TMI Blog2022 (5) TMI 1619X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosed amount of paddy milled by the assessee and enhanced his income accordingly without bringing any evidence on record to suggest a suppression of the stock of paddy by the assessee and the books of accounts have not been rejected by the AO u/s.145(3) of the Act, which implies an acceptance of the results therein by the AO. AO merely relied on the figures of electricity consumption available in the internet without verifying the facts and circumstances of the case of the assessee and he rightly held that this is not a plausible approach of the AO. In view of foregoing discussions, we reach to a logical conclusion that the CIT (A) was right in deleting the addition made by the AO on the basis of on suspicion, conjectures and surmises without bringing any adverse material and positive evidence against the assessee on record to show that the assessee has claimed higher electricity consumption to avoid tax payment. Ground No.1 of the revenue is rejected. Capital contribution by partners - failure to explain the source and nature of cash deposits immediately before transfer and they had not shown adequate in their ITRs for Capital contribution - CIT(A) deleted addition obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to estimate production and corresponding purchases. 4. Ld Sr. D.R. vehemently submitted that the Assessing officer has made addition on account of electricity consumption after examining the production and corresponding purchase of raw materials which could not be doubted in any manner. Ld Sr DR also submitted that the AO has taken the average consumption of electricity for immediately preceding two assessment years and there was no power failure during the relevant period and the assessee could not substantiate any other reason to explain the higher consumption of electricity, therefore, the assessment order on this issue may kindly be upheld by dismissing the conclusions arrived at by the ld CIT(A). 5. Replying to above, ld counsel for the assessee drew our attention to relevant part of impugned order of the ld CIT(A) para 1 at pages 2 to 4 and also reiterated the written submission on Ground No.1 which reads as follows: . As regards the Ground No.1 of the Department , the assessee submits that the calculation regarding the undisclosed income as calculated by the AO is based on purely surmises and suspicious. The assessee maintained books of accounts which are au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sold during the year was without bringing any instance on record to effect that particular has been milled and not recorded in the books of accounts. The circumstances relied on the by the AO on basis of electrical consumption and milling made has lack of consistency. Moreover, during the assessment proceedings the partner of the assessee firm Sri Santosh Kumar Agarwal fully explained the AO how the units consumed during the year. The assessee explained that during the year under consideration there were several breakdown of electricity through out of the year and such more electricity was consumed to restart the machinery again and again. In addition to this it was also explained that a construction (Expansion) on the part of factory was also in progress and as such electricity were also used and consumed for the construction machinery. It can be verified from the Balance Sheet of the Assessee duly reflected Capital in Progress . The calculation of the consumption of the electricity as well as the paddy milled was duly furnished before the AO on 06.12.2018 reflecting the units utilised per quintal of paddy for the past three years alongwith the year under consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of electricity consumption is liable to be deleted. Therefore, we find no infirmity in the order of CIT(A) and it is justified. Accordingly, the only ground raised by the Revenue is dismissed. (iv) ACIT vs. Khambhatta Family Trust (62 TTJ (Ahd.) 685(1998) Held r that merely because the consumption of electricity was more and the production was less it would be no ground for rejection of the trading version. As the estimation of suppression in the milling by the AO is deleted , the consequential addition on account of estimated capital employed in the suppressed milling is also deleted. 6. Ld counsel has placed reliance on the various decisions including the decision of ITAT Cuttack in the case of Prinik Steels Pvt Ltd (supra) and submitted that suspicion, however strong cannot take place of evidence against the assessee for making a sustainable addition. Ld counsel submitted that the ld CIT(A) after considering the facts and circumstances of the case and by relying various judgments rightly held that the higher consumption of electricity by itself is not a ground to infer suppression of production by the assessee.. 7. On careful consideration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order para 2.3.4 submitted that the assessee has shown capital introduction in its account and credit entries in the name of Shri Santosh Kumar Agarwal, Shri Saurav Agarwal and Shri Ashwin Kumar Agarwal to the tune of Rs.47,00,000/-, Rs.15,30,000/- and Rs.89,60,000/-, respectively, the source of which was not satisfactorily explained, therefore, the AO was right in treating the unexplained cash credit u/s.68 of the Act in the hands of the assessee as the capital was unaccounted income of the assessee brought back in the regular book through the accounts of its partners and in making addition in the hands of the assessee firm. 10. Ld counsel reiterated the written submissions placed at pages 6 to 9 of APB, which reads as follows: As regards the unexplained capital (Ground No. 2 of the Departmental Appeal), the assessee was asked to furnish the documentary evidences in support of the Capital Introduced by the Partners. The assessee during the course of assessment proceedings furnished the ledger copy of all the partners alongwith the bank accounts, copy of the I. Tax Returns to prove the identity and credit worthiness. The AO inquired into the source of credit entries in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 388 (Guj) Held, dismissing the appeal, that the capital was introduced by the partners. The Assessing Officer did not bring any material to indicate that the partners had no capacity to introduce such capital. In other words, the Assessing Officer did not hold that the capital was, in fact, not introduced by the partners but it was only in disguise the cash credit of the firm. Significantly, the partners were also subjected to tax assessment. Their assessment order were placed on record, which showed that in the returns, they declared the income from agricultural operations. They had produced extracts of 7/12 and 8A of the lands in support of their claims. The sums in question could not be taxed in the firm's hands. Commissioner of Income Tax v. Jaiswal Motor Finance 141 ITR 706 (All.) 1983 Prayer That in view of the above settled judicial pronouncements, the impugned addition so made by the AO being not sustainable in the eye of law and the grounds taken by the revenue, being not backed by any concrete evidence, needs to be dismissed in the interest of justice. 11. Precisely reiterating the above written submission, ld counsel submitted that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries in the bank accounts of the respective partners, then it was open to him to re-open the assessments of these partners and make addition in their hands after conducting inquiries. He also noted that the assessee firm has established the genuineness of the transaction, source of capital introduced shown in the books of account, which was contributed by all three partners, then there is not further responsibility of the assessee on each and every credit entry occurring in the bank accounts of its partners. In this regard, we are in agreement with the conclusions arrived at by the ld CIT(A) and in our considered opinion, if the AO was not satisfied with the creditworthiness of the partners, then he was eligible to take action against the partners under the relevant provisions of the Act but no addition can be made in the hands of the assessee firm in view of preposition rendered by Hon ble Gujarat High in the case of Odedara Constructions (supra) and judgment of Hon ble Allahabad High Court in the case of Jaiswal Motor Finance (supra). Respectfully following the same, we are compelled to hold that the conclusions arrived at by the CIT(A) does not carry any ambiguity, perversity a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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