Sood Brij & Associates, New Delhi V. ACIT, New Delhi

ITA 2108/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77756 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 04-07-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 11-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Assessee Lawyers: S K SARKAR
• Keywords: Bonafide belief; Reassessment proceedings
• Section: 234B; 37(1); 147; 148

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI S. V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 2108 /DEL/ 2013 (ASSESSMENT YEAR: 2006 - 07 ) SOOD BRIJ & ASSOCIATES C - 72, BASEMENT, SOUTH EXTENSION - II NEW DELHI PAN: AACFS1960K VS. ACIT CIRCLE - 37(1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : S. K. SARKAR, CA RESPONDENT BY : RENUKA JAIN GUPTA, CIT DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD C IT(A) , XXVIII, NEW DELHI DATED 14.01.2013 FOR THE ASSESSMENT YEAR 2006 - 07 . 2. THE GROUNDS OF APPEAL PREFERRED BY THE ASSESSEE ARE AS FOLLOWS: - 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) XXVIII, DELHI HAS ERRED IN CONFIRMING THE INITIATION OF REASSESSMENT PROCEEDINGS U/S 147/ 148 OF THE ACT BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 37(1), NEW DELHI. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND THE LEARNED ASSISTANT COMMISSIONER OF INCOME - TAX HAVE ERRED IN LAW AS WELL AS ON FACTS IN NOT ALLOWING PARTNERS REMUNERATION U/S 40(B) OF THE INCOME - TAX ACT, 1961. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND THE LEARNED ASSISTANT COMMISSIONER OF INCOME - T AX HAVE ERRED IN NOT CONSIDERING THE PAYMENT OF ADVANCE TAX PAID BY THE PARTNERS ON THE PARTNERS REMUNERATION WHILE COMPUTING INTEREST U/S 234B READ WITH SECTION 155(1A) OF THE INCOME TAX ACT, 1961. 4. THE APPELLANT - FIRM CRAVES FOR ITS RIGHTS, WITHOUT PRE JUDICE, TO ADD, DELETE, ALTER, MODIFY OR OTHERWISE PRESENT ANY GROUNDS OF APPEAL EITHER AT OR BEFORE HEARING OF THE APPEAL. 3. APROPOS VALIDITY OF INITIATION OF RE - ASSESSMENT PROCEEDINGS U/S 147/ 148 OF THE ACT. 4. THE UNDISPUTED FACTS ARE THAT NOTICE U/ S 148 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT) FOR THE ASSESSMENT YEAR 2006 - 07 WAS ISSUED ON 20 TH JANUARY 2010 BY ASSESSING OFFICER, A. K. DHIR, ACIT, CIRCLE 37(1), NEW DELHI. THE ASSESSEE REPLIED TO THE PAGE NO. 2 SAID NOTICE BY LETTER DATED 22 ND FEBRUAR Y 2011. NOTICE U/S 143(2) OF THE ACT WAS ISSUED BY GAURAV SHARMA ACIT, CIRCLE 37(1) NEW DELHI, BY NOTIC E DATED 04.07.2011. A CCORDING TO THE ASSESSEE , THE REASON TO RE - OPEN WAS COMMUNICATED TO IT ONLY ON 08 TH AUGUST 2011, MEANING THAT THE REASONS TO REOPEN WAS PURPORTEDLY RECORDED AND SUPPLIED TO IT WELL AFTER THE LIMITATION EXPIRED ON 31 ST MARCH 2011 . SO ACCORDING TO THE ASSESSEE , THE NOTICE BEFORE , RECORDING THE REASONS, TO REOPEN HAVE VITIATED THE ENTIRE RE - ASSESSMENT AND SO IS VOID - AB - INITIO. HOWEVER, WE FIND THAT T HERE ARE TWO F LA W S TO THE SAID CONTENTION, FIRSTLY THE OUTER LIMIT PRESCRIBED BY SECTION 149 WILL EXPIRE ONLY ON 31.03.2 013 FOR ASSESSMENT YEAR 2006 - 07 , WHICH IS THE RELEVANT YEAR FOR OUR CONSIDERATION SECONDLY THE REASONS WHICH IS ON RECORD IS FOUND TO BE NOT DATED ; AND THE REASONS HAVE BEEN RECORDED AND SIGNED BY THE ASSESSING OFFICER, WHO HAS SENT THE NOTICE U/S 148 ON 20 TH JANUARY 2010 AND NOT BY THE PRESENT ASSESSING OFFICER, WHO HAS SIMPLY FORWARDED THE COP Y OF THE REASONS RECORDED BY HIS PREDECESSOR A.O. ( A.K. DHIR) FROM WHICH WE CAN SAFELY INFER THAT THE REASON S WERE RECORD ED BEFORE THE ISSUE OF NOTICE BY THE PRESENT INCUMBENT. THIS INFERENCE OF OURS ALSO GET STRENGTH FROM THE ORDER OF THE CO - ORDINATE BENC H IN ASSESSEES OWN CASE IN ITA NO. 4738/DEL/2011 AND 4739/DEL/2011 FOR ASSESSMENT YEAR 2003 - 04 AND ASSESSMENT YEAR 2005 - 06. 15. AS FAR AS THE FIRST OBJECTION OF ASSESSEE IS CONCERNED, FROM THE DOCUMENTS FILED BY THE LD DR, AS NOTED ABOVE, IT IS EVIDENT THAT THE REASONS WERE RECORDED ON 30 TH MARCH, 2010 AND ON THE SAME DATE NOTICE U/S 148 WAS ISSUED. THE REASON WERE SUPPLIED TO THE ASSESSEE ON 22 ND NOVEMBER, 2010. THESE FACTS ARE NOT IN DISPUTE. THEREFORE, IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF A. G. HOLDINGS PVT. LTD. (SUPRA), THE RE - ASSESSMENT PROCEEDINGS CANNOT BE HELD TO BE BAD IN LAW WHEREIN, IN PARA 11 IT H AS BEEN OBSERVED AS UNDER: - THE FACTUAL SITUATION IN THE CASE BEFORE US IS HOWEVER DIFFERENT. THERE ARE NO TWO SSETS OF REASONS RECORDED BY THE RESPONDENT IN THE PRESENT CASE. THE REASONS WERE RECORDED ON 09.03.2011. IT WAS ON THE BASIS OF THESE REASONS THAT THE THE APPROVAL OF THE ADDITIONAL COMMISSIONER OF INCOME TAX WAS OBTAINED AND THEREAFTER NOTICE U/S 148 WAS ISSUED ON 15.03.2011. THERE IS NO DISPUTES THAT THE NOTICE WAS SERVED ON THE PETITIONER. THERE IS NO DISPUTES THAT THE NOTICE WAS SERVED ON T HE PETITION ER . THERE IS ALSO NO DISPUTE THAT THE REASONS RECORDED BY THE RESPONDENT ON 09.03.2011 WERE SUPPLIED TO THE PETITIONER 30.08.2012. THESE REASONS UNDISPUTEDLY WERE THE SAME AS WERE RECORDED BY THE ASSESSING OFFICER ON 09.03.2011. THE ONLY FEATURE IN THE PRESENT CASES IS THAT THERE WAS A DELAY ON 4 1/2 MONTHS IN SUPPLYING THE REASONS RECORDED BY THE ASSESSING OFFICER TO THE PETITIONER. THIS BY ITSELF CANNOT INVALIDATE THE REASSESSMENT PROCEEDINGS. THE FACTUAL SITUATION I N THE PRESENT CASE IS ENTIRE LY DIFFERENT FROM THE FACTS OF THE CASE BEFORE DIVISION BENCH OF THIS COURT IN HARYANA ACRYLIC MANUFACTURING CO. (SUPRA). THE RATIO LAID DOWN IN THAT CASE CAN THEREFORE HARDLY HAVE ANY APPLICATION TO THIS CASE. ACCORDINGLY, THE CONTENTION OF THE PETITION ER IS REJECTED . 16. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF A.G. HOLDINGS (SUPRA), WE REJECT THE FIRST PLEA RAISED BY THE ASSESSEE. PAGE NO. 3 5 . IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AND THE FACTS ENUMERATED ABOVE, WE ARE NOT INCLINED TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT REASSESSMENT WAS BAD IN ABSENCE OF REASONS TO RE OPEN BEING SUPPLIED TO IT AFTER LIMITATI ON PERIOD PRESCRIBED BY THE ACT. THEREFORE WE DISMISSES THIS GROUND OF THE ASSESSEE AND CONFIRM THE ORDER OF THE LD CIT(A). 6 . GROUND NO. 2 APROPOS NOT ALLOWING PARTNERS REMUNERATION U/S 40(B) OF THE ACT. 7 . WE FIND T HAT THIS ISSUE HAS BEEN ALREADY DECI DED BY THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08 IN ITA NO. 4738 AND 4739/DEL/2011. THE HONBLE HIGH COURT HAS HELD AS UNDER: - 20. BOTH THE PARTIES AGREED THAT THE ISSUE IS COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT AGAINST THE ASSESSEE IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007 - 08 WHEREIN, IT HAS BEEN HELD AS UNDER: '5. CLAUSE (III) AND OTHER CLAUSES IN SECTION 40 (B) SPECIFICALLY USE THE EXPRESSION 'IN ACCORDANCE WITH THE TERMS OF THE PARTNERSHIP DEED.' THIS CLEARLY INDICATES AND MANIFESTS THE LEGISLATIVE MANDATE THAT THE QUANTUM OF REMUNERATION OR THE MANNER OF COMPUTING THE QUANTUM OF REMUNERATION SHOULD BE STIPULATED IN THE PARTNERSHIP DEED. THE EXPRESSION 'IN ACCORDANCE WITH THE TER MS OF THE PARTNER DEED' READ WITH CLAUSE (III) OF SECTION 40 (B), REQUIRES AND MANDATES THAT THE QUANTUM OF REMUNERATION OR THE MANNER OF COMPUTATION OF QUANTUM OF REMUNERATION SHOULD BE STATED IN THE PARTNER SHIP DEED AND SHOULD NOT BE LEFT UNDERMINED, UN DECIDED OR TO BE DETERMINED OR DECIDED ON A FUTURE DATE. 6. THE QUESTION RAISED IS WHETHER THE CONDITIONS STIPULATED IN THE AFORESAID SECTION ARE SATISFIED IN THE PRESENT CASE OR NOT. THIS REQUIRES EXAMINATION OF THE RELEVANT CLAUSES OF THE PARTNERSHIP DEE D DATED 1ST MAY, 1976 AND THE SUPPLEMENTARY PARTNERSHIP DEED DATED 1ST APRIL, 1992. 7. CLAUSE 7 OF THE PARTNERSHIP DEED DATED 1ST MAY, 1976 READS AS UNDER: '7. THAT THE PROFITS OR LOSSES OF THE PARTNERSHIP, AS THE CASE MAY BE, SHALL BE DIVIDED AMONGST AND BORNE BY THE PARTNERS EQUALLY.' 8. CLAUSES 1 AND 2 OF THE SUPPLEMENTARY PARTNERSHIP DEED DATED 1 ST APRIL,1992 READS AS UNDER: '1. THAT SUBJECT TO MUTUAL CONSENT OF THE PARTNERS, AND SUBJECT TO THE PROVISIONS OF THE INCOME TAX ACT,1961, THE WORKING PARTNER OR PARTNERS SHALL BE PAID SUCH REMUNERATION AS MAY BE MUTUALLY AGREED BETWEEN THEMSELVES, FROM TIME TO TIME, AND SUCH 12 ITA NOS.4738 TO 4740 /DEL/2011 REMUNERATION SHALL BE DEDUCIBLE EXPENSES BEFORE ARRIVING AT THE SHARE OF THE PARTNERS AS ALLOWABLE FROM THE PROFITS. 2. THAT BOTH THE PARTNERS (HEREINAFTER REFERRED AS WORKING PARTNERS), SHALL DEVOTE THEIR TIME AND ATTENTION IN THE CONDUCT OF THE AFFAIRS OF THE PARTNERSHIP FIRM, AS THE CIRCUMSTANCES AND NEED OF THE FIRMS BUSINESS MAY REQUIRE. THE TOTAL REMUN ERATION PAYABLE TO THE WORKING PARTNERS SHALL BE AN AMOUNT PERMISSIBLE AS REMUNERATION TO THE WORKING PARTNERS UNDER THE INCOME TAX ACT, 1961 AND AS PER APPLICABLE FROM TIME TO TIME.' 9. THE PARTNERSHIP AS NOTICED ABOVE IS BETWEEN TOW PARTNERS AND UNDER CL AUSE 7 OF THE PARTNERSHIP DEED DATED 1ST MAY, 1976 PROFITS AND LOSSES OF PAGE NO. 4 THE PARTNERSHIP, AS THE CASE MAY BE, ARE TO BE DIVIDED AND BORNE BY THE PARTNERS EQUALLY. CLAUSE1, THEREFORE, REQUIRES A MUTUAL AGREEMENT IN FUTURE. THE AFORESAID CLAUSE, THEREFORE, D OES NOT SATISFY THE REQUIREMENT THAT THE PAYMENT OF REMUNERATION SHOULD BE IN ACCORDANCE WITH THE TERMS OF THE PARTNERSHIP DEED AND THAT THE REMUNERATION SHOULD RELATE TO PAYMENTS MADE IN THE PERIOD AFTER THE DATE OF SAID PARTNERSHIP DEED. THE TRIBUNAL IS, THEREFORE, RIGHT IN THEIR CONCLUSION THAT CLAUSE 1 OF THE SUPPLEMENTARY PARTNERSHIP DEED DATED 1ST APRIL, 1992, DOES NOT SATISFY THE REQUIREMENTS OF SECTION 40 (B) (V). FROM THE SAID CLAUSE IT IS NOT POSSIBLE TO ASCERTAIN THE QUANTUM OR THE AMOUNT OF REMU NERATION WHICH IS PAYABLE IN TERMS OF THE SUPPLEMENTARY PARTNERSHIP DEED. 10. THIS BRINGS US TO CLAUSE 2 OF THE SUPPLEMENTARY DEED DATED 1AT APRIL, 1992. THE FIRST SENTENCE IS CLAUSE 2 STATES THAT THE TWO PARTNERS WILL BE THE WORKING PARTNERS. THE SECOND S ENTENCE IN CLAUSE 2 STIPULATES THAT THE TOTAL REMUNERATION PAYABLE TO THE WORKING PARTNERS UNDER THE ACT, AS APPLICABLE FROM TIME TO TIME. THE QUESTION IS WHETHER THE TWO CLAUSES READ TOGETHER QUANTIFY OR STIPULATE THE MANNER OF QUANTIFYING THE REMUNERATIO N THAT IS PAYABLE TO THE PARTNERS? HAVING EXAMINED THE SAID CLAUSES, WE FEEL THAT ON CONJOINT READING OF CLAUSE 7 OF THE PARTNERSHIP DEED DATED 1ST MAY, 1976 AND CLAUSE 1 AND 2 OF THE SUPPLEMENTARY PARTNERSHIP DEED DATED 1ST APRIL, 1992, CONDITION OF SECTI ON 40 (B) (V). 13 ITA NOS.4738 TO 4740 /DEL/2011 11. CLAUSE 2 OF THE SUPPLEMENTARY DEED HAS TO BE READ ALONG WITH CLAUSE 1 OF THE SAME DEED. THESE TWO CLAUSES HAVE TO BE READ HARMONIOUSLY AND REASONABLE TO UNDERSTAND THE TWO CONVENANTS AND GIVE EFFECT TO T HEIR TRUE MEANING. THE SECOND SENTENCE OF CLAUSE 2 NEITHER QUANTIFIES NOR LAYS DOWN THE MANNER OF QUANTIFYING THE TOTAL REMUNERATION PAYABLE TO THE PARTNERS. CLAUSE 2 STIPULATES THE MAXIMUM AMOUNT THAT CAN BE PAID AS REMUNERATION TO THE TWO PARTNERS BUT DO ES NOT QUANTIFY THE REMUNERATION PAYABLE IN A PARTICULAR YEAR. QUANTUM OR THE AMOUNT OF REMUNERATION AND THE MANNER OF COMPUTING IS NOT SPECIFIED OR STIPULATED BUT AS NOTICES UNDER CLAUSE 1 HAS BEEN LEFT TO BE DECIDED BY A MUTUAL AGREEMENT IN FUTURE. 12. T HE APPELLANT IN ACTUAL PRACTICE HAS NOT READ AND UNDERSTOOD CLAUSE 2 AS STIPULATING THAT THE TWO PARTNERS ARE ENTITLED TO REMUNERATION EQUAL TO THE MAXIMUM AMOUNT STIPULATED IN SECTION 40 (B) (V) OF THE ACT. AS PER THE RETURN OF INCOME FILED ON 23RD AUGUST , 2007, THE APPELLANT FIRM HAD DECLARED INCOME OF RS.1,44,59,522/ - . IT IS PRUDENT TO NOTE THAT AS PER THE BOOKS AND THE ACT RS.98,81,165/ - WOULD BE THE MAXIMUM REMUNERATION PAYABLE TO THE TWO PARTNERS BUT THE REMUNERATION ACTUALLY PAID WAS RS.21,40,000/ - . THIS IS ADMITTED BY THE APPELLANT AND FURTHER IN GROUNDS OF APPEAL IT IS STATED THAT RS.98,81,165/ - REPRESENTS THE MAXIMUM AMOUNT PAYABLE U/S 40 (B) (V) BUT NOT THE AMOUNT THAT HAS BEEN MUTUALLY AGREED TO BE PAID AS REMUNERATION. IN OTHER WORDS, THE APPELL ANT HAS ACCEPTED THAT CLAUSE 2 DOES NOT QUANTIFY OR PROVIDE THE MANNER OF COMPUTING REMUNERATION PAYABLE TO THE PARTNERS BUT STIPULATES THE MAXIMUM AMOUNT PAYABLE. THUS, THE LIMITS SPECIFIED U/S 40 (B) (V) ARE INCORPORATED AND HAVE BECOME PART AND PARCEL O F THE PARTNERSHIP DEED BUT NOT THE AMOUNT OR THE QUANTUM REMUNERATION. THIS IS LEFT UNDECIDED, UNSTIPULATED AND LEFT TO THE DISCRETION OF THE TWO PARTNERS TO BE DECIDED AT A FUTURE POINT IN TIME. THEREFORE, PAYMENT OF RS.21,40,000/ - WAS NOT IN ACCORDANCE W ITH THE TERMS OF THE SUPPLEMENTARY PARTNERSHIP DEED DATED 1ST APRIL, 1992 THOUGH AUTHORIZED BY THE SAID DEED. THE REMUNERATION WAS PAID IN PAGE NO. 5 TERMS OF A SUBSEQUENT UNDERSTANDING BETWEEN THE TWO PARTNERS REGARDING THE QUANTUM AND THE AMOUNT TO BE PAID. THE SAI D UNDERSTANDING HAS NOT BEEN BROUGHT ON RECORD AND PROBABLY WAS AN ORAL UNDERSTANDING. THE APPELLANT HAS NOT 14 ITA NOS.4738 TO 4740 /DEL/2011 RELIED ON OR REFERRED TO ANY SUCH ' PARTNERSHIP DEED' TRIBUNAL OR BEFORE US. 13. RATIO OF THE DECISION OF THE HIM ACHAL PRADESH HIGH COURT IN COMMISSIONER OF INCOME TAX VS. ANIL HARDWARE STORE,[2010] 323 ITR 368 (HP), DOES NOT ASSIST THE STAND A CONTENTION OF THE APPELLANT. ON EXAMINING THE PARTNERSHIP DEED, IT WAS HELD THAT THE TWO PARTNERS WERE ENTITLED TO 50% OR EQ UAL AMOUNT AS REMUNERATION. THE CONTENTION OF THE REVENUE THAT THE PARTNERSHIP DEED DID NOT EXACTLY DETERMINE THE REMUNERATION PAYABLE TO THE PARTNERS, WAS REJECTED HOLDING THAT THE REQUIREMENT PAYABLE TO THE PARTNERS, WAS REJECTED HOLDING THAT THE REQUIRE MENT OF THE SECTION WAS THAT THE PARTNERSHIP DEED SHOULD SPECIFY THE AMOUNT PAYABLE OR THAT THE MANNER OF QUANTIFYING THE REMUNERATION SHOULD BE SPECIFIED. IN THE SAID CASE, THE HIGH COURT HELD THAT THE MANNER OF FIXING THE REMUNERATION WAS SPECIFIED IN TH E PARTNERSHIP DEED. 14. ON READING THE SUPPLEMENTARY PARTNERSHIP DEED, IN THE PRESENT CASE, IT IS CLEAR THAT THE REMUNERATION IS NOT SPECIFIED. THE MANNER OF COMPUTING THE REMUNERATION IS NOT SPECIFIED ON THE OTHER HAND, THE REMUNERATION PAYABLE IS LEFT TO FUTURE MUTUAL AGREEMENT BETWEEN THE PARTNERS WHO ARE ENTITLED TO DECIDE AND QUANTIFY THE QUANTUM. REMUNERATION CAN BE ANY AMOUNT OR FIGURE BUT NOT MORE THAN THE MAXIMUM AMOUNT STATED IN SECTION 40 (B) (V) OF THE ACT. THEREFORE, THE REQUIREMENT OF SECTION 40 (B) (V) ARE NOT SATISFIED.' 8 . IN THE LIGHT OF THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE, WHICH WE ARE BOUND BY LAW TO FOLLOW, WE RESPECTFULLY DO SO, AND CONFIRM THE ORDER OF THE LD CIT(A) AND DISMISS THIS GROUND OF THE ASSESSEE. 9 . GROUND NO. 3 IS IN RESPECT OF NON CONSIDERATION OF THE PAYMENT OF ADVANCE TAX PAID BY THE PARTNERS ON THE PARTNERS REMUNERATION WHILE COMPUTING INTEREST U/S 234B READ WITH SECTION 1 55 (IA) OF THE ACT. 10. THE LD. AR CONTENTED THAT THE T HIRD GROUND OF APPEAL RELATES TO CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT. ACCORDING TO LD. AR A S PER THE PROVISIONS OF SECTION 155 ( I A ) OF THE ACT , WHEREI N RESPECT OF ANY COMPLETED ASSESSMEN T OF A FIRM , IT IS FOUND THAT ANY REMUNERATION OF ANY PARTNER IS NOT DEDUCTIBLE UNDER CLAUSE (B) OF SECTION 40 OF THE ACT , THE ASSESSING OFFICER MAY AMEND THE ORDER OF ASSESSMENT OF PARTNER WITH A VIEW TO ADJUSTING THE INCOME OF PARTNER TO THE EXTENT OF THE AMOUNT NOT DEDUCTIBLE. AS PER THE LD. AR, IN THE PRESENT CASE WHILE CALCULATING INTEREST U/S. 234B OF THE ACT , THE LEARNED ASSESSING OFFICER HAS NOT CONSIDE RED THE ABOVE PROVISIONS OF SECTION 155(IA) OF THE ACT. ACCORDING TO THE LD AR, SINCE THE PARTNERS ARE ASSESSED IN THE SAME RANGE THE TAXES PAID BY BOTH THE PARTNERS AS WORKING PARTNERS REMUNERATION NEED TO BE ADJUSTED AGAINST THE TAX PAYABLE ON ACCOUNT OF DISALLOWANCE OF PARTNERS REMUNERATION OF RS. 21,60,000/ - AND THE INTEREST U/S. 234B OF THE ACT BE CALCULATED TO BE RECKONED AFTER CONSIDERING THE DATES OF PAYMENT OF TAXES PAID BY PARTNERS ON THE PAGE NO. 6 WORKING PARTNERS REMUNERATION AS THE TAX PAID IS ON SAME IN COME WHICH WAS DISALLOWED. FURTHER, IT WAS CONTENTED BY THE LD. AR THAT DISALLOWANCE OF PARTNERS REMUNERATION COULD NOT BE ANTICIPATED WHILE CALCULATING ADVANCE TAX LIABILITY U/S. 208 AND 209 OF THE ACT. THUS THERE IS NO DEFAULT IN COMPLYING WITH THE PROV ISIONS OF SEC. 208/209 SO AS TO ATTRACT PROVISIONS OF SECTION 234B OF THE ACT. ACCORDING TO THE LD. AR , THE PARTNERS HAD BEEN PAID THEIR REMUNERATION/ SALARY STRICTLY IN ACCORDANCE WITH THE TERMS OF THE PARTNERSHIP DEED ; AND THIS AMOUNT PAID TO THE PARTNER S DID NOT EXCEED THE MAXIMUM PERMISSIBLE AMOUNT PRESCRIBED BY THE ACT AND, THEREFORE, THE ASSESSEE WAS UNDER BONAFIDE BELIEF OF THE ENTITLEMENT FOR DEDUCTION . ACCORDING TO HIM, IN CIT VS. ANAND PARKASH (2009) TAXMAN 44 (DELHI) IT WAS HELD THAT: - THE LEVY O F INTEREST U/S 234B OF THE ACT IS COMPENSATORY IN NATURE AND IS NOT IN THE NATURE OF PENALTY. WHERE THE REVENUE HAD NOT SUFFERED ANY LOSS, THEREFORE, THERE COULD BE NO QUESTION OF LEVYING INTEREST U/S. 234B OF THE ACT. SO, ACCORDING TO THE LD. AR, SINCE TH E ADVANCE TAX ON THE PARTNER REMUNERATION HAS BEEN PAID BY THE PARTNERS, THEREFORE THE REMUNERATION TO THE PARTNERS DISALLOWED IN THE HANDS OF FIRM HAS TO BE ADJUSTED. AFTER SUCH ADJUSTMENT , THE AMOUNT OF TAX PAID ON PARTNERS REMUNERATION IS TO BE ADJUSTED TOWARDS THE TAX LIABILITY OF THE ASSESSEE FIRM. ACCORDING TO LD AR, K EEPING IN VIEW THE OBSERVATION OF THE JURISDICTIONAL HIGH COURT THAT , SINCE THERE IS NO CA SE OF LOSS TO THE REVENUE, LEVY OF INTEREST U/S. 234 OF THE ACT C ANNOT BE IMPOSED. THE LD. AR CITED THE CASE OF CIT VS. K K MARKETINGS (200 5) 278 ITR 596 (DEL) TO DRIVE A POINT THAT IN THAT CASE THE PARTIES REQUESTED THE REVENUE THAT THE CASH SEIZED FROM THE PREMISES OF THE FIRM TO BE ADJUSTED TOWARDS THE ADVANCE TAX LI ABILITY OF THE FIRM IN ORDER TO AVOID INTEREST WAS UPHELD BY THE JURISDICTIONAL HIGH COURT HOLDING THAT THE SAID REQUEST WAS EQUITABLE AND REASONABLE AND DISMISSED THE APPEAL OF THE REVENUE. SO BY APPLYING THE SAME ANALOGY, THE LD. AR CONTENDS THAT SINCE T HE PARTNERS HAVE REMITT ED THE ADVANCE TAX FOR THE DISALLOWED REMUNERATION, IT SHOULD BE ADJUSTED AS ADVANCE TAX FOR THE DISALLOWED AMOUNT . THEREFORE IT IS THE PRAYER OF THE LD. AR THAT WE MAY DIRECT THE ASSESSING OFFICER TO CHARGE INTEREST U/S 234B KEEPING IN VIEW THE AMOUNT OF ADVANCE TAX PAID ON PARTNERS REMUNERATION, WHICH HAS BEEN DISALLOWED U/S 40(B)(V) OF THE ACT AND WHICH NEEDS TO BE ADJUSTED U/S. 155(1A) OF THE ACT. THE LD. AR PRAYED ALTERNATIVELY THAT THE ASSESSING OFFICER MAY BE DIRECTED T O ADJUST REFUND DUE TO THE PARTNERS AND ADJUSTMENT THEREOF IN TAX LIABILITY OF FIRM ON ACCOUNT OF ADJUSTMENT IN PARTNERS REMUNERATION AS PER PROVISIONS OF SECTION 155(1A) OF THE ACT AT THE TIME PASSING ORDER U/S. 143(3)/ 147 OF THE ACT. THUS, ACCORDINGLY O NLY INTEREST U /S 234B OF THE ACT MAY BE CHARGED. ON THE OTHER HAND, THE LD DR RELIED ON THE ORDER OF THE LD CIT(A) AND STATED THAT CHARGING OF INTEREST U/S 234B OF THE ACT WAS CONSEQUENTIAL AND THE SAID ORDER NEED NOT BE DISTURBED. PAGE NO. 7 11 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AND HAVE GONE T HROUGH THE CASE LAW CITED BEFORE US BY BOTH THE PARTIES. WE FIND THAT THE LD. CIT(A) HAS NOT ADJUDICATED THIS ISSUE SAYING THAT CHARGING OF INTEREST U/S 234 OF THE ACT IS CONSEQUENTIAL. IT HAS BEEN BROUGHT TO OUR NOTICE THAT AS PER THE PROVISION OF SECTION 155(IA) OF THE ACT WHEREIN RESPECT OF ANY COMPLETED ASSESSMENT OF A FIRM , IT IS FOUND THAT ANY REMUNERATION OF ANY PARTNERS IS NOT DEDUCTIBLE UNDER CLAUSE (B) OF SECTION 40 OF THE ACT , T HE ASSESSING OFFICER MAY AMEND THE ORDER OF ASSESSMENT OF THE PARTNER WITH A VIEW TO ADJUSTING THE INCOME OF THE PARTNER TO THE EXTEND OF THE AMOUNT NOT DEDUCTIBLE. IN THE PRESENT CASE, IT HAS BEEN SUBMITTED BEFORE US THAT THE ASSESSING OFFICER HAS NOT DONE THIS EXERCISE IN RESPECT TO THE PARTNERS INCOME INCONSEQUENCE TO THE DISALLOWANCE OF REMUNERATION IN T HE HANDS OF THE ASSESSEE FIRM AND AS STATED EARLIER THE LD CIT(A) HAS NOT DEALT WITH T HE ISSUE IN HAND. IN THE LIGHT OF THE SAID SUBMISSION BY THE LD AR, WE SET - ASIDE THIS ISSUE BACK TO THE FILED OF THE AO, WHO SHALL AMEND THE ORDER OF THE ASSESS MENT OF THE PARTNER AS ENVISAGED IN SECTION 155(1A) OF THE ACT AND THEREAFTER LOOK AFRESH THE ISSUE OF INTEREST CHARGEABLE U/S 234B OF THE ACT IN THE HANDS O F THE ASSESSEE FIRM, TAKING INTO CONSIDERATION THE CASE LAWS CITED BY THE LD AR IN THIS BEHALF. NEEDLESS TO SAY, SUFFICIENT OPPORTUNITY MAY BE GRANTED TO THE ASSESSEE BEFORE PASSING THE ORDER. 12 . IN THE RESULT THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13 . 06 .2014. - SD/ - - SD/ - ( S. V. MEHROTRA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :13 / 06 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI