TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 689
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.... and returned loss as declared by the assessee may kindly be accepted. 2. That the AO has made the addition of Rs. 37,80,000 on account of unexplained capital introduced by the partners, Sh. Santosh Jaiswal Rs. 37,00,000 and Sh. Asit Dixit Rs. 80,000. Assessee has submitted the details of capital introduced by both the partners before AO and CIT(A) but both have not accepted and addition made by AO which is confirmed by CIT(A) same is not correct and may kindly be deleted.' 3. The brief facts of the case are that the assessee, a partnership firm selling country liquor under licence from the State Excise Department, returned it's income for the year at Rs. (-) 26,130, i.e., after deducting interest to partners at Rs. 4,45,680. The assessee did not produce books of account during assessment proceedings, i.e., in response to notice u/s. 143(2), and it was found by the Assessing Officer (AO) that it had failed to maintain verifiable evidences in respect of sales, sealing and bottling charges, and lease money, the latter two being expenses, claimed at Rs. 51.31 lacs and Rs. 258.99 lacs respectively (PB pg. 74). Rejecting the disclosed book results, he estimated the assessee&#....
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....bit the reconciliation of the payments with the amounts claimed, which are in no insubstantial sums. The non-acceptance of the assessee's book results, and completing the assessment as a best judgment assessment, is, under the circumstances, unexceptional. 5.2. As regards the reasonability of the estimation of profit, in the absence of past history; the current being the first year of the assessee's business, a comparable case/s becomes the only manner of testing the assessee's declared results. The ld. CIT(A) has rebutted the comparable case cited by the assessee before him (refer pg. 9 of the IO). A perusal of the said order by the Tribunal (in ITA No. 159/Jab/2009, dated 13/7/2012), placed at pgs. 3-10 of the assessee's paper-book, though not adverted to during hearing, shows that in that case the assessee disclosed a net profit of Rs. 1,74,530 on a sale of Rs. 328.72 lacs, justifying the same - which found acceptance by the Tribunal, on the basis of loss on account of unutilized lease money at Rs. 8,09,338, stock against which could not be lifted due to dull market conditions. No such claim obtains in the instant case, which pertains to the preceding year. The ....
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....capital from his Sand business, but no withdrawals were found in M/s. Santosh Jaiswal (Sand Contract) (PB pgs. 36-49, at pg. 48); iii) No date-wise details of withdrawal of Rs. 37 lacs, nor his personal books, were furnished; iv) No evidence to substantiate the built-up or otherwise of savings by Sh. Asit Dixit, was provided. These findings were endorsed by the ld. CIT(A). His decision, at para 3.3 (pgs. 8-10) of his order, read out during hearing, is based on and comprises the following reasons: a). the assessee-firm came into existence only vide partnership deed dated 26/4/2004, w.e.f. 01/4/2004. How could it be then said that the capital was introduced by the partners in the firm during the preceding year, i.e., FY 2003-04?; b). no documents to show the huge cash withdrawal of Rs. 145 lacs by Sh. Santosh Jaiswal (in fy 2003-04) had been submitted, nor its break-up so as to exhibit its investment, furnished despite being called for; c). no linkage had been established between the cash withdrawn and the investment in the assessee-firm; d). no evidence/details as to savings, the stated source of capital attributed to Sh. Asit Dixit, had been produced, nor his tax retur....
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....to be of the assessee-firm, being non-existent on that date, the balance-sheet as on 31.03.2004 also cannot be said to be of the assessee-firm. Per contra, the firm claiming to be the owner of the assets as reflected in its' Balance-Sheet as on 01/4/2004, the first day of it's existence, even as it cannot be said to be the owner thereof as at the close of 31/3/2004, nor has shown any receipt of funds on 01/4/2004, it is liable to satisfactorily explain the nature and source thereof, failing which the same could be assessed as its' income chargeable to tax. The Revenue's argument is valid, and is precisely the reason why the assessee is being called upon to explain the credits in its' accounts, which, therefore, can only be regarded as on 01.04.2004, the beginning of the year, i.e., even if investments by the concerned creditors were made during the preceding year, enjoining the assessee to explain the nature and source thereof, which otherwise could only be enquired into, and in the event of the same being not explained, brought to assessment as income for the preceding year. Sh. Seth would during hearing explain this by stating that the partnership was in exis....
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.... 68 of the Act. The law makes no difference on the basis of the date, the first or the last day of the previous year, whereat a sum comes to be credited in the books of the assessee; the premise being of the assessee being the beneficiary of the sum/s credited (Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC); Kale Khan Mohamed Hanif v. CIT [1963] 50 ITR 1 (SC), affirming the decision by the Hon'ble jurisdictional High Court in [1958] 34 ITR 609 (MP)). This is irrespective of whether the credit in the assessee's books is to the account of a partner or another (Govindarajulu Mudaliar (supra); CIT v. Metachem Inds. [2000] 245 ITR 160 (MP); CIT v. Kishorilal Santoshilal [1995] 216 ITR 9 (Raj)). 8.3. I may next consider both the sums credited on the merits of the explanation/s furnished: (a) Rs. 80,000/- (Sh. Asit Dixit) The source of this sum stated to be the savings (capital) of AD, built-up over the period of his service as a sales Manager in a liquor firm, drawing Rs. 10,000 to Rs. 12,000 per month. The claim is wholly unsubstantiated, which is the principal reason for its' non-acceptance by the Revenue, being otherwise a plausible explanation, particularly co....
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....Jaiswal) The source has, again, been ascribed to the creditors' capital, withdrawn from another partnership firm, Santosh Jaiswal (Ratlam), also a Jabalpur based liquor dealer. The reason for its' non-acceptance is two-fold. There is nothing to show that the said withdrawal has been in cash and, two, no date-wise breakup of the same has been provided. Also, and equally, in the absence of any break-up of the withdrawal, stated to be in cash, it cannot be linked with the investment in his name in the assessee-firm, the stated avenue of the said withdrawal. How, pray, are these objections by the Revenue to be faulted with, even as no explanation toward the same was forthcoming during hearing as well? In case of a direct transfer of funds, each debit to his capital account in Santosh Jaiswal (Ratlam) would get reflected as a corresponding credit in his account with either the assessee-firm (or, rather, the payee-entity inasmuch as the assessee was not in existence up to 31.03.2004), or any other entity/investment avenue, as indeed credited to the capital account in M/s. SJ (Sand) (PB pg. 48). However, that being not the case, it is only the cash account in the (personal) boo....
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.... or otherwise gathered by the AO could form the basis of such an assessment. It is the best judgment of the assessing authority and not of any other, so that it would, unless shown to be vitiated, hold (CIT v. Rayala Corporation (P.) Ltd. [1995] 215 ITR 883 (Mad)). The addition under reference however is not based on or the result of any estimate by the AO based on the material on record. But one made in view of an unsatisfactory explanation inasmuch as it is not substantiated. Not producing the evidence which the assessee is expected to be possessed of would even otherwise entail an adverse inference (Union of India v. Rai Deb Singh Bist [1973] 88 ITR 200 (SC)). The question that therefore obtains is whether the assessee is under the given facts and circumstances of the case; the matter already having traversed through assessment, remand and first appellate stage, to be allowed a further opportunity. It is this question that needs to be addressed, and qua which this Tribunal considers the answer as in affirmative. Further, even as such a remission would usually be at a cost, particularly considering the non-cooperation before the AO, it is being abstained from in the facts and cir....