Shri Pratikkumar Bipinchandra Patel, Ahmedabad V. The Income Tax Officer, Ward-3, Gandhinagar

ITA 2063/AHD/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1266 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 13-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVETIA
• Section: 143(3); 148

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.2063/AHD/2015 / ASSTT. YEAR: 2009-2010 PRATIKKUMAR BIPINCHANDRA PATEL 249, RAMJI MANDIR KADVA PATEL VAS CHANDKHEDA AHMEDABAD. PAN : AOFPP 9064 G VS ITO, WARD-3 GANDHINGAR. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI S.N. DIVETIA REVENUE BY : SMT. SMITI SAMANT, SR.DR ! / DATE OF HEARING : 21/09/2015 '#$ ! / DATE OF PRONOUNCEMENT: 24 /09/2015 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF THE CIT(A), GANDHINAGAR DATED 28.4.2015 PASSED FOR THE ASSTT.YEAR 2009- 10. 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.6,35,573/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HIS RETURN OF INCOME ON 4.9.2010 DECLARING TOTAL INCOME OF RS.2,9 7,290/-. THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT ON 26.12.2011. THE AO HAD REOPENED THE ASSESSM ENT BY ISSUANCE OF NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT. THE AO HAS ITA NO.2063/AHD/2015 2 OBSERVED THAT THE ASSESSEE IS A PARTNER IN A FIRM V IZ. M/S.SYUOG INFRASTRUCTURE. THE CLAUSE 5 OF THE PARTNERSHIP DE ED CONTEMPLATES THAT A SIMPLE INTEREST AT THE RATE OF 12% PER ANNUM OR A T SUCH OTHER RATE AS MAY BE MUTUALLY AGREED UPON OR PRESCRIBED UNDER SEC TION 40(B)(IV) OF THE INCOME TAX ACT, 1961 WOULD BE APPLICABLE AND WO ULD BE GIVEN ON THEIR CAPITAL CONTRIBUTION. ACCORDING TO THE AO, T HE ASSESSEE HAD INVESTED CAPITAL OF RS.2,06,94,845/- IN THE PARTNER SHIP FIRM . HE OUGHT TO RECEIVE INTEREST INCOME ON THIS CAPITAL FROM THE FIRM AND SUCH INTEREST INCOME OUGHT TO BE OFFERED FOR TAXATION. THE LD.AO HAS CALCULATED SUCH INTEREST INCOME OF RS.6,35,573/-. SINCE THE ASSESS EE HAS NOT DISCLOSED THIS INTEREST INCOME IN THE RETURN, THE AO HAS REOP ENED THE ASSESSMENT. IN RESPONSE TO THE QUERY OF THE AO, IT WAS CONTENDE D BY THE ASSESSEE THAT A MEMORANDUM OF UNDERSTANDING WAS EXECUTED, WH EREBY, IT WAS PROVIDED THAT NO INTEREST WOULD BE PAID TO THE PART NERS ON THEIR CAPITAL CONTRIBUTION. SINCE NO INTEREST WAS PAID, THEREFOR E, THE ASSESSEE DID NOT RECOGNIZE THE INTEREST INCOME. THE LD.AO REJEC TED THIS PLEA OF THE ASSESSEE ON THE GROUND THAT THIS MEMORANDUM OF UNDE RSTANDING IS NOT ON A STAMP PAPER AND IT HAS NOT BEEN NOTARIZED. IT IS A SUBSEQUENT DEVELOPMENT AND IT IS CONTRARY TO THE CLAUSE (5) OF THE PARTNERSHIP DEED. HE GAVE PREFERENCE TO THE PARTNERSHIP DEED I NSTEAD OF MEMORANDUM OF UNDERSTANDING, AND ACCORDINGLY, MADE ADDITION OF RS.6,35,573/-. 4. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE HAS PLA CED ON RECORD THE COPY OF THE PARTNERSHIP DEED. A PERUSAL OF THE PAR TNERSHIP DEED WOULD INDICATE THAT THERE ARE SEVEN PARTNERS. TO OUR MIND THE VERACITY OF THE MEMORANDUM OF UNDERSTANDING OUGHT NOT TO BE DECIDED ON PERIPHERAL ISSUES, VIZ. IT WAS NOT ON STAMP PAPER, AND IT WAS NOT NOTARIZED ETC. THE LD.AO OUGHT TO HAVE VISUALIZED THE FACT THAT WH ETHER THE ITA NO.2063/AHD/2015 3 PARTNERSHIP FIRM HAS CLAIMED EXPENDITURE ON ACCOUNT OF INTEREST WHICH DEEMED TO HAVE BEEN PAID TO THE ASSESSEE. WHETHER OTHER PARTNERS HAVE MADE CAPITAL CONTRIBUTION ?. THEY HAD RECOGNI SED SUCH INTEREST INCOME IN THEIR RETURNS. THE AO OUGHT TO HAVE RECO RDED STATEMENT OF PARTNERS IN ORDER TO ASCERTAIN WHETHER MEMORANDUM O F UNDERSTANDING WAS ACTUALLY EXECUTED BY THE PARTNERS OR NOT. AT T HE CLOSE OF THE YEAR, IF THE PARTNERS HAVE DECIDED NOT TO GIVE INTEREST O N THE PARTNERS CAPITAL CONTRIBUTION, THEN NO INTEREST INCOME CAN BE SAID T O HAVE ARISEN IN THE HANDS OF THE PARTNERS. BUT, THIS IS A QUESTION OF FACT, WHICH CAN ONLY BE EXAMINED BY EXAMINING THE ACCOUNTS OF THE FIRM AS W ELL AS INDIVIDUAL PARTNERS AND BY RECORDING THE STATEMENT OF PARTNERS . THE APPROACH OF THE AO IS NOT IN ACCORDANCE WITH THE LAW, THEREFORE , WE SET ASIDE BOTH THE IMPUGNED ORDERS AND RESTORE THIS ISSUE TO THE F ILE OF THE AO FOR RE- ADJUDICATION. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 24 TH SEPTEMBER, 2015 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 24/09/2015