M/s. Attic Construction, Ahmedabad V. The Income tax Officer,Ward-9(2), Ahmedabad

ITA 1588/AHD/2011

• Counselvise Citation: 158820514 RSA 2011
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 08-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Assessee Lawyers: MRS URVASHI SHODHAN
• Keywords: Opportunity of being heard; Additional evidence

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MUKUL KR. SHRAWAT, JM AND A. K. GAROD IA, AM M/S ATTIC CONSTRUCTION, 64, SHARDANAGAR, PALDI, AHMEDABAD. VS. INCOME-TAX OFFICER, WARD 9(2), AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- MRS. URVASHI SHODHAN, AR RESPONDENT BY:- SHRI A. K. PATEL, AR DATE OF HEARING : 30/9/2011 DATE OF PRONOUNCEMENT : O R D E R PER A. K. GARODIA, ACCOUNTANT MEMBER . THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-XV, AHMEDABAD DATED 23.3.3011 FOR ASST. YEAR 2007-08. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- (1) THE LD. CIT(A)-XV HAS ERRED IN LAW AND FACTS IN PAR TLY ALLOWING THE APPEAL FOR ASSESSMENT YEAR 2007-08. (2) THE LD. CIT(A) HAS ERRED TO NOT ACCEPTING THE MODIF IED PARTNERSHIP DEED WITH EFFECT FROM 01.04.2005. ITA NO.1588/AHD/2011 ASST. YEAR :2007-08 ITA NO.1588/AHD/2011 ASST. YEAR 2007-08 2 (3) THE LD. CIT(A) HAS ERRED IN ARRIVING AT CONCLUSION IN NOT ACCEPTING THE COPY OF MODIFIED PARTNERSHIP DEED CON SIDERING THAT THE SAID IS ADDITIONAL EVIDENCE. (4) THE LD. CIT(A) HAS ERRED NOT ACCEPTING THE PRINCIPL E THAT THE NOTIONAL OR HYPOTHECATED INTEREST CAN NOT BE ADDED WITH THE INCOME OF THE FIRM. 2. THE BRIEF FACTS ARE THAT IT IS NOTED BY THE AO I N PARA 3 OF THE ASSESSMENT ORDER THAT ON GOING THROUGH THE CAPITAL ACCOUNT OF THE PARTNERS FILED ALONG WITH THE RETURN OF INCOME, IT WAS NOTIC ED THAT THERE WERE DEBIT BALANCES IN THE PARTNERS ACCOUNTS OF B.S. PANDYA H UF AND P. N. TALATI HUF ON WHICH NO INTEREST WAS CHARGED. THE AO ISSUED A SHOW CAUSE NOTICE AS TO WHY THE INTEREST ON DEBIT BALANCE OF P ARTNERS CAPITAL ACCOUNT SHOULD NOT BE CHARGED AND THE SAME SHOULD NOT BE AD DED TO THE TOTAL INCOME. IN RESPONSE THEREOF, THE ASSESSEE VIDE ITS LETTER DATED 24/12/2009 SUBMITTED BEFORE AO THAT LOOKING TO THE PERSPECTIVE OF THE BUSINESS OF THE FIRM, THE PARTNERS HAVE DECIDED THAT NO INTEREST BE CHARGED/PAID FOR FINANCIAL YEAR 2006-07. THE AO WAS NOT SATISFIED. H E NOTED THAT AS PER CLAUSE 6(D) OF THE PARTNERSHIP DEED FILED DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, IT CLEARLY MENTIONED THAT INTEREST SHA LL BE PAID/CHARGED ON CAPITAL ACCOUNTS OF THE PARTNERS. THE AO WORKED OUT THE INTEREST TO BE CHARGED ON DEBIT BALANCE OF THE PARTNERS AND SUCH I NTEREST WAS WORKED OUT BY THE AO @ 12% AND IN THIS MANNER HE MADE AN ADDIT ION OF RS.10,33,253/-. BEING AGGRIEVED THE ASSESSEE CARRIE D THE MATTER BEFORE LD. CIT(A). ITA NO.1588/AHD/2011 ASST. YEAR 2007-08 3 3. BEFORE LD. CIT(A), THE ASSESSEE FURNISHED A COPY OF MODIFIED PARTNERSHIP DEED WITH EFFECT FROM 1.4.2005 AND SUBM ITTED THAT AS PER MODIFIED PARTNERSHIP DEED, NO INTEREST IS CHARGEABL E ON DEBIT BALANCES OF PARTNERS CAPITAL ACCOUNT AND NO INTEREST IS PAYABLE TO THE PARTNERS ON CREDIT BALANCE IN THE PARTNERSHIP. THIS PARTNERSHIP DEED W AS NOT ADMITTED BY THE LD. CIT(A) ON THE BASIS THAT THIS IS A FRESH EVIDEN CE BECAUSE THIS PARTNERSHIP DIEE WAS NOT PRODUCED BEFORE THE AO. HE CONFIRMED THE ADDITION MADE BY THE AO BUT A PART RELIEF WAS ALLOW ED BY HIM WITH REGARD TO CREDIT BALANCE IN THE PARTNERS ACCOUNT. NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US FOR THE ADDITION CONFIRMED BY THE LD. CIT(A). 4. AT THE TIME OF HEARING THE LD. AR SUBMITTED A CO PY OF AGREEMENT MODIFYING THE DEED OF PARTNERSHIP, AS PER WHICH, TH IS AGREEMENT WAS EXECUTED ON 1.4.2005 AND AS PER CLAUSE (2) OF THIS AGREEMENT, THE FIRM WAS NOT REQUIRED TO PAY/CHARGE INTEREST ON THE CAPI TAL ACCOUNT OF THE PARTNERS W.E.F. 1.4.2005. AT THIS JUNCTURE, IT WAS POINTED OUT BY THE BENCH THAT AS PER THE PROVISIONS OF SUB-SECTION (4) OF SE CTION 184, WHERE ANY CHANGE IN THE PARTNERSHIP DEED HAD TAKEN PLACE IN T HE PREVIOUS YEAR, THE ASSESSEE FIRM SHALL FURNISH A CERTIFIED COPY OF THE REVISED PARTNERSHIP DEED ALONG WITH THE RETURN OF INCOME FOR THE ASST. YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE AMENDMENT IN THE PARTNERSHIP DEED HAS TAKEN PLACE. THE ITA NO.1588/AHD/2011 ASST. YEAR 2007-08 4 BENCH WANTED TO KNOW WHETHER THIS AGREEMENT MODIFYI NG THE DEED OF PARTNERSHIP HAS BEEN SUBMITTED ALONG WITH RETURN OF INCOME FOR THE ASST. YEAR2006-07 BECAUSE THIS AGREEMENT IS SAID TO HAVE BEEN EXECUTED ON 1.4.2005 AND THE SAME IS REQUIRED TO BE FURNISHED A S PER PROVISIONS OF SUB-SECTION (4) OF SECTION 184. IN REPLY, IT WAS SU BMITTED THAT THIS FACT IS NOT READILY AVAILABLE ON RECORD AND WAS NOT LOOKED INTO BY THE AUTHORITIES BELOW AND HENCE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO FOR FRESH DECISION AFTER ASCERTAINING THE FACTUAL POSIT ION IN THIS REGARD. LD. DR SUPPORTED THE ORDER OF LD. CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD AND GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. W E FIND THAT THE CASE OF THE ASSESSEE IS THAT AS PER THE REVISED PARTNERSHIP DEED, AS PER AGREEMENT EXECUTED ON 1.4.2005, NEITHER INTEREST IS PAYABLE T O THE PARTNERS ON CREDIT BALANCE OF PARTNERS CAPITAL ACCOUNT NOR INTEREST I S CHARGEABLE BY THE FIRM ON THE DEBIT BALANCE OF THE PARTNERS ACCOUNT, BUT THIS PARTNERSHIP DEED WAS NOT PRODUCED BEFORE THE AO AND WAS PRODUCED BEF ORE LD. CIT(A) FOR THE FIRST TIME BUT WAS NOT ADMITTED BY HIM BECAUSE THE SAME WAS A FRESH EVIDENCE AND THE REQUIREMENT OF RULE 46-A WAS NOT B EING COMPLIED WITH. BUT IN THE INTEREST OF JUSTICE, WE FEEL THAT THIS A SPECT SHOULD BE LOOKED INTO AS TO WHETHER AS PER REQUIREMENT OF SUB-SECTION (4) OF SECTION 184, A CERTIFIED COPY OF THIS REVISED PARTNERSHIP DEED WAS SUBMITTED OR NOT ALONG ITA NO.1588/AHD/2011 ASST. YEAR 2007-08 5 WITH THE RETURN OF INCOME FOR THE ASST. YEAR 2006-0 7. THIS ASPECT WAS NOT LOOKED INTO BY THE AUTHORITIES BELOW AND NECESSARY FACTS ARE NOT AVAILABLE BEFORE US. THIS ASPECT WAS TOTALLY LOST SIGHT OF BY THE AUTHORITIES BELOW AND HENCE, IF IT IS FOUND THAT CERTIFIED COPY OF TH E REVISED PARTNERSHIP DEED WAS SUBMITTED BY THE ASSESSEE ALONG WITH RETURN OF INCOME FOR ASST. YEAR 2006-07 AS PER THE REQUIREMENT OF SUB-SECTION (4) O F SECTION 184, THEN THE SAME HAS TO BE ADMITTED AND THE MATTER IS TO BE DEC IDED AS PER THIS REVISED PARTNERSHIP DEED. WE, THEREFORE, SET ASIDE THE ORDE RS OF AUTHORITIES BELOW AND RESTORE THE MATTER TO THE FILE OF AO FOR FRESH DECISION. THE AO SHOULD EXAMINE THE RECORD OF ASST. YEAR 2006-07 TO FIND OU T AS TO WHETHER A CERTIFIED COPY OF AGREEMENT MODIFYING THE DEED OF P ARTNERSHIP SAID TO HAVE BEEN EXECUTED ON 1.4.2005 HAVE BEEN SUBMITTED ALONG WITH THE RETURN OF INCOME FOR THAT ASST. YEAR OR NOT. IF THI S HAS BEEN SUBMITTED WITH THE RETURN OF INCOME OF THAT YEAR, THE AO HAD TO TAKE INTO ACCOUNT THIS AGREEMENT AND THIS ISSUE IN QUESTION HAS TO BE DECIDED BY HIM AFRESH. BUT IF THIS WAS NOT DONE, THEN THIS AGREEMENT MODIF YING THE DEED OF PARTNERSHIP HAS TO BE IGNORED AND AO SHOULD DECIDE THE ISSUE AFRESH IN THE LIGHT OF ORIGINAL PARTNERSHIP DEED DATED 1 ST SEPTEMBER, 2003. THE AO SHOULD PASS A SPEAKING ORDER AS PER ABOVE DISCUSSIO N AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. ITA NO.1588/AHD/2011 ASST. YEAR 2007-08 6 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 14/10/2011. SD/- SD/- (MUKUL KR. SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 4 /10/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 13/10/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..