ITO, WD-40(1), KOLKATA, Kolkata V. M/s Narayan Road Lines, Kolkata

ITA 1039/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4138 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2016
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 29-11-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 13-05-2016
• Court: TRIBUNAL
• Department Lawyers: AMITABHA BHATTACHARYA
• Assessee Lawyers: ROYA ATHAGHARA ACA LD
• Keywords: Audit objection; Tax effect
• Section: 143(3); 154

Judgement Text

1 ITA NO.1039/KOL/2016 NARAYAN ROAD LINES, AY 2005-06 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI S. S. VISWAN ETHRA RAVI, JM] I.T.A NO. 1039/KOL/2016 ASSESSMENT YEAR: 2005-06 INCOME-TAX OFFICER, WD-40(1), KOLKATA VS. M/S. NAR AYAN ROAD LINES (PAN: AAGFN3828D) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 29.11.2016 DATE OF PRONOUNCEMENT: 02.12.2016 FOR THE APPELLANT: SHRI AMITABHA BHATTACHARYA, JCIT FOR THE RESPONDENT: MISS ROYA ATHAGHARA, ACA, LD. AR ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-12, KOLKATA VIDE APPEAL NO. 312/CIT(A)-12/KOL/WD.40(1)/2014-15 DATED 29.02. 2016. ASSESSMENT WAS FRAMED BY ITO, WARD-56(1), KOLKATA U/S. 143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2005-06 VIDE HIS ORDER DATED 03.10.2007. 2. AT THE OUTSET, THE LD. AR OF THE ASSESSEE RAIS ED A PRELIMINARY OBJECTION THAT THE ISSUE UNDER DISPUTE INVOLVES AN AMOUNT OF RS.37,764/- ONL Y AND ACCORDINGLY, THE TAX EFFECT ON THE SAME WOULD BE LESS THAN RS. 10 LACS AND HENCE, IN V IEW OF THE CIRCULAR NO. 21/2015 DATED 10.12.2015 THE APPEAL OF REVENUE IS TO BE DISMISSED AS NOT MAINTAINABLE. IN RESPONSE TO THIS, THE LD. DR STATED THAT THIS IS AN APPEAL AGAINST TH E ORDER PASSED BY THE AO U/S. 154 OF THE ACT. THE PROCEEDINGS U/S. 154 OF THE ACT HAD BEEN TRIGGERED OUT OF THE REVENUE AUDIT OBJECTION AS COULD BE EVIDENT FROM THE STATEMENT OF FACTS FILED BY THE DEPARTMENT BEFORE THE TRIBUNAL. HENCE, THE CASE FALLS UNDER THE EXCEPTIO N CLAUSE TO THE CBDT CIRCULAR CITED SUPRA. WE ARE IN AGREEMENT WITH THE ARGUMENT OF TH E LD. DR AND ACCORDINGLY, DISMISS THE PRELIMINARY OBJECTION OF THE LD. AR IN THIS REGARD. 3. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.37,764/- MADE TO WARDS REMUNERATION PAID TO PARTNERS OF THE FIRM IN THE FACTS AND CIRCUMSTANCES OF THE CASE . 2 ITA NO.1039/KOL/2016 NARAYAN ROAD LINES, AY 2005-06 4. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND HAD PAID REMUNERATION OF RS.1,20,000/- TO ITS WORKING PARTNE RS. BASED ON THE COMPUTATION OF PROFITS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 40(B) OF THE ACT, THE REMUNERATION ALLOWABLE UNDER THE ACT WORKED OUT TO RS.1,57,764/- WHICH WAS ACCORDINGLY CLAIMED AS DEDUCTION FROM THE PROFITS OF THE FIRM BY THE ASSESSEE. THE AO THOUGH ORIGINALLY ALLOWED SUCH DEDUCTION IN THE ASSESSMENT FRAMED U/S. 143(3) OF T HE ACT DATED 03.10.2007 LATER ON SOUGHT TO RECTIFY THE SAME BY AN ORDER U/S. 154 OF THE ACT DATED 08.03.2012 RESTRICTING THE ALLOWABILITY OF REMUNERATION PAID TO WORKING PARTNE RS AT RS.1,20,000/-. AGITATED BY THIS DISALLOWANCE THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE LD. CIT(A) WHO ON VERIFICATION OF THE COMPUTATION OF REMUNERATION PAID TO PARTNERS HE LD THAT THE SAME WAS CLAIMED BY THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 40(B) OF THE ACT AND ALSO HELD THAT THE ACTUAL PAYMENT OF REMUNERATION IS IRRELEVANT IN THI S REGARD. ACCORDINGLY, HE DELETED THE DISALLOWANCE. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: I. THAT, ON THE FACT AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN ALLOWING RELIEF BY DELETING THE ADDITION OF RS.37,764/-, MADE BY RECTI FICATION U/S. 154 OF THE I. T. ACT AS THE MISTAKE WAS APPARENT FROM RECORD BY ADDING BACK EXC ESS REMUNERATION WHICH WAS ALLOWED WHILE MAKING SCRUTINY ASSESSMENT U/S. 143(3) OF THE I. T. ACT. 5. THE LD. DR RELIED ON THE ORDER OF THE AO AND ON THE OTHER HAND, THE LD. AR RELIED ON THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAD ONLY CLAIMED TH E REMUNERATION PAID TO THE PARTNERS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 40(B) OF THE ACT BASED ON THE AVAILABILITY OF THE PROFITS IN THE FIRM. IN THIS SCENARIO, THE ACTUAL PAYMENT OF REMUNERATION TO THE PARTNERS DOES NOT MATTER. HENCE, WE FIND THAT THE ORDER OF THE L D. CIT(A) DOES NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY, THE GROUND RAISED BY TH E REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 02.12.2016 SD/- SD/- (S.S. VISWANETHRA RAVI) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED :2ND DECEMBER, 2016 JD.(SR.P.S.) 3 ITA NO.1039/KOL/2016 NARAYAN ROAD LINES, AY 2005-06 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ITO, WD-40(1), KOLKATA. 2 RESPONDENT M/S. NARAYAN ROAD LINES, 7, TARACHAND D UTTA STREET, KOLKATA-700 073. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .