M/S NIRMAL ELECTRONIC, HOSHIARPUR V. PR. COMMISSIONER OF INCME TAX -1, JALANDHAR

ITA 155/ASR/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5750 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 28-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 263; 40(b)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & DR. M.L. MEENA, ACCOUNTANT MEMBER) ITA. No: 155/Asr/2019 (Assessment Years: 2014-15) M/s Nirmal Electronic, G.T. Road, Khudda Tehsil Dasuya, Dist- Hoshiapur, PAN No. AAJFN2805N V/S Pr. C.I.T.-I, Jalandhar (Appellant) (Respondent) Appellant by : Shri J.S. Bhasin, A.R. Respondent by : Smt. Abha Rani Singh, CIT/DR (आदेश आदेशआदेश आदेश)/ORDER Date of hearing : 07 -12-2021 Date of Pronouncement : 23-12-2021 PER MAHAVIR PRASAD, J.M. 1. This appeal filed by the Assessee is directed against the order of the Ld. Pr. Commissioner of Income Tax order dated 16/01/2019 arising out of assessment order dated 29/08/2016. Assessee has taken following grounds of appeal: 1. That neither in facts nor on law, the Ld. Pr.CIT(A) was justified in exercising jurisdiction under section 263 of the Income-Tax Act, 1961, in this case. ITA No. 155/Asr/2019 . A.Y. 2014-15 2 2. That the Ld. Pr.CIT(A grossly erred in setting aside the assessment order of the Ld. A.O. passed u/s. 143(3), on a wholly wrong premise that the partners salary claimed by the assessee firm u/s. 40(b)(ii), was not allowable in terms of CBDT Circular No. 739 dated 25.03.1996. 3. That the Ld. A.O. having taken a view after taking partnership deed on record, the Ld. Pr.CIT(A) erred in substituting her view on the point, to set aside the order of A.. 4. That the order under appeal is against law and facts of the case. 2. Brief facts of the case are that Ld. Pr. CIT notices that order u/s. 143(3 of the Income Tax Act, 1961 dated 29.08.2016 in the case of the assessee has following discrepancies: “During the perusal of partnership deed it is noticed that there are three partners (i) Sh. Jagir sngh S/o Sh. Mohar Singh, (ii) Sh. Harpreet Singh S/o Sh. Jagir Singh and (iii) Sh. Sarbjit Singh S/o Sh. Jagir Singh. As per para 7 of the partnership deed, it has been mentioned that the remuneration to the working partners of the firm will be the amount of remuneration allowable under the provision of section 40(b)(v) of the Income-tax Act, 1961 and remuneration to the working partners will be paid as party No. 1 @ 20%, party No. 2 @ 40% and party No. 3 @ 40%. It is noticed that the salary has not been quantified in the deed as it has been mentioned in the ratio which is not allowable as per section 40(b)(ii). While framing assessment the salary of Rs. 12,00,000/- debited by the assessee firm in P & L a/c was required to be disallowed and added to the income of the assessee which in this case has not been done by the A.O.” 3. In response to the said notice, Ld. A.R. filed detailed reply and stated that all the details have already been filed by the Ld. A.O. but Ld. CIT did not agree with the contention of the assesee and held that order passed by the Assessing Officer on 29.08.2016. Erroneous insofar as it is pre judicial to the interest of the revenue and said order was set aside to the extent to the file of the Assessing Officer to pass fresh order after making necessary enquiries/investigation. We have been informed that pursuant to the order u/s. 263 Ld. A.O has already made addition in the hands of the assessee. ITA No. 155/Asr/2019 . A.Y. 2014-15 3 4. Now assessee has come before us by way of an appeal. 5. We have gone through the relevant record and impugned order. In this case, the assessee firm is a partnership firm and it is mentioned in the partnership deed that all partner will be the working partners within the meaning of section 40(b) and to be paid monthly salary as per the Income Tax provisions. 6. After seeing the paper book filed by the Ld. A.R. wherein at page no. 1, assessee has already furnished the copy of the partnership deed before A.O. and also furnished the capital account of the all partners. The Ld. A.O. did not point out any ambiguity in the documents filed by the assessee. The Ld. A.O. has examined and verified each and every details pertaining to remuneration to the partners. 7. The Hon’ble Supreme Court has held in the matter of CIT vs Greenworld Corporation (2009) 181 Taxmann.com 111 (SC) held that both the conditions precedent for exercising the jurisdiction u/s. 263 are conjunctive and not disjunctive. The Hon’ble Court has held that assessment order should not be interfered only because another view is possible. 8. In the matter of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC), has observed “ that every loss of revenue as a consequence of the order of the A.O. cannot be treated as prejudicial to the interest of the revenue. If the AO has adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two view are possible and the A.O. has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of revenue, unless the view taken by the A.O. is unsustainable in law. 9. The Hon’ble Calcutta High Court in the matter of Pr.CIT vs. Kesoram Inds Ltd. (2020) 423 ITR 180 (Cal) in which, the issue on which order u/s. 263 was passed, was ITA No. 155/Asr/2019 . A.Y. 2014-15 4 not the subject matter of show cause notice, nor even it was indicated in the notice that the A.O. had not made adequate enquires, the Tribunal orders, quashing the order was upheld by the High Court. 10. The Co-ordinate Bench in the matter of Rubber Wings vs. ITO ITA No. 261/Asr/2012 it was held that the claim of salary was allowable if the manner of quantification of salary was specified by the assessee. 11. Thus, in view of the above discussion, we set aside the order of the Ld. Pr. CIT and allow the appeal of the assessee. 12. In the result, appeal filed by the Assessee is allowed. Order pronounced U/R 34(4) on 23-12-2021 Sd/- Sd/- (DR. M. L. MEENA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 23/12/2021 Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER Deputy/Asstt.Registrar ITAT,Amritsar