Southend Project, New Delhi V. ACIT, New Delhi

ITA 201/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7602 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 04-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Assessee Lawyers: MANOJ SHUKLA
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SH. I.C. SUDHIR , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 201 /DEL/ 2014 ASSESSMENT YEAR: 2007 - 08 M/S. SOUTHEND PROJECT, B - 4/43, 2 ND FLOOR, SAFDARJUNG ENCLAVE, NEW DELHI VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 24(1), NEW DELHI GIR/PAN : AABAS3310F (APPELLANT) (RESPONDENT) APPELLANT BY SH. MANOJ SHUKLA, CA RESPONDENT BY SMT. ANIMA BARNWAL, SR. DR. DATE OF HEARING 07.04.2016 DATE OF PRONOUNCEMENT 0 6 .06.2016 ORDER PER O.P. KANT , A. M. : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST ORDER DATED 22/11/2013 OF THE COMMISSIONER OF INCOME - TAX( APPEALS) - IX, NEW DELHI FOR ASSESSMENT YEAR 2007 - 08 RAISING FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN VIEW OF THE PROVISIONS OF LAW, THE ASSESSING OFFICER HAS ERRED IN DISALLOWING RS. 13,00,000/ - (THIRTEEN LACS) U/S. 40(BA) BEING THE SALARY/REMUNERATION PAID TO DIRECTORS OF SUKH REALTERS P. LTD. AND LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE. 2. ON FACTS AND CIRCUMSTANCES OF CASE, THE ASSESSING OFFICER IS WRONG AND UNJUSTIFIED IN INITIATING PENALTY PROCEEDINGS U/S 271(1) OF THE INCOME TAX ACT, 1961. 3. ANY OTHER GROUND AT THE TIME OF HEARING. 2. T HE FACTS IN BRIEF ARE THAT THE ASSESSEE, AN ASSOCIATION OF PERSON (AOP) FILED ITS RETURN OF INCOME ON 15/11/2007 D ECLARING TOTAL INCOME OF RS. 3,92,43, 963/ - . THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSING OFFICER 2 ITA NO. 201/DEL/2014 AY: 2007 - 08 OBSERVED THAT THE ASSESSEE HAD ALLOWED REMUNERATION O F RS. 13,00, 000/ - TO THE TWO DIRECTORS OF THE COMPANIES WHO WERE MEMBERS OF THE ASSESSEE AOP. THE ASSESSING OFFICER HELD THAT SUCH REMUNERATION PAID TO THE DIRECTORS WAS NOT AL LOWABLE ACCORDING TO SECTION 40(BA) OF THE ACT. THE LEARNED COMMISSIONER OF INCO ME - TAX ( APPEALS) ALSO UPHELD THE DISALLOWANCE HOLDING THAT D IRECTORS WERE THE REPRESENTATIVE S OF THE MEMBER COMPANY AND IN HIS OPINION DIRECTOR AND MEMBER COMPANIES WERE INSEPARABLE. AGGRIEVED, THE ASSESSEE IN APPEAL BEFORE US. 3. IN GROUND NO. 1, THE ASSE SSEE HAS CHALLENGED DIS ALLOWANCE OF RS. 13, 00,000/ - PAID AS SALARY/REMUNERATION TO DIRECTORS OF MEMBER COMPANIES. 3.1 BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE REMUNERATION OF RS. 10.60 L ACS WAS PAID TO MR . SUKHBIR SINGH AND RS. 2.40 L ACS WAS PAID TO S MT . DAYAWATI TOWARDS THE SERVICES RENDERED BY THEM IN THEIR INDIVIDUAL CAPACITY AND COMMENSURATE WITH EXPERIENCE AND REQUIREMENT OF THE PROJECT CARRIED OUT UNDER THE ASSESSEE AOP AND THEY WERE NOT THE MEMBER OF THE AOP . HE FURTHER SUBMITTED THAT THE LEARNE D COMMISSIONER OF INCOME - TAX ( APPEALS) HAD TREATED THEM IN REPRESENTATIVE CAPACITY OF THE MEMBER COMPANIES WITHOUT ANY EVIDENCES ON RECORD. 3.2 ON THE OTHER HAND, THE LEARNE D S ENIOR DEPARTMENTAL REPRESENTATIVE (DR), R ELYING ON THE ORDERS OF THE AUTHORITIES BELOW SUBMITTED THAT THE REMUNERATION PAID TO BOTH THE DIRECTORS WAS IN VIOLATION OF THE PROVISIONS OF SECTION 40 (BA) OF THE ACT. 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY I SSUE IN DISPUTE IN THE GROUND IS WHETHER THE DIRECTORS WERE REPRESENTATIVE OF THE MEMBER COMPANIES. WE FIND THAT THERE IS NO EVIDENCE ON RECORD WHICH COULD SUGGEST THAT THESE TWO D IRECTORS WERE REPRESENTING THE MEMBER COMPANIES. THE REMUNERATION HAS BEEN P AID TO THEM FOR THE SERVICES RENDERED BY THEM FOR THE ASSESSEE AOP AND LOOKING TO THE EXPERIENCE IN THEIR RESPECTIVE FIELD. WE ARE OF THE OPINION THAT MR SUKHBIR SINGH AND MRS DAYAWATI 3 ITA NO. 201/DEL/2014 AY: 2007 - 08 WERE NOT MEMBERS OF THE AOP EITHER IN THE INDIVIDUAL CAPACITY OR IN THE REPRESENTATIVE CAPACITY AND , THEREFORE , REMUNERATION PAID TO THEM IS NOT DISALLOWABLE UNDER THE PROVISIONS OF SECTION 40(BA) OF THE ACT. ACCORDINGLY, THE GROUND OF THE APPEAL IS ALLOWED. 4. IN RESPECT OF INITIATION OF PENALTY PROCEEDING UNDER SECTION 27 1(1)(C) OF THE ACT. WE FIND THAT THIS GROUND IS PREMATURE AS PENALTY PROCEEDINGS WERE MERELY INITIATED AND NOT LEVIED BY THE ASSESSING O FFICER IN THE ASSESSMENT ORDER, THEREFORE , THE GROUND BEING INFRUCTUOUS, WE DISMISS THE SAME. 5. IN THE RESULT , THE APP EAL OF THE ASSESSEE IS PARTLY ALLOWED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 6 TH JUNE , 2016 . SD/ - SD/ - ( I.C. SUDHIR ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 6 TH JUNE , 2016 . LAPTOP / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI