M/S BHATNAGAR OPTICALS V. INCOME TAX OFFICER

ITA/40/2013

AI Insights

M/s Bhatnagar Opticals appealed against the order of the Income Tax Appellate Tribunal Agra, which dismissed their earlier appeal regarding the disallowance of deductions for salary and remuneration paid to partners. The Tribunal's decision was based on the assessee's failure to comply with procedural requirements under Sections 142(1) and 144 of the Income Tax Act, which led to an ex parte assessment. The Tribunal cited Section 184(5), which prohibits deductions for payments made to partners in cases of non-compliance with these sections. The Tribunal found no substantial question of law that warranted interference with the lower authorities' findings.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 756383 (HC-AGRA)
• Appeal Type: Others
• Pronouncement Date: 10-12-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: D P S BHADORIYA; SAURABH JAIN
• Assessee Lawyers: ANIL SHARMA
• Keywords: Exparte assessment order; Unexplained expenditure; Deduction by way of salary and remuneration
• Section: 144; 142(1); 184; 185

Judgement Text

" I.T.A.No.40/2013 1 M/s Bhatnagar Opticals Vs. Income Tax Officer 10/12/2014 Shri Anil Sharma, Advocate for the appellant. Shri D.P.S.Bhadoriya and Shri Saurabh Jain, Advocates for the respondent. Heard. 2. Appellant has filed this appeal against the order dt.15.2.2013 passed by the Income Tax Appellate Tribunal Agra, Bench Agra in ITA No.313/Agra/2012. 3. By the aforesaid order, learned tribunal dismissed the appeal of the appellant after recording following observations :- “5.1 Considering the facts of the case in the light of the above provisions, it is clear that the assessee failed to comply with the provisions of Section 144 of the IT Act. Whatever return of income was filed originally was declared invalid because the assessee failed to remove the deficiency in the return. The assessee also failed to file the return of income as required u/S.142(1) of the IT Act and also failed to comply with the notice u/s. 144 of the IT Act. Therefore, the provision of section 144 of the IT Act has been rightly invoked against the assessee for framing the exparte assessment order. Sub.section (5) of section 184 of the IT Act is exception to Rule and would clearly disentitle the I.T.A.No.40/2013 2 assessee for claiming deduction by way of salary and remuneration etc. in case the assessee made a failure as provided u/S.144 of the IT Act. Similarly, the assessee has also failed to prove other ingredients of section 184 of the IT Act before the AO. Therefore, the provisions of section 185 of the IT Act would also apply in the case of the assessee. Thus, according to section 184 (5), the assessee would not be entitled for deduction by way of salary and remuneration. These provisions have no concern whatsoever even if the status of the assessee is noted as 'firm' in the body of the order. The entire crux of the facts has to be applied against the relevant provision of law for making assessment. Since the assessee did not produce any evidence or material at any stage and there is no denial even before us that the assessee claimed deduction on account of salary and remuneration in the original return of income, the AO was justified in holding the expenditure to be unexplained. Further, the findings of the AO are supported by the details filed in the return of income by the partners in which they have declared the amount of salary received from the assessee from the assessee firm and as such specific material was available with the Revenue Department to prove that the assessee paid salary to these partners for which deduction has been claimed. Considering the above discussion in the light of the above I.T.A.No.40/2013 3 provisions, we do not find any justification to interfere with the orders of the authorities below. The findings of fact recorded by the authorities below are accordingly confirmed and the appeal of the assessee is accordingly dismissed.” 4. The contention of the learned counsel for the appellant is that the appellant assessee firm has been denied the benefit of salary and remuneration, which was being paid to some persons and the benefit has been added as income of the assessee firm, which is contrary to law, hence, the appeal be admitted on the substantial questions of law framed by the appellant in the memo of appeal. 5. During the assessment year, the revenue found that the assessee firm had paid salary and remuneration to the following persons :- (i) Smt. Pooja Bhatnagar Salary Rs.72,000/- (ii) Shri Rachit Bhatnagar Remuneration Rs.24,000/- (iii) Shri Anurag Bhatnagar Remuneration Rs.24,000/- 6. Revenue further held that the assessee was not eligible to get benefit of deduction of the aforesaid amount from the income of the assessee in view of sub section (5) of Section 184 of the IT Act, which reads as under :- I.T.A.No.40/2013 4 “(5) Notwithstanding anything contained in any other provision of this Act, where, in respect of any assessment year, there is on the part of a firm any such failure as is mentioned in section 144, the firm shall be so assessed that no deduction by way of any payment of interest, salary, bonus, commission or remuneration, by whatever name called made by such firm to any partner of such firm shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession” and such interest, salary, bonus, commission or remuneration shall not be chargeable to income-tax under clause (v) of section 28.” 7. For the aforesaid purpose, learned Tribunal has recorded cogent reasons in para 5.1 of the order quoted above. 8. In this view of the matter, in our opinion, no substantial question of law is involved for determination in this appeal. 9. Consequently, we do not find any merit in this appeal. It is hereby dismissed. No order as to costs. (S.K. Gangele) (Sheel Nagu) Judge Judge SP "