A.K.Steel Industries, Kolkata V. I.T.O.,Ward-43(1), Kolkata

ITA 1275/KOL/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0209 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-11-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 27-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYANTA KHANRA
• Assessee Lawyers: M. SATNALIWALA
• Section: 20

Judgement Text

1 ITA NO. 1275/KOL/2019 A.K. STEEL INDUSTRIES, AY- 20 15-16 , C(SMC) , IN THE INCOME TAX APPELLATE TRIBUNAL C(SMC) BENCH : KOLKATA ( ) . . , ) [BEFORE SHRI A. T. VARKEY, JM] ITA NO.1275/KOL/2019 ASSESSMENT YEAR: 2015-16 A.K. STEEL INDUSTRIES (PAN: AAVFA4161H) VS. INCOME-TAX OFFICER, WD-43(1), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 25.11.2019 DATE OF PRONOUNCEMENT 31.12.2019 FOR THE APPELLANT SHRI M. SATNALIWALA, ADVOCATE FOR THE RESPONDENT SHRI JAYANTA KHANRA, JCIT, SR. D R ORDER THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-13, KOLKATA DATED 27-03-2019 FOR THE ASSESSMENT YEAR 2015-16. 2. THE SOLE GROUND OF APPEAL OF THE ASSESSEE IS AGA INST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF PARTNERS SALARY OF RS.1,80,732/- PAID TO SRI KISHAN DAS JINDAL. 3. BRIEFLY STATED FACTS AS OBSERVED BY THE AO ARE THAT THE PARTNER OF ASSESSEE FIRM (LATE) SHRI KRISHNA JINDAL WAS ABOUT 80 YEARS OLD D URING THE YEAR UNDER CONSIDERATION, SO, ACCORDING TO AO, HE (SHRI KRISHNA JINDAL) WOULD NOT HAVE BEEN IN A POSITION TO ACTIVELY PARTICIPATE IN THE DAY TO DAY AFFAIRS OF THE FIRM D ILIGENTLY AND EFFICIENTLY. THEREFORE, ACCORDING TO AO, PAYMENT OF SALARY TO SHRI KRISHNA JINDAL CANNOT BE JUSTIFIED UNDER ANY CIRCUMSTANCES WHEN NORMAL RETIREMENT AGE IS 60 YEAR S. ACCORDING TO AO, AT THE AGE OF 80 YEARS IT CANNOT BE EXPECTED THAT AN INDIVIDUAL CAN PUT HIS BEST EFFORTS INTO BUSINESS AND AT THE BEST HE CAN PLAY THE ROLE OF ONLY AN ADVISOR. THE AO ALSO OBSERVED THAT THE FUNCTION OF (LATE) KRISHNA JINDAL WAS SUPERVISION OF ACCOUNTS A ND FINANCIAL POSITION OF THE FIRM. THIS, ACCORDING TO AO, DOES NOT INVOLVE REGULAR ATTENDANC E OR ACTIVE PARTICIPATION IN THE AFFAIRS OF THE FIRM. ACCORDING TO AO, PAYING SALARY TO SUCH A PARTNER IS NOT A PRUDENT BUSINESS PRACTICE. THUS ACCORDING TO AO, PAYMENT OF SALARY TO SUCH A SENILE PARTNER IS ONLY DONE TO REDUCE PROFIT AND TAX BURDEN ON THE FIRM. SO, THE A O DISALLOWED THE CLAIM OF ASSESSEE IN 2 ITA NO. 1275/KOL/2019 A.K. STEEL INDUSTRIES, AY- 20 15-16 RESPECT OF SALARY TO THIS PARTNER AND ADDED THE AMO UNT IN RESPECT OF SALARY TO THE TUNE OF RS.1,80,732/- TO THE TOTAL INCOME OF THE ASSESSEE F IRM. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ACT ION OF THE AO. AGGRIEVED, ASSESSEE IS BEFORE US. 4. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDING TO THE ASSESSEE, INITIALLY IT WAS A PROPRIETORSHIP CONCERN; AND LATER THE PROPRIETARY CONCERN GOT CONVERTED TO A PARTNERSHIP FIRM ON 01.04.2012, [A COPY OF THE PARTNERSHIP DEED IS FOUND PLACED AT PAGES 1 TO 6 OF PAPER BOOK]. AS PER THE PARTNERSHIP DEED, THE MAIN PARTNER WAS SHRI KISHAN JINDAL SINCE HE S TARTED THE BUSINESS FROM ITS INCEPTION AND WAS THE SOLE PROPRIETOR TILL 01.04.2012 WHEN IT WAS CONVERTED TO A FIRM. HOWEVER, THE MAIN GRIEVANCE OF THE ASSESSEE FIRM IS THAT THE SALARY W HICH HAS BEEN DISBURSED TO THE MAIN PARTNER SHRI KRISHNA JINDAL TO THE TUNE OF RS.1,80, 732/- WAS DISALLOWED BY AO ON PURE SURMISES AND GUESS WORK AND ON THE PERSONAL BELIEF OF AO THAT A PERSON AT THE AGE OF 80 YEARS CANNOT BE EXPECTED TO DO ANY MEANINGFUL ACTIV ITIES REGARDING THE AFFAIRS OF THE FIRM WHICH CANNOT BE COUNTENANCED BY ME BECAUSE THE AO H AS MADE HIS OBSERVATIONS NOT BASED ON ANY MATERIAL BUT PURELY ON CONJECTURES AND SURMI SES AND HIS PERSONAL BELIEF. MOREOVER, IT WAS BROUGHT TO MY NOTICE THAT TILL THE EARLIER ASSE SSMENT YEARS NO DISALLOWANCE OF THE SALARY TO SHRI KRISHNA JINDAL HAS BEEN MADE AND FOR THE AY 2016-17 (SUBSEQUENT ASSESSMENT YEAR) THE AO HAS ALLOWED THE CLAIM OF THE ASSESSEE IN RES PECT OF SALARY TO (LATE) SHRI KISHAN JINDAL. THUS, FROM THE AFORESAID DISCUSSION, IT IS OBSERVED THAT THE ACTION OF THE AO CANNOT BE COUNTENANCED FIRSTLY FOR THE SAKE OF CONSISTENC Y AND SECONDLY THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THIS PARTNER IS A SENILE OR INA CTIVE OR NON-WORKING AND CANNOT BE CONSIDERED AS WORKING PARTNER. THE DISALLOWANCE MA DE ON CONJECTURE AND SURMISES CANNOT BE ACCEPTED AND THEREFORE, THE ADDITION IS DELETED. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 31ST DECEM BER, 2019. SD/- (ABY. T. VARKEY) JUDICIAL MEMBER DATED :31ST DECEMBER, 2019 JD.(SR.P.S.) 3 ITA NO. 1275/KOL/2019 A.K. STEEL INDUSTRIES, AY- 20 15-16 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. A. K. STEEL INDUSTRIES, 20, MAH ARSHI DEBENDRA ROAD, KOLKATA-700 007. 2 RESPONDENT ITO, WARD-43(1) , KOLKATA. 3. 4. 5. CIT(A)-13, KOLKATA (SENT THROUGH E-MAIL) CIT- , KOLKATA. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR