ITO, New Delhi V. M/s Rameshwar Synthetics, New Delhi

ITA 1862/DEL/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8858 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 12-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: RAJ KUMARCA

Judgement Text

ITA NO. 1862/D/2011 AY: 2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.1862/DEL/2011 ASSESSMENT YEAR : 2007-08 INCOME TAX OFFICER, VS RAMESHWAR SYNTHETICS , WARD 28(2), 13-15, KUCHA USTAD DAG, NEW DELHI. CHANDNI CHOWK, NEW DELHI. (PAN: AAAFR6284R) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI VIKRAM SAHAY, SR.DR RESPONDENT BY : SHRI RAJ KUMAR,CA DATE OF HEARING: 12.02.2015 DATE OF PRONOUNCEMENT: 27.2.2015 O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THE ABOVE APPEAL HAS BEEN FILED BY THE REVENUE AGAI NST THE ORDER OF CIT(A)-XXV, NEW DELHI DATED 15.02.2011 PERTAINING T O AY 2007-08. THE SOLE GROUND RAISED BY THE REVENUE READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN L AW THE LD. CIT(A) HAS ERRED IN DELETING THE DEMAND OF RS.5 2,53,256/- WITHOUT APPRECIATING THE FACT THAT THERE WAS NO MEN TION OF ANY LIABILITY TO BE PAID BY THE ASSESSEE TO SHRI RAMESH KUMAR JAITWANI ON HIS RETIREMENT W.E.F. 1.4.2005. 2. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RECORD PLACED BEFORE US. LD. DR SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN ITA NO. 1862/D/2011 AY: 2007-08 2 DELETING THE DEMAND OF RS.52,53,256/- WITHOUT APPRE CIATING THE FACT THAT THERE WAS NO MENTION OF ANY LIABILITY TO BE PAID BY THE A SSESSEE TO SHRI RAMESH KUMAR JAITWANI ON HIS RETIREMENT W.E.F. 1.4.2005. REPLYING TO THE ABOVE, LD. AR SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE AS DEDUCTION AND THE ASSESSEE HAS ALSO NOT GOT ANY PROFIT OUT OF ANY CESSATION OF LIABILITY, THEREFORE, WRONG ADDITION MADE BY THE AO WAS RIGHTL Y DELETED BY THE CIT(A). 3. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS OF BOTH THE SIDES, AT THE OUTSET, WE NOTE THAT THE CIT(A) GRANTED RELIEF FOR THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND FINDINGS:- 4. THE AO HAS MADE THE ADDITION OF RS 52,53,256/- I.E. THE AO HAD ADDED BACK BOTH THE AMOUNTS OF RS 43,93, 256/- AND RS 8,60,0001- ON THE GROUND THAT THERE WAS NO REQUIREMENT OF PAYMENT BY THE DELHI BRANCH TO THE L UDHIANA BRANCH AS THE ACCOUNTS WERE SAID TO BE TREATED AS S ETTLED AS PER CLAUSE-3 OF THE PARTNERSHIP DEED AFTER THE SEPA RATION OF THE BUSINESS AND ALSO ON THE GROUND THAT THERE WAS NO D IRECT CONFIRMATION FROM THE LUDHIANA PARTY. THE MAIN GROU ND OF DISALLOWANCE BY THE AO IS THAT ONCE THE ACCOUNTS AR E SAID TO BE TREATED AS SETTLED IT MEANS NOTHING IS TO BE PAI D OR RECEIVED BY EITHER OF THE PARTIES. 5.5. THE ASSESSEE HAS SUBMITTED THAT ALL THE DETAIL S AND CONFIRMATIONS WERE SUBMITTED TO THE AO BUT THE SAME WAS NOT CONSIDERED BY THE AO. IT IS SUBMITTED THAT THE PART NERS OF THE FIRM WERE THE COUSIN BROTHERS AND THEY HAVE DECIDED TO RUN INDEPENDENT BUSINESSES AT LUDHIANA AND AT DELHI AND THEY HAVE DRAWN A PARTNERSHIP DEED FOR THIS PURPOSE AND THE PAYMENTS HAVE BEEN MADE AS PER THE PARTNERSHIP DEED ITSELF. IT IS SUBMITTED THAT THE PAYMENTS TO LUDHIANA PARTY IS NOT CLAIMED AS AN EXPENDITURE IN BUSINESS. IT IS ALSO S UBMITTED THAT THE LIABILITIES ARE BEING PAID AND THERE IS NO CESS ATION OF ITA NO. 1862/D/2011 AY: 2007-08 3 LIABILITY WHICH SHOULD INVITE ANY ADDITION. IT IS A LSO SUBMITTED THAT THE PAYMENTS ARE MADE THROUGH THE BOOKS OF ACC OUNTS OF THE ASSESSEE OUT OF ITS OWN CAPITAL AND CONFIRMATIO N OF THE PARTY WAS ALSO SUBMITTED TO THE AO AND THE PAN OF T HE LUDHIANA PARTY IS AAIPR6098K BUT THE SAME HAS BEEN IGNORED BY THE AO WITHOUT ANY VALID REASON. 5.6. I HAVE CONSIDERED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I FIND CONSIDERABLE MERIT IN THE SUBMISSION OF THE ASSESSEE. SO FAR AS THE FACTS ARE CONCERNED THERE WAS A SINGLE BUSINESS OF THREE PART NERS NAMELY SH RAMESH JAITWANI, WAS LOOKING AFTER THE LU DHIANA HEAD OFFICE BRANCH AND THE OTHER TWO PARTNERS SH MA DAN LAL JAITWANI AND SH ANUJ JAITWANI WERE LOOKING AFTER TH E DELHI BRANCH AND THEY HAVE DECIDED TO SEPARATE AND DO THE IR INDEPENDENT BUSINESS AND THEY HAVE DRAWN A PARTNERS HIP DEED ACCORDINGLY. AS PER THE PARTNERSHIP DEED VIDE PAGE- 1 (SECOND PARA) THE ASSETS AND LIABILITY OF THE LUDHIANA BRAN CH IS TO BE TAKEN CARE OF BY SH RAMESH JAITWANI WHEREAS THE ASS ETS AND LIABILITY OF DELHI BRANCH IS TO BE TAKEN CARE OF BY THE OTHER TWO PARTNERS SH MADAN LAL JAITWANI AND SH ANUJ JAITWANI WERE LOOKING AFTER THE DELHI BRANCH. AS A CONSEQUENCE OF THE PARTNERSHIP DEED, THE DELHI BRANCH HAS TO MAKE THE PAYMENTS OF LIABILITIES TO THE LUDHIANA BRANCH AND IN THE PR OCESS THE PAYMENT OF RS 8,60,000/- HAS BEEN MADE DURING THE C URRENT AY 2007-08OUT OF THE TOTAL LIABILITY OF RS.43,93,256/- . THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE AS A DEDUC TION AND THE ASSESSEE HAS ALSO NOT GOT ANY PROFIT OUT OF ANY CESSATION OF LIABILITY. AFTER CONSIDERING ALL THE FACTS AND CIRC UMSTANCES OF THE CASE, I AM OF THE VIEW THAT THERE IS MERIT IN T HE SUBMISSION OF THE ASSESSEE AND I DO NOT FIND ANY MERIT TO SUST AIN THE ADDITION OF THE AO AND ACCORDINGLY, THE ADDITION MA DE BY THE AO IS DELETED. 4. IN VIEW OF ABOVE, WE ARE UNABLE TO SEE ANY INFIR MITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE ORDER OF T HE FIRST APPELLATE AUTHORITY AS DELHI BRANCH HAS TO MAKE PAYMENT OF LIABILITY TO TH E LUDHIANA BRANCH AND IN THE PROCESS, THE PAYMENT OF RS.8,60,000 HAS BEEN MADE D URING THE AY 2007-08 OUT OF THE TOTAL LIABILITY OF RS.43,93,256/- WHICH HAS ALSO BEEN SHOWN IN THE BALANCE ITA NO. 1862/D/2011 AY: 2007-08 4 SHEET OF DELHI BRANCH AS LIABILITY. WE MAY ALSO PO INT OUT THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE IN THE PROFIT & LOSS AC COUNT AS DEDUCTION AND THERE WAS NO CESSATION OF ANY LIABILITY RESULTING INTO RE TIREMENT OF SHRI RAMESH JAITWANI. IN THIS SITUATION, THE AO WAS NOT JUSTIF IED IN MAKING THE ADDITION WHICH WAS RIGHTLY DELETED BY THE CIT(A). ACCORDING LY, GROUND NO. 1 OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.2.2015. SD/- SD/- (R.S. SYAL) (CHANDRAMOHAN G ARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 27TH FEBRUARY 2015 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR