G.Venkgatesan, Coimbatore V. ITO, Tiruppur

ITA 1514/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7706 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 01-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 27-05-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: S SIVASHANMUGAM
• Section: 80C; 143(3)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY , JUDICIAL MEMBER ./ I T.A. NO. 1 514 /MDS/2016 / ASSESSMENT YEAR :20 11 - 12 SHRI G. VENGATESAN, 77/35, SATHYANARAYAN PURAM, CHINTHAMANIPUDUR EXTN., COIMBATORE 641 103. [PAN:A B VPV2353B] VS. THE INCOME TAX OFFICER , WARD 1 ( 6 ) , TIRUPPUR. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI S . SIVA S HANMUGAM , ADVOCATE / RESPONDENT BY : SHRI SUPRIYO PAL , JCIT / DATE OF HEARING : 01 . 1 2 .201 6 / DATE OF P RONOUNCEMENT : 28 .02 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 3 , C OIMBATORE , DATED 29 .0 3 . 2016 RELEVANT TO THE ASSESSMENT YEAR 20 11 - 12 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE IN RESPECT OF RECEIPTS FROM EPF. I.T.A. NO . 1514 /M/ 16 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNER IN M/S. SOUNDER TEXTILES. AND FILED HIS RETURN OF INCOME ON 14.10.2011 RETURNING TAXABLE INCOME OF .7,88,000/ - . THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] WAS ISSUED AND SERVED ON 10.08.2012. THE DETAILS FILED BY THE ASSESSEE WERE EXAMINED AND THEREAFTER THE AS SESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ASSESSING TAXABLE INCOME AT .22,19,780/ - BY MAKING ADDITION/DISALLOWANCE. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND RAISED THE GROUND WITH REGARD TO THE DISALLOWANCE IN RESPECT OF RECEIPTS FROM EPF. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FACTS OF THE CASE, THE LD. CIT(A) UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE WAS ONE OF THE PARTNERS IN M/S. SOUNDER TEXTILES, A PARTNERSHIP FIRM. THE ASSESSEE HAS NOT CLAIMED ANY SALARY FROM THE FIRM DURING RELEVANT PREVIOUS YEAR. THE ASSESSEE HAS RECEIVED A SUM OF .10,16,107/ - FROM THE EPF ACCOUNT WHICH WAS CONTRIBUTED BY ASSESSEE S PARTNERSHIP FIRM TO THE EPF ACCOUNT OF . 46,345/ - AND PARTNER S CONTRIBUTION OF .9,71,762/ - . IT WAS THE SUBMISSION I.T.A. NO . 1514 /M/ 16 3 THAT THE ASSESSEE WAS NOT IN RECEIPT OF SALARY AND NOWHERE CLAIMED A NY DEDUCTION UNDER SECTION 80C OF THE ACT. 6. WITH REGARD TO THE ISSUE, I N THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT 'THE ASSESSEE'S PERSONAL BANK ACCOUNT ALSO HAD CERTAIN RECEIPTS (RS. 9717621 - AND RS. 46435/ - ) WHICH THE AR STATED W ERE RECEIPTS ON ACCOUNT OF HIS MATURITY SUM RECEIVED FROM THE EPF ACCOUNT THE AR STATED THAT THE FIRM M/S. SOUNDAR TEXTILES HAS CONTRIBUTED TO THE EPF ACCOUNT. THERE ARE NO DEBITS TO HIS CAPITAL OR CURRENT ACCOUNT WITH THE FIRM FOR EITHER THE EMPLOYEES CON TRIBUTION OR FOR HIS OWN PORTION OF THE CONTRIBUTION. ON THE OTHER HAND, THE ASSESSEE HAS NOT ADMITTED ANY INCOME IN HIS HAND FOR THE SUBSCRIPTION PAID FROM THE FIRM. THE ASSESSEE IS A PARTNER IN THE FIRM AND HAS NO EMPLOYER - EMPLOYEE RELATIONSHIP WITH I T. HENCE, THE CONTRIBUTION BY THE FIRM SHOULD HAVE BEEN EITHER DEBITED TO HIS CAPITAL ACCOUNT OR SHOULD HAVE BEEN SHOWN AS HIS INCOME IN THE RELEVANT PYS. THESE HAVE NOT HAPPENED IN THE PAST. THE FIRM HAS SHOWN THIS EXPENSE AS PART OF ITS EPF DEDUCTIONS. T HE MATURITY SUM HAS FALLEN INTO THE ASSESSES'S LAP AS A WINDFALL FOR WHICH THE SOURCE HAS NOT BEEN EXPENDED BY HIM OR HAS BEEN OFFERED AS INCOME IN HIS HAND. THE ENTIRE RECEIPT THEREFORE BECOMES TAXABLE INCOME IN HIS HANDS IN THE YEAR OF RECEIPT AND WILL B E DEALT ACCORDINGLY.' IN VIEW OF THE ABOVE OBSERVATIONS, THE ASSESSING OFFICER DISALLOWED THE RECEIPTS FROM EPF AND BROUGHT TO TAX. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD . CIT(A) HAS OBSERVED AS UNDER: 6.1 IT IS CORRECT THAT THERE IS NO EMPLOYER - EMPLOYEE RELATIONSHIP BETWEEN THE PARTNER AND THE FIRM. THE CONTRIBUTION OF THE FIRM AS AN EMPLOYER IN THIS CASE WILL BECOME TAXABLE INCOME OF THE APPELLANT WHO IS PARTNER OF THE F IRM AS HE IS NOT EMPLOYEE OF THE FIRM. THIS MAKES 50% OF THE RECEIPTS I.E., EMPLOYEE S CONTRIBUTION TO EPF WHICH IS RECEIVED BY THE APPELLANT DURING THE FINANCIAL YEAR RELEVANT FOR ASSESSMENT YEAR I.T.A. NO . 1514 /M/ 16 4 2011 - 12 AS CLEARLY TAXABLE IN HIS HANDS. AS REGARDS THE APP ELLANT'S CONTRIBUTION IT IS STATED THAT IT HAS BEEN MADE FROM THE INCOME DERIVED FROM THE FIRM BY THE APPELLANT IN THE CAPACITY AS A PARTNER. IN SHORT, IT IS SHARE INCOME WHICH IS RECEIVED BY THE APPELLANT FROM THE FIRM AND IT IS NOT TAXABLE IN APPELLANT'S HANDS. IN THE ABSENCE OF EMPLOYER - EMPLOYEE RELATIONSHIP AND CONSIDERING THE EXEMPT NATURE OF SHARE INCOME, THIS PART OF CONTRIBUTION ALSO WHICH IS RECEIVED BY THE APPELLANT IN THIS FINANCIAL YEAR 2011 - 12 IS TAXABLE AND THE DISALLOWANCE IS CONFIRMED. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AS WELL AS CONFIRMATION STATEMENT FILED BY THE ASSESSEE . ON VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE, THE ASSESSING OFFICER NOTI CED THAT THE ASSESSEE HAS RECEIVED .9,71,762 AND .46,345/ - ON ACCOUNT OF MATURITY SUM FROM THE EPF ACCOUNT. BEFORE THE ASSESSING OFFICER, THE AR OF THE ASSESSEE HAS SUBMITTED THAT THE FIRM M/S. SOUNDER TEXTILES HAS CONTRIBUTED TO THE EPF ACCOUNT, BUT THE ASSESSING OFFICER COULD NOT FIND D EBITS TO HIS CAPITAL OR CURRENT ACCOUNT WITH THE FIRM FOR EITHER THE EMPLOYER S CONTRIBUTION OR FROM HIS OWN PORTION OF THE CONTRIBUTION. FURTHER, THE ASSESSEE HAS NOT ADMITTED ANY INCOME IN HIS HAND FOR THE SUBSCRIPTION PAID FROM THE FIRM. FURTHER, THE AS SESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE IS A PARTNER IN THE FIRM AND HAS NO EMPLOYER - EMPLOYEE RELATIONSHIP WITH IT AND THEREFORE, HE DISALLOWED THE ENTIRE RECEIPT FROM EPF ACCOUNT , WHICH WAS CONFIRMED BY THE LD. CIT(A) . 6.1 BEFORE US, BY FIL ING CONFIRMATION STATEMENT OF INCOME, THE ASSESSEE CLAIMS TO HAVE IN RECEIPT OF SALARY FROM THE PARTNERSHIP FIRM FROM 2003 - 04 TO I.T.A. NO . 1514 /M/ 16 5 2009 - 10 AND ONLY IN THE FINANCIAL YEAR 2010 - 11, THE ASSESSEE HAS NOT RECEIVED THE SALARY FROM THE PARTNERSHIP FIRM. UPON PERUSA L OF THE PARTNERSHIP DEED OF M/S. SOUNDER TEXTILES, WE FIND THAT THE PARTNERS ARE ELIGIBLE FOR SALARY, COMMISSION, REMUNERATION THAT MAY BE DECIDED FROM TIME TO TIME BY ALL PARTNERS AS PER CLAUSE (A) TO 10 OF THE DEED . THESE DETAILS WERE NOT AVAILABLE BEFO RE THE ASSESSING OFFICER OR BEFORE THE LD. CIT(A) AND FOR THE FIRST TIME, THE ASSESSEE HAS FILED THE ABOVE PARTICULARS BEFORE THE TRIBUNAL. UNDER THESE FACTS AND CIRCUMSTANCES, WE REMIT THE ENTIRE ISSUES BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ENTIRE PARTICULARS AND DECIDE THE ISSUES AFRESH IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON T HE 28 TH FEBRUARY , 201 7 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 28 . 0 2 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.