TMI Blog2004 (4) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under s. 143(1)(a) in a summary manner which was later on reopened under s. 147(a) and notice under s. 148 was issued to the assessee on the basis of information and investigation that the assessee-firm had no business at Malerkotla but the business was carried out at Mandi Gobindgarh and thereby the assessee was not disclosing its true and full disclosure of the income. Reopening of the case was made, as is evident from the order of learned CIT(A), on the basis of information conducted by the investigation wing of the Revenue that some drafts were being prepared by one Shri Vinod Kumar Manro who was not associated with the firm during the asst. yr. 1985-86 but was a partner in the firm during asst. yrs. 1986-87 and 1987-88. Since these drafts were not reflected in any of the books of account of Shri Vinod Kumar Manro, such drafts were added in the income of Shri Vinod Kumar Manro after reopening his case under s. 148 on substantive basis during the asst. yr. 1985-86. However, the AO in the case of assessee-firm after reopening the case, made an addition on estimate basis as no books and vouchers were produced by the assessee. 3. Learned CIT(A), in appeal, observed that durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A) that there was nothing on record to suggest that the assessee had failed to submit its true income before the Department. Apart from this, the AO while completing the assessment under s. 148, had not established any material evidence to suggest that any part of the income of the assessee-firm had escaped assessment. We have also considered the fact that base on which such reopening was made, i.e., drafts purchased by Shri Vinod Kumar Manro, was taxed in the hands of Vinod Kumar Manro (Ind.) on substantive basis which was later on set aside by the learned CIT(A) and the AO framed reassessment after set aside where no substantial addition was made in the hands of Vinod Kumar Manro also. Therefore, there was no justification in the estimation of the income of the assessee-firm based on just presumption that the income has escaped assessment. We, therefore, observing the facts and circumstances of the present case, do not find any infirmity in the order of learned CIT(A) while annulling such order of AO. Accordingly, we uphold the same and reject the ground of appeal raised by the Revenue. 7. In ITA Nos. 486 and 488/Chd/1997, the Revenue has taken the following effective gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom this branch were made out in the name of Shri Vinod Kumar Manro or/and in favour of Maharashtra Trading Co., Bombay. It was noticed by the AO that in some of the drafts while purchasing the drafts, the applicant had given the address C/o Varun Steel Industries. The AO, on the basis of above inquiry, further found that drafts purchased in the name of Vinod Kumar Manro and credited in his bank account at Bombay, were not reflected in the books of Varun Industries in which Vinod Kumar Manro was a partner. The AO asked the assessee to explain the reason for non-recording the transactions in the books. The assessee in its reply stated that the assessee-firm had not operated any so-called account at Kukarmajra as well as at Bombay and no business was being done at Bombay by them. However, AO noted that Shri Vinod Kumar Manro was one of the co-partner in the firm and was engaged in the commission business of sale and purchase of iron and steel and opened a bank account No. 32019 on 10th March, 1984 with Union Bank of India at Bombay and later on joined the firm M/s Varun Steel Industries. It was further impractical and impossible for a single man to run business at two places, i.e., o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other person. Learned CIT(A) further held that Shri Vinod Kumar Manro was the recipient of the drafts and he had duly confessed that he was carrying on the business in his individual and AOP capacity with the firm as AOP for the asst. yrs. 1986-87 and 1987-88 and there was nothing to suggest that the other partner of the assessee had anything in this business activity. Learned CIT(A) also considered the finding of the AO that Shri Vinod Kumar Manro could not be at both places and held that inference could not be that the other person has to be a partner of the firm as Vinod Kumar Manro has made claim that AOP was running this business. Therefore, learned CIT(A) concluded that there was no particular evidence which would show that the firm was engaged in running of this business as has been alleged by the AO and in respect of which addition has been made. Learned CIT(A) further observed that further the business was being run by Shri Vinod Kumar Manro in his individual capacity or as partner of AOP was a matter to be decided separately but merely giving the address of the firm in some of the drafts purchased, could not lead to the conclusion that the firm itself, was carrying on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posited in bank account at Bombay related to his own independent business and the business carried on by Vinod Kumar Associates, an AOP consisting of himself, Anil Kumar and Pawan Kumar. The same fact was also intimated to the ITO concerned by Vinod Kumar Manro vide his letter dt. 10th Feb., 1996, which is available at pp. 55 to 58 of paper book filed by him. Learned counsel for the assessee also pointed that protective assessment framed in case of Vinod Kumar Manro for asst. yrs. 1986-87 and 1987-88 by the AO was ultimately set aside by the CIT which is evident from pp. 43 to 45 of paper book and the AO while framing the reassessment on direction of such set aside, did not make any substantial addition in the hands of Vinod Kumar Manro which is evident from the order of AO after set aside by the learned CIT(A) under s. 143(3). A copy of the same is placed at p. 88 of the paper book submitted by the assessee. 11. Therefore, concluding his arguments, learned counsel for the assessee strongly supported the order of learned CIT(A) and observed that once Shri Vinod Kumar Manro had accepted the fact that drafts purchased at Punjab Sind Bank, Kukarmajra, and deposited at Bombay bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inod Kumar Manro, the key person in purchasing of these drafts, was the main partner of the firm, and some of the drafts which were purchased from Punjab Sind Bank, Kukarmajra, did mention the name of the assessee-firm in the column meant for address of the purchaser of drafts. Apart from this, the AO has not established any nexus between the drafts purchased and the assessee-firm. We have also considered the fact that Shri Vinod Kumar Manro vide his affidavit available at p. 51 of the paper book and statement recorded before the AO, has taken the responsibility of having made these drafts in his individual capacity and has categorically stated that the assessee-firm was not at all involved in the purchase of these drafts. Apart from this, substantial addition in asst. yr. 1985-86 and protective assessment in asst. yrs. 1986-87 and 1987-88 in the hands of Vinod Kumar Manro on account of purchase of these drafts, was set aside by the learned CIT(A) and the AO while framing reassessment after such set aside by the learned CIT(A), has framed the assessment of Vinod Kumar Manro without making substantial addition in all the three years. It is also an admitted fact that Shri Vinod Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration under s. 185 was granted to the firm. In asst. yr. 1985-86 the assessee-firm had four partners namely Shri Narinder Kumar, Smt. Amita Diwan, Smt. Suhagwanti and Smt. Kamlesh whereas in asst. yrs. 1986-87 and 1987-88, Smt. Amita Diwan and Vinod Kumar Manro were the partners of the firm. Subsequent to the investigation by the investigation wing regarding alleged purchase of drafts from Mandi Gobindgarh, the assessment was reopened under s. 147 r/w s. 148 and thereafter, after coming to the conclusion by the AO that the assessee was not maintaining proper books of account and was not disclosing true income earned by it, the AO cancelled the registration granted for all these three years. 14. It was submitted before the learned CIT(A) by the assessee that initiation of s. 148 for asst. yr. 1985-86 was not valid and that the earlier assessment was allowed on the basis of Form 12 filed along with the return. It was further informed by the assessee that books of account pertaining to asst. yr. 1987-88 were already in the possession of the Department. The learned CIT(A), after observing the contention of the assessee, held that registration was earlier allowed on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e asked for by the AO under s. 147 r/w s. 148. Learned counsel for the assessee further relied on the following judgments in support of his contention: (i) CIT vs. Panduranga Engineering Co. (1997) 139 CTR (AP) 173 : (1997) 223 ITR 400 (AP) (ii) CIT vs. Faiz Mohd., Hasim Ali, Taj Mohd., Noor Mohd. (1986) 53 CTR (Raj) 221 : (1986) 160 ITR 396 (Raj) (iii) CIT vs. A.K. Timber Traders (1989) 78 CTR (P H) 124 : (1989) 177 ITR 486 (P H). Therefore, it was argued by the learned counsel for the assessee that the learned CIT(A) has rightly allowed registration based on the facts and circumstances of the present case. 17. In his rejoinder, learned Departmental Representative for the Revenue strongly opposed the contention of the assessee for asst. yr. 1986-87. It was submitted by the learned Departmental Representative for the Revenue that audited accounts do not allow the assessee not to submit the books of account before the AO when asked for. 18. We have heard both the parties and have perused the orders of tax authorities. In this case, cancellation of registration by the AO was made with the presumption that the assessee has not disclosed its true state of affairs by not dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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