Shreeji Enterprises, Ahmedabad V. The ACIT.,(OSD)Circle-10, Ahmedabad

ITA 292/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1316 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 28-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 01-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gift

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ ././ ./ ITA NO. 292/AHD/2012 / ASSESSMENT YEAR: 2007-08 M/S. SHREEJI ENTERPRISES, A-702, NIRMAN COMPLEX, OPP. HAVMOR RESTAURANT, NAVRANGPURA, AHMEDABAD PAN : ABBFS 8099 M VS ACIT (OSD), CIRCLE-10, AHMEDABAD / // / (APPELLANT) / // / (RESPONDENT) ASSESSEE(S) BY : SHRI PRITESH SHAH, AR REVENUE BY : SHRI RAJDEEP SINGH, SR DR / // / DATE OF HEARING : 28/06/2016 / // / DATE OF PRONOUNCEMENT: 29/06/2016 / // / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XVI, AHMEDABAD , DATED 24.11.2011 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE SOLITARY GROUND RAISED BY THE ASSESSEE IN TH IS APPEAL READS AS UNDER:- THE LEARNED CIT(A) ERRED IN CONFIRMING THE PENALTY UNDER SECTION 271(A)(C) OF RS.3,00,000/- WHICH IS REQUESTED TO BE D ELETED. 3. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 1 43(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'T HE ACT') WAS FRAMED VIDE ORDER DATED 11.12.2009. WHILE FRAMING THE ASS ESSMENT, THE ITA NO. 292/AHD/2012 SHREEJI ENTERPRISES VS. ACIT AY : 2007-08 2 ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF SHORT AGE IN STOCK, DISALLOWANCE OF REMUNERATION PAID TO WORKING PARTNE R AND DISALLOWANCE OF GIFT EXPENDITURE AND ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. SUBSEQUENTLY, THE ASSESSIN G OFFICER LEVIED PENALTY OF RS.3,00,000/- ON ADDITION OF RS.8,89,592 /- VIDE ORDER DATED 28.01.2011. AGAINST THIS PENALTY ORDER, THE ASSESS EE FILED AN APPEAL BEFORE THE LD. CIT(A) WHO, AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE, DISMISSED THE APPEAL. 3.1 NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE TH IS TRIBUNAL. 3.2 LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS AS WERE MADE IN THE ARGUMENTS SUMMARY. HE RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PTROPRODUCTS (P) LTD, REPORTED IN (2010) 322 ITR 0158 (SC) AND T HE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY, REPORTED IN (2013) 359 IT R 565 (KARNATAKA) IN SUPPORT OF HIS CONTENTION THAT THE ASSESSEE HAS NEITHER CONCEALED THE PARTICULARS OF HIS INCOME NOR FURNISHED ANY INACCUR ATE PARTICULARS OF INCOME. HE SUBMITTED THAT IN CASE OF SHORTAGE OF S TOCK, THE ASSESSING OFFICER HAS TREATED THE SAME AS UNACCOUNTED SALES W ITHOUT HAVING ANY EVIDENCE ON RECORD AND IN THE CASE OF REMUNERATION TO PARTNER, THERE WAS A DOUBLE TAXATION SINCE THE ASSESSEE FIRM AS WE LL AS PARTNER, BOTH COMES UNDER THE HIGHEST SLAB OF INCOME TAX RATES; T HUS, IN CASE OF REMUNERATION, THERE IS NO LOSS OF REVENUE TO THE GO VERNMENT. HE CONTENDED THAT NO TAX IS EVADED BY THE ASSESSEE. ITA NO. 292/AHD/2012 SHREEJI ENTERPRISES VS. ACIT AY : 2007-08 3 3.3 ON THE CONTRARY, LD. DR OPPOSED THE SUBMISSIONS AND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE PENALTY IS SUSTAINED ON TWO ADDITIONS M ADE ON ACCOUNT OF SHORTAGE OF STOCK TREATED AS UNACCOUNTED SALES AND DISALLOWANCE OF REMUNERATION TO PARTNER PAID TO THE PRIVATE LIMITED COMPANY. WE FIND THAT LD. CIT(A) HAS DECIDED THIS ISSUE BY OBSERVING AS UNDER:- 2.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE LD. COUNSEL AND THE FACTS OF THE CASE. THE PENALTY U/S 271(1)(C) OF THE ACT HAS BEEN LEVIED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITH REFERENCE TO REMUNERATION PAID TO THE COMPANY M/S. DHIRAJ DIA MOND TOOLS PVT LTD AS WORKING PARTNER AND FOR THE SHORTAGE OF STOC K TREATED AS UNACCOUNTED SALES. IT IS THE SETTLED POSITION OF L AW THAT THE REMUNERATION ETC. CAN BE PAID BY THE FIRM ONLY TO T HE INDIVIDUALS AND NOT TO THE REPRESENTATIVE OF THE PARTNER. THE HON BLE SUPREME COURT IN THE CASE OF RASHIK LAL & CO VS. CIT, 229 ITR 458 (S C) HAS HELD THAT IN LAW THE HUF CAN NEVER BE A PARTNER IN A PARTNERSHIP FIRM. IF A KARTA OR ANY OTHER MEMBER OF HUF JOINS PARTNERSHIP HE CAN DO SO ONLY AS AN INDIVIDUAL. THEREFORE, COMMISSION PAID TO A PARTNE R WHO REPRESENT ITS HUF WILL BE HIT BY MISCHIEF OF SECTION 40(B) AND WIL L NOT BE ALLOWABLE AS DEDUCTION IN CASE OF THE FIRM. 2.4 THUS, IT IS CLEAR THAT THE REMUNERATION CAN BE PAID TO A WORKING PARTNER WHO IS AN INDIVIDUAL BECAUSE ONLY THE INDIV IDUAL CAN RENDER SERVICES AS A WORKING PARTNER FOR THE FIRM. AS PER THE FACTS OF THE CASE, THE REMUNERATIONS OF RS.5,16,537/- AND RS.4,16,606/ - WERE ACTUALLY PAID TO SHRI RAJHESH AGARWAL AS A WORKING PARTNER R ESPECTIVELY FOR HIMSELF AND AS A REPRESENTATIVE DIRECTOR OF THE COM PANY. THUS, IN FACT REMUNERATION OF RS.9,33,143/- WAS PAID TO ONLY ONE PERSON FOR RENDERING THE SERVICES AS A WORKING PARTNER BUT THE AMOUNT OF RS.4,16,606/- WAS SHOWN TO BE PAID TO THE COMPANY A S ABOVE IN A REPRESENTATIVE CAPACITY. NO ANY SEPARATE SERVICES WERE RENDERED BY SHRI RAJESH AGARWAL ON BEHALF OF THE COMPANY AS A R EPRESENTATIVE ITA NO. 292/AHD/2012 SHREEJI ENTERPRISES VS. ACIT AY : 2007-08 4 WORKING PARTNER. IT IS EVIDENT FROM RECORD THAT TH E APPELLANT HAD DIVERTED RS.4,16,606/- IN THE NAME OF REMUNERATION TO THE COMPANY JUST TO REDUCE THE TAXABLE INCOME. THE COMPANY HAS DISCLOSED THIS REMUNERATION AS OTHER INCOME IN ITS RETURN OF INCOM E AND CLAIMED CERTAIN DEDUCTIONS AND NET INCOME WAS SHOWN FOR RS. 2,17,371/- ONLY. THIS IS A FACT THAT NO EXPENSES WERE INCURRED TO EA RN THE REMUNERATION BY THE COMPANY BUT THE COMPANY HAD CLAIMED THE DEDU CTION BY SHOWING THE REMUNERATION AS OTHER INCOME. THUS, TH E BASIC PURPOSE OF GIVING REMUNERATION TO THE COMPANY WAS TO OBLIGE TH E COMPANY TO CLAIM CERTAIN EXPENSES AGAINST THIS INCOME. THE AS SESSING OFFICER HAD THUS RIGHTLY COME TO A CONCLUSION THAT THE DETAILS SUPPLIED BY THE ASSESSEE IN THE RETURN OF INCOME WITH REFERENCE TO THE REMUNERATION TO PARTNERS WAS INCORRECT AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT LTD 322 ITR 158 (SC) IS NOT APPLICABLE ON THE FACTS OF THE CASE. THE ASSESSING OFFICER WAS THUS JUSTIFIED IN LEVYING THE PENALTY FOR FURNISHING INA CCURATE PARTICULARS OF INCOME WITH REFERENCE TO THE PAYMENT OF REMUNERATIO N TO THE COMPANY AS WORKING PARTNER AND THE SAME IS HEREBY CONFIRMED . 2.5 AS REGARDS THE SHORTAGE OF STOCK TREATED AS UN DISCLOSED SALES, THERE IS CLEAR FINDING OF THE CIT(A) IN PARA 3.1 OF HIS AP PELLATE ORDER THAT THE PARTNER OF THE APPELLANT FIRM HAD ADMITTED THAT THE SHORTAGE SHOWN IN THE BOOKS IN FACT REPRESENT UNACCOUNTED SALES THERE FORE I AGREE WITH THE ASSESSING OFFICER THAT IT HAD SOLD 33.164 MT OF STO CK OUTSIDE ITS BOOKS OF ACCOUNT. THE SO CALLED SHORTAGE CLAIMED WAS THE REFORE, ACTUALLY TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ASSESSING OFFICER WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN ITS R ETURN OF INCOME AND ALSO JUSTIFIED IN LEVYING THE PENALTY U/S 271(1)(C) O F THE ACT. THE PENALTY LEVIED FOR FURNISHING OF INACCURATE PARTICU LARS OF INCOME WITH REFERENCE TO SHORTAGE OF STOCK IS HEREBY CONFIRMED. 4.1 SO FAR THE PENALTY LEVIED ON ACCOUNT OF SHORTAG E OF STOCK, IT WAS INCUMBENT UPON THE ASSESSEE TO GIVE TRUE AND FAIR P ICTURE OF THE STOCK. SINCE THE ASSESSEE FAILED TO DO SO, IN OUR CONSIDER ED VIEW, THE PENALTY LEVIED ON THIS AMOUNT CANNOT BE DELETED. HOWEVER, IN RESPECT OF CLAIM OF REMUNERATION PAID TO THE WORKING PARTNER, IN OUR CONSIDERED ITA NO. 292/AHD/2012 SHREEJI ENTERPRISES VS. ACIT AY : 2007-08 5 OPINION, THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAI NING THE PENALTY IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT I N THE CASE OF RELIANCE PETROPRODUCTS (P) LTD (SUPRA). RESPECTFUL LY FOLLOWING THE RATIO OF DECISION OF HONBLE SUPREME COURT IN THE C ASE OF RELIANCE PETROPRODUCTS (P) LTD (SUPRA), WE HEREBY DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY ON THE ADDITION MADE ON ACCOU NT OF DISALLOWANCE OF REMUNERATION PAID TO THE WORKING PARTNER. THUS, THIS GROUND OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. 5. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE COURT ON 29 TH JUNE, 2016 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (KUL BHARAT) JUDICIAL MEMBER AHMEDABAD; DATED 29/06/2016 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, TRUE COPY / // / ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD