TMI Blog2014 (11) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of the firm M/s Dixit & Co. – there was force in the claim of the assessee and it has been held that for deposits in the bank account in the name of M/s Dixit & Co., no addition can be made in the hands of this individual – thus, the entire matter is to be remitted back to the AO for fresh consideration – Decided in favour of assessee. - ITA Nos.613 & 677/LKW/2009, I.T.A. Nos. 91 to 94/Lkw/2010 - - - Dated:- 14-11-2014 - Shri Sunil Kumar Yadav And Shri A. K. Garodia,JJ. For the Appellant : Shri R. P. Tiwari For the Respondent : Shri P. K. Dey, D.R. ORDER Per A. K. Garodia, A. M. All these six appeals are filed by the assessee, which are directed against separate orders of CIT(A) relevant to assessment years 1996-97 to 2001-02. All the appeals were heard together and are being disposed of by way of this common order for the sake of convenience. 2. These are very old appeals, which were listed for hearing on various occasions. In fact, adjournment was granted to Learned A.R. of the assessee on last several dates with the observations last opportunity i.e. on 15/05/2014, 22/05/2014, 29/05/2014, 14/07/2014, 18/07/2014 and 5/08/2014. Ultimately the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 68 of the Act cannot be invoked on various deposits/credits found recorded in the books of account of the assessee in the absence of books of the assessee maintained for that previous year. This Hon'ble Bombay High Court in the case of CIT vs. Bhaichand H. Gandhi 141 ITR 6 (Bom.) wherein the Hon'ble Bombay high Court has held that the bank pass book is not a book maintained by the assessee or under his instructions and cash credits for previous year shown in pass book cannot be treated as income. Proposition 2 Addition of unexplained income of amounts appearing as credit in bank statement of firm M/s Dixit Co. -not sustainable. As far addition in respect of credit entries in passbook of M/s Dixit Co., a partnership firm cannot be made in hands of assessee who is individual. As the deposits in the account of M/s. Dixit Company are concerned. M/s Dixit Company is a separate partnership firm which fact is evidenced by a deed of partnership dated 07.09.1993 copy of which is already obtained by the Income Tax Department from Bank. The Assessing Officer while framing the original assessment himself had requisitioned the bank accounts of M/s. Dixit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilar view on the facts which are exactly replica of the facts of the assessee case. In the said case the firm was maintaining books of account and cash credit entries in the books of the firm were added in the hands of the partner who was not maintaining any books of account. The Hon'ble Punjab and Haryana High Court held that where a partner maintained no books of account and cash credit entry appeared in the books of the firm, the amount of the cash credit could not be assessed as income from undisclosed sources in the hands of the partner treating the books of account of the partnership firm as those of individual partner. The Hon'ble Punjab Haryana High Court has followed the judgment of the Hon'ble Patna High Court in the case of Laxmi Narain Gupta Vs. CIT 124 ITR 94. (Patna) In light of the above legal position, there is no justification of the Department in treating the deposits in the bank pass book of the firm M/s Dixit Company as unexplained income in the hands of the assessee who is a separate legal entity. Further the assessee-appellant would like to further plead that at no stage of the proceedings the Department has brought any nexus on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee as the book profits could be. The secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even through concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. Further the assessee's regular income as declared in return is also included in this bank account while the same has also been separately added resulting in double addition. 5. We have considered the rival submissions. Regarding the first legal proposition of Learned A.R. of the assessee that when the assessee is not maintaining any books of account, no addition is justified u/s 68 of the Act. In this regard, we would like to observe that even if no addition is justified u/s 68 of the Act, addition can be made u/s 69 of the Act in respect of deposit in bank account if the assessee cannot satisfactorily explain the source of deposit. This is by now settled position of law that merely because a wrong section has been invoked by the Assessing Officer, the addition cannot be deleted and such order is not illegal and at the best it is irregular which can be regularized by substitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings, it was stated that the business of the firm was constituted for consultancy on of electric installation of companies, but due to absence of business and shortage of funds, the firm has remained in loss throughout. The Assessing Officer has also noted that it was also stated by the assessee in this letter that Shri Vishal Dixit is a partner in HUF capacity and both the partners operated the bank account and the bank account is not related to Shri Vishal Dixit in any manner in individual capacity. The Assessing Officer also noted that vide further reply dated 03/12/2008, the assessee has stated that in the year 1993-94, the assessee formed a partnership firm in the name of M/s Dixit Co. and started business of car sale purchase and since beginning, the firm incurred losses, as such no income tax return was filed. It was also submitted that the assessee filed income tax return in his individual capacity and as there was no income from the firm, the matter was not mentioned in the ITR. The Assessing Officer also noted that another partnership deed dated 11/09/97 was also submitted during the assessment proceedings after Tribunal order in first round and this deed is between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and hence, we hold that for deposits in the bank account in the name of M/s Dixit Co., no addition can be made in the hands of this individual. 8. The third legal proposition is that the Department has not given any benefit to the assessee of peak credit theory or telescoping. In this regard, we feel that if the assessee can establish that any deposit in the individual bank account of this assessee or any expenses or investment by this individual assessee is out of withdrawal from the bank account of the firm M/s Dixit Co., then the assessee deserves to get telescoping to that extent because source in the hands of this individual assessee gets explained and if the firm is not able to explain then action may be taken in the hands of the firm as per law but no addition can be made in the hands of this individual where the assessee deserves telescoping as discussed. 9. Regarding the merit of various additions in various years, we feel that in view of our decision in respect of Legal contentions No. 2 and 3, the entire matter should go back to the file of the A.O. for a fresh decision in the light of this decision. Hence, we set aside the orders of learned CIT (A) in all t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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