M/s Mas Properties and Developers, V. ITO,

ITA 140/BANG/2013

• Counselvise Citation: 14021114 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 04-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BALAKRISHNAN
• Assessee Lawyers: V SRINIVASAN
• Keywords: Wrong claim; Revised return
• Section: 142(1); 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER ITA NOS.140 TO 142(BANG) 2013 (ASSESSMENT YEARS : 2005-06, 2006-07 & 2007-08) M/S MAS PROPERTIES & DEVELOPERS, NO.1439, BAZAAR STREET, HUNSUR APPELLANT PAN NO.AAKFM4280C VS THE INCOME-TAX OFFICER, WARD-1(3), MYSORE RESPONDENT ASSESSEE BY : SHRI V SRINIVASAN, CA REVENUE BY : SHRI BALAKRISHNAN, JCIT DATE OF HEARING : 30-07-2014 DATE OF PRONOUNCEMENT : 28 -08-2014 O R D E R PER SHRI ABRAHAM P GEORGE, AM: IN THESE APPEALS FILED BY ASSESSEE COMMON GROUNDS H AVE BEEN RAISED. THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT HE WAS NOT PRESSING GROUND NOS.3 & 4. THESE GROUNDS ARE THEREF ORE, DISMISSED AS NOT PRESSED. THIS LEAVES US WITH GROUND NO.2, IN W HICH THE ASSESSEE ASSAILS DISALLOWANCE OF REMUNERATION, CONSIDERING T HE FIRM AS AN ASSOCIATION OF PERSONS (AOP), INVOKING SEC.184(5) O F THE ACT, 1961. ITA NO.140 TO 142(BANG)2013 2 2. FACTS APROPOS ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 1999-2000, PURS UANT TO CERTAIN DIRECTIONS BY THIS TRIBUNAL NOTICED THAT ASSESSEE, A PARTNERSHIP FIRM, WAS RUNNING A MARRIAGE HALL AND ALSO DERIVING RENTAL IN COME. HOWEVER, HE NOTED THAT NO RETURNS WERE FILED FOR THE IMPUGNED ASSESSM ENT YEARS. NOTICES U/S 148 OF THE IT ACT, 1961 WAS ISSUED ON 15-12-200 9 AND PURSUANT THERETO ASSESSEE FILED RETURNS ON 08-01-2010 DECLAR ING LOSS OF RS.48,647/-, RS.43,358/- AND RS.4,194/- RESPECTIVELY FOR ASSESSM ENT YEARS 2005-06, 2006-07 & 2007-08. 3. IN THE COMPUTATION OF INCOME FILED BY THE ASSESS EE, ASSESSEE HAD SHOWN RENT RECEIVED ON LETTING OUT OF SHOPS AND COL LECTIONS FROM RENTING OUT OF A HALL. ASSESSEE HAD CLAIMED REMUNERATION O F RS.50,000/- PAID TO PARTNERS AS A DEDUCTION FROM SUCH RECEIPTS. THE AO PUT THE ASSESSEE ON NOTICE THAT IT HAD FAILED TO FILE A RETURN OF INCOM E AS REQUIRED U/S 139 OF THE IT ACT, 1961, AND THEREFORE, SEC.144 STOOD ATTR ACTED. AS PER THE ASSESSING OFFICER ONCE THERE WAS A FAILURE OF THE N ATURE MENTIONED IN SEC.144 OF THE IT ACT, 1961, SEC.184(5)R.W.S.185 OF THE IT ACT, 1961 HAD TO BE APPLIED. IN OTHER WORDS, ACCORDING TO HIM, N O DEDUCTION COULD BE ALLOWED FOR INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION PAID TO PARTNERS. REPLY OF THE ASSESSEE WAS THAT HE HAD F ILED RETURNS PURSUANT ITA NO.140 TO 142(BANG)2013 3 TO NOTICE ISSUED U/S 148 OF THE IT ACT, 1961 AND TH EREFORE, SEC.144 WAS NOT ATTRACTED. HOWEVER, THE AO DID NOT ACCEPT THIS CONTENTION. ACCORDING TO HIM, ONCE THERE WAS A FAILURE TO FILE RETURN OF INCOME EITHER U/S 139(1) OR 139(4) OF THE IT ACT, SEC.144 CAME IN TO PLAY AND SECTION 184(5) STOOD ATTRACTED. IN THIS VIEW OF THE MATTER , THE REMUNERATION PAID BY THE ASSESSEE TO ITS PARTNERS WERE NOT ALLOWED. 4. IN ITS APPEAL BEFORE THE CIT(A), ASSESSEE REITER ATED THE SAME ARGUMENTS TAKEN BY IT BEFORE THE AO. LEARNED CIT( A) WAS NOT IMPRESSED. ACCORDING TO HIM, ASSESSEE HAD FAILED TO FILE CORRE CT RETURNS AND THE RETURN FILED PURSUANT TO NOTICES ISSUED UNDER SECTI ON 148 CONTAINED FALSE CLAIMS. SUCH RETURNS NOT BE CITED AS A GROUND FOR BESTOWING A BENEFIT ON THE ASSESSEE. THUS, HE CONFIRMED THE ADDITION MADE BY THE AO. 5. NOW, BEFORE US LEARNED AR STRONGLY ASSAILING THE ORDER OF THE LOWER AUTHORITIES SUBMITTED THAT ASSESSEE HAD ADMIT TEDLY NOT FILED THE RETURN U/S 139(1) OF THE IT ACT, 1961. HOWEVER, AC CORDING TO HIM, RETURNS WERE FILED PURSUANT TO NOTICES UNDER SECTIO N 148 ISSUED FOR THE IMPUGNED ASSESSMENT YEAR ON 15-12-2009. AS PER LEA RNED AR ONCE SUCH RETURNS WERE FILED THERE WAS NO SCOPE FOR APPLYING FIRST TWO LIMBS OF SUB- SEC(1) OF SEC.144 OF THE IT ACT, 1961. THE ONLY LI MB THAT WOULD BE ATTRACTED WAS CLAUSE(C), BUT FOR ATTRACTING THIS LI MB THERE SHOULD HAVE BEEN A FAILURE TO COMPLY WITH A NOTICE ISSUED U/S 1 43(2) OF THE IT ACT, 1961. HERE, THERE WAS NO SUCH FAILURE ON THE PART OF THE ASSESSEE. ITA NO.140 TO 142(BANG)2013 4 6. READING SUB-SEC.5 OF SEC.184, LEARNED AR SUBMITT ED THAT ONLY WHEN THERE WAS A FAILURE OF THE NATURE MENTIONED IN SEC.144 OF THE IT ACT, 1961, DISALLOWANCE OF CLAIM FOR DEDUCTION OF P AYMENT OF INTEREST, SALARY, BONUS COMMISSION OR REMUNERATION TO PARTNER S COULD BE DONE. THUS, ACCORDING TO HIM, THE LOWER AUTHORITIES FELL IN ERROR IN DISALLOWING THE CLAIM OF SALARY PAID TO PARTNERS. 7. PER CONTRA, LEARNED DR SUBMITTED THAT ASSESSEE H AD FAILED TO FILE THE RETURN AS SPECIFIED U/S 139(1) NOR HAD IT FILED ANY RETURN UNDER SEC. 139(4) OF THE IT ACT, 1961. THEREFORE, ACCORDING T O HIM, THE AO WAS JUSTIFIED IN INVOKING CLAUSE(A) OF SUB-SECTION(1) O F SEC.144 AND MAKING A BEST JUDGMENT ASSESSMENT. ONCE A BEST JUDGMENT AS SESSMENT WAS DONE, SEC.184(5) STOOD AUTOMATICALLY ATTRACTED. NO CLAIM FOR DEDUCTION INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION TO PARTNERS COULD BE ALLOWED. AS PER LEARNED DR THE ASSESSEE SHOULD NOT BE ALLOWED TO TAKE ADVANTAGE OF ITS OWN FAILURE FOR CLAIMING A DEDUCTI ON WHICH WAS OTHERWISE NOT ALLOWABLE. 8. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHORIT IES AND HEARD THE RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT TH E ASSESSEEE HAD NOT FILED ANY RETURN VOLUNTARILY, AS PRESCRIBED U/S 139 (1) OF THE IT ACT, 1961 ITA NO.140 TO 142(BANG)2013 5 OR BELATEDLY OR PRESCRIBED U/S 139(4) OF THE IT ACT , 1961. THE RETURNS FILED BY THE ASSESSEE WERE PURSUANT TO NOTICES ISSU ED U/S 148 OF THE IT ACT, 1961. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO LOOK AT SUB-SEC.1 OF SEC.148 OF THE IT ACT, 1961, WHICH READS AS UNDER; 148 (1) BEFORE MAKING THE ASSESSMENT, REASSESSMENT OR RE- COMPUTATION UNDER SECTION 147, THE ASSESSING OFFICE R SHALL SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM TO FUR NISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTI CE, A RETURN OF HIS INCOME OR THE INCOME OF ANY OTHER PER SON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DU RING THE PREVIOUS YEAR CORRESPONDING TO THE RELEVANT ASSESSM ENT YEAR, IN THE PRESCRIBED FORM AND VERIFIED IN THE PR ESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETUR N REQUIRED TO BE FURNISHED UNDER SECTION 139. 9. A READING OF THE ABOVE CLEARLY SHOW THAT A RETUR N FILED IN PURSUANCE OF NOTICE U/S 148 OF THE IT ACT, 1961 IS TO BE TREATED AS A RETURN REQUIRED TO BE FURNISHED U/S 139 OF THE IT A CT, 1961. FAILURE OF AN ASSESSEE TO FILE THE RETURN U/S 139(1) OF THE IT AC T, 1961 WOULD GIVE POWERS TO THE AO TO ISSUE A NOTICE FOR FILING RETUR N AS SET OUT IN SEC.142(1) OF THE IT ACT, 1961. ONCE AN AO CHOSE N OT TO ISSUE SUCH ITA NO.140 TO 142(BANG)2013 6 NOTICE BUT TO PROCEED U/S148, THE CONSEQUENCE MENTI ONED THEREIN HAS TO FOLLOW. IT IS NECESSARY TO REPRODUCE SUB-SEC.1 OF SEC.144 OF THE IT ACT, 1961, AT THIS JUNCTURE. 144 (1) IF ANY PERSON; (A) FAILS TO MAKE THE RETURN REQUIRED (UNDER SUB-SE CTION(1) OF SECTION 139) AND HAS NOT MADE A RETURN OR A REVISED RETURN UNDER SUB-SECTION(4) OF SUB-SECTION(5) OF THAT SECT ION; OR (B) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION(1) OF SECTION 142(OR FAILS TO COMPLY WI TH A DIRECTION ISSUED UNDER SUB-SECTION(2A) OF THAT SECT ION) OR (C ) HAVING MADE A RETURN, FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION(2) OF SECTION 143 . THE (ASSESSING OFFICER, AFTER TAKING INTO ACCOUNT ALL R ELEVANT MATERIAL WHICH THE ASSESSING OFFICER HAS GATHERED,( SHALL, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD, MAKE THE ASSESSMENT) OF THE TOTAL INCOME OR LOSS TO THE BEST OF HIS JUDGMENT AND DETERMINE THE SUM PAYABLE BY TH E ASSESSEEON THE BASIS OF SUCH ASSESSMENT .. 10. ONCE A RETURN HAS BEEN FILED BY THE ASSESSEE PU RSUANT TO A NOTICE U/S 148 OF THE IT ACT, 1961, THE CLAUSE THAT WOULD APPLY TO HIM IS CLAUSE(C ) OF SUB-SEC.(1) OF SEC.144 OF THE IT ACT, 1961. HE GOES OUT OF THE AMBIT OF CLAUSE(A). FOR APPLYING CLAUSE(C ), IT IS NECESSARY THAT ASSESSEE SHOULD HAVE FAILED TO COMPLY WITH THE TERMS OF NOTI CE ISSUED UNDER ITA NO.140 TO 142(BANG)2013 7 SEC.143(2) OF THE IT ACT, 1961. AT PAGE-2 OF THE ASSESSMENT ORDER, THE AO HAS MENTIONED AS UNDER; AS PER SCRUTINY GUIDELINES ISSUED BY BOARD FOR FIN ANCIAL YEAR 2010-11, ALL CASES WHERE RETURNS WERE FILED IN RESPONSE TO NOTICE U/S 148 HAVE TO BE SELECTED FOR SCRUTINY AND ACCORDINGLY CASE WAS SELECTED FOR SCRUTINY AND NO TICES U/S 143(2) AND 142(1) WERE ISSUED ON 14-09-2011. IN R ESPONSE TO SAID NOTICES, ASSESSEES AUTHORIZED REPRESENTATIVE SRI T.N.RAMADAS, ITP, APPEARED AND PRODUCED BOOKS OF AC COUNTS, BANK PASS BOOKS AND VARIOUS DETAILS CALLED FOR. 11. THUS, IT IS CLEAR THAT THERE WAS NO FAILURE I N COMPLYING WITH THE NOTICES ISSUED U/S 143(2) OF THE IT ACT, 1961. THE RESULT IS THAT ASSESSEE COULD NOT HAVE BEEN FASTENED WITH THE CONSEQUENCES THAT ARISE OUT OF A BEST JUDGMENT ASSESSMENT U/S 144 OF THE IT ACT, 196 1. IT IS NOT THAT SECTION 184(5) COME INTO OPERATION WHENEVER AN ASSE SSMENT IS MADE U/S144. IN OUR OPINION, SEC.184(5), COMES INTO PLAY ONLY WHEN THERE IS A COMPLETE FAILURE AS MENTIONED IN SEC.144 OF THE ACT . WHILE MAKING AN ASSESSMENT U/S 144, DUE TO NON-COMPLIANCE, THE AO M AY HAVE TO RESORT TO ITA NO.140 TO 142(BANG)2013 8 HIS JUDGMENT. HOWEVER, FOR APPLYING THE FAILURES M ENTIONED IN SEC.144. FOR THE PURPOSE OF SEC.184(5), THE FAILURE HAS TO B E COMPLETE, BECAUSE THAT WOULD GIVE RISE TO THE PRESUMPTION THAT THE FIRM IS NOT GENUINE. IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE CLAIM FOR DEDUCTION BY WAY OF PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION O R REMUNERATION TO THE PARTNERS COULD NOT HAVE BEEN DISALLOWED. THE DISAL LOWANCE OF REMUNERATION TO PARTNERS FOR IMPUGNED ASSESSMENT YE AR THEREFORE, STANDS DELETED. 12. THE APPEALS OF THE ASSESSEE FOR ALL THE ASSESS MENT YEARS ARE THEREFORE, TREATED AS PARTLY ALLOWED. S D / - (N.V.VASUDEVAN) SD/ - (ABRAHAM P GEORGE) JUDICAL MEMBER ACCOUNTANT MEMBER BANGALORE: D A T E D : 28-08-2014 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE