M/s. Gulzar Singh Gurbachan Singh, Distt.Bathinda V. The Income-tax Officer, Bathinda

ITA 147/ASR/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4133 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 11-02-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 10-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Business income; Opportunity of being heard; Revised return
• Section: 40(b); 142(1); 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NOS. 146&147/ASR/2014 ASSESSME NT YEARS: 2007-08&2008-09 GULZAR SINGH GURBACHAN SINGH, GRAIN MARKET, GONIANA MANDI, DISTRICT BATHINDA [PAN: AACFM 1332M] VS. INCOME TAX OFFICER, WARD 2(1), BATHINDA (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. N. ARORA (ADV.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 11.02.2019 DATE OF PRONOUNCEMENT: 15.02.2019 ORDER PER SANJAY ARORA, AM: THIS IS A SET OF TWO APPEALS BY THE ASSESSEE AGITAT ING THE ORDERS BY THE COMMISSIONER OF INCOME TAX (APPEALS), BATHINDA ('CI T(A)' FOR SHORT) OF EVEN DATE (30.12.2013), PARTLY ALLOWING THE ASSESSEES APPEAL S CONTESTING ITS ASSESSMENTS U/S. 144 OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAF TER) FOR THE ASSESSMENT YEARS (AYS.) 2007-08 AND 2008-09. 2. AT THE VERY OUTSET, IT WAS CLARIFIED BY THE LD. COUNSEL FOR THE ASSESSEE, SH. ARORA, THAT THE ISSUES ARISING IN BOTH THE APPEALS ARE COMMON, RAISING IDENTICAL GROUNDS; THE DIFFERENCE BEING ONLY IN THE AMOUNT OF THE DISALLOWANCES UNDER REFERENCE. FOR THE SAKE OF DISCUSSION, REFERENCE IN THIS ORDER, AS WAS THE CASE DURING HEARING, MADE TO THAT PERTAINING TO AY 2007-08. ITA NOS. 146 & 147/ASR/2014 (AYS 2007-08 & 2008-09) GULZAR S INGH GURBACHAN SINGH V. CIT 2 3. THE PRINCIPAL ISSUE RAISED IN THESE APPEALS IS T HE DISALLOWANCE OF INTEREST U/S. 36(1)(III) READ WITH SEC. 40(B) ALLOWED TO THE PART NERS ON THEIR CAPITAL ACCOUNT BALANCES IN VIEW OF SECTION 184(5) OF THE ACT, WHIC H READS AS UNDER: CHAPTER XVI A. ASSESSMENT OF FIRMS ASSESSMENT AS A FIRM. 184. (1) A FIRM SHALL BE ASSESSED AS A FIRM . (2) TO (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 F IRM 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 I N COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON' AND SUCH INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION SHALL NOT BE CHARGEABLE TO INCOME-TAX UNDER CLAUSE ( V ) OF SECTION 28. THE ASSESSEES CASE BEFORE THE TRIBUNAL AS WELL AS BEFORE THE FIRST APPELLATE AUTHORITY IS THAT THE DISALLOWANCE IS NOT TENABLE A S THE ASSESSMENT/S HAS BEEN WRONGLY FRAMED U/S. 144. FURTHER, BUT FOR THE ASSES SMENT/S BEING U/S. 144, AND THE CONSEQUENT APPLICABILITY OF SEC. 184(5), THERE IS N O OTHER GROUND FOR THE DISALLOWANCE OF THE SAID INTEREST, BEING ALLOWED TO PARTNERS FROM YEAR TO YEAR. 4. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. 4.1 THE LAW IN THE MATTER IS CLEAR AND UNAMBIGUOUS. WHERE THERE IS A FAILURE ON THE PART OF THE ASSESSEE, BEING A FIRM, AS MENTIONE D IN SECTION 144, IT SHALL NOT BE ALLOWED ANY DEDUCTION IN RESPECT OF INTEREST AND RE MUNERATION TO PARTNERS OF SUCH FIRM IN THE COMPUTATION OF ITS INCOME UNDER CHAPTE R IV-D (I.E., ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON) FOR THE RELEVANT YEAR, AND WHICH AMOUNT/S SHALL NOT BE ASSESSED IN THE HANDS O F THE PARTNERS U/S. 5 R/W S. 28(V) OF THE ACT. THE LD. CIT(A), NOTING THE PROVISION OF SECTION 184(5), CONFIRMED THE ITA NOS. 146 & 147/ASR/2014 (AYS 2007-08 & 2008-09) GULZAR S INGH GURBACHAN SINGH V. CIT 3 DISALLOWANCE, FINDING THE ASSESSEES CASE AS COVERE D U/SS. 144(1)(B) AND 144(1)(C), WITH THERE BEING NO ISSUE AS REGARDS THE SERVICE OF THE NOTICES U/SS. 142(1) AND 143(2) (PARAS 2.6 & 2.7 OF THE IMPUGNED ORDER (IO)) . AFTER MEETING THE ASSESSEES RELIANCE ON CIT V. DHARTI FILMS [1991] 191 ITR 261 (BOM), BEING A DECISION PRIOR TO THE AMENDMENT IN THE ACT BY FINANCE ACT, 1992, W .E.F. 01.04.1993, HE ALSO OBSERVES A FAILURE TO PRODUCE THE BOOKS OF ACCOUNT IN THE ASSESSMENT PROCEEDINGS; THE ASSESSEE HAVING RATHER FILED TWO BALANCE-SHEETS (AS AT THE RELEVANT YEAR-END) WITH DIFFERENT FIGURES BEFORE THE AO (PARAS 2.8 TO 2.10 OF THE IO) 4.2 SECTION 144 IN ITS RELEVANT PART READS AS UNDER : BEST JUDGMENT ASSESSMENT. 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) OR SUB- SECTION (5) OF THAT SECTION, OR (B) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR FAILS TO COMPLY WITH A DIRECTION ISSUED UNDER SU B-SECTION (2A) OF THAT SECTION, 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 TH E RELEVANT MATERIAL WHICH THE ASSESSING OFFICER HAS GATHERED, SHALL, AFTER GIVING THE ASSES SEE AN OPPORTUNITY OF BEING HEARD, MAKE THE ASSESSMENT OF THE TOTAL INCOME OR LOSS TO THE BEST OF HIS JUDGMENT AND DETERMINE THE SUM PAYABLE BY THE ASSESSEE ON THE BASIS OF SUCH ASSESS MENT: PROVIDED THAT SUCH OPPORTUNITY SHALL BE GIVEN BY THE ASSESS ING OFFICER BY SERVING A NOTICE CALLING UPON THE ASSESSEE TO SHOW CAUSE, ON A DATE AND TIME TO BE SPECIFIED IN THE NOTICE, WHY THE ASSESSMENT SHOULD NOT BE COMPLETED TO THE BEST OF HIS JUDGMENT: PROVIDED FURTHER THAT IT SHALL NOT BE NECESSARY TO GIVE SUCH OPPORT UNITY IN A CASE WHERE A NOTICE UNDER SUB-SECTION (1) OF SECTION 142 HAS BEE N ISSUED PRIOR TO THE MAKING OF AN ASSESSMENT UNDER THIS SECTION. THE ONLY MANNER, THEREFORE, THE ASSESSEE COULD HAVE SUCCESSFULLY PLEADED ITS CASE IS BY SHOWING THAT THE FINDING AS TO THE FAILURE ON THE PART OF THE ASSESSEE AS MENTIONED IN SECTIONS 144(1)(B) AND 144(1)(C) IS FA CTUALLY INCORRECT, I.E., IN THE ITA NOS. 146 & 147/ASR/2014 (AYS 2007-08 & 2008-09) GULZAR S INGH GURBACHAN SINGH V. CIT 4 FACTS AND CIRCUMSTANCES OF THE CASE. A PERUSAL OF T HE ASSESSMENT ORDER (FOR BOTH THE YEARS) SHOWS A STRING OF DEFAULTS IN COMPLYING WITH THE NOTICES U/S. 142(1) AND S. 143(2), AS UNDER: (PARA 3 OF THE ASSESSMENT ORDER F OR AY 2007-08) NOTICE U/SS. STATUS (A) 142(1) DATED 14.11.2008 INCOMPLETE INFORMATION FILED ON 22.06.2009 (B) ADJOURNED TO 08.07.2009 NONE ATTENDED (C) 143(2) (FOR 25.08.2009) NO COMPLIANCE (D) 142(1) AND 143(2) (FOR 29.09.2009) NONE ATTEND ED (E) 143(2) DATED 30.09.2009 (FOR 07.10.2009) NO COM PLIANCE PART REPLY ON 23.10.2009 (F) ADJOURNED TO 29.10.2009 NONE ATTENDED (G) 142(1) DATED 05.11.2009 (FOR 11.11.2009) NO COM PLIANCE NONE OF THE FINDINGS IS DISPUTED. THE ASSESSEES ON LY CASE IS THAT THERE WAS PART COMPLIANCE. SECTION 144(1)(B) (S. 144(1)(C)) GETS A TTRACTED IN THE ABSENCE OF ALL THE TERMS OF THE NOTICE U/S. 142(1) (S. 143(2)) BEING N OT COMPLIED WITH, SO THAT A PART COMPLIANCE IS NOT EXCLUDED; RATHER, SPECIFICALLY IN CLUDED. IN FACT, I OBSERVE A COMPLETE NON-COMPLIANCE ON SEVERAL OCCASIONS AND, F URTHER, FOR BOTH, I.E., NOTICE U/S. 142(1) AND SEC. 143(2), EVEN AS QUA ONLY ONE IS SUFFICIENT TO ATTRACT S.144. THE FAILURE TO PRODUCE BOOKS OF ACCOUNT AND VOUCHERS IN THE ASSESSMENT PROCEEDINGS (PARA 4 OF THE ASSESSMENT ORDER), AS ALSO NOTED BY THE LD. CIT(A), WOULD THOUGH STAND TO BE COVERED BY THE FAILURE TO COMPLY WITH T HE TERMS OF NOTICE U/S. 142(1) OR, AS THE CASE MAY BE, S. 143(2). THE NON-ISSUE OF NOT ICE U/S. 144, AS AGAIN NOTED BY THE LD. CIT(A), IS EXCEPTED BY THE SECOND PROVISO TO SECTION 144(1). I, ACCORDINGLY, FIND NO REASON TO INTERFERE; THE ASSESSMENT/S HAVIN G BEEN RIGHTLY FRAMED U/S. 144. ITA NOS. 146 & 147/ASR/2014 (AYS 2007-08 & 2008-09) GULZAR S INGH GURBACHAN SINGH V. CIT 5 4.3 THE ASSESSEE DURING HEARING RELIED ON THE DECIS ION IN VIJAY VEER SINGH V. ITO [2015] 153 ITD 506 (AGRA) (SMC). AS RIGHTLY POINTE D OUT IN THE SAID ORDER, SECTION 184(5) GETS ATTRACTED NOT AS A RESULT OF TH E ASSESSMENT BEING U/S. 144, BUT AS A RESULT OF THE LAPSES MENTIONED IN SECTION 144. TH AT IS, THE DISABLING PROVISION OF SECTION 184(5) COMES INTO PLAY ONLY WHEN THE ASSESS MENT IS FRAMED U/S. 144 FOR THE REASON OF THE ASSESSEE COMMITTING ANY FAILURE AS ME NTIONED IN SECTION 144. THIS IS PRECISELY WHAT HAS HAPPENED IN THE INSTANT CASE, WI TH THERE BEING A SERIES OF FAILURES AS SPECIFIED IN SECTIONS 144(1)(B) AND 144(1)(C). I N THE FACTS OF THAT CASE, SECTION 144 WAS INVOKED ON ACCOUNT OF APPLICATION OF SECTIO N 145(3) OF THE ACT. THERE WAS, CLEARLY, NO DEFAULT OF THE NATURE SPECIFIED IN SECT ION 144, FOR SECTION 184(5) TO BECOME APPLICABLE. THE CITED DECISION IN VIJAY VEER SINGH (SUPRA), THUS, ON FACTS, AS WELL AS IN LAW, SUPPORTS THE CASE OF THE REVENUE AND NOT OF THE ASSESSEE. AT THE SAME TIME, WITHOUT DOUBT, THE INTEREST DISALLOWED C ANNOT BE ASSESSED U/S. 28(V) IN THE HANDS OF THE PARTNERS, I.E., IN VIEW OF SECTION 184(5) ITSELF, SO THAT, WHERE SO, THE SAME WOULD REQUIRE BEING EXCLUDED. 4.4 I DECIDE ACCORDINGLY, DISMISSING GROUNDS (C) TO (F) OF THE APPEAL; GROUNDS (A) AND (B) BEING GENERAL IN NATURE, WARRANTING NO ADJUDICATION. 5. THE SECOND ISSUE RAISED IS WITH REGARD TO THE DI SALLOWANCE SUSTAINED BY THE LD. CIT(A) AT RS.32,500, I.E., AT 1/4 OF THE CLAIM FOR SHOP EXPENSES (AT RS.1,29,898), AS AGAINST AT 50% BY THE AO. THE ASSESSEE (THROUGH ITS COUNSEL) WAS DURING HEARING ASKED OF THE SHOP EXPENSES CLAIMED FOR THE PRECEDING YEAR/S, TO NO ANSWER. NO CASE FOR THE DISALLOWANCE BEING EXCESSIVE IS MAD E OUT. THE SAME IS ACCORDINGLY CONFIRMED. ITA NOS. 146 & 147/ASR/2014 (AYS 2007-08 & 2008-09) GULZAR S INGH GURBACHAN SINGH V. CIT 6 6. THE LAST GD. (H) OF THE APPEAL IS QUA CONFIRMATION OF THE DISALLOWANCE OF THE CASH DISCOUNT EXPENDITURE, CLAIMED AT RS.22,905, IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE. THE ASSESSEES CONTENTION B EFORE ME AS TO NO VOUCHERS HAVING BEEN CALLED FOR IN THE ASSESSMENT PROCEEDING S, STOOD REPELLED BY THE LD. DR WITH REFERENCE TO THE AOS CLEAR FINDING OF THE FAI LURE TO PRODUCE BOOKS OF ACCOUNT AND VOUCHERS (AT PARA 4 OF HIS ORDER); HE, RATHER, GOING ON TO STATE THAT NO BOOKS OF ACCOUNT WERE MAINTAINED IN THE REGULAR COURSE OF BU SINESS. THE ASSESSEE, A COMMISSION AGENT, HAS DISCLOSED A GROSS COMMISSION RECEIPT OF RS.5.42 LACS, WITH THE MAXIMUM EXPENDITURE INCURRED BEING UNDER THE HE AD STAFF SALARY (AT RS.48,000). THE TOTAL SALES FOR THE YEAR ARE AT RS. 0.71 LACS. THE CLAIM OF CASH DISCOUNT IS, UNDER THE CIRCUMSTANCES, WHOLLY UNTENA BLE AND, BESIDES, UNEXPLAINED AT ANY STAGE. I DECIDE ACCORDINGLY, CONFIRMING THE IMP UGNED DISALLOWANCE. 7. IN THE RESULT, THE ASSESSEES APPEALS ARE DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 15, 2019 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATE: 15.02.2019 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: GULZAR SINGH GURBACHAN SINGH , GRAIN MARKET, GONIANA MANDI, DISTRICT BATHINDA (2) THE RESPONDENT: ITO, WARD 2(1), BATHINDA (3) THE CIT(APPEALS), BATHINDA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORD ER