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TMI Blog2023 (8) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Therefore we see merit in the submission of the ld AR that the revenue on the one hand taking a stand that the income belongs to the partnership firm and on the other hand taxing the same income again in the hands of the assessee resulting in double taxation. From the perusal of the CBDT circular and considering the ratio of the decision in the case of KT.Joseph [ 2009 (8) TMI 122 - ITAT COCHIN ] it is clear that the income belonging to the firm whether disclosed or undisclosed can be taxed only in the hands of the firm and not in the hands of the partner . Accordingly we are of the considered view that the income cannot be taxed as income of the assessee u/s 68 of the Act and the addition thus made stands deleted on merits also. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ee also submitted that out of the said credit, a sum of Rs. 7,53,49,860/- is reversed in F.Y. 2016-17. The Assessing Officer did not accept the submissions of the assessee and held that the amount of assessee's share of Rs. 6,16,83,505/- can be claimed as exempt only when the tax on such income is pid by the firm. Therefore, the Assessing Officer assessed the share of profit as unexplained cash credit under section 68 in the hands of the assessee. 3. Aggrieved, the assessee preferred further appeal before the CIT(A). The CIT(A) upheld the addition made by the Assessing Officer by holding that - "15. In the present case an amount of Rs. 6,16,83,505/- has been credited in the capital account of the assessee on 01/04/2015. Further, the said credit entry is not a mere book entry because out of this amount, the appellant has utilized Rs. 3,76,74,930/- by way of cash withdrawal on 30/12/2016. Therefore, the said credit entry of Rs. 6,16,83,505/- clearly falls within the ambit of sec. 68 of the Act. It is a well settled legal position that in case of a credit entry, the primary onus of explaining the nature and source of said credit entry, is on the assessee and the assessee is req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash which was withdrawn by the partners on 30/12/2016. However, same has not been explained by the appellant. It may also be mentioned that till date the appellant has not filed any financial statements of M/s Monarch and Qureshi explaining as to how credit entry on account of profit has been made in the capital account of partners, without showing corresponding profit in the P/L Account. 18. The appellant has further contended that the share of profit of a partnership firm in the hands of the partners is always exempt. This contention is of no help to the appellant because as explained earlier in this order, it is an admitted fact that no profit corresponding to Rs. 12,33,67,010- has been shown by the firm M/s Monarch and Qureshi Builders in its return or P/L Account. Therefore, this contention of the appellant cannot be accepted in view of specific facts of this case. 19. Considering the totality of facts of the case, I am of the opinion that the appellant has miserably failed in discharging his onus for satisfactorily explaining the credit entry of Rs. 6,16,83,505/- made in his capital account on 01/04/2015. Therefore, the addition of Rs. 6,16,83,505/- made by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, submitted that the monetary limits cannot be applied rigidly since the same is for the administrative purpose of proper distribution of work among various levels of officers of the department. The ld DR further submitted that there was another circular issued by the CBDT dated 08/04/2011 in which the CIT was given the power to adjust the monetary limit depending on the work load and therefore the monetary limit set in instruction dated 31.01.2011 is not rigid. The ld DR placed reliance in this regard on the decision of the Hon'ble Madras High Court in C. Krishnan vs The Income Tax Officer Ward I(4) in W.P. Nos.792 & 5793 of 2013 judgement dated 27th November, 2014. 7. We heard the parties and perused the materials on record. We notice that the Kolkata Bench of the Tribunal in the case of Krishnendu Chowdhury (supra) has considered a similar issue and held that - 8. We have heard the rival submissions and gone through the facts and circumstances of the case. We have also perused the assessment records. The crux of the issue in the case is that the notice under section 143(2) of the Act was not issued by the Income-tax Officer in terms of Instruction No. 1 of 2011 [F. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax to initiate the assessment proceedings which was later transferred to the Income-tax Officer. However, the Income-tax Officer did not further issue any notice under section 143(2) of the Act. Therefore, the Income-tax Officer assumed the charge without issuing notice and consequently completed assessment under section 143(3) of the Act without jurisdiction. In similar facts and circumstances, the co-ordinate Bench of this Tribunal has decided the issue in favour of the assessee in the case of Ajanta Financial Services Pvt. Ltd. v. ITO in I. T. A. No. 1426/Kol/2011, dated May 21, 2012. We consider it fit to incorporate the relevant portion of the Tribunal order which is as under : "5, We find that the Hon'b/e Chhattisgarh High Court in the case of Deputy CIT v. Sunita Finlease Ltd. [2011] 330 ITR 491 (Chhattisgarh) has considered the same Instruction No. 9 of 2004 dated September 20, 2004 which are applicable in the present case also and quash the selection of scrutiny and completion of assessment by holding as invalid. The Hon'ble Chhattisgarh High Court in Sunita Finlease Ltd.'s case (supra) has considered section 119 of the Act by st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for its own advantage under the Act is given the right to forgo the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119. The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It /s a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorised as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities. The facts and circumstances in the present case are that the selection of scrutiny in this case is also completed beyond the prescribed period as prescribed in Instruction No. 9 of 2004 dated September 20, 2004. The assessee's case was selected for scrutiny first time on October 18, 2004 as per copy of order sheet entry, and notice was issued fixing the hearing on October 18, 2004 itself. As per Instruction No. 9 of 2004 dated September 20, 2004 the process of selection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 and notice under sections 143(2)(ii) and 142(1) was issued on July 11, 2005 i.e., beyond the period of the scrutiny as specified in Instruction No. 10 of 2004 dated September 20, 2004. Therefore, keeping in view of the decision of the Hon'ble Chhattisgarh High Court in the case of Sunita Finlease Ltd. (supra) as well as the Tribunal's order in I. T. A. No. 1426/Kol/2011 in the case of Ajanta Financial Services Pvt. Ltd. (supra). 8.1 In view of above we set aside the orders of the Revenue authorities by quashing the order of the assessment framed under section 143(3) of the Act since the issue of notice under section 143(2) of the Act was not done by the Income-tax Officer as specified in CBDT Instruction No. 1 of 2011 dated January 31, 2011. As the assessment proceedings under section 143(3) of the Act have been held as invalid, therefore in our considered view the other issues raised by the assessee do not require any adjudication. Hence the ground raised by the assessee is allowed. 8. We also notice that the Bombay High Court had also held a similar view in the case of Ashok Devichand Jain (supra). The facts of the present case is identical where the returned income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm on account of any exemption or deduction as per the provisions of the Act. Therefore, the Ld.AR summarised by saying that the income which is declared under IDS, 2016 by the firm under no circumstance can be treated as the income of the partner. 10. The Ld.DR, on the other hand, relied on the order of the lower authorities. 11. We heard the parties and perused the materials on record. We notice that the M/s Monarch and Qureshi Builders., in which assessee is a partner has declared a sum of Rs. 12,33,67,010 as income under IDS 2016 but the declaration failed as the taxes due on income declared was not paid by the firm. The Assessing Officer held that the income from partnership firm can be claimed as exempt only when the firm has paid tax on such income. Since M/s Monarch and Qureshi Builders did not pay the taxes, the assessing officer did not accept that the share of profit of the assessee from partnership firm can be exempt. The Assessing Officer proceeded to treat the income as unexplained cash credit under section 68. The CIT(A) upheld the addition for the reason that the genuineness as well as source of this credit entry stands unproved by the assessee. We notice t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hands to which it belongs. 13. The learned representative of the assessee during the course of hearing has also pointed out errors in the proposed order of learned AM. He rightly said that observations that firm M/s Malabar Associates is not in existence or defunct or dissolved, are factually incorrect. Legal inference drawn by learned AM was also not correct. On his own showing that in the case of firm, partners have joint and several liability,- the firm M/s Malabar Associates could have been assessed through the assessee partner and liability of that firm recovered from the assessee and other partners in accordance with law. It was further not possible or permissible under the law to make assessment of income of firm in the hands of the assessee partner, merely because he had pocketed some portion of undisclosed income of the firm. Income of firm could only be assessed in the hands of the firm and not in the hands of the partner, i.e., the assessee. 12. The ld AR during course of hearing submitted that the addition towards the income declared under IDS 2016 is made in the hands of M/s Monarch and Qureshi Builders and the firm is in appeal before the CIT(A) against the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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