TMI Blog2017 (12) TMI 1254X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition made by the AO considering the purchase as bogus has been deleted in the former part of this order. Therefore, the impugned addition is also deleted being co- related with the said purchases. Addition on account of capital introduced by Sh. Rishi Sachdeva, the partner in the assessee firm - Held that:- The amount in question was deposited by the partner as his capital, therefore, even if the Assessing Officer was not satisfied with the explanation of the assessee, it cannot be added in the hands of the assessee firm. At the most it cannot be considered in the hands of the individual partner of the assessee firm.Therefore, considering the totality of the facts, as discussed herein above, am of the view that the learned CIT(A) was not justified in confirming the addition made by the Assessing Officer on account of capital contributed by the partner in the assessee firm. Assessee appeal allowed. - ITA No. 2912/Del/2014 - - - Dated:- 20-12-2017 - Sh. N. K. Saini, Accountant Member Assessee by : Smt. Rano Jain, Adv. Sh. Ashish Goel, Adv. Revenue by : Sh. T. Vasanthan, Sr. DR ORDER This is an appeal by the assessee against the order dated 12.02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art. 4. Vide Ground No. 3, the grievance of the assessee relates to the confirmation of addition of ₹ 36,23,600/- made by the AO by treating the purchases as bogus. 5. Facts of the case in brief are that the AO during the course of assessment proceedings noticed that the assessee firm made total purchases of ₹ 70,09,040/- out of which purchases of ₹ 36,23,600/- were made from M/s Parshanath Enterprises. The AO asked the assessee to produce ledger account of M/s Parshanath Enterprises which was furnished by the assessee. The AO also asked the assessee to submit the bills of purchases. The assessee furnished copies of the bills vide letter dated 27.10.2009. The AO observed that out of the total purchases from M/s Parshanath Enterprises, ₹ 28,47,698/- were of Rudraksh Kawach Chain. However, no such material was there in the closing stock of the assessee. The AO alleged that most of the sales had been made to the assessee by M/s Parshanath Enterprises during the period from 15.01.2007 to 24.01.2007 and there were only two sales bills issued by the assessee between 24.01.2007 to 02.02.2007. He considered the transaction as suspicious and issued summons u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchased from M/s Parshanath Enterprises All bills, ledger account and other details of the transactions were produced The item was a trading item and the profit was shown as income The Assessing Officer recorded the statement of some Mukesh Mangla and on the basis of this statement treated as the transaction as bogus No opportunity of cross examination was provided to the assessee The assessee produced evidence in the form of books, bank statement confirming the payment made to the said party, copies of bills, confirmation and copy of DVAT return of the party It was stated that Mr. Mangla did not have power of attorney of the proprietor of M/s Parshanath Enterprises that is Mr. Sachin Jain The entire item purchased was sold and was therefore not available in the closing stocks A remand report on the submissions and the documents filed by the appellant was called for the Assessing Officer wherein he reiterated and placed reliance on the statement of Mr. Mangla and the opportunities provided to assessee to contradict the evidence. Inspite of repeated opportunities the assessee did not produce any evidence against the statements m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... written by the assessee to the AO. It was further submitted that the assessee furnished a number of additional evidence in the form of DVAT return, sales tax return, certificate of registration, sales transfer register and purchase transfer register of M/s Parshanath Enterprises in order to prove the genuineness of the purchase transaction. It was further submitted that out of the total purchases amounting to ₹ 70,09,040/-, the assessee had the purchases amounting to ₹ 36,23,600/- from M/s Parshanath Enterprises and if the same was to be taken as bogus, the gross profit would jump to a very high rate of 62.5%, which was not possible in such type of cases. It was further submitted that the assessee in its rejoinder gave reply to all the six allegations levied by the AO and also offered to produce the concerned party i.e. M/s Parshanath Enterprises before the ld. CIT(A) or the AO as per their convenience. A reference was made to page no. 103 of the assessee s paper book which is the copy of the rejoinder to the remand report. It was further submitted that the assessee furnished copy of confirmation from M/s Parshanath Enterprises, its bank account, copy of ledger account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erprises. It is also not in dispute that the sales made by the assessee from the purchases under consideration and the gross profit rate has been accepted then there was no reason to consider the purchases amounting to ₹ 36,23,600/- as bogus purchases. In that view of the matter, the addition sustained by the ld. CIT(A) amounting to ₹ 36,23,600/- is deleted. 12. The next issue vide Ground No. 4 relates to the sustenance of addition of ₹ 54,898/- on account of commission on bogus purchases u/s 69C of the Act. 13. Since, the addition amounting to ₹ 36,23,600/- made by the AO considering the purchase as bogus has been deleted in the former part of this order. Therefore, the impugned addition is also deleted being co- related with the said purchases. 14. The next issue vide Ground No. 5 relates to the confirmation of addition of ₹ 4,25,000 made by the AO on account of capital introduced by Sh. Rishi Sachdeva. 15. The facts related to this issue in brief are that the assessee raised capital of ₹ 4,25,000/- which had been invested by Sh. Rishi Sachdeva and was received by assessee firm in cash. The AO observed that the assessee failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d copies of the income tax returns filed by Sh. Rishi Sachdeva which are placed at page nos. 56 to 58 of the assessee s compilation. In the present case, in my opinion, if the AO was not satisfied regarding the transaction relating to the cash deposited by partner whose identity was not in doubt and the assessee furnished all the relevant documents then the addition could have been made in the hands of the said partner and not in the hands of the assessee. The aforesaid view is also supported by the decisions of the various Hon ble Courts as discussed hereinafter. 20. On a similar issue, the Hon'ble Allahabad High Court in the case of CIT vs. Jaiswal Motor Finance 141 ITR 706 (All) has held as under: If there are cash credit entries in the books of a firm, in which the accounts of the individual partners exist, and it is found as a facts and circumstances that cash was received by the firm from its partners, then, in the absence of any material to indicate that they were the profits of the firm, it could not be assessed in the hands of the firm. 21. Similarly the Hon'ble Allahabad High Court in the case of India Rice Mills vs. CIT [1996] 85 Taxman 227 (All) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l account, since these partners admitted to have made these investments in the assessee-firm and since there was no material to indicate that the cash credits were the profit of the firm, they could not be assessed as the firm's income and that the unexplained investments could be assessed in the individual hands of the partners under section 69 Income-tax Act, if that was permissible. 25. On a similar issue, the Hon'ble Punjab Haryana High Court in the case of CIT vs. Metal Metals of India (supra) observed in para 5 as under: 5. In the present case, the firm has given explanation about the source namely Suresh Bhandari, partner, who himself is an assessee. The said partner has admitted having made deposit with the firm. Thus, as far as the firm is concerned, even if the gift claimed to have been received by Suresh Bhandari is to be rejected, the said Suresh Bhandari may be liable to be taxed by treating the said amount as undisclosed income, but the firm cannot be subjected to tax on that ground. 26. In the present case also the amount in question was deposited by the partner as his capital, therefore, even if the Assessing Officer was not satisfied with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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