ITO, Ward-7(2), Hyderabad V. M/s Sri Lakshmi Agencies, Hyderabad

ITA 239/HYD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2965 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 27-02-2013
• Court: TRIBUNAL
• Assessee Lawyers: SHRIGANGADHAR PANDA
• Keywords: Tax effect
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 239/HYD/2013 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER, WARD 7(2), APPELLANT HYDERABAD VS. M/S SRILAKSHMI AGENCIES, RESPONDENT HYDERABAD. (PAN AAGFS7415K) APPELLANT BY : SHRIGANGADHAR PANDA REVENUE BY : NONE DATE OF HEARING : 30/05/2012 DATE OF PRONOUNCEMENT : 30/05/ 2013 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF CIT(A)-VI, HYDERABAD DATED 29/11/2012 FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A FIRM, ENGAGED IN THE BUSINESS OF WHOLESALE DISTRIBUTION O F RC & SIM CARDS (PREPAID) OF BSNL AND FOR THE YEAR REFERENCE THE ASSESSEE HAD SHOWN TO HAVE ACHIEVED CERTAIN TURNOVERS ON WHI CH THE TOTAL COMMISSION OF RS. 99,63,548/- WAS RECEIVED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD NOT FURNIS HED ANY 2 ITA NO. 239/H/13 M/S SRILAKSHMI AGENCIES BOOKS OF ACCOUNT AND AS SUCH THE AO ESTIMATED THE P ROFIT @10% ON THE ENTIRE COMMISSION RECEIVED, AS INCOME OF THE ASSESSEE AND DISALLOWED THE REMUNERATION AND INTEREST PAID TO PA RTNERS. 3. ON APPEAL, BEFORE THE CIT(A) THE ASSESSEES OBJE CTIONS WERE CONFINED TO TWO ISSUES, NAMELY, I) ESTIMATION OF PR OFITS @ 10% ON GROSS COMMISSION AND II) DISALLOWANCE OF REMUNERATI ON OF RS. 1,80,000/- AND INTEREST PAID TO PARTNERS OF RS. 2,8 1,691/-. IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) THAT TH E AO HAD NOT GIVEN ENOUGH CHANCE TO THE ASSESSEE AT THE TIME OF ASSESSMENT TO SUBMIT THE BOOKS, SINCE THE FATHER OF THE PARTNER W AS SERIOUSLY ILL AND POSTINGS COULD NOT BE ATTENDED. IT WAS FURTHER SUBMITTED THAT INTEREST AND REMUNERATION TO PARTNERS WERE CLAIMED AS PER PROVISIONS OF SECTION 40(B), WHICH ARE ALLOWABLE. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, FOLLOW ED HIS ORDER FOR AY 2008-09 IN ASSESSEES OWN CASE WHEREIN IT WA S DECIDED THAT IN ABSENCE OF ANY INFORMATION OR BOOKS OF ACCO UNT, THE PROFITS ARE TO BE DETERMINED/ESTIMATED AT 15% ON TH E GROSS COMMISSION, I.E. EXCLUDING OTHER INCOMES. ACCORDING LY, THE CIT(A) DIRECTED THE AO TO ESTIMATE THE PROFIT ON GROSS COM MISSION AT 15%. THE CIT(A) OBSERVED THAT THE ESTIMATE STANDS ENHANCED IN THIS YEAR UNDER CONSIDERATION. HOWEVER, ON THE LINE S OF THE ORDER FOR AY 2008-09, THE CIT(A) DIRECTED THE AO TO ALLOW REMUNERATION AND INTEREST TO THE PARTNERS, WHICH WERE CLAIMED AN D ALLOWABLE AS PER PROVISIONS U/S 40(B) OF THE IT ACT. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US AN D HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF THE LEARNED CIT(A), HYDERABAD, IS ERRONEOU S IN LAW AND FACTS OF THE CASE. 2. THE CIT(A) HAS ERRED IN HOLDING THAT AFTER ESTIM ATING THE INCOME @ 15% DEDUCTIONS FOR REMUNERATION AND INTERE ST 3 ITA NO. 239/H/13 M/S SRILAKSHMI AGENCIES PAID TO THE PARTNERS SHOULD BE SEPARATELY ALLOWED, WHICH IS AGAINST THE PROVISIONS OF SEC. 184(5) OF THE INCOME -TAX ACT, WHEREIN IT IS CLEARLY STATED THAT IF THE ASSESSMENT IS COMPLETED U/S 144 OF THE IT ACT, REMUNERATION AND I NTEREST PAID TO PARTNERS SHOULD BE DISALLOWED. 3. THE LEARNED CIT(A) OUGHT TO HAVE REJECTED THE B OOKS OF ACCOUNT AND ESTIMATED THE INCOME BECAUSE AS THE ASS ESSEE IS UNABLE TO PRODUCE BILLS/VOUCHERS IN SUPPORT OF V ARIOUS EXPENSES CLAIMED, IT IS A CASE WHERE EXPENSES SHOUL D HAVE BEEN DISALLOWED INSTEAD OF ESTIMATING THE INCOME. 4. THE LEARNED CIT(A) FAILED TO GIVE ANY OPPORTUNIT Y TO THE AO IN TERMS OF RULE 46A OF THE IT RULES, BEFORE INV OKING HIS DECISION TO REJECT THE BOOKS OF ACCOUNT AND ESTIMAT E THE INCOME. 5. NONE APPEARED ON BEHALF OF THE RESPONDENT-ASSESS EE AT THE TIME OF HEARING BEFORE US. HOWEVER, WE PROCEED TO D ECIDE THE APPEAL AFTER HEARING THE LEARNED DR AND ON MERITS. 6. WE HAVE HEARD THE ARGUMENTS OF THE LEARNED DR, P ERUSED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHO RITIES BELOW. WE FIND THAT, AFTER GIVING APPEAL EFFECT, THE TAX EFFECT INVOLVED IN THIS APPEAL FILED BY THE REVENUE IS LESS THAN RS. 3 LAKHS AND THIS POSITION HAS NOT BEEN DISPUTED EVEN BY THE LEARNED DR. AS PER THE CBDT INSTRUCTION NO. 3 OF 2011 ISSUED ON 09/02/ 2011, THE MONETARY LIMIT FOR FILING OF AN APPEAL BY THE DEPAR TMENT BEFORE THE TRIBUNAL HAS BEEN REVISED TO RS. 3 LAKHS. AS DE CIDED BY THE CBDT, APPEALS SHALL NOT BE FILED BY THE DEPARTMENT IN CASES WHERE TAX EFFECT DOES NOT EXCEED RS. 3 LAKHS. IN TH E CASE OF CIT VS. MADHUKAR INAMDAR (HUF) 318 ITR 149, THE HONBLE BOMBAY HIGH COURT HAS HELD THAT CBDT INSTRUCTION FIXING AN Y MONETARY LIMIT FOR FILING THE APPEAL WOULD APPLY EVEN FOR TH E PENDING CASES. KEEPING IN VIEW THE SAID DECISION OF HONBLE JURISD ICTIONAL HIGH COURT AND THE BOARD INSTRUCTION NO. 3 OF 2011 DATED 09/02/2011, WE HOLD THAT THE PRESENT APPEAL FILED BY THE DEPART MENT INVOLVING 4 ITA NO. 239/H/13 M/S SRILAKSHMI AGENCIES TAX EFFECT OF LESS THAN RS. 3 LAKHS IS NOT MAINTAIN ABLE AND THE SAME IS, THEREFORE, DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D, AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 30/05/2013 UPON CONCLUSION OF HEARING. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAV AN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: 30 TH MAY, 2013. KV COPY TO:- 1) ITO, WARD 7(2), HYDERABAD. 2) M/S SRI LAKSHMI AGENCIES, 13-6-439/A/11A, SRI KRISH NA BALAJI COMPLEX, GUDIMALKAPUR, HYDERABAD. 3) THE CIT (A)-VI, HYDERABAD 4) THE CIT-VI, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.