The ACIT, Circle-2, Ahmedabad V. M/s. Kaypee, Ahmedabad

ITA 1909/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85505 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 02-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Assessee Lawyers: S N DIVATIA
• Keywords: Business income
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFO RE SHRI SHAILENDRA KR. YADAV, J.M. & SHRI ANIL CHATURVEDI , A.M.) I. T. A. NO. 1909 / AHD/ 20 1 1 (A SSESSMENT YEAR: 2008 - 09) THE A.C.I.T CIRCLE - 2, AHMEDABAD V/S M/S. KEYPEE MAHARAJA COMPLEX, NR. RELIEF CINEMA, RELIEF ROAD, AHMEDABAD (APPELLANT) (R ESPONDENT) PAN: AABFK 6935B APPELLANT BY : SHRI ROOP CHAND, SR. D.R. RESPONDENT BY : SHRI S. N. DIVATIA, A.R. ( )/ ORDER DATE OF HEARING : 18 - 12 - 2014 DATE OF PRONOUNCEMENT : 05 - 01 - 2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) - XVI, AHMEDABAD DATED 24.05.2011 FOR A.Y. 2008 - 09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSH IP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF FOAM, RUBBER AND RAXINE ETC. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 08 - 09 ON 28.09.2008 DECLARING TOTAL INCOME OF RS. 43,60,180/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FR AMED UNDER SECTION ITA NO 1909/AHD/2011 . A.Y. 2008 - 09 2 143(3) VIDE ORDER DATED 22.11.2010 AND THE TOTAL INCOME WAS DETERMINED AT RS. 83,04,468/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 24.11.2011 ALLOWED THE APPEAL OF THE ASSESSEE. A GGRIEVED BY THE ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US AND THE GROUNDS RAISED BY REVENUE ARE AS UNDER: - 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OUT OF REMUNERATION TO PARTNERS AMOUNTING TO R S. 29,44,288/ - HOLDING THAT IT IS AS PER TERMS AND CONDITIONS OF THE PARTNERSHIP DEED. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT A SURVEY U/S. 133A WAS CARRIED OUT ON 18.09.2007 WHEREIN THE PARTNER OF ASSESSEE SHRI KAMLESH KAKWANI HAD ADMITTED EXCESS STOCK OF RS. 75,00,412/ - AND HAD AGREED TO PAY THE TAX ON THE EXCESS STOCK. A.O NOTICED THAT THE EXCESS STOCK OF RS. 75 LACS WAS CREDITED IN THE PROFIT AND LOSS ACCOUNT AND PARTNERS REMUNERATION OF RS. 29,94,288/ - U/S. 40 B(V) WAS CLAIMED OR THE EXCESS STOCK DISCLOSED . A.O WAS OF THE VIEW THAT THE EXCESS STOCK FOUND AT THE TIME OF SURVEY WAS UNEXPLAINED AND THEREFORE RELYING ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHAMMAD HAZI HASAN VS. CIT 247 ITR 290 (GUJ) HELD THAT THE AMOUNT DECLARED DURING SURVEY CANNOT BE CONSIDERED FOR DETERMINING THE REMUNERATION TO PARTNERS. HE ACCORDINGLY DISALLOWED THE REMUNERATION OF RS. 29,44,288/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO AFTER CO NSIDERING THE VARIOUS DECISIONS , DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER: - 4.5 AFTER CONSIDERING THE AFORESAID DISCUSSION, I AM OF THE, OPINION THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN WORKING OUT THE REMUNERATION OF WORKING PARTNERS AFTER REDUCING THE INCOME OF RS. 75,00,000/ - ON ACCOUNT OF EXCESS STOCK FROM THE PROFIT OF THE FIRM. SAME IS THE VIEW EXPRESSED BY VARIOUS JUDICIAL AUTHORITIES AS RELIED UPON BY THE LD. COUNSEL AND THE DETAILS ARE REPRODUCED IN PARA - 4.1 ABOVE. THE ITA NO 1909/AHD/2011 . A.Y. 2008 - 09 3 HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR VS. S.K. SRIGIRI & BROS. (2008) 20 (1) ITCL 248 (KARN - HC), THE HON'BLE BANGLORE TRIBUNAL IN THE CASES OF DEEPA AGRO AGENCIES VS. ITO 98 TTJ (BANG.) 766 AND ROYALE SUNRISE V. ITO 99 TTJ (BANG.) 1305 AND THE HON'BLE RAJKOT TRIBUNAL IN THE CASE OF ITO VS. JAMANDAS MULJIBHAI 99 TTJ (RAJKOT) 197 HAD EXPRESSED THE VIEW THAT PARTNERS' REMUNERATION CAN BE ALLOWED OUT OF ADDITIONAL BUSINESS INCOME SURRENDERED DURING SURVEY. THE REMUNERATION TO PARTNERS IS WORKED OUT FROM THE BUSINESS INCOME ON THE BASIS OF TERMS AND CONDITIONS OF THE PARTNERSHIP DEED. THE APPELLANT FIRM HAD CORRECTLY WORKED OUT THE REMUNERATION PAYABLE TO THE WORKING PARTNERS OUT OF THE PROFIT AS PER PROFIT AND LOSS ACCOUNT AND THE PROFIT AS PER PROFIT AND LOSS ACCOUNT IS INCLUSIVE OF THE INCOME SURRENDERED DURING THE COURSE OF SURVEY. IN VIEW THEREOF, THERE IS NO JUSTIFICATION FOR THE DISALLOWANCE OF REMUNERATION TO PARTNERS AND MAKING ADDITION OF RS. 29,44,288/ - . THE ADDITION WAS NOT RIGHTLY MAD E AND THE SAME IS HEREBY DELETED. THE SECOND GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. SUPPORTED THE ORDER OF CIT(A) AND FURTHER RELIED ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHILPA DYEING AND PRINTING MILLS PVT. LTD. (2013) 39 TAXMAN.COM 3 (GUJ) AND THE DECISION OF AHMEDABAD TRIBUNAL IN THE CASE OF NAVBHARAT PACKAGING COMPANY ITA NO . 70/AHD/2013 ORDER DATED 10.01.2014. HE ALSO PLACED ON RECORD, THE COPY OF THE AFORESAID DECISIONS . HE THUS SUPPORTED THE ORDER OF CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) AFTER RELYING ON THE V ARIOUS DECISIONS CITED IN HIS ORDER HAS HELD THAT THE PARTNERS REMUNERATION CAN BE ALLOWED OUT OF THE ADDITIONAL BUSINESS INCOME SURRENDERED DURING THE SURVEY. BEFORE US NO MATERIAL HAS BEEN PLACED ON RECORD BY REVENUE TO ESTABLISH THAT THE ASSESSEE WAS EN GAGED IN ANY OTHER BUSINESS ACTIVITY OTHER THAN THAT DISCLOSED BY ASSESSEE NOR COULD ESTABLISH THAT THE AMOUNT OFFERED FOR TAX AND CREDITED IN THE BOOKS IS NOT THE BUSINESS INCOME OF THE ASSESSEE. FURTHER REVENUE HAS NOT BROUGHT ITA NO 1909/AHD/2011 . A.Y. 2008 - 09 4 ON RECORD ANY CONTRARY BINDING DE CISION IN ITS SUPPORT NOR COULD CONTROVERT THE FINDINGS OF CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 05 - 01 - 201 5 . SD/ - SD/ - (SHAILENDRA KR. YADAV ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH 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,AHMEDABAD