-1- IN HIGH COURT OF JHARKHAND AT RANCHI C.M.P No.492 of 2010 M/s Prayag Tendu Leaves Processing Company, P .O. & P.S., Haliwanta, District Garwha through its Partner Nishant Kumar Jaiswal, S/o Late Ranjan Jaiswal, Resident of Nishant Bhawan, Ward No.6, Dudhi, P .O. & P .S. - Dudhi, District Sonebhadra (U.P.) . .. Petitioner Versus Commissioner of Income Tax, Central Revenue Building, Main Road, Ranchi, P.O. - G.P.O., P - Ghutia, District Ranchi .S. ..... Opp. Party With Tax Appeal No.38 of 2008 Commissioner of Income Tax, Central Revenue Building, Main Road, Ranchi, P.O. - G.P.O., P - Ghutia, District Ranchi .S. .. Appellant Versus M/s Prayag Tendu Leaves Processing Company, P .O. & P.S., Haliwanta, District Garwha through its Partner Nishant Kumar Jaiswal, S/o Late Ranjan Jaiswal, Resident of Nishant Bhawan, Ward No.6, Dudhi, P .O. & P.S. - Dudhi, District Sonebhadra (U.P.) .. Respondent CORAM: HON'BLE ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE AMITAV K. GUPTA For Petitioner/ Respondent : Ms. Darshana Poddar Mishra, Advocate (on behalf of applicant in C.M.P & on behalf of respondent in T.A. ) For Opposite Party/ Appellant : Mr. Deepak Roshan, Advocate (on behalf of O.P in C.M.P & on behalf of appellant in T.A. ) --------- th 15/Dated: 12 October, 2017 Per D.N. Patel, A.C.J 1. This Civil Miscellaneous Petition has been preferred under Order XLI Rule 21 of Code of Civil Procedure wherein tax appeal being Tax Appeal No.38 of 2008 was dismissed ex-parte, as submitted by counsel for petitioner (original respondent). Counsel appearing for petitioner has submitted that aforesaid Order XLI Rule 21 is to be read with Section -2- 260A (7) of Income Tax Act, 1961. 2. Counsel appearing for petitioner (original respondent) has relied upon decision of Hon'ble High Court of Madhya Pradesh, in case of Shrinath Buliyan Refinery V. Commissioner of Income-tax , reported in (2002) 125 TAXMAN 1018 (M.P.). 3. Having heard counsel for both sides, looking to reasons stated in para 04 to 09 of Civil Miscellaneous Petition and in view of aforesaid decision, as per Order XLI Rule 21 to be read with Section 260A (7) of Income Tax Act, 1961, ex-parte order passed in appeal can be challenged by respondent and said ex-parte order passed in appeal can be restored as sufficient cause is available. 4. We, therefore, recall order passed by this Court dated 14.09.2010 in Tax Appeal No.38 of 2008 and Tax Appeal No.38 of 2008 is restored to its original file with same number. 5. This Civil Miscellaneous Petition is allowed and disposed of. Tax Appeal No.38 of 2008 1. This Tax Appeal is taken for its final hearing upon consent of counsel for both sides. 2. Counsel appearing for appellant has submitted that this respondent is partnership firm. assessment for year 2001 2002 had already been made and Commissioner of Income Tax while exercising power under Section 263 of Income Tax -3- Act (revisional power) opened assessment mainly on grounds that huge amount of cash was brought to partnership firm by two partners namely, Ranjan Jaiswal and Anju Jaiswal. Ranjan Jaiswal brought cash of Rs.9,46,126/- and Anju Jaiswal brought cash at Rs.9,51,563/-. No details have been given as to how cash has been obtained by Ranjan Jaiswal and Anju Jaiswal. Assessing Officer has not properly investigated as to how cash has been brought in partnership firm. Assessing Officer had not examined identity, genuineness of transaction and creditworthiness of donors. Opportunities were given to assessee to produce donors, but, donors were never produced. order passed by Commissioner of Income Tax under Section 263 of Income Tax Act dated 03.06.2005 was challenged by assessee by way of appeal being Income Tax Appeal No.48/ PAT/ 06, which Income Tax Appellate Tribunal, Circuit Bench, Ranchi allowed vide order dated 23.11.2007 mainly on ground that assessee is partnership firm who got amount by cheque/ demand drafts. Details whereof have been given by Ranjan Jaiswal and Anju Jaiswal. These facts are not in dispute. As appeal was allowed by Income Tax Appellate Tribunal, Circuit Bench, Ranchi, present Tax Appeal has been preferred by department mainly on aforesaid ground of identity of donors, genuineness of transaction and creditworthiness -4- of donors. These aspects of matter have not been properly investigated by Assessing Officer, and hence, order passed by Income Tax Appellate Tribunal, Circuit Bench, Ranchi dated 23.11.2007 in Income Tax Appeal No.48/ PAT/ 06 for assessment year 2001-02, deserves to be quashed and set aside. 3. Counsel appearing for respondent (assessee) has submitted that no error has been committed by Income Tax Appellate Tribunal, Circuit Bench, Ranchi in allowing appeal preferred by assessee mainly for reasons that assessee is partnership firm which has received amount by cheques or demand drafts, details whereof are on record. These cheques or demand drafts have been given by Ranjan Jaiswal and Anju Jaiswal for amount of Rs.9,46,126/- and for amount of Rs.9,51,563/- respectively. It is submitted by counsel for respondent that this assessee- partnership firm has already explained that without any ambiguity and without any equivocalness of source of amount. It is submitted by counsel for respondent that department is in search of source of source which is not permissible. From where Ranjan Jaiswal and Anju Jaiswal obtained amount, that can be asked to Ranjan Jaiswal and Anju Jaiswal by re-opening their re-assessment, but, facts remain that partnership firm has received amount by cheques or demand drafts. Thus, source of amount has already been explained. This aspect of -5- matter has been properly appreciated by Income Tax Appellate Tribunal, Circuit Bench, Ranchi while allowing appeal preferred by assessee by order dated 23.11.2007. 4. Counsel appearing for respondent has relied upon several decisions which are as under : (a) 256 ITR 360 (Gujarat); (b) (1985) 151 ITR 150 (Patna); (c) (2009) 177 TAXMAN 331 (Delhi); (d) (2013) 215 TAXMAN 85 (Gujarat (M.A.G.); (e) (2004) 268 ITR 381 (Patna); (f) (2007) 208 CTR 459 (Punjab & Haryana); (g) (2007) 291 ITR 232 (Madras); (h) 245 ITR 160 (M.P.); (i) (2013) 214 TAXMAN 440 (Allahabad); (j) (2015) 282 CTR 200 (Patna). 5. On basis of aforesaid decisions, it is submitted by counsel for respondent that once it is established that amount has been invested by particular person, to be member of partnership firm, then responsibility of assessee- partnership firm is over. Evidently, it is for partners to explain source of funds and it is not open for Assessing Officer to have treated said amount, brought by partners, to be income of firm. This aspect of matter has been properly appreciated by Income Tax -6- Appellate Tribunal, Circuit Bench, Ranchi while allowing appeal preferred by assessee by order dated 23.11.2007, hence, this appeal may not be entertained by this Court. Reasons :- 6. Having heard learned counsel for both sides and looking to facts and circumstances of case, we see no reason to entertain this Tax Appeal mainly for following facts and reasons :- I. For assessment year 2001 -02, this respondent filed returns and assessment order was passed and assessment was made on 14.11.2003. II. This respondent is partnership firm and partners thereof, Ranjan Jaiswal and Anju Jaiswal, brought amount to partnership firm as capital by cheques and bank drafts. said amount is at Rs.9,46,126/- and at Rs.9,51,563/- respectively. III. After assessment was made by Assessing Officer, same was taken up in Revision, by Commissioner of Income Tax under Section 263 of Income Tax Act by exercising revisional power and said order was passed by Commissioner of Income Tax vide order dated 03.06.2005. said order is at Annexure 2 to this memo of this Tax Appeal. IV. This order passed by Commissioner of Income Tax under Section 263 of Income Tax Act dated 03.06.2005 was challenged by respondent assessee before Income Tax Appellate Tribunal, Circuit Bench, -7- Ranchi and Income Tax Appellate Tribunal allowed appeal by order dated 23.1.2007, and hence, this Tax Appeal has been preferred by department. V. It appears from facts of case that respondent is assessee which is partnership firm. amount received by assessee is by cheques or bank drafts, details whereof have already been mentioned in detail, which are as under :- 1. Sri R anjan Jaiswal Date Amount Mode of Payment 2.9.00 43,312.50 by A/c payee cheque 16.10.00 8,30,540.36 by A/c payee drafts 4.01.01 25,887.00 by A/c payee cheque 1.2.01 291.00 by bank interest 7.3.01 20,000.00 by A/c payee cheque 22.3.01 25,988.00 by A/c payee cheque Total = Rs.9,46,126.76 2. Smt. Anju Jaiswal 24.10.00 Rs.6,38,700.00 By A/c payee Bank Draft 28.4.00 4,203.00 By A/c payee cheque 19.6.00 4,203.00 - do - 26.7.00 8,406.00 - do - 6.9.00 4,203.00 - do - 6.11.00 4,203.00 - do - 15.1.01 8,406.00 - do - 14.3.01 4,203.00 - do - 30.3.01 8,406.00 - do - 31.3.01 4,203.00 Decited P/T Dept. 31.3.01 12,000.00 Being Godown rent credited. 1.12.00 427/- Bank Intt. 23.10.00 50,000.00 By Bank drafts 28.11.00 1,00,000.00 - do - 8.3.01 1,00,000.00 - do - Total = Rs.9,51,563.00 -8- VI. In view of aforesaid amount received from Ranjan Jaiswal and Anju Jaiswal by account payee cheques or by Bank drafts, by this respondent assessee firm, department cannot ask respondent partnership firm about source of income of Ranjan Jaiswal and Anju Jaiswal. respondent - assessee can show source of income of partnership firm, but source of source cannot be shown by this respondent assessee. This aspect of matter has been properly appreciated by Income Tax Appellate Tribunal, Circuit Bench, Ranchi, while allowing appeal preferred by respondent. VII. It appears that department has given notice to respondent assessee giving details as to how Ranjan Jaiswal and Anju Jaiswal got cash and from whom. This is error apparent on face of record. Respondent assessee cannot explain source of , source of income of partnership firm. If department wants to reopen assessment of Ranjan Jaiswal and Anju Jaiswal, it is always permissible in eye of law subject to restriction imposed by Income Tax Act of limitation etc. VIII. It is admitted fact that this respondent partnership firm has received amount from Ranjan Jaiswal and Anju Jaiswal by account payee cheques or by Bank drafts. Thus, source of income of respondent assessee is absolutely legal one. This aspect of -9- matter has properly been appreciated by Income Tax Appellate Tribunal by allowing appeal preferred by respondent assessee. IX. It has been held by Hon'ble Gujarat High Court in case of Deputy Commissioner of Income Tax Vs. Rohini Builders, reported in 256 I.T.R 360 (Guj.) in paragraph no.7 as under :- 7. We have considered rival submissions and have also gone through order passed by Assessing Officer, relevant portion of which we have also extracted in para 2 above. Commissioner of Income Tax (Appeals) more or less confirmed addition on reasoning given by Assessing Officer in assessment order. perusal of chart given by us in para 3 above indicates that out of 21 creditors Assessing Officer has recorded statements of only six creditors, viz, creditors at serial Nos.1, 2, 3, 4, 6, and 7. However, in respect of all 21 creditors assessee has furnished their complete addresses along with GIR numbers/ permanent account numbers as well as confirmations along with copies of assessment orders passed in cases of creditors at serials Nos.1, 2, 4, 5, 6, 7, 9, 10, 11, 12 and 16. In remaining cases where assessment orders passed were not readily available, assessee has furnished copies of returns filed by creditors with Department along with their statement of income. All loans were received by assessee by account payee cheques and repayments of loans have also been made by account payee cheques along with interest in relation to those loans. It is rather strange that although Assessing Officer has treated cash credits as non- genuine, he has not made any addition on account of interest claimed as business expenditure and has been allowed by Assessing Officers. It is also pertinent to note that in respect of some of creditors interest was credited to their accounts/ paid to them after deduction of tam at source and information to this effect was given in loan confirmation statements by those creditors filed by assessee before Assessing Officer. Thus it is clear that assessee had discharged initial onus which lays on it in terms of section 68 by proving identity of creditors by giving their complete addresses GIR numbers/ permanent accounts numbers and copies of assessment orders wherever readily available. It has also proved capacity of creditors by showing that amounts were received by assessee by accounts payee cheques drawn from bank accounts of creditors and assessee is not expected to prove genuineness of cash deposited in bank accounts of those creditors because under law assessee can be asked to prove source of credits in its books of account but not source of source as held by Bombay High Court in case of Orient Trading Co. Ltd. V. CIT - 10 - MANU/MH/0055/1962. genuineness of transaction is proved by fact that payment to assessee as well as cheques and interest is also paid by assessee to be depositors is made by account payee cheques and interest is also paid by assessee to creditors by account payee cheques. Merely because summons issued to some of creditors could not be served or they failed to attend before Assessing Officer, cannot be ground to treat loans taken by assessee from those creditors as not-genuine in view of principles laid down by Supreme Court in case of Orisa Corporation MANU/SC/0249/1986. In said decision Supreme Court has observed that when assessee furnishes names and addresses of alleged creditors and GIR numbers, burden shifts to Department to establish Revenue's case and in order to sustain addition Revenue has to pursue enquiry and to establish lack of creditworthiness and mere non-compliance of summons issued by Assessing Officer under section 131, by alleged creditors will not be sufficient to draw adverse inference against assessee. In case of six creditors who appeared before Assessing Officer and whose statements were recorded by Assessing Officer, they have admitted having advanced loans to assessee by account payee cheques and in case Assessing Officer was not satisfied with cash amount deposited by those creditors in their bank accounts, proper course would have been to make assessment in cases of those creditors by treating cash deposits in their bank accounts as unexplained investments of those creditors under section 69. (Emphasis supplied) X. It has been held by Hon'ble Patna High Court in case of Additional Commissioner of Income-tax Vs. Hanuman Agarwal , reported in (1985) 151 I.T.R 150 (Patna) in paragraph no.3 as under :- 3. It is by now well-settled that Sec.131(1)(b) empowers but does not oblige revenue authorities concerned to administer oath. Therefore, statements of witnesses taken without administration of oath are equally admissible in evidence. When evidence of such witness is being taken in course of assessment proceeding, witness has no right, but assessee has, to be represented by lawyer or other authorised representative. assessee is not supposed to know capacity of money-lender or cash creditor. It is within exclusive domain or dark trusses of minds of creditors to know as to whether and how their sources of income are arrived. It is for that specific purpose that Sec.131 of Act has been introduced so that in case of any suspicion, ITO or authorities concerned may exercise powers of civil court under Sec.131 and call upon creditor concerned to prove his capacity to pay and - 11 - genuineness of his transaction. Once ITO or authority concerned is satisfied that creditor is not telling truth, it has been left open to assessee to discharge his subsequent onus of proving genuineness of transaction and capacity of creditor to pay by cross-examining him. Where, therefore, assessee gives correct name, address and G.I.R. number of creditor, as my learned brother has observed, he has discharged his onus and unless notice in due form under Sec.131 of Act is issued by revenue authority concerned to test veracity or genuineness of transaction or capacity of creditor to pay, assessee has to succeed. (Emphasis supplied) XI. It has been held by Hon'ble Delhi High Court in case of Commissioner of Income-tax Vs. Diamond Products Ltd. , reported in (2009) 177 TAXMAN 331 (Delhi) in paragraph no.5 as under :- 5. We have heard learned counsel for appellant and have examined findings returned by Tribunal as well as those returned by Commissioner of Income-tax (Appeals) and find ourselves to be in agreement with conclusions arrived at by Tribunal. Assessing Officer is not permitted to examine source of source once assessee has been able to establish that transaction with his creditors is genuine and that creditors' identities and creditworthiness have been established. In this case, this had been done, therefore, it was not open to Assessing Officer to make addition of Rs.23,00,000 after entering upon examination of source of source. Consequently, we feel that no interference is called for on this conclusion in impugned order passed by Tribunal. Tribunal has correctly applied law on facts determined by it. No substantial question of law arises on aspect of matter. (Emphasis supplied) XII. It has been held by Hon'ble Gujarat High Court in case of Commissioner of Income-tax-IV Vs. Heena Sharma , reported in (2013) 215 TAXMAN 85 (Gujarat) (MAG.) in paragraph no.11 as under :- 11. In instant case, as can be noted from findings of Tribunal, Assessing Officer had not summoned any of donors. However, it had issued letters under section 133(6) of Act. Assessing Officer had also called for confirmation letters which were received by it. assessee also had furnished all other requisite documents like copies of DD, gift deed, copy of PAN cards, copy of acknowledgement of returns of donors along with computation and balance sheet. It also found that all donors were assessed to tax except one who was based at USA. On - 12 - thus having found identity of donors so also creditworthiness and genuineness of transaction having been established, Tribunal did not accept say of Revenue that gifts were bogus. (Emphasis supplied) XIII. It has been held by Hon'ble Patna High Court in case of Commissioner of Income-tax Vs. Md. Perwez Ahmed. , reported in (2004) 268 ITR 381 (Patna) in paragraph no.2 as under :- 2. Tribunal after having considered materials on record has found that section 68 of Income-tax Act, 1961 is not attracted in case for reason that in this case credit in books if account of assessee-firm is on account of introduction of capital by partners and firm has failed to prove amount credited in books of account and as such it would be assessed in hands of partners as unexplained investment. (Emphasis supplied) XIV. It has been held by Hon'ble Punjab & Haryana High Court in case of Commissioner of Income- tax Vs. Rameshwar Dass Suresh Pal Cheeka , reported in (2007) 208 CTR 459 (Punjab & Haryana) in paragraph no.5 as under :- 5. We are also in agreement with view taken by Tribunal that no case was made out for addition to income of firm even if deposits made with firm by partners were unexplained income of partners. These view has been taken by us in our recent order passed on 6-11-2006 in CIT V. Metal & Metals of India [IT Appeal No.370 of 2006], wherein it was observed as under : In present case, firm has given explanation about source namely Suresh Bhandari, partner, who himself is assessee. said partner has admitted having made deposit with firm. Thus, as far as firm is concerned, even if gift claimed to have been received by Suresh Bhandari is to be rejected, said Suresh Bhandari may be liable to be taxed by treating said amount as undisclosed income, but firm cannot be subjected to tax on that ground. (Emphasis supplied) XV. It has been held by Hon'ble Madras High Court in case of Commissioner of Income-tax Vs. Taj Borewells , reported in (2007) 291 ITR 232 - 13 - (Madras) in paragraph no.13 as under :- 13. Inthe present case, assessee-firm had explained source of capital. So, there was explanation offered by assessee-firm. said explanation has not been rejected by Assessing Officer. Later, Assessing Officer examined partners and partners had also made explanation in respect of source for contribution of capital to assessee-firm. Assessing Officer had also partially accepted explanation offered by partners. Assessing Officer had not rejected explanation offered by firm. Unless and until explanation offered by firm is rejected and same is not genuine, Assessing Officer cannot invoke provision of Section 68 of Act. In present case, explanation offered by firm was accepted and later, Assessing Officer examined partners and not accepted explanation. Assessing Officer cannot ask assessee-firm to prove source of source. Once firm had offered explanation and established that capital was contributed by partners, same could not be assessible in hands of firm. Unless there are contradictions and inconsistencies in statement of partners, credit cannot be treated as unexplained and cannot be added under Section 68 of Act in hands of assessee-firm. Also, it is clear from language employed under Section 68 of Act that only assessee alone has to offer explanation. If assessee makes explanation, it is for Assessing Officer to accept or reject same. finding given by Tribunal is that assessee- firm had explained source of capital and hence same cannot be assessed as undisclosed income in hands of assessee firm. order of Tribunal reads as follows:- "When assessee has explained amounts as capital contributions by partners, Revenue authorities are not justified in holding that assessee has not explained source and same is to be added under head Other Sources in hands of firm. In case Assessing Officer doubted genuineness of source, he should have considered same in hands of partners only and not in case of firm. This view of ours is supported by decisions of Allahabad High Court in cases reported in 141 ITR 706 and 221 ITR 239, cited supra. Under these circumstances, we delete addition of Rs.5,25,000/-under head Other Sources from income of assessee-firm." (Emphasis supplied) XVI. It has been held by Hon'ble Madhya Pradesh High Court in case of Commissioner of Income-tax Vs. Matachem Industries , reported in (2000) 245 ITR 160 (Madhya Pradesh) in paragraph no.3 as - 14 - under :- 3. We have heard learned counsel for parties. Section 68 of Act of 1961 says that where any sum is found credited in books of assessee maintained for any previous year, and assessee offers no explanation about nature and source thereof or explanation offered by him is not, in opinion of Income-tax Officer, satisfactory, sum so credited may be charged to income-tax as income of assessee of that previous year. Therefore, according to Section 68, first burden is on assessee to satisfactorily explain credit entry in books of account of previous year. If explanation given by assessee is satisfactory, then that entry will not be charged with income of previous year of assessee. In case explanation offered by assessee is not satisfactory or source offered by assessee-firm is not satisfactory, then in that case, amount should be taken to be income of assessee. In present case, Assessing Officer did not feel satisfied with explanation given by assessee and accordingly assessed all three credit entries to account of assessee as income. (Emphasis supplied) XVII. It has been held by Hon'ble Allahabad High Court in case of Zafa Ahmad & Co. Vs. Commissioner of Income-tax, Varanasi. , reported in (2013) 214 TAXMAN 440 (Allahabad) in paragraph no.9, which reads as under :- 9. Taking various facts enumerated above, we are of considered opinion that Tribunal had erred in holding that amount deposited by two partners is liable to be added under section 68 of Act on ground that gifts received by respective partners from various persons could not be explained as creditworthiness of donors had not been established. Tribunal had wrongly drawn adverse inference upon fact that donors had filed their Income Tax Return for Assessment Years 1988-89 to 1991-92 on single day and further return for Gift Tax was filed on 25.08.1992, which was well within due date. (Emphasis supplied) XVIII. It has been held by Hon'ble Patna High Court in case of Commissioner of Income Tax-I, Patna & Anr. Vs. M/S Anurag Rice Mills, Navi Nagar, Aurangabad, Gaya, Bihar. , reported in (2015) 282 CTR 200 (Patna) in last page of order, which - 15 - reads as under :- ----- In present matter, partners were also assessees and had been summarily assessed under Section 143 (1) of Act for several years prior to assessment year 1991-92. They have brought in said amount to be included as capital to firm. Evidently, it is for partner to explain source of said funds and it was not open to Assessing Officer to have treated said amount as income of firm as there was no business of firm to carry forward such income, and it was not in dispute that amounts had been brought in by partners into firm. In said circumstances, Tribunal has rightly held that if at all assessments had to be made, they may be of partners of firm and not firm itself and such amounts could not have been treated as income of firm by relying upon Section 68 of Act. (Emphasis supplied) 7. In view of aforesaid decisions where assessee has given support of gift or amount received from particular person with necessary documents, such as, copies of demand drafts and cheques etc., no addition could have been made by this appellant in respect of amount received by assessee. Under Section 68 of Income Tax Act, Assessing Officer while assessing Partnership Firm, can go behind source of income of partnership firm, but he cannot go to source of source . aforesaid aspect of matter has been properly appreciated by Income Tax Appellate Tribunal by allowing appeal preferred by respondent assessee and no error has been committed by Income Tax Appellate Tribunal, Circuit Bench, Ranchi. 8. In view of aforesaid facts, reasons and judicial pronouncement so far as question raised by appellant is concerned, no error has been committed by - 16 - Income Tax Appellate Tribunal in quashing and setting aside order passed by Commissioner of Income Tax under Section 263 of Income Tax Act dated 03.06.2005. This Tax appeal is, therefore dismissed as no substantial question of law is involved. (D. N. Patel, A.C.J) (Amitav K. Gupta, J) Dey - Chandan/- Prayag Tendu Leaves Processing Company v. Commissioner of Income-tax, Ranchi