TaxTMI 
TaxTMI 
2019 (6) TMI 1122
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....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 introduction submitted by the assessee is not reconciled and the ....
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....ry 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 enquiry and also it is not a case of inadequate enquiry whereby an unsustainable view has been formed by the Assessing officer. It wa....
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....e 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 of the abvoe, balance sheet of the said firms showing their corresponding loan amounts and capital account of Shaleen Vajpayee alongwith a statement of capital additon is attached for your reference. " 5.1 It is further seen that the AO, on consideration of the aforesaid reply in the order of as....
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....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, in such circumstances it cannot be validly alleged and held that the claim was accepted without enquiries in the assessment proceedings, particularly when the evidence in support of capital contribution has been placed on record. 5.4 It is trite law and has also been held by the Hon'ble Jharkhand High Court in case of Prayag Tendu Leaves Processing Co. v. CIT (Supra) that und....
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....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 addition on account of interest claimed as business expenditure and has been allowed by the Assessing Officers. It is also pertinent to note that in respect of some of the creditors the interest was credited to their accounts/ paid to them after deduction of tam at source and information to this effect was given in the loan confirmation statements by those creditors filed by the assessee befo....
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....ases 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 representative. The assessee is not supposed to know the capacity of the money-lender or the cash creditor. It is within the exclusive domain or the dark trusses of the minds of the creditors to know as to whether and how their sources of income are arrived. It is for that specific purpose that Sec.131 of the Act has been introduced so that in case of any suspicion, the ITO or the authorities concerned may....
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....ners 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 contributed by the partners, the same could not be assessible in the hands of the firm. Unless there are contradictions and inconsistencies in the statement of the partners, the credit cannot be treated as unexplained and cannot be added under Section 68 of the Act in the hands of the assessee-firm. Also, it is clear from the language employed under Section 68 of the Act that only the assessee alone has to offer explanation. If ....
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....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 Return for the Assessment Years 1988-89 to 1991-92 on a single day and further the return for the Gift Tax was filed on 25.08.1992, which was well within the due date." 5.4.6 Thus in view thereof Hon'ble Jharkhand High Court has held as under: "7. In view of the aforesaid decisions where assessee has given support of the gift or the amount received from the particular person with necessary documents, such as, copies of demand drafts and cheques etc., no a....
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....o 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 done in the impugned order is to refer to the circular of the Central Board of Direct Taxes and conclude that "in the case of the assessee-company, the Assessing Officer was duty-bound to calculate and allow depreciation on the BOT in conformity of the Central Board of Direct Taxes Circular No. 9 of 2014 but the Assessing Officer failed to do so. Therefore, the order of the Assessing Officer is erroneous insofar as prejudicial to the interests of the Revenue". 11. In the considere....