The ITO, Ward-9(2), Ahmedabad V. M/s. Dharti Developers, Ahmedabad

ITA 2672/AHD/2009

• Counselvise Citation: 267220514 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 25-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R B SHETH
• Keywords: Procedural lapse; Bonafide mistake
• Section: 80HHC

Judgement Text

, , . .. . . .. . , , , , . .. . . .. .!'#$ !'#$ !'#$ !'#$ , % % % % & & & & IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SHRI A.K.GARODIA, A.M.) . ITA NO. 2672/AHD./2009 : ' ()- 2006-07 I.T.O., WARD-9(2), AHMEDABAD (,- /APPELLANT) -VS- M/S. DHARTI DEVELOPERS, AHMEDABAD ( ./,- /RESPONDENT ) (PAN : AAEFD 6638G) ,- 0 1 / APPELLANT BY : SHRI SAMIR TEKRIWAL, SR.D.R. ./,- 0 1 / RESPONDENT BY : SHRI R.B.SHETH, A.R. 2'3 0 4% / DATE OF HEARING : 24/10/2011 5'( 0 4% / DATE OF PRONOUNCEMENT : 25/10/2011 / ORDER PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 22-07-2009 OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XV, AHM EDABAD DELETING THE DISALLOWANCE OF RS.12,69,506/- MADE BY THE AO, AFT ER INVOKING THE PROVISIONS OF SECTION 185 OF THE I.T. ACT, 1961 FOR THE ASSESSMEN T YEAR 2006-2007. 2. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 31.07.2006 SHOWING TOTAL LOSS OF RS.69,100/-. ON VE RIFICATION OF PROFIT & LOSS A/C., THE AO NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.12,69,506/-, BEING INTEREST PAID TO PARTNERS. THE AO, IN PARA 3 OF THE ASSESSME NT ORDER, OBSERVED THAT THIS RETURN HAS BEEN FILED BY THE ASSESSEE, AS PER THE PROVISIO NS OF SECTION 184(2) OF THE I.T. ACT, UNDER WHICH, THE ASSESSEE WAS REQUIRED TO ENCLOSE/F ILE ALONG WITH THE RETURN OF INCOME, A CERTIFIED COPY OF PARTNERSHIP DEED. ON PERUSAL OF RETURN OF INCOME, THE AO NOTICED THAT THE ASSESSEE FAILED TO FILE THE CERTIFIED COPY OF PARTNERSHIP DEED ALONG WITH THE ITA NO. 2672-AHD-09 2 RETURN OF INCOME. THE AO ACCORDINGLY ISSUED A SHOW CAUSE NOTICE DATED 04.11.2008 REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE PROVISIONS OF SECTION 185 OF THE I.T. ACT, SHOULD NOT BE INVOKED AND INTEREST OF RS. 12,6 9,506/- PAID TO PARTNERS SHOULD BE DELETED. IN REPLY, THE ASSESSEE, VIDE LETTER DATED 11.11.2008, SUBMITTED AS UNDER: ' WE HAD WITH RETURN OF THE INCOME ATTACHED THE PARTN ERSHIP DEED. THE DEED IS AN INSTRUMENT IN WRITING WITH INDIVIDUAL SHARE SPECIFIED THEREIN AS REQUIRED U/S, 184(1). THERE MAY BE TECHNICAL LAPSE AS FAR AS SEC 184(2) IS CONCERNED, WHICH ACCORDING TO YOU THE DEED DOES NOT BEAR SIGNATURE O F ALL THE PARTNERS CERTIFYING THE DEED. THROUGH AN OVERSIGHT SUCH LAPSES MA HAVE CREPT IN. THE SPIRIT OF LAW IS THAT THE ASSESSING OFFICER MUST BE SATISFIED BEF ORE FINALIZING THE ASSESSMENT THAT THE INSTRUMENT OF PARTNERSHIP IS GENUINE WITH THE ENDORSEMENT OF THE PARTNERS NAMED THEREIN. ANY BONAFIDE MISTAKE IS ALW AYS PARDONABLE IN EYES OF LAW .' 2.1 AFTER CONSIDERING THE AFORESAID SUBMISSION, THE AO, IN THE ASSESSMENT ORDER, OBSERVED THAT THE SAME IS NOT ACCEPTABLE FOR THE RE ASON THAT AS PER EXPLANATION TO SUB- SECTION (2) OF SECTION 184, IT IS MANDATORY FOR THE ASSESSEE TO GET THE COPY OF INSTRUMENT OF PARTNERSHIP DEED CERTIFIED IN WRITING BY ALL THE PARTNERS NOT BEING MINORS. SINCE THE ASSESSEE HAS ONLY FILED A XEROX COPY OF P ARTNERSHIP DEED ALONG WITH RETURN OF INCOME, THE ASSESSEE HAS NOT COMPLIED THE MANDATORY PROVISIONS OF SECTION 184(2) OF THE I.T. ACT, 1961. THEREFORE, THE PROVISION OF SEC TION 185 IS CLEARLY ATTRACTED. THE AO ALSO STATED THAT THIS IS NOT A TECHNICAL LAPSE B UT A CLEAR VIOLATION OF PROVISION OF SECTION 184(2) OF THE I.T. ACT, 1961. THE AO ACCORD INGLY DISALLOWED THE INTEREST PAID TO THE PARTNERS AMOUNTING TO RS.12,69,506/-. 3. ON APPEAL, BEFORE THE LD. CIT(A), THE ASSESSEE C ONTENDED THAT IT WAS A TECHNICAL LAPSE WHICH OCCURRED DUE TO OVERSIGHT. IT WAS ALSO STATED THAT DULY CERTIFIED COPY OF PARTNERSHIP DEED WAS FILED BEFORE THE AO BEFORE THE ASSESSMENT WAS COMPLIED. THE RELIANCE WAS ALSO PLACED ON THE DECISION OF THE ITA T, DELHI BENCH IN THE CASE OF ISHAR DASS SAHNI & SONS VS- DCIT REPORTED IN 68 TTJ 125 (DELHI) WHEREIN THE TRIBUNAL HELD AS UNDER: THE PROVISION ABOUT THE CERTIFIED COPY OF THE INSTR UMENT ACCOMPANYING THE RETURN ON INCOME IS DIRECTORY IN NATURE AND ITS SUB STANTIAL COMPLIANCE BY FILING UNCERTIFIED PHOTOSTAT COPY OF INSTRUMENT OF PARTNER SHIP ALONG WITH RETURN OF INCOME AND BY PRODUCING CERTIFIED COPY AT THE TIME OF ASSESSMENT, WOULD BE ENOUGH. ITA NO. 2672-AHD-09 3 3.1 AFTER CONSIDERING THE ABOVE SUBMISSION, IN THE IMPUGNED ORDER, THE LD. CIT(A) HELD THAT THE ASSESSEE HAS CORRECTED THE PROCEDURAL LAPSE BEFORE THE ASSESSMENT WAS FINALISED AND ITAT, DELHI BENCH ( SUPRA ), CITED BY THE ASSESSEES COUNSEL, SUPPORTS THE CASE OF THE ASSESSEE. HE ACCORDINGLY DIRECTED THE A O TO DELETE THE ADDITION OF DISALLOWANCE OF INTEREST PAID TO THE PARTNERS AMOUN TING TO RS.12,69,506/-. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US, SHRI SAMIR TEK RIWAL, SR.D.R. APPEARED ON BEHALF OF THE REVENUE AND RELYING ON THE DECISION O F THE HONBLE HIGH COURT OF KERALA IN THE CASE OF BHASKAR & CO. VS- CIT REPOR TED IN [2010] 187 TAXMAN 163 (KER.), POINTED OUT THAT PRODUCTION OF CERTIFIED CO PY OF INSTRUMENT OF PARTNERSHIP DEED IS MANDATORY FOR CLAIMING ASSESSMENT IN THE STATUS OF A FIRM FO R ANY ASSESSMENT YEAR COMMENCING FROM 1993-94 ONWARDS, IRRESPECTIVE OF WH ETHER SUCH AN ASSESSEE WAS ASSESSED AS A REGISTERED FIRM UP TO 1993-94. HE ACC ORDINGLY CONTENDED THAT THIS IS THE SOLITARY JUDGEMENT AVAILABLE ON THIS ISSUE. THEREFO RE, DISALLOWANCE OF RS. 12,69,506/- BEING INTEREST PAID TO PARTNERS BE RESTORED. 5. ON THE OTHER HAND, SHRI R.B.SHETH, A.R., APPEARI NG ON BEHALF OF THE ASSESSEE, VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). THE C OUNSEL OF THE ASSESSEE POINTED OUT THAT ACCOUNTED CERTIFICATE UNDER SECTION 80HHC IS ALSO REQUIRED TO BE FILED AT THE TIME OF FILING THE RETURN OF INCOME. THE HONBLE GU JARAT HIGH COURT, IN THE CASE OF VXL INDIA LTD. VS- ITO REPORTED IN 219 CTR 242/207 TAXATION 553, HELD THAT TO OBTAIN REPORT OF THE ACCOUNTANT IS A CONDITION PREC EDENT AND IT IS MANDATORY IN NATURE, NON-FURNISHING SUCH REPORT AT THE TIME OF FILING TH E RETURN INCOME BUT AT A SUBSEQUENT STAGE AND BEFORE ASSESSMENT IS COMPLETED, THE ASSES SEES CLAIM OF DEDUCTION U/S.80HHC CANNOT BE DISALLOWED. THE COUNSEL OF THE ASSESSEE ALSO RELIED ON THE FOLLOWING OBSERVATIONS OF JUDGEMENT OF HONBLE HIGH COURT OF KERALA IN THE CASE OF BHASKAR & CO. ( SUPRA ), WHICH IS RELIED ON BY THE LD. D.R., THAT HONBL E HIGH COURT HAD IN THE CONCLUDING PARAGRAPH NOTED THAT THEREFO RE WE DIRECT THE A.O. TO VERIFY FROM THE RECORD AND FIND OUT WHETHER THE ASSESSEE H AS PRODUCED CERTIFIED COPY OF THE DEED OF PARTNERSHIP WHEN THE ASSESSMENT WAS TAKEN U P AND IF SO GRANT THE STATUS AS A FIRM ITA NO. 2672-AHD-09 4 5.1 FURTHER RELIANCE WAS PLACED, BY THE LD. COUNSEL FOR THE ASSESSEE, ON THE FOLLOWING JUDGEMENTS: I) HONBLE CALCUTTA HIGH COURT, IN CASE OF RAIBAHD UR BUESHWARLAL MOTILAL MALWASIE TRUST (195 ITR 825) AND HONBLE BOMBAY HIG H COURT IN THE CASE OF SHIVANAND ELECTRONICS (209 ITR 63) HAD HELD THAT HA VING REGARD TO THE NATURE OF THE PROVISION AND THEIR OBJECT THE DIRECTION GIV EN IN SECTION 184(2) OF THE ACT, FALLS IN THE AREA OF PROCEDURE AND HENCE DIREC TORY IN NATURE. II) STATE OF TAMILNADU V/S KODAIKENAL MOTOR UNION P. LTD. (AIR 1986 SC 1973) LOOKING TO THE PURPOSE OF STATUTE THE COURT SHOULD NOT ALWAYS STICK TO LITERAL MEANING. III) STATE OF UP V/S BABURAM UPADHYAY (AIR 1961 S C 751) THOUGH THE WORD ''SHALL' IS PRIMA-FACIE SUGGEST MAN DATORY REQUIREMENT BUT LOOKING TO THE OBJECT OF THE STATUTE COURT MAY CONS IDER I. DIRECTORY IN NATURE IV) RAZA BULAND SUGAR CO. LTD V/S MUNICIPAL BOARD RAMPUR (AIR 1965 SC 895) HAVING REGARD TO THE PURPOSE AND INTENTION OF THE LEGISLATURE, SERIOUS GENERAL INCONVENIENCE OR INJUSTICE TO PERSONS RESUL TING FROM READING OF THE PROVISION ONE WAY OR OTHER REGARDING NATURE IS MAND ATORY OR DIRECTORY BE CONSIDERED SYMPATHETICALLY. 6. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE CASE BEFORE US, THE ASSESSEE HAS ENCLOSED THE PHOTO COPY OF THE PARTNERSHIP DEED ALO NG WITH RETURN OF INCOME. HOWEVER, THROUGH INADVERTENCE, HE FAILED TO GET IT CERTIFIED BY ALL THE PARTNERS. THIS ALONE INDICATES THAT THE ASSESSEE HAS MADE SUBSTANT IAL COMPLIANCE OF PROVISIONS CONTAINED IN SECTION 184 OF THE I.T. ACT. BEFORE TH E ASSESSMENT, THE ASSESSEE HAS REMOVED THE DEFECT BY FILING THE CERTIFIED COPY OF THE PARTNERSHIP DEED. IN THESE FACTS, WE ARE OF THE VIEW THAT THE LD. CIT(A) IS LEGALLY A ND FACTUALLY CORRECT IN DIRECTING THE AO TO TREAT THE ASSESSEE FIRM AS REGISTERED, FOLLOW ING THE DECISION OF THE ITAT, DELHI BENCH IN THE CASE OF ISHAR DASS SAHNI & SONS VS- D CIT ( SUPRA ), WE, THEREFORE, ITA NO. 2672-AHD-09 5 INCLINE TO UPHOLD THE ORDER OF THE LD. CIT(A). RESU LTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 6 0 5'( #' ) 25/10 /2011 ' 7 0 !3 8 THIS ORDER PRONOUNCED IN THE OPEN COURT ON 25/10/2011. SD/- SD/- (A.K.GARODIA) (T.K. 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