M/s Sapna Kansal (Wine Traders), Bulandshahr V. ACIT, Bulandshahr

ITA 2779/DEL/2013

• Counselvise Citation: 277920114 RSA 2013
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-04-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 07-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R K SACHDEVA
• Keywords: Opportunity of being heard
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI J.S.REDDY, ACCOUNTANT MEMBER I.T.A .NO.-2779/DEL/2013 (ASSESSMENT YEAR-2005-06) SAPNA KANSAL (WINE TRADERS) VS. ACIT CHANDRA VIII, NEAR POWER HOUSE BULANDSHAHAR MOHH. NANNU KHAN, GULAOTHI BULANDSHAHAR PAN AAWFS3956M (APPELLANT) (RESPONDENT) APPELLANT BY: SH. R. K . SACHDEVA, ADV RESPONDENT BY: SH. SAMEER SHARMA, SR. DR PER DIVA SINGH, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 19/2/2013 OF LD. CIT (A) MEERUT PERTAINING TO 2005-06 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS.. 1. THAT THE ORDER OF THE LD. A.O PASSED U/S 143( 3) IS BAD IN LAW AND FACTS OF THE CASE. 2. THAT THE LD. COMMISSIONER OF I. TAX APPEAL HAD ERRE D IN LAW AS WELL AS ON FACTS OF THE CASE IN SUSTAINING THE STATUS OF FIRM AS AOP AS ASSESSED BY THE LEARNED ASSESSING OFFICER WHICH OUGHT NOT TO HAVE B EEN SUSTAINED BY THE CIT (APPEAL) RATHER THE STATUS OF R.F. OUGHT TO HAVE BE EN ALLOWED AS CLAIMED BY THE APPELLANT. 3. THAT THE LD. COMMISSIONER OF INCOME TAX APPEAL HAD ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN SUSTAINING THE DISALLOWANCE OF INTEREST AND REMUNERATION PAID TO THE PARTNERS OF THE SAID FIRM AMOUNTING TO RS.27,5800/- WHICH OUGHT NOT TO HAVE BEEN SUSTAINED BY THE LD. C OMMISSIONER OF INCOME TAX (APPEAL). 2. THE RELEVANT FACTS OF THE CASE ARE AT THE ASSESS EE DECLARED AN INCOME OF RS.37,480/- IN THE STATUS OF FIRM BY WAY OF FILING ITS RETURN. THE SAME WAS SUBJECTED TO SCRUTINY ASSESSMENT AFTER ISSUANCE OF NOTICE U/S 143(2) AND U/S 142(1) ITA NO277 9/DEL/2013 2 ALONG WITH QUESTIONNAIRE ETC. A PERUSAL OF THE ASS ESSMENT ORDER SHOWS THAT THE ASSESSEE WAS PUT TO NOTICE TO EXPLAIN THE FALL IN G P FROM 16.29% DECLARED IN THE PRECEDING YEAR TO 16.21% IN THE YEAR UNDER CONSIDER ATION. HOWEVER, CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE G.P WAS NOT DI STURBED. THESE FACTS ARE FOUND NARRATED IN PARA 2 OF THE ASSESSMENT ORDER. 2. RETURN IS ACCOMPANIED WITH AUDIT REPORT AND AUDITE D COPIES OF TRADING AND P&L A/C AND BALANCE-SHEET WHICH TALLIES AT RS.1 7,08,463.97 N.P.. ASSESSEE FIRM HAS DECLARED GROSS PROFIT OF RS.16,94,783/- ON TOTAL TURNOVER OF RS.1,04,55,590/- WHICH GIVES A G.P. RATE OF 16.21% AGAINST 16.29% SHOWN IN THE PRECEDING YEAR. NET PROFIT RATE WAS SHOWN @ 3%. T HE ASSESSEE WAS THEREFORE, REQUIRED TO JUSTIFY THE GROSS PROFIT SHOWN BY IT. ASSESSEE FILED REPLY STATING THAT IN THE PREVIOUS YEAR THE SALES WENT HIGH DUE TO LESS M ARGIN OF PROFIT BUT OVER ALL G.P INCREASED TO RS.16,94,783/-. A LITTLE REDUCTION IN THE MARGIN OF PROFIT INCREASED THE G.P OF THE ASSESSEE IN THE PREVIOUS YEAR. THE REDUCTION IN G.P RATE THEREFORE, WAS BENEFICIAL AND IN THE INTEREST OF THE ASSESSEE AS WELL AS REVENUE BOTH. IT WAS FURTHER STATED THAT THE NET PROFIT RATE IN THE PREC EDING YEAR WAS 2.90% WHEREAS THE YEAR UNDER CONSIDERATION IT IS 3% ACCORDING TO YOU, HENCE THERE BEING NO FALL, THE NET PROFIT SHOWN IS JUSTIFIED. THE FACTS GIVEN BY THE ASSESSEE IS VERIFIABLE FROM RECORDS, HENCE G.P/N.P. SHOWN BY THE ASSESSEE IS NO T DISTURBED. 3. THE FACTS QUA THE GROUNDS RAISED AS EMANATING F ROM THE A.O SHOW THAT THE AO TOOK COGNIZANCE OF THE FACT THAT THE ASSESSEE FI RM ENGAGED IN THE BUSINESS OF PURCHASE AND RETAIL SALE OF WINE HAD 6 PARTNERS WHE REIN THE LICENSE BY THE U.P GOVERNMENT AUTHORITY HAD BEEN GRANTED IN THE NAME O F SMT SAPNA KANSAL, INDIVIDUAL UNDER THE PROVISIONS OF UP EXCISE (SETTL EMENT OF LICENSE FOR RETAIL SALE OF COUNTRY LIQUOR) RULES 2002. REFERRING TO CLAUSE 8 THEREOF WHICH PROVIDED THE CONDITIONS FOR CONVERSION OF LICENSE GRANTED TO AN INDIVIDUAL INTO A PARTNERSHIP BY INTRODUCTION OF PARTNERS THE AO WAS OF THE VIEW THA T IN THE FACTS OF THE PRESENT CASE THE PARTNERS HAD BEEN INTRODUCED WITHOUT FULFILLING THE REQUISITE CONDITIONS. IN THESE CIRCUMSTANCES, THE PARTNERSHIP WAS CONSIDERED TO BE VOID AND THE INCOME WAS ASSESSED AS AOP. RELIANCE WAS PLACED UPON BIHAR LAL JAISWAL UPON THE DECISION OF THE APEX COURT IN THE CASE OF BIHARI LAL JAISWAL (2 17 ITR 746). AS A RESULT OF THE ITA NO277 9/DEL/2013 3 AO, DISALLOWED PARTNER REMUNERATION AND INTEREST OF CAPITAL TO THE EXTENT OF 2,75,807/- IN ACCORDANCE WITH CLAUSE (BA) OF SECTIO N 40 OF THE ACT. 4. AGGRIEVED BY THIS THE ASSESSSEE WENT IN APPEAL B EFORE THE CIT(A). BEFORE WHOM VARIOUS ARGUMENTS WERE ADVANCED APART FROM THE ARGUMENT THAT THE ASSESSEE HAS BEEN ASSESSED AS A FIRM BY WAY OF AN ASSESSMENT ORDER PASSED AFTER SCRUTINY U/S 143(3) IN 2003-04 ASSESSMENT YEAR AND THAT THE ASSESSEE IS A GENUINELY AND VALIDLY CONSTITUTED FIRM. IT IS SEEN THAT THE CIT( A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. LD. AR REITERATED THE ARGUMENTS ADVANCED BEFORE THE CIT(A) . LD. SR. DR RELIES ON THE SAME. ON A CONSIDERATION OF THE ENTIRE FACTS AND C IRCUMSTANCES OF THE CASE IT IS SEEN THAT THE ACTION OF THE AO HAS BEEN CONFIRMED R ELYING UPON THE CASE LAW HOWEVER, THE SPECIFIC ARGUMENT OF THE ASSESSEE NAME LY THAT ITS STATUS ON SAME FACTS AND CIRCUMSTANCES HAS BEEN ACCEPTED IN A SCRUTINY O RDER U/S 143(3) IN 2003-04 ASSESSMENT YEAR HAS NOT BEEN CONSIDERED. THE SAID CLAIM NEEDS TO BE VERIFIED AND CONSIDERED WHILE ADJUDICATING THE ISSUE. ACCORDING THE ISSUE IS RESTORE BACK TO THE CIT(A) WITH THE DIRECTION TO OBTAIN A REMAND REPORT IF NEED BE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. ACCORDINGLY THE GROUNDS RAISED ARE SET ASID E. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 2 2 ND OF NOVEMBER 2013. SD/- SD/- (J.S.REDDY) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 22/11/2013 *R. NAHEED* ITA NO277 9/DEL/2013 4 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI