SHRI ECHJARAJ SINGH, Kota V. CIT, Kota

ITA 305/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5134 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 30-03-2015
• Court: TRIBUNAL
• Department Lawyers: MEENA CIT DHK
• Assessee Lawyers: M C BHANDARI; HIREN BHANDARI C AS
• Keywords: Business income; Depreciation
• Section: 80C; 143(3); 263; 28

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 305/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11. SHRI IJYARAJ SINGH, BRIJRAJ BHAWAN, CIVIL LINES, KOTA. CUKE VS. THE COMMISSIONER OF INCOME TAX, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACZPS 6028 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI M C BHANDARI & SHRI HIREN BHANDARI (C.AS) JKTLO DH VKSJ LS@ REVENUE BY : SHRI M.S. MEENA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 12.07.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 22/07/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT, KOTA DATED 09.02.2015 PERTAINING TO ASSESSMENT YEAR 2010 -11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- THE LEARNED COMMISSIONER OF INCOME TAX, KOTA ERRE D IN LAW AS WELL AS ON FACTS IN PASSING THE ORDER UNDER SECTION 263 OF I.T. ACT 1961 WITHOUT POINTING OUT ANY PARTICULAR ERROR IN THE OR DER OF ASSESSING OFFICER PASSED ON 19.12.2012 WHICH IS PASSED AFTER PROPER ENQUIRY, DISCUSSIONS, TAKING EVIDENCE ETC. ETC. DURING THE A SSESSMENT PROCEEDINGS. THE COMMISSIONER OF INCOME TAX FAILED TO APPRECIATE THAT ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT AFTER DETAIL E NQUIRY, EXAMINATION OF ACCOUNTS AND DETAILS OF EXPENSES AND OBTAINED AL L NECESSARY EVIDENCES ETC. ETC. AND PASSED ORDER DATED 19.12.20 12 TREATING AND ALLOWING THE EXPENDITURE INCURRED IN RESPECT OF EAR NING OF BUSINESS INCOME AND IN THE NOTICE IT IS MENTIONED BY CIT THA T EXPENDITURE HAS BEEN INCURRED ON EXEMPTED INCOME AND PERSONAL EXPEN DITURE WHICH IS 2 ITA NO. 305/JP/2015 SHRI IJYARAJ SINGH VS. CIT NOT FACTUALLY CORRECT AS THERE IS NO INCOME ASSESSE D AS EXEMPTED INCOME AND NO PERSONAL EXPENDITURE INCURRED AND THE RE ARE BUSINESS INCOME EARNED, ON WHICH TAX HAS BEEN LEVIED TREATIN G AS BUSINESS INCOME. SO ALSO ON CONSIDERATION AND ON THE BASIS OF OBJECT ION OF AUDIT PARTY THE TAKING OF ACTION UNDER SECTION 263 IS ALSO NOT JUSTIFIED. THEREFORE ORDER PASSED BY THE ASSESSING OFFICER IS NOT ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. THE DETAIL FACTS HAVE BEEN GIVEN IN THE STATEMENT O F FACTS ANNEXED HEREWITH SEPARATELY. IT IS, THEREFORE, PRAYED THAT ORDER PASSED UNDER SE CTION 263 BY COMMISSIONER OF INCOME TAX, KOTA IS ILLEGAL, UNWARR ANTED AND DESERVES TO BE CANCELLED/QUASHED. 2. BRIEFLY STATED THE FACTS ARE THAT CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY AND ASSESSMENT UNDER SECTION 143(3) OF THE IT ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 19.12.2012. WHILE FRAMING THE ASSESSMENT, THE AO AFTER VERIFYING THE BOOKS OF ACC OUNT AND OTHER MATERIAL PLACED BEFORE HIM ACCEPTED THE RETURNED INCOME. SUBSEQUEN TLY, THE LD. CIT REVISED THE ORDER OF AO BY INVOKING PROVISIONS OF SECTION 263 O N THE BASIS AS SET OUT IN THE NOTICE THAT THE ASSESSEE HAS CLAIMED EXPENDITURE TO THE TUNE OF RS. 4,33,718/- AGAINST THE INCOME FROM INTEREST AND REMUNERATION A RISES FROM DIFFERENT PARTNERSHIP FIRMS AND ALSO ON THE BASIS THAT THE DEDUCTION CLAI MED UNDER SECTION 80C OF RS. 80,605/- WAS EXCESSIVE AS ALLOWABLE DEDUCTION UNDER SECTION 80C COMES TO RS. 56,749/-. IN RESPONSE TO THE NOTICE ISSUED UNDER S ECTION 263, THE ASSESSEE MADE WRITTEN SUBMISSIONS DATED 9 TH DECEMBER, 2014. THE LD. CIT DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND PROCEEDED TO PASS TH E IMPUGNED ORDER AND HELD THAT THE ORDER PASSED BY THE AO IS ERRONEOUS IN SO FAR A S PREJUDICIAL TO THE INTERESTS OF 3 ITA NO. 305/JP/2015 SHRI IJYARAJ SINGH VS. CIT THE REVENUE. HE SET ASIDE THE ASSESSMENT WITH A DIR ECTION TO THE AO TO FRAME IT DENOVO AFTER MAKING PROPER ENQUIRY AND VERIFICATION OF BOOKS OF ACCOUNT AND OTHER RECORDS/DOCUMENTS AND AFTER FOLLOWING THE DIRECTION S AS GIVEN IN THE IMPUGNED ORDER. 3. THE LD. COUNSEL FOR THE ASSESSEE SHRI MC BHANDAR I VEHEMENTLY ARGUED THAT THE ORDER PASSED BY LD. CIT IS NOT JUSTIFIED ON TH E FACT THAT THE LD. CIT HAS FAILED TO CONSIDER THE BINDING PRECEDENTS AND ALSO FAILED TO APPRECIATE THE FACTS IN RIGHT PERSPECTIVE. THE LD. COUNSEL SUBMITTED THAT THE LD . CIT HAS INITIATED PROCEEDINGS UNDER SECTION 263 WHEN AN OBJECTION WAS RAISED BY T HE AUDIT PARTY. HE SUBMITTED THAT THIS BASIS IS CONTRARY TO THE JUDICIAL PRECEDE NTS. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE BEING A PUBLIC PERSON A ND MEMBER OF PARLIAMENT ALSO HAVING BUSINESS INTEREST IN VARIOUS PARTNERSHIP FIR MS AS PARTNER. DUE TO HIS ENGAGEMENTS IN PUBLIC LIFE, HE WAS UNABLE TO LOOK A FTER THE AFFAIRS OF THE PARTNERSHIP FIRMS. THEREFORE, HE HAD APPOINTED PERSONS TO LOOK AFTER THE AFFAIRS AND IN THE COURSE OF MANAGEMENT OF AFFAIRS, THE EXPENSES INCUR RED IS AN ALLOWABLE EXPENDITURE AS PER THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAHARASHTRA SUGAR MILLS LTD., 82 ITR 452 (SC). THE LD. COUNSEL ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT RENDERED IN THE C ASE OF CIT VS. RAMNIK LAL KOTHARI, 74 ITR 57 (SC). RELIANCE IS ALSO PLACED O N THE JUDGMENT OF HONBLE RAJASTHAN HIGH COURT RENDERED IN THE CASE OF CIT VS . JABARMAL DUGAR, 84 ITR 158 (RAJ.). 3.1. LD. COUNSEL SUBMITTED THAT ANOTHER REASON MENT IONED IN THE NOTICE IS THAT DEDUCTION UNDER SECTION 80C WAS CLAIMED EXCESSIVELY . THE LD. COUNSEL SUBMITTED THAT IN RESPECT OF SPECIFIC QUERY IN POINT NO. 7, E VIDENCE OF DEDUCTION CLAIMED U/S 4 ITA NO. 305/JP/2015 SHRI IJYARAJ SINGH VS. CIT 80C HAS BEEN GIVEN. THE LD. COUNSEL RELYING UPON T HE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BINANI C EMENT LTD., 384 ITR 457 (CAL.) SUBMITTED THAT EVEN IF THERE MAY BE ERROR THEN THE ASSESSING OFFICER CAN CORRECT THE MISTAKE APPARENT FROM RECORD. THE LD. COUNSEL SUBMI TTED THAT IN THE CASE IN HAND, THE REVENUE HAS FAILED TO DEMONSTRATE THAT THE ORDE R PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3.2. ON THE CONTRARY, THE LD. D/R SUPPORTED THE ORD ER OF THE LD. CIT AND SUBMITTED THAT SO FAR THE EXCESSIVE CLAIM OF DEDUCTION IS CON CERNED, THE ASSESSEE HAS CONCEDED THE FACT THAT IT HAS CLAIMED EXCESSIVE DEDUCTION. H E FURTHER SUBMITTED THAT A PERUSAL OF THE ASSESSMENT ORDER WOULD MAKE IT CLEAR THAT TH E AO HAS NOT APPLIED HIS MIND AND NO ENQUIRY WAS MADE WITH REGARD TO THE CLAIM OF THE ASSESSEE RELATED TO EXPENDITURE AND THE DEDUCTION. 3.3. IN REJOINDER, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAS IN FACT MADE ENQUIRY. IT IS NOT NECESSARY THAT AO SHOU LD RECORD HIS FINDING ON EACH QUERY SO RAISED IN THE ASSESSMENT ORDER. HE DREW OU R ATTENTION TO PAGE 50 OF THE PAPER BOOK WHEREIN IN POINT NO. 7 SPECIFIC QUESTION IS RAISED WITH REGARD TO THE DEDUCTION CLAIMED UNDER SECTION 80C OF RS. 87,554/- AND ALSO DETAILS OF VARIOUS EXPENDITURES CLAIMED BY THE ASSESSEE. IN RESPONSE THERETO, THE ASSESSEE HAD GIVEN DETAILED REPLY. IN SUPPORT OF THIS, THE LD. COUNSEL DREW OUR ATTENTION TO PAGES 53-54 OF THE PAPER BOOK. 3.4. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. THERE IS NO DISPUTE WITH REGARD TO THE POSITION OF LAW THAT POWERS CONFERRED UNDER SECTION 263 CAN BE INVOKED IF THE LD. CIT FINDS THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND 5 ITA NO. 305/JP/2015 SHRI IJYARAJ SINGH VS. CIT PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT IS ALSO SETTLED POSITION OF LAW THAT ABSENCE OF ANY OF THESE CONDITIONS WOULD MAKE THE O RDER UNDER SECTION 263 AS UNJUSTIFIED AND ILLEGAL. IN THE CASE IN HAND, THE F IRST GROUND OF INVOKING PROVISIONS OF SECTION 263 IS THAT THE ASSESSEE CLAIMED EXPENDITUR E OF RS. 4,33,718/- ON ACCOUNT OF SALARY AND ALLOWANCES, POSTAGE, TELEPHONE & STATION ERY AND TRAVELING, CAR, VEHICLE AND CONVEYANCE, BANK CHARGES, OTHER BUSINESS OFFICE EXPENSES, LEGAL EXPENSES AND FEES, DEPRECIATION. THE EXPLANATION OF THE ASSESSE E BEFORE THE AO VIDE HIS LETTER DATED 5 TH NOVEMBER, 2012 IN POINT NO. 10 HAS STATED THAT INT EREST HAS BEEN RECEIVED FROM M/S. MADHO ASSOCIATES, KOTA, BRIJRAJ BHAWAN PA LACE HOTEL, MAYUR SERVICE STATION, KOTA AND TOSHAKHANA, BESIDES INTEREST REM UNERATION FROM M/S. MAHALAXMI ASSOCIATION, KOTA AND TOSHAKHANA. ALL THESE FIRMS A RE OLD FIRMS AND ASSESSED TO TAX SINCE A LONG TIME. THE SAME PARTNERSHIP DEED CONTIN UED. FROM THAT IT IS CLEAR THAT THE ASSESSEE HAS STATED THAT HE WAS PARTNER IN VARI OUS PARTNERSHIP FIRMS. IN RESPECT OF THE EXPENSES, THE ASSESSEE ALSO STATED IN THAT R EPLY ABOUT THE EXPENDITURES INCURRED AND DEDUCTION CLAIMED. THE AO AFTER CONSI DERING THE SUBMISSIONS ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF DEDUCTION/E XPENDITURE. NOW THE QUESTION ARISES IS WHETHER THE AO ERRED IN ALLOWING THE EXPE NDITURE. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF CIT VS. JABARMAL DUGA R (SUPRA). WE FIND THAT THE HONBLE HIGH COURT HAS HELD THAT THE EXPENDITURE WA S ALLOWABLE. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. S.B. GHO SE, 124 ITR 674 (CAL.), AFTER CONSIDERING VARIOUS JUDGMENTS HELD THAT WHEN THE INCOME OF A PARTNERSHIP IS ALLOCATED T THE DIFFERENT PARTNERS OF A FIRM, THE PARTNERS ARE ENTITLED TO HAVE THEIR INCOME ASSESSED IN ACCORDANCE WITH LAW, THAT IS TO SAY, UNDER SECTION 28 OF THE I.T. 6 ITA NO. 305/JP/2015 SHRI IJYARAJ SINGH VS. CIT ACT, 1961. IN MAKING THAT ASSESSMENT, A PARTNER OF THE FIRM, BEING AN ASSESSEE, IS ENTITLED TO ALL THE DEDUCTIONS ALLOWABLE UNDER THE ACT. IN ORDER TO EARN THE INCOME AS A PARTNER OF A FIRM, A PARTNER OF A FIRM HAS TO DO SOME WORK AND HE HAS TO INCUR CERTAIN EXPENSES, E.G., HOLDING CONSULTATION FOR TH E WORK OF THE FIRM AT ONES RESIDENCE OR ACTS DONE IN ORDER TO FACILITATE OR EA RN THE INCOME AS A PARTNER OF THE FIRM. SUCH EXPENDITURE WAS ALLOWABLE. IN VIEW OF THESE J UDGMENTS, THE ACT OF THE AO CANNOT BE TERMED AS ERRONEOUS. THEREFORE, ON THI S GROUND INVOKING OF PROVISIONS OF SECTION 263, IN OUR CONSIDERED VIEW WAS NOT JUST IFIED. 4. ANOTHER GROUND THE LD. CIT HAS TAKEN FOR INVOKIN G PROVISIONS OF SECTION 263 IS THAT THE ASSESSEES EXCESSIVE CLAIM OF DEDUCTION UN DER SECTION 80C WAS ALLOWED BY THE AO WITHOUT MAKING ENQUIRY WITH REGARD TO THE AL LOWABILITY OF SUCH CLAIM. AS PER THE LD. CIT, THE ASSESSEE WAS ENTITLED FOR DEDUCTIO N OF RS. 56,749/- OUT OF RS. 80,605/-, HENCE THE DEDUCTION OF RS. 23,856/- WAS N OT ALLOWABLE AND THE AO ALLOWED SUCH DEDUCTION. 4.1. THE CONTENTION OF THE ASSESSEE IS THAT ON THIS GROUND ALSO THE LD. CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 . IT IS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THERE IS NO DISPUTE WITH REGA RD TO THE FACT THAT OUT OF RS. 80,605/-, THE LD. CIT HIMSELF HAS ALLOWED DEDUCTION . IT WAS CONTENDED THAT ALL DETAILS WERE GIVEN TO THE AO IN RESPECT OF SPECIFIC QUERY IN POINT NO. 7 OF LETTER DATED 29.10.2012 ISSUED BY THE AO, VIDE ASSESSEES LETTER DATED 5 TH NOVEMBER, 2012. THE LD. COUNSEL DREW OUR ATTENTION TO PAPER BOOK PAGES 53-54 IN SUPPORT OF THIS CONTENTION. FROM THE DETAILS FILED IN THE PAPER BOO K, IT TRANSPIRED THAT THE ASSESSEE HAS CLAIMED DEDUCTION ON GROSS AMOUNT PAID TO THE S CHOOL. HOWEVER, OUT OF THIS GROSS AMOUNT, THE ASSESSEE WAS ENTITLED FOR DEDUCTI ON TO THE EXTENT OF TUITION FEE 7 ITA NO. 305/JP/2015 SHRI IJYARAJ SINGH VS. CIT ALONE. THEREFORE, THE AO ERRED IN ALLOWING THE DEDU CTION ON GROSS AMOUNT. BUT LOOKING TO THE AMOUNT INVOLVED, IN OUR CONSIDERED V IEW, THE LD. CIT SHOULD HAVE GIVEN DIRECTION TO THE AO AS HE IS EMPOWERED TO DO SO TO RESTRICT THE CLAIM TO THE EXTENT OF ALLOWABLE DEDUCTION INSTEAD OF SETTING AS IDE THE ASSESSMENT ORDER. AS PER SECTION 263, THE LD. CIT IS EMPOWERED TO MODIFY THE ASSESSMENT. THEREFORE, ON THE FIRST GROUND, ORDER OF LD. CIT IS SET ASIDE AND QUA SHED BEING CONTRARY TO THE LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN RE SPECT OF ALLOWABILITY OF EXPENDITURE TO A PARTNER FOR A FIRM; AND IN RESPECT OF SECOND GROUND, THE DIRECTION ISSUED BY THE LD. CIT IS MODIFIED. THE AO IS DIREC TED TO RESTRICT THE DEDUCTION TO THE EXTENT OF RS. 56,749/- CLAIMED UNDER SECTION 80-C. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/07/201 6. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 22/07/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI IJYARAJ SINGH OF KOTA. 2. THE RESPONDENT- THE COMMISSIONER OF INCOME TAX, KOTA. 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 305/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 8 ITA NO. 305/JP/2015 SHRI IJYARAJ SINGH VS. CIT