TMI Blog2016 (4) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... f the firm in which the accounts of the individual partners exist and it is found as a fact that cash was received by the firm from its partners, then in the absence of any material to indicate that they were profits of the firm, it could not be assessed in the hands of the firm. In the present case before us also there is no finding that the cash introduction is on account of the profit of the firm but actually these are partners’ money. Respectfully following the precedents and in the given facts of the case, we delete the addition - Decided in favour of assessee Charging interest u/s. 220(2) - Held that:- In the facts of the present case in which the original assessment order has been set aside by the Tribunal and matter restored to the Assessing Officer for fresh assessment and therefore in view of the circular of CBDT No.334 Dt.3.4.1982, the interest can be levied only from the date of default of the demand notice issued in pursuance of the fresh assessment order. The order of CIT(A) holding that interest under section 220(2) has to be levied from the date of default as per the original assessment order therefore cannot be sustained. The same is set aside - Decided in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The issue in this appeal of assessee is against the order of CIT(A) confirming the action of AO in adding the partners capital in the firm s hand as unexplained cash credits appearing in the name of Kona Udyog Steel Corporation and Metal Trading Corporation. 3. Briefly stated facts are that the original assessment was completed by the AO u/s. 143(3)/147 of the Act on 04.01.1999 which was set aside by CIT(A) vide his order dated 16.02.2001. Subsequently, the AO made assessment in response to the order of CIT(A) u/s. 144/251 on 22.03.2002, which was confirmed by CIT(A) vide his order dated 07.01.2005. Subsequently, ITAT vide its order dated 30.08.2005 set aside the order of CIT(A) dated 07.01.2005 and again the AO gave appeal effect to the order of ITAT and framed fresh assessment u/s. 143(3)/147/251 of the Act vide dated 15.11.2006 (the impugned order now). The CIT(A) passed appellate order vide dated 20.09.2007 which is the impugned order before us now. The AO on the setting aside assessment has made addition of advance/unsecured loans from the below mentioned three parties: (i) M/s. Kona Udyog, 65, G. T. Road, North Howrah, (ii) Steel Corporation, 65, G.T. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm should not be treated as unexplained cash credit and added to the income of the firm u/s.68 of the I.T Act. 4. It is a well known fact that all the partners of the firm were misguiding the Department and giving false statement about the three creditors and were willfully evading the tax payable on the alleged credits. Therefore, it may please be explained as to why prosecution proceedings should not be initiated against the firm and the partners of the firm U/s.276C and 277 of the I.T. Act. Your reply should reach the undersigned by 4th of October 2006. The assessee was required to send his reply by 4-10-06. No compliance was however made. On 28- 9-06, a letter was received from the assessee requesting for minimum 30 days of time for replying the letter. Thereafter, on 4-10-06, a letter was written to the assessee to make compliance by 11-10- 06. Again, there was no compliance. On 27-10-06, a letter was again written to the assessee giving one more opportunity to submit reply by 13-11-06. On 13-11-2006 the assessee submitted a letter for extending the date of hearing by a month. In my opinion, enough opportunity has been allowed to the assessee for submitting repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have certainly tried to recover the advances or at least would have filed suit for recovery of the same: In fact, as mentioned above, since the unaccounted money of the firm and its partners was credited in the name of three alleged creditors, the claim for recovering the advance given was never made. On this fact also, it is established that the money deposited in the firm belonged to the firm and the partners acting on behalf of the firm. The source of these deposits remain unexplained, therefore, it is presumed to be unexplained income of the assessee firm for the year under consideration in terms of Sec.68 of the LT. Act. (iii) The assessee had given confirmatory letters along with the GIR No. in respect of the three alleged creditors before the Ld. CIT(A). The Ld. CIT(A) had forwarded these GIR Nos. to the ITO who submitted his remand report stating that GIR Nos. quoted in respect of the alleged creditors were false and bogus. The assessee also could not furnish any Xerox copy of the proof of filing of return of income by the three alleged creditors. Therefore, primary responsibility of submitting the confirmatory letters in respect of the three alleged creditors was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e firm in which the accounts of the individual partners exist and it is found as a fact that cash was received by the firm from its partners, then in the absence of any material to indicate that they were profits of the firm, it could not be assessed in the hands of the firm. 7. In Narayandas Kedamath v. CIT (supra), it was observed as under: There may be a genuine case where a partner or a stranger may bring in moneys to the credit of the firm and the partner or the stranger may have come into those moneys by thoroughly dishonest means, but it is not for the firm which is being assessed to satisfy the Department that the moneys which it received from the partner or the stranger were moneys which the partner or the stranger obtained by honest means. In my opinion that would be throwing too heavy a burden upon the assessee. We do not wish to lay down any general law which should apply to all cases. In most cases it would depend upon the facts actually found. On the facts actually found and strictly confining our decision to the facts of this case we are of opinion that there were no materials on which the Department could have come to the conclusion that these credits re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners have introduced capital in the hands of the firm and in that eventuality addition cannot be made in the hands of the firm. 7. We have heard rival contentions and gone through facts and circumstances of the case. We find from the facts of the case that AO while making enquiry from the Bank, he made it clear in the remand report and as mentioned in para - 3 of the show-cause notice dt.13-09-2006, that the money in fact belonged to the partners of the assessee firm. The partners of the assessee firm deposited their unaccounted money in the name of M/s. Kona Udyog, M/s. Steel Corporation and M/s. Metal Trading Corporation. This fact was certainly in the knowledge of all the partners of the assessee firm since they had put their signature on the different cheques which were credited in the A/c. of the assessee firm. The assessee always claimed that the creditors had given advances against supply of goods. The assessee could not give any proof of supply of any goods. From the facts on record and also from the Balance Sheet of the firm from assessment year 1994-95 onwards and at least till assessment year 2003-04, it is found that the liability of the sundry creditors remains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO u/s. 143(3)/147 of the Act on 04.01.1999 which was set aside by CIT(A) vide his order dated 16.02.2001. Subsequently, the AO made assessment in response to the order of CIT(A) u/s. 144/251 on 22.03.2002, which was confirmed by CIT(A) vide his order dated 07.01.2005. Subsequently, ITAT vide its order dated 30.08.2005 set aside the order of CIT(A) dated 07.01.2005 and again the AO gave appeal effect to the order of ITAT and framed fresh assessment u/s. 143(3)/147/251 of the Act vide dated 15.11.2006 (the impugned order now). The CIT(A) passed appellate order vide dated 20.09.2007 which is the impugned order before us now. In such circumstances, when the interest u/s. 220(2) of the Act has been charged by AO from the date of original assessment framed u/s. 143(3)/147 of the Act on 04.01.1999 is as per the provisions of the Act or not. Ld. Counsel for the assessee before us relied on a CBDT Circular No. 334 dated 03.04.1982, wherein the legal position taking into consideration the decision of Hon ble Kerala High Court , Hon ble Delhi High Court and Hon ble Karnataka High Court s view explained the position. The dispute is regarding levy of interest u/s. 220(2) of the Act. Under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuant to the fresh assessment order. But in case the order of CIT(A) is subject matter of further appeal and the Tribunal has restored the order of Assessing Officer either in part or wholly, the interest payable under section 220(2) of the Act will be computed with reference to the due date reckoned from original demand notice and with reference to the tax finally determined in the assessment. In the present case, the original order of assessment was confirmed by CIT(A) but on further appeal, the Tribunal set aside the order of CIT(A) and the issue restored to the Assessing Officer. Therefore in terms of the Circular of CBDT, the interest under section 220(2) of the Act has to be charged only in respect of demand raised as per the fresh assessment order. In the facts of the present case in which the original assessment order has been set aside by the Tribunal and matter restored to the Assessing Officer for fresh assessment and therefore in view of the circular of CBDT (supra), the interest can be levied only from the date of default of the demand notice issued in pursuance of the fresh assessment order. The order of CIT(A) holding that interest under section 220(2) has to be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion from the Banker regarding the payment of consideration to these parties, the genuineness of the transaction is not established. The appellant has not produced the purchase, sale and stock register in original to prove that these purchases are properly recorded in the books of accounts. In the absence of evidence, the appellant failed to prove the identity of the parties from whom the purchases were claimed and the genuineness of the transaction. The A.O is correct as per law in treating the purchases as not genuine and bogus. The A.O's action is correct as per law and is upheld. Therefore, grounds of appeal fail and hence rejected. Aggrieved, now assessee is in second appeal before Tribunal. 12. We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee has produced purchase bills, bank account, statement pertaining to purchase price and issuance of cheques. The assessee also produced photo copy of stock register and purchase register maintained by him, which were not verified by the AO properly. These were produced before us also by the assessee in its paper book and stating the reason that all the entries are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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