Commissioner Of Income-Tax, Jalandhar v. M/S National Hardware Store

ITA No. 43 of 2002 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 43 of 2002 Date of Decision: 20.7.2010 Commissioner of Income-tax, Jalandhar ....Appellant. Versus M/s National Hardware Store ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Vivek Sethi, Advocate for the appellant. ADARSH KUMAR GOEL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order of the Income Tax Appellate Tribunal, Amritsar Bench,Amritsar (hereinafter referred to as “the Tribunal”) passed in ITA No.980 (ASR)/1993 on 27.10.2009 for the assessment year 1978-79proposing to raise the following substantial questions of law:- “1.Whether, on the facts and in the circumstancesof the case the Ld. ITAT was justified in law indismissing the appeal of the Revenue wherebysustaining the findings of the Ld. DCIT (A)deleting the penalty of Rs.9,018/- imposed bythe A.O. u/s 271 (1)(c) of the Income-tax Act,1961 on account of unexplained and ingenuinecredits introduced in the capital accounts of theof the case the Ld. ITAT was justified in law indismissing the appeal of the Revenue wherebysustaining the findings of the Ld. DCIT (A)deleting the penalty of Rs.9,018/- imposed bythe A.O. u/s 271 (1)(c) of the Income-tax Act,1961 on account of unexplained and ingenuinecredits introduced in the capital accounts of the partners and appearing in the account books ofthe assessee in the asstt. year 1978-79 holdingthat in case there was unexplained credit in thecapital account of the partner, the only legalcourse available with the Department was tomake addition in his personal income? Whether, on the facts and in the circumstancesof the case the Ld. ITAT was justified in law inholding that the addition could have beenmade only in the case of the partners regardingaccreditation in their capital accounts and if theaddition could not be legally made in the caseof the firm, there was no question of imposingpenalty on such addition irrespective of the factthat the assessee had not agitated this issuebefore the authorities below?” 2.Facts necessary for adjudicating the appeal may benoticed. The assessee is a partnership firm. It was following thefinancial year as its previous year and for the previous year relevant tothe assessment year 1978-79, the assessee filed return declaring totalincome of Rs.59,850/-. During the course of assessment, the AssessingOfficer vide order dated 16.3.1985 made addition of Rs.49,070/- to thedeclared income on account of unexplained cash credits. According tothe assessee, the cash credit entries were deposits by the partnerswhich plea was not accepted by the Assessing Officer. However, onappeal, the CIT (A) reduced the addition of Rs.49,070/- to Rs.15,000/- ITA No. 43 of 2002 on account of unexplained cash credits and held that the quantum ofunexplained cash credit was liable to be taxed. The said order of theCIT (A) was upheld by the Tribunal. As regards penalty, the AssessingOfficer levied penalty amounting to Rs.9018/-, i.e. 100% of tax onconcealed income. This was challenged by the assessee by filing anappeal which was allowed by the CIT (A) by accepting the explanationof the assessee that the credits in the capital account of the partners donot belong to the firm. The identity of the partners was held establishedand as such the firm was absolved from any further liability. Learnedcounsel for the assessee had placed reliance on the followingjudgments:- (i)Naryan Das Kedar Nath B vs. CIT (1952) 22ITR 18 (Bomb) (ii)Indo-European Machinery Co. Vs. CIT(1955) 28 ITR 493 (Punjab) (iii)Balbhadra Chand Munna Lal Vs. CIT (1958)33 ITR 781 (Allahabad) (iv)A. Vogindarajulu Mudalia Vs. CIT (1958) 34ITR 807 (SC) 3.On appeal by the revenue before the Tribunal, the order ofCIT (A) was upheld. (i)Naryan Das Kedar Nath B vs. CIT (1952) 22ITR 18 (Bomb) (ii)Indo-European Machinery Co. Vs. CIT(1955) 28 ITR 493 (Punjab) (iii)Balbhadra Chand Munna Lal Vs. CIT (1958)33 ITR 781 (Allahabad) (iv)A. Vogindarajulu Mudalia Vs. CIT (1958) 34ITR 807 (SC) 3.On appeal by the revenue before the Tribunal, the order ofCIT (A) was upheld. 4.We have heard learned counsel for the revenue. 5.The Tribunal while upholding the finding of the CIT (A) hasheld that if there was unexplained cash credit in the capital account ofthe partners, there could be neither any addition to the income of thefirm nor penalty could be imposed on that account. The addition could ITA No. 43 of 2002 only be made to the income of the partners and similarly action forpenalty could be taken only against the partners.6.In view of the concurrent findings recorded by the CIT (A)and the Tribunal, the questions of law proposed could not be held to besubstantial questions of law. 7.The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE July 20, 2010gbs (AJAY KUMAR MITTAL)JUDGE