TMI Blog2021 (4) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... be assessed as income from undisclosed sources of the firm. also see METACHEM INDUSTRIES [ 1999 (9) TMI 21 - MADHYA PRADESH HIGH COURT] - Thus addition was rightly deleted by the Ld. CIT(A). Addition on account of amount received from Shri Ankush Gupta - explanation of source - HELD THAT:- It is not in dispute that the assessee received a sum from Shri Ankush Gupta through banking channel and the source of source was explained by the assessee by furnishing the documentary evidences to prove the credit worthiness of Shri Punit Gupta and Shri Akash Bansal from whom Shri Ankush Gupta received the amount. The said documents revealed that the amount of ₹ 32,00,000/- was received by Shri Ankush Gupta from his brother Shri Puneet Gupta who is the NRI and settled in UK. The said amount was transferred from the NRE account. The Assessee also explained the source of another amount of ₹ 9,50,000/- received by Shri Ankush Gupta from his cousin Shri Akash Bansal by furnishing the copy of bank account of Shri Akash Bansal, therefore the addition made by the A.O. was not justified and the Ld. CIT(A) rightly deleted the same particularly when the assessee proved the identity and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this appeal be set aside and that of the Assessing Officer be resorted to. v. That the appellant craves leave to add or amend any grounds of appeal before it is finally disposed off. 3. Vide Ground No. (i) the grievance of the Department relates to the deletion of addition of ₹ 20,50,000/- made by the A.O. on account of the amount credited in the capital account of Smt. Swaran Kanta. 4. Facts related to this issue in brief are that the assessee filed the return of income on 21/09/2013 declaring an income of ₹ 1,28,240/- which was processed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as 'Act'). Subsequently the case was selected for scrutiny. During the course of the assessment proceedings, the A.O. noticed that in the capital account of Smt. Swaran Kanta partner, a sum of ₹ 20,50,000/- was credited as per following details: 29/06/2012 Cheque No. 858646 8,00,000/- 26/07/2012 Cheque No. 858647 50,000/- 11/08/2012 Cheque No. 858648 7,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have been made in the hands of Smt. Swaran Kanta. However the complete evidences have been provided to your good self along with source of source hence the additions of ₹ 2050000/- made in the firm's hand being Partner's Capital addition should be deleted. c) Further your kind attention is invited to the Order Sheet entries which has been placed in the paper book at page No. 1 to 3. Your honor will find that in the Order sheet entries, the proceedings were started on 23.12.2015 and the last proceedings are dated on 19.02.2016 on which date the case was adjourned to 26.02.2016. From the order sheet entries your honor will find that no show cause notice has been issued to the assessee before making any additions on accounts of unexplained credits in the name of Smt. Swaran Kanta which violates the Principles of Natural Justice and additions based on this issue should be deleted and assessment should be quashed. 5.1. The aforesaid submission were forwarded to the A.O. by the Ld. CIT(A) for the remand report. In response the A.O. submitted as under: Kindly refer to reply filed by the counsel of the assessee dated 26.09.2017 addressed to you. 2. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o is the son of assessee. The amount was transferred through RTGS in the saving account of Smt. Swaran Kanta being maintained with State Bank of India. Further, again to repeat ₹ 12,00,000/- has been received on 11.08.2012 through RTGS from the saving account of Sh. Puneet Gupta NRE who is the son of assessee. The amount was transferred through RTGS in the saving account of Smt. Swaran Kanta being maintained with State Bank of India. Please note that his son is working in U.K. and he has maintained NRE account with CITI Bank, Ludhiana and the photocopy of the bank statement is placed in the paper book at page number 8 which may please be referred. It is further submitted that ₹ 50,000/- has been introduced in the capital account from the saving account number 6010007210393 with State Bank of India, Aggar Nagar, Ludhiana on 26.07.2012 from the balance outstanding in her saving account. The photocopy of bank saving account is placed in the paper book at page number 7 which may please be referred. It may be mentioned here that the A.O. in his remand report has mentioned that the amount of ₹ 20.50,000/- has been received from NRE Saving account of Sh. Puneet Gupta but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word about the amounts received by Smt. Swaran Kanta from her son who is living and working in U.K. and has transferred the funds through RTGS from his NRE account. The assessee has given him all the clarifications of the amounts received from her son from his NRE account which itself proves of source also. In view of the above facts it is requested and prayed to deleted the addition of ₹ 20,50,000/- in the hands of the firm under the wrong notion of law. 5.3. It was further submitted as under: Written submissions dated 12.02.2078 Sh. Puneet Gupta, NRE has also given the following documents to prove that the amounts were sent by him from relation Foreign Exchange department being confirmation of transactions done by Sh. Puneet Gupta and the complete details are being given as under: a) The first transaction is dated 26.06.2012 of 9000 GBP and the conversion rate is 88.45 and Indian ₹ 796050 which was transferred by Sh. Puneet Gupta, NRE from London, Barclays Bank, PLC, Canary Wharf, London as per photocopy of the document attached. b) The second transaction is dated 06.08.2012 of 14000 GBP and the conversion rate is 85.80 and Indian ₹ 1201200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Foreign Exchange (FX) Department for transfer of amount of ₹ 1201200/- in his NRE Account maintained in India. 3. The copy of bank statement with Barclays Bank in the name of Sh. Puneet Gupta. In this statement on 24.10.2012, 14000 GBP were transferred to Rational Foreign Exchange (FX) Department for transfer of amount of ₹ 1197700/- in his NRE Account maintained in India. 4. The copy of bank statement with Barclays Bank in the name of Sh. Puneet Gupta. In this statement on 12.11.2012, 14000 GBP were transferred to Rational Foreign Exchange (FX) Department for transfer of amount of ₹ 1218700/- in his NRE Account maintained in India. 5. The copy of bank statement with Barclays Bank in the name of Sh. Puneet Gupta. In this statement on 22.03.2013, 15000 GBP were transferred to Rational Foreign Exchange (FX) Department for transfer of amount of ₹ 1231500/- in his NRE Account maintained in India. The documents are being attached and your honor will find that all the transactions were carried out by Sh. Puneet Gupta from his bank accounts or through his company in which he was having 100% share holding. These bank statements were received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 00000010007210393 of Smt. Swarnkanta maintained by her with SBI. Agar Nagar. Ludhiana by Sh. Puneet Gupta through RTGS on 11.08.2012 and the same was also introduced in her capital account on 11.08.2012 (₹ 7,00,000/-) and 13.08.2012 (₹ 5,00,000/-) as capital in the assessee firm. It was again submitted that an amount of ₹ 50,000/- was again introduced as capital on 26.07.2012 out of outstanding balance in the bank account of Smt. Swarnkanta. It has again been submitted that the assessee firm has given complete explanation to the Assessing Officer along with documentary evidence but the Assessing Officer has made impugned addition in the hands of the assessee firm without considering the fact that the amount belongs to Smt. Swarnkanta and if at all any addition was to be made it should have been made in the hands of Smt. Swarnkanta. It has again been submitted that the Assessing Officer has not given any show cause notice before making the addition under reference which violates the principles of natural justice. On careful consideration of the rival contentions, I am of the opinion that the assessee firm has explained even the source of source in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as received by the partner from her son Shri Puneet Gupta who is NRI, the transaction was through banking channel out of the NRE saving bank account of Shri Puneet Gupta, therefore the addition made by the A.O. was not justified. Moreover the amount was received by the assessee firm from the partner who explained the source for the same and if at all any addition was called for that was required to be made in the hands of the partner and not in the hands of assessee firm. On an identical issue the Hon'ble Jurisdiction High Court in the case of ITO Vs. Nahar Singh Sadhu Singh (supra) held that the partner had the requisite amount to invest towards the capital account of the firm. Since no evidence had been pointed out against that finding the amount could not be assessed as income from undisclosed sources of the firm. 10.1. Similarly the Hon'ble M.P. High Court in the case of CIT Vs. Metachem Industries (supra) held as under: Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee is over. Whether that person is an income-tax payer or not and where he had brought this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,50,000 4 14/11/2012 4,00,000 5 19/11/2012 11,50,000 13.2. The A.O. again asked the assessee to file the source of corresponding deposits in the bank account. In response the assessee submitted as under: The credit appearing at ₹ 10,00,000/- dated 31.10.2012 was received by Ankush Gupta from his brother Puneet Gupta. ₹ 1,50,000/- and ₹ 4,00,000/- dated 14.11.2012 have been received from Sh. Aakash Bansal, brother in law, ₹ 11,50,000/- dated 19.11.2012 has been received from his brother Sh. Puneet Gupta. Further ₹ 7,00,000/- dated 20.12.2012 has been given by Ankush Gupta to Swaran Fastner. Further ₹ 2,00,000/- is the correct figure instead of ₹ 8,00,000/- and the correct date is 28.12.2012 instead of 23.12.2012 which has also been given to Swam Fastners. 13.3. The A.O. however was not satisfied from the submissions of the assessee and made the addition of ₹ 40,50,000/- by observing as under: I have considered the reply of the assessee. He has stated that the creditor received the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mutual Funds. There was a balance of ₹ 197250.85 on 07.05.2012 in the saving account out of which amount of ₹ 100000/- was given to Swaran Fastners. This amount is mentioned on Paper book page No. 10. Further the receipt of ₹ 10 lakh from Sh. Puneet Gupta, his real brother from his Brother's NRE saving account. The copy of NRE saving account is placed in the paper book page No. 16 to 18. The amount of ₹ 10 lakh is mentioned in the saving account of Sh. Puneet Gupta in the paper book page 17 being maintained with CITI bank. The amount was received by Sh. Ankush Gupta through RTGS. out of which ₹ 4 lakh was given by Sh. Ankush Gupta on 31.10.2012 and the amount of ₹ 6 lakh was given to Swaran Fastners on 01.11.2012. These facts can be verified from the paper book page No. 12 being saving account with State Bank of India of Sh. Ankush Gupta. Sh. Ankush Gupta further received the amount of, ₹ 4 lakh, ₹ 1.50 lakh, ₹ 4 lakh from Sh. Akash Bansal on 14.11.2012. The saving accounts of Sh. Akash Bansal with State Bank of India, Account No. 30784612826, (Jaitu) Faridkot from where the amount of ₹ 1.50 lakh was received by Sh. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of attorney which is placed in the paper book page No. 28 to 29. The photocopy of the Return of Income along with Computation chart is placed in the paper book page No. 30 to 32 to prove the contention and this amount was received in the Axis Bank which is placed in the paper book page 15. b) Further your kind attention is invited to the Order Sheet entries which has been placed in the paper book at page No. 1 to 3. Your honor will find that in the Order sheet entries, the proceedings were started on 23.12.2015 and the last proceedings are dated on 19.02.2016 on which date the case was adjourned to 26.02.2016. From the order sheet entries your honor will find that no show cause notice has been issued to the assessee before making any additions on accounts of unexplained credits in the name of Sh. Ankush Gupta which violates the Principles of Natural Justice and additions based on this issue should be deleted and assessment should be quashed. 2. The assessee has discharge the onus by producing the following documents in the case of Smt. Swaran Kanta and Sh. Ankush Gupta: a) The confirmed copy of account showing the complete names and addresses, PAN No. of the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,50,000/- 5. 15.11.2012 5,50,000/- 6. 19.11.2012 6,00,000/- 7. 19.11.2012 4,00,000/- 8. 21.11.2012 1,50,000/- 9. 20.12.2012 7,00,000/- 10. 28.12.2012 2,00,000/- The assessee vide questionnaire dated 06.11.2015 was asked to file evidence of source of corresponding deposits in the bank account of the creditor i.e. source of deposits in the bank account of Ankush Gupta in SBI. In this regard, the assessee filed reply dated 14.03.2016 (copy enclosed), but no complete details have been filed. Hence, credit of ₹ 40,50,000/- in the books of the assessee, in the name of Shri Ankush Gupta was treated as not explained and the same was treated as income of the assessee by my predecessor even after considering the reply filed by the assessee dated 27.11.2015 in which the assessee; has stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aggar Nagar, Ludhiana. Further, The A.O. has not considered the amount of repayment of ₹ 7.00,000/- dated 4.12.2012 paid by the firm to Ankush Gupta and amount was deposited in the saving account number 912010063667577 with Axis Bank, Aggar Nagar. Ludhiana. Further. The A.O. has not considered the amount of repayment of ₹ 6,00,000/- dated 4.12.2012 paid by the firm to Ankush Gupta and amount was deposited in the saving account number 912010063667577 with Axis Bank, Aggar Nagar, Ludhiana. Further, The A.O. has not considered the amount of repayment of ₹ 3,00,000/- dated 10.12.2012 paid by the firm to Ankush Gupta and amount was deposited in the saving account number 912010063667577 with Axis Bank, Aggar Nagar, Ludhiana. Further, The A.O. has not considered the amount of repayment of ₹ 8,00,000/- dated 10.12.2012 paid by the firm to Ankush Gupta and amount was deposited in the saving account number 912010063667577 with Axis Bank, Aggar Nagar, Ludhiana. Sh. Ankush Gupta has given ₹ 7,00,000/- from the Axis Bank on 20.12.2012 and ₹ 2,00,000/- dated 28.12.2012 out of the amounts received back from Swaran Fastners which have been credited in his savin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y please be deleted. It is also important to mention here that the Ankush Gupta is being assessed separately and she is filing separate return of income for each assessment year. If at all the explanation given by the assessee firm seems to be incorrect the right course was to make the additions in the hands of Sh. Ankush Gupta who has admitted the credits in his account. In view of the above facts it is requested and prayed to deleted the addition of ₹ 41,50,000/- in the hands of the firm under the wrong notion of law. It is important to mention here that the A.O. issued the notice to the assessee for clarification of written submission given by the assessee vide letter No. ITO/ward(2)/Ldh/1718/485 dated 13.10.2017 and letter No. ITO/ward(2)/Ldh/1718/540 dated 13.11.2017 and the undersigned attended and clarified each and every issue on the issue of introduction of Cash Credit by Sh. Ankush Gupta. The photocopies of the enquiries letter issued by the A.O. are also attached for your kind reference. The A.O. has not uttered a single word about the amounts received by Sh. Ankush Gupta from his brother who is living and working in U.K. and has transferred the funds through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upta. It has again been submitted that the assessee firm has given complete explanation to the Assessing Officer along with documentary evidence but the Assessing Officer has made impugned addition in the hands of the assessee firm without considering the fact that the amount has been transferred by Sh. Ankush Gupta out of his explained sources and if at all any addition was to be made it should have been made in the hands of Shri Ankush Gupta. It has again been submitted that the Assessing Officer has not given any show cause notice before making the addition under reference which violates the natural justice. On careful consideration of the rival contentions, I am of the opinion that the assessee firm has explained even the source of source in respect of the amount received from Sh. Ankush Gupta by producing copy of NRE account of Sh. Puneet Gupta and copies of bank account of Sh. Akash Bansal. On perusal of the bank accounts of Sh. Puneet Gupta, Sh. Akash Bansal and Sh. Ankush Gupta, I am convinced that the amount which Sh. Ankush Gupta has given to the assessee firm is out of explained sources. When asked to prove the source of Sh. Puneet Gupta, the learned AR of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s transferred from the NRE account. The Assessee also explained the source of another amount of ₹ 9,50,000/- received by Shri Ankush Gupta from his cousin Shri Akash Bansal by furnishing the copy of bank account of Shri Akash Bansal, therefore the addition made by the A.O. was not justified and the Ld. CIT(A) rightly deleted the same particularly when the assessee proved the identity and creditworthiness of depositor as well as genuineness of transaction. 20. The next issue vide ground No. (iii) relates to the deletion of addition of ₹ 3,88,82,000/- made by the A.O. on account of the transaction with M/s. Shree Radha Commodity Services. 21. As regards to this issue the Ld. Counsel for the Assessee at the very outset stated that an identical issue having similar facts was involved for the A.Y. 2008-09 in ITA No. 728/Chd/2018 in the Departmental appeal, in assessee's own case which has been adjudicated by this Bench of ITAT vide order dt. 03/10/2019 and the addition of ₹ 2,26,30,000/- received from the same creditor M/s. Shree Radha Commodity Services was held to be genuine and the deletion of the said addition by the Ld. CIT(A) was confirmed vide aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) was that the confirmed copy of the account of M/s. Shree Radha Commodities Services whose proprietor is Shri Kaushal Gupta a family member of the partners of the assessee firm was furnished to the A.O. and that the transactions in the case of M/s. Shree Radha Commodities Services were mostly in cash due to its nature of business, whenever the cash was received by the said firm it was deposited in its bank account and out of the deposits in the bank account, amount had been transferred to the assessee firm through banking channel. In the instant case, the Ld. CIT(A) categorically stated that for the A.Y. under consideration assessment in the case of M/s. Shree Radha Commodities Services was reopened under section 147 of the Act under identical facts and the reassessment was completed under section 143(3) read with section 147 of the Act vide order dt. 23/03/2016, however no addition on account of cash deposits were made and the A.O. came to the conclusion after verifying the books of accounts that the cash deposited was found to be explained. The said observation of the Ld. CIT(A) was not rebutted. In the present case when the cash deposited in the bank account of M/s. Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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