TMI Blog2005 (8) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessee to furnish evidence regarding availability of funds with its sub-creditor firm after the gap of twelve years, when it was on records that the creditor firms ceased to exist at the time when the original assessment proceedings were pending. (5) Because, the assessee by overwhelming evidence brought on records has proved availability of fund with him and also with his creditor firms up to the extent as required under the law. (6) Because, in any view of the case there can be no valid addition in the hands of firm. (7) Because, the CIT(A) has fallen in error in making unending enquiry regarding the availability of funds with the firm. The CIT(A) erred in extending the scope of enquiry from the assessee firm to its partners and from partners to their sub-creditors and after this regarding the repayment made by partners to its creditors. (8) Because, the case law s relied and referred by the CIT(A) is distinguishable on facts and are not applicable to the facts and circumstances of the present case. (9) Because, in any view of the case the order of the authorities below is bad on facts as well as in law." 3. It is considered appropriate to address the backgr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns in order to justify the fact of advancing the loan to the partners of assessee firm had shown an abnormal high sale in the first two months of the financial year and the entire sales had been made in cash. Accordingly, it was concluded that this could not be verified. He further took note of the fact that these two persons had small credit balance in their accounts with the said concerns, as such it was considered to be not believable that they would be allowed to withdraw such a huge amount from the said two concerns. 6. According to the Assessing Officer the assessee could not establish that Shri Pramod Kumar undertook the journey and could not establish source of funds from which the draft was purchased and as such an addition was made of Rs. 2,11,900 under section 69. 7. In appeal before the first appellate authority as per para 2.1 of the impugned order, the submissions made before the Assessing Officer were reiterated at length. It was contended that the draft had been purchased out of the withdrawals made by the two partners from their respective firms. The argument was advanced that at several places the Assessing Officer has observed that the books of account h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sales tax registration by the said concern was obtained on 30-6-1990 and was effective from 5-2-1990. As such it was concluded that none of the requirements of law was fulfilled by the said concern in time. The CIT (Appeals) further examined the fact that in the said concern there were two other partners apart from Mr. Pramod Kumar Agarwal having equal shares. After examining the financial position of the two concerns the CIT (Appeals) observed that the total sales made was Rs. 2,19,630 during this period and the alleged closing stock was worth Rs. 1,25,050 with them. As such only a small cash in hand was available with the said concern. However, in the next year sale of about 30 per cent of the total sales made in the first two months of the year was found strange especially since all the sales were shown to have been made in cash. He further observed that M/s. Tri Shakti Brick Fields had a huge liability as such the financial position of the said concern was also not so sound. Accordingly it was concluded that it would not have been financially feasible for the said concern to advance loan to one of the partners at the cost of the trade creditors and that too to that partners w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late after the returns of the assessee had been filed. On a perusal of the balance sheet of the said concern, he observed that the major asset here also is the closing stock. In the said concern, there were in all three partners. Commenting upon the position of the said firm, the CIT (Appeals) observed that in 1990-91 assessment year, the total sales of bricks in the entire year was stated to be Rs. 5,50,500 and sale in the next two months in the subsequent assessment year to the extent of Rs. 3,09,900 was doubted. Referring to section 132(5) order of the Assessing Officer in the case of the assessee wherein it was stated by the Assessing Officer that the entire sales were made in cash, the CIT(A) doubted the explanation of the assessee. It was further his view that with the closing stock only of Rs. 1,86,200, it could not be accepted that this concern would part with the sale of Rs. 95,000 in the form of payment to Shri Sailendra Kumar since the firm had creditors of more than Rs. 1,00,000. Even here, the CIT (Appeals) took objection to the fact that the complete details with regard to P L account, balance sheet for assessment years 1991-92 and 1992-93 though specifically called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in appeal before the Tribunal. 14. On behalf of the assessee it was contended that everything possible so as to substantiate its claim before the tax authorities had been done by the assessee in the facts of the present case. Accordingly, the addition, it was submitted should not have been confirmed. It was submitted that addi- tion has been confirmed merely relying upon propositions of law laid down in the different facts in different judgments. In the facts of the present case, it was contended that it is not a situation that the assessee has changed its stands at different times so as to lead to the conclusion that the assessee is giving self-serving statements. In the facts of the present case it was contended that right from the stage of assessment as well as in proceedings under section 132(5), the assessee has consistently stated that loan of Rs. 1,11,000 and Rs. 95,000 had been taken by the partners of the assessee firm from the concerns M/s. Tri Shakti Brick Fields, Firozabad and M/s. Mahesh Bricks Fields Firozabad. The fact of the assessee two partners being partners in these concerns has consistently been asserted on behalf of the assessee firm. This consistent sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee right from the beginning had said that loans have been taken from the two concerns by the partners. The fact of loan and the existence of the said concerns is established and cannot be doubted and in fact has not been doubted. It was further argued that if the department had any doubt about the genuineness of these concerns or about the genuineness of the claim of the assessee that loans had been taken from said concerns, then what was stopping the department from taking action against the said concerns and examine their records. It was further argued that the assessee cannot be held liable to explain the affairs of the said two firms and even if any decisions contrary to the business interest of the said concerns were taken by those concerns even then the assessee cannot be faulted as it is for those concerns to watch out for their interests. The onus placed on the assessee, it was contended in the facts of the case had been discharged. 19. It was reiterated that consistent stand has been taken by the assessee all along. Reliance was placed upon S. Hastimal v. CIT [1963] 49 ITR 273 (Mad.) for the proposition that after the lapse of so many years, for which the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose two concerns and all these facts have been placed before the tax authorities. Reliance was also placed upon pages 14 to 18 which also contained the written submissions before the CIT (Appeals). Inviting attention to the same, it was contended that none of the evidences have been rebutted by the CIT(A) and the evidences have simply been brushed aside based on conjectures and surmises. 23. It was contended, too much emphasis has been laid on the mode of travel of Sri Pramod Kumar Agarwal and evidences that the funds were available with the assessee, the sources from they were available, have been ignored. It was contended that the said two firms had also been assessed to tax, as such, had been income tax assessee has completely been ignored. It was contended that the onus placed upon the assessee in the facts of the case, has been fully discharged. It was further submitted that the search had taken place at CCL, Ranchi on 21-2-1991. As such, neither the assessee nor the said two concerns could have filed the return on 21-2-1991 and the returns which have been filed late again does not lead to anything. It was contended that undue importance to this fact which is not disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the department in the affairs of the said two concerns, the assessee cannot be faulted if the affairs of the said two concerns were not in order according to the department; in such situation it was argued that action should be taken there. Accordingly, it was contended that the reliance placed upon by the CIT (Appeals) on various judgments is not applicable to the peculiar facts of the case, as they operate in different facts and circumstances. 24. The learned DR on the other hand placed heavy reliance upon the orders of the tax authorities. It was his submission that the orders of the tax authorities are self-explanatory on facts, as such, the addition deserves to be confirmed. Specific attention was invited to the fact that the returns of both the concerns, from which the partners of assessee had taken loan had been filed late. The return of assessee also, it was emphasized had also been filed late. Thus the assessee, it was asserted could comfortably ensure that required funds could be shown from there. It was also emphasized that the entire transactions are in cash namely the two concerns have made sales in cash. They had allegedly advanced the funds to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the source of the financing of the draft purchased at Ranchi by the assessee before the Assessing Officer. Another undisputed fact on record is that the return filed by the assessee was late. Yet again undisputed fact on record in similar line is that the returns of said two concerns were also filed late. The next undisputed fact on record, which automatically falls out from the above is that M/s. Tri Shakti Brick Field and Mahesh Brick Kiln were also income-tax assessee. The undisputed fact again on record is that no inference has been drawn by the Assessing Officer with regard to the late filing of return by the assessee and apparently neither in the other two concerns. Since it is borne out from the record that on account of late filing of return the assessee has not tried to change its stand and come up with a different explanation as the consistent stand qua the source of funds is taken by the assessee before the Assessing Officer in the assessment proceedings remains the same. Another undisputed fact on record is that the returns of the said two concerns were processed in 143(1) proceedings and no 143(3) order was passed by the Assessing Officer. In continuation of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the facts of the present case the said proposition is sought to be transferred to a situation where an income tax assessee makes sales in cash advances loans to its partners in cash, partners supports the factum of loan by its account existing in the said firm, the said firm affirms the fact of advancing the loan. In these circumstances, if a partner has been given a loan by the said concern, which according to the Assessing Officer should not have been given since there were claims of trade creditors I am unable to see as to how surrounding circumstances as laid down by Apex Court in the case of Sumati Dayal can be read into it. If an assessee has advanced a loan to one of its partners at the cost of its trade creditors, then the remedy of trade creditors is to file a civil suit. If the affairs of said two concerns were not as they should have been according to ideal business wisdom, then the fact that the said two concerns had to close down is also an evidence on record. The fact that apparently their affairs should have been inquired into by the tax authorities is again a decision, which is not relevant to the issue at hand. As far as the assessee in the present proceedings i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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