The DCIT, Circle-2, Surat V. M/s. V.K. Maniyar & Sons, Surat

ITA 1238/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1762 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-04-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 07-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHAILESH B VAIDYA
• Keywords: Business income; Deemed to accrue or arise in india; Tangible material; Difference of opinion; Change of opinion
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: S H RI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER THE DCIT, CIRCLE - 2, SURAT - 395001 (APPELLANT) VS M/S. V.K. MANIYAR & SONS, J - 19, J.J. A/C MARKET, RING ROAD, SURAT - 395002 PAN:AACFV5073E (RESPONDENT) REVENUE BY : S H RI ALPESH PARMAR , SR. D . R. ASSESSEE BY: S H RI SHAILESH B. VAIDYA , A.R. DATE OF HEARING : 29 - 04 - 2 016 DATE OF PRONOUNCEMENT : 29 - 04 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2005 - 06 , AR ISES FROM ORDER OF THE CIT(A) - II, SURAT DATED 13 - 03 - 2012 IN APPEAL NO. CAS - II/392/10 - 11 , IN PROCEEDINGS UNDER SECTION 143(3) R.W.S 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 1238 / A HD/ 20 1 2 A SSESSMENT YEAR 200 5 - 06 I.T.A NO.1238 /AHD/20 12 A.Y. 2005 - 06 PAGE NO DCIT VS. M/S. V.K. MANIY AR & SONS 2 2. THE REVENUE S TWIN SUB STANTIVE GROUNDS RAISED IN THE INSTANT APPEAL CHALLENGE THE LOWER APPELLATE ORDER QUASHING THE REOPENING IN QUESTION AS MERE CHANGE OF OPINION THEREBY DELETING SECTION 40(B) DISALLOWANCE/ADDITION OF ASSESSEE S PARTNERS REMUNERATION AMOUNTING TO RS. 23,74,9 60/ - . BOTH PARTIES STRONGLY REITERATE THEIR RESPECTIVE PLEADINGS IN THE COURSE OF HEARING. 3. FACTS OF THE CASE ARE IN A NARROW COMPASS. THIS ASSESSEE - FIRM TRADES IN ART SILK CLOTH. THE DEPARTMENT CONDUCTED A SURVEY IN ITS CASE. THE ASSESSEE DISCL OSED EXCESS STOCK AMOUNT OF RS. 55,23,757/ - IN COURSE THEREOF. IT FILED ITS RETURN ON 31 - 10 - 2005 STATING INCOME OF RS. 32,78,640/ - . THE ASSESSING OFFICER COMPLETED A REGULAR ASSESSMENT DETERMINING ITS ASSESSABLE INCOME AS RS. 34,41,910/ - AFTER MAKING VAR IOUS DISALLOWANCES . HE THEREAFTER FORMED REASONS TO BELIEVE THAT ASSESSEE S INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT QUA ITS PARTNERS REMUNERATION CLAIM OF RS. 23,74,960/ - AGAINST THE ABOVE STATED DISCLOSURE OF EXCESS STOCK NOT ADMISSIBLE . HE ACCORDINGLY ISSUED SECTION 148 NOTICE DATED 25 - 03 - 2010. WE FIND FROM RE - ASSESSMENT FRAMED ON 24 - 12 - 2010 THAT ASSESSING OFFICER ADOPTED THE VERY REASONING IN MAKING THE IMPUGNED SECTION 40(B) DISALLOWANCE OF RS. 23,74,960/ - . 4. THE ASSESSEE CHALLENGED T HE VALIDITY OF THE REOPENING AND ALSO CORRECTNESS OF TH E IMPUGNED DISALLOWANCE ON MERITS. THE CIT(A) I.T.A NO.1238 /AHD/20 12 A.Y. 2005 - 06 PAGE NO DCIT VS. M/S. V.K. MANIY AR & SONS 3 ACCEPTS BOTH THE ARGUMENTS. HE HOLD S THE IMPUGNED REOPENING AS MERE CHANGE OF OPINION WITHOUT ANY FRESH TANGIBLE MATERIAL . HE COMES TO MERITS. WE FIND FROM THE PAGE 27 OF LOWER APPELLATE ORDER THAT ASSESSEE S SURVEY STATEMENT DECLARING EXCESS STOCK/UNDISCLOSED INCOME ARISING ON ACCOUNT OF DEFECT IN BOOKS TO CONCLUDE THAT THE SAME IS IN THE NATURE OF ITS BUSINESS INCOME ONLY SINCE THERE IS NO OTHER SOURCE OF UNDISCLOSED INCOME EXCEPT THIS ART SILK TRADING. THE CIT(A) PROCEEDS TO HOLD THAT ONCE THE ABOVE STATED UNDISCLOSED INCOME IS IN THE NATURE OF ASSESSEE S BUSINESS INCOME, IT IS VERY MUCH ENTITLED TO CLAIM ITS CONSEQUENTIAL PARTNERS REMUNERATION DEDUCT ION U/S. 40(B) OF THE ACT AS PER TRIBUNAL S ORDER IN FASHION WORLD VS. ACIT ITA 1634 DECIDED ON 12 - 02 - 2010 AS WELL AS THAT OF CHOKSI HIRALAL MAGANLAL VS. DCIT (2011) 141 TTJ (AHD) (UO) PAGE 01. HE ACCORDINGLY DELETES THE IMPUGNED PARTNERS REMUNERATION DISALLOWANCE . THIS LEAVES THE REVENUE AGGRIEVED. 5. WE HAVE HEARD BOTH THE SIDES. WE COME TO MERITS OF THE CASE FIRST. THERE IS NO DISPUTE THAT ASSESSEE HAS DISCLOSED ITS UNACCOUNTED EXCESS STOCK OF RS. 55,23,755/ - AND CLAIMED ITS PARTNERS REMUNERATION DEDUCTION OF RS. 23,74,960/ - . THE REVENUE S CASE IS THAT THE SAME IS NOT ALLOWABLE SINCE THE SAME IS NOT ITS BUSINESS INCOME BUT COMES UNDER DEEMED INCOME UNDER CHAPTER VI OF THE ACT NOT ENTITLED FOR ANY SUCH INCOME IN THE NATU RE OF PARTNERS REMUNERATION IN QUESTIO N . HOWEVER, IT FAILS TO POINT OUT ANY EXCEPTION OR DISTINCTION TO THE ABOVE REFERRED TRIBUNAL S DECISION HOLDING OTHERWISE THEREBY DECIDING THE VERY ISSUE IN ASSESSE E S FAVOUR. WE I.T.A NO.1238 /AHD/20 12 A.Y. 2005 - 06 PAGE NO DCIT VS. M/S. V.K. MANIY AR & SONS 4 REITERATE THAT ASSESSEE S UNDISCLOSED IS IN THE NATURE OF EXCESS STOCK AND THERE IS NO MATERIAL TO CONCLUDE THAT THE SAME HAS BEEN DERIVED FROM ANY OTHER SOURCE. WE REJECT REVENUE S LATTER SUBSTAN T IV E GROUND ON MERITS LEAVING THE LEGAL ISSUE OF V ALID ITY OF REOPENING TO HAVE BEEN RENDERED INFRUCT U OUS. 6. THIS REVENUE S APPEAL I S DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 29 - 04 - 201 6 SD/ - SD/ - ( ANIL CHATURVEDI ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 29 /04 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,