Notice was issued on 18.1.2017 u/s 154 of the Act and, reply thereon was furnished on 8.2.2017. The Ld. PCIT, thereafter, issued show-cause notice dated 1.3.2018 u/s 263 of the Act on the following basis: "2. On examination of the records, it has been noticed that:- (i) During the year, fresh capital of Rs. 9,02,09,297/- has been shown introduced by Shri Shaleen Bajapai, partner of the assessee firm. Shri Shaleen Bajpai has shown income of Rs. 37,205/- only in his return of income filed for AY 2013-14. Vide reply dated 02.1.2015, the source of this capital introduction has been explained by the assessee out of repayment of loan from M/s Jagdish Data Systems Private Ltd. at Rs. 3,81,58,000/- and out of withdrawals from the capital account of Shri Shaleen Bajpai with M/s Jet Tech System at Rs. 5,12,86,000/- However, vide reply dated 31.01.2017, placed on record, the assessee has submitted that Rs. 3,93,58,000/- has been introduced on account of repayment of loan from M/s Jagdish Data Syatems Private Ltd. and Rs. 5,35,28,000/- has been introduced out of capital withdrawal from M/s Jet Tech System. Thus, it is clear that the figure of capital introd....
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....rification of capital introduced by the partner. Accordingly, the A.O. after raising necessary query by way of notice u/s 142(1) and on being satisfied about the source of capital introduced by the partner, framed the impugned order. Therefore, the order cannot be perverse. 5. That on merit, Sh. Shaleen Vajpayee, the partner of the firm has introduced capital out of withdrawal of his capital/loan accounts in his other business entities, (subject to scrutiny u/s 143(3) of the Act) by account payee cheques under the same jurisdiction. 6. Without prejudice to the above the learned Commissioner of Income Tax has erred in law and facts while directing the A.O to make de- novo assessment. 7. That any other grounds of appeal may be added/deleted or amended at the time of hearing. Therefore it is prayed that the directions u/s 263 of the Act, may please be declared as void or any other suitable order as the Hon'ble Bench may deem fit be passed." 3.0 Before us the Ld. Authorised Representative (AR) submitted that the impugned order was passed without satisfying the statutory provisions in the Act. It was submitted that it is not a case of lack of enqui....
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.... material on record. It is seen that in the instant year the assessee firm had raised capital from one of the partners namely Shri Shaleen Vajpayee to the tune of Rs. 9,02,09,297/-. During the assessment proceedings a query regarding the same was raised by the AO and the assessee, vide reply dated 2.12.2015, had stated as under: "1.Details of source of addition of capital with evidence (in response to point no. 8 your Questionnaire)- The assessee is a partnership firm. During the year capital was introduced by one of its partenrs, Shaleen Vajpayee to commence operations of the firm. An addition of approx Rs. 9 crores (Rupees Nine Crores) was made by the said partner the source of which is explained below:- i) Receipt of loan repayment from M/s Jagdish Data Systems Pvt. Ltd.- An amount of approx 4 crore was invested in the firm out of the repayments of loans advanced to M/s Jagdish Data System Pvt. Ltd. during earlier years. ii) Withdrawal of capital from M/s Jet Tech System - Capital to the tune of approx 5 crore was introduced in the assessee firm out of withdrawal of capital by Shaleen Vajpayee from M/s Jet Tech System. In evidence ....
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....tion in his capital account. 5.3 It will be noted from the above that, undisputedly, even as per the Ld. PCIT, the capital has been received from Shri Shaleen Vajpayee who is a partner of the assessee firm. It is also noted that during the course of proceedings the assessee had stated that capital was introduced to commence operations of the firm and that the source thereof were withdrawals from M/s Jagdish Data Systems (P) Ltd. and M/s Jet Tech Systems. The balance sheets of said entities showing their corresponding loan amounts and capital account of Shri Shaleen Vajpayee along with a statement of capital addition was placed on record. However what has been held is that Shri Shaleen Vajpayee had explained source of capital essentially out of withdrawals from two entities namely Jagdish Data System (P) Ltd. and M/s Jet Tech System but the figures as reflected in the reply and the figures as furnished in response to notice u/s 154 of the Act were not the same. In this context, the basic contention of the assessee is that in a case of capital contribution by the partner who is assessed to tax and such capital being introduced through banking channels which is also duly confirmed,....
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.... Commissioner of Income Tax (Appeals) more or less confirmed the addition on the reasoning given by the Assessing Officer in the assessment order. A perusal of the chart given by us in para 3 above indicates that out of 21 creditors the Assessing Officer has recorded the statements of only six creditors, viz. creditors at serial Nos.1, 2, 3, 4, 6, and 7. However, in respect of all the 21 creditors the assessee has furnished their complete addresses along with GIR numbers/ permanent account numbers as well as confirmations along with the copies of the assessment orders passed in the cases of creditors at serials Nos.1, 2, 4, 5, 6, 7, 9, 10, 11, 12 and 16. In the remaining cases where the assessment orders passed were not readily available, the assessee has furnished the copies of returns filed by the creditors with the Department along with their statement of income. All the loans were received by the assessee by account payee cheques and the repayments of loans have also been made by account payee cheques along with the interest in relation to those loans. It is rather strange that although the Assessing Officer has treated the cash credits as non- genuine, he has not made any addi....
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....e of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessment in the cases of those creditors by treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69." 5.4.1 The Hon'ble Jharkhand High Court had also relied upon the judgement of the Hon'ble Patna High Court in the case of ACIT vs. Hanuman Agarwal reported in 151 ITR 150 where in it had been held as under: "3. It is by now well-settled that Sec.131 (1)(b) empowers but does not oblige the revenue authorities concerned to administer oath. Therefore, the statements of witnesses taken without administration of oath are equally admissible in evidence. When the evidence of such witness is being taken in the course of the assessment proceeding, the witness has no right, but the assessee has, to be represented by a lawyer or other authorised represent....
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....ced reliance upon the judgement of the Hon'ble Madras High Court in the case of Taj Borewells (Supra) where it has been held as under: "'13. In the present case, the assessee-firm had explained the source of capital. So, there was an explanation offered by the assessee-firm. The said explanation has not been rejected by the Assessing Officer. Later, the Assessing Officer examined the partners and the partners had also made explanation in respect of the source for the contribution of the capital to the assessee-firm. The Assessing Officer had also partially accepted the explanation offered by the partners. The Assessing Officer had not rejected the explanation offered by the firm. Unless and until the explanation offered by the firm is rejected and the same is not genuine, the Assessing Officer cannot invoke the provision of Section 68 of the Act. In the present case, the explanation offered by the firm was accepted and later, the Assessing Officer examined the partners and not accepted the explanation. The Assessing Officer cannot ask the assessee-firm to prove source of a source. Once the firm had offered an explanation and established that the capital was contrib....
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....ill not be charged with the income of the previous year of the assessee. In case the explanation offered by the assessee is not satisfactory or the source offered by the assessee-firm is not satisfactory, then in that case, the amount should be taken to be the income of the assessee. In the present case, the Assessing Officer did not feel satisfied with the explanation given by the assessee and accordingly assessed all the three credit entries to the account of the assessee as the income." 5.4.5 Lastly the Hon'ble Jharkhand High Court has also discussed the judgement of Hon'ble Allahabad High Court in the case of Zafa Ahmad & Co. (Supra) where in it has been held as under: "9. Taking the various facts enumerated above, we are of the considered opinion that the Tribunal had erred in holding that the amount deposited by the two partners is liable to be added under section 68 of the Act on the ground that the gifts received by the respective partners from the various persons could not be explained as creditworthiness of the donors had not been established. The Tribunal had wrongly drawn an adverse inference upon the fact that the donors had filed their Income Tax Retur....
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....r to conduct enquiry and not merely remit the matter to the Assessing Officer without conducting any verification/enquiry. In the case of PCIT vs. Delhi Airport Metro Express (P) Ltd. reported in 398 ITR 8 (Del) it has been held as under: "9. It is seen, in the order dated March 30, 2016, the Principal Commissioner of Income-tax has proceeded by setting out the contents of the show-cause notice and the contents of the reply given by the assessee. It appears that no inquiry, as such, was undertaken by the Principal Commissioner of Income-tax to come to the conclusion that the original assessment order was erroneous and prejudicial to the interests of the Revenue. 10. For the purposes of exercising jurisdiction under section 263 of the Act, the conclusion that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the Principal Commissioner of Income-tax is of the view that the Assessing Officer did not undertake any inquiry, it becomes incumbent on the Principal Commissioner of Income-tax to conduct such inquiry. All that the Principal Commissioner of Income-tax has don....