M/s Bhatnagar Optical, Gwalior V. I.T.O., Ward 2(1), Gwalior

ITA 313/AGR/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0234 (ITAT-AGRA)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-02-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 09-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Business expenditure; Opportunity of being heard; Revised return
• Section: 69C; 142(1); 133A; 131; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 313/AGRA/2012 ASSTT. YEAR : 2006-07 M/S. BHATNAGAR OPTICALS, VS. INCOME-TAX OFFICER , SANJAY COMPLEX, WARD 2(1), GWALIOR. JAYENDRAGANJ, GWALIOR. (PAN : AAGFB 0508 C) (APPELLANT) (RESPONDENT) APPELLANT BY : 11.02.2013 RESPONDENT BY : 15.02.2013 DATE OF HEARING : SHRI MAHESH AGARWAL, C.A. DATE OF PRONOUNCEMENT OF ORDER : SHRI K.K. MISHRA, JR. D.R. ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A), GWALIOR DATED 29.04.2012 FOR THE ASSESSMENT YEAR 20 06-07, CHALLENGING THE ADDITION OF RS.1,20,000/- ON ACCOUNT OF SALARY AND REMUNERATION PAID TO THE PARTNERS. 2. THE ASSESSEE FILED APPLICATION FOR ADMISSION OF ADDITIONAL GROUNDS, ON WHICH REPLY OF THE DEPARTMENT WAS SOUGHT. HOWEVER, ON THE DATE OF HEARING, THE LD. ITA NO. 313/AGRA/2012 2 COUNSEL FOR THE ASSESSEE SEEKS PERMISSION TO WITHDR AW THE APPLICATION FOR RAISING THE ADDITIONAL GROUND OF APPEAL. THE SAME IS ACCORD INGLY DISMISSED AS WITHDRAWN. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED RETURN OF INCOME ON 30.03.2007 SHOWING LOSS OF RS.2097/-. NO TRADING AC COUNT, PROFIT & LOSS ACCOUNT AND BALANCE SHEET WERE FILED WITH THE RETURN OF INC OME. DEFICIENCY LETTER WAS ISSUED TO THE ASSESSEE BUT IT WAS NOT COMPLIED WITH BY THE ASSESSEE TO REMOVE THE DEFECT IN THE RETURN OF INCOME. THEREFORE, THE SAME RETURN WAS TREATED AS INVALID AND WAS ALSO INTIMATED TO THE ASSESSEE AS SUCH. SIM ULTANEOUSLY, THE NOTICE U/S. 142(1) WAS ISSUED ON 19.03.2008 REQUIRING THE ASSES SEE TO FILE THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL, WHICH WAS ALS O NOT COMPLIED WITH BY THE ASSESSEE. FURTHER NOTICE U/S. 142(1) AND SUMMON U/S . 131 WERE ISSUED TO THE ASSESSEE TIME TO TIME REQUIRING THE ASSESSEE TO APP EAR IN THE PROCEEDINGS BEFORE THE AO AND TO PRODUCE THE BOOKS OF ACCOUNTS AND SUPPORT ING DOCUMENTS, BUT THE ASSESSEE DID NOT COMPLY WITH THE SAME. SURVEY U/S. 133A WAS CONDUCTED ON 18.12.2008 IN THE PREMISES OF THE ASSESSEE AND SOME DOCUMENTS WERE IMPOUNDED, BUT NO REGULAR BOOKS OF ACCOUNT WERE FOUND AT THE P REMISES OF THE ASSESSEE. STATEMENT OF THE PARTNER OF THE ASSESSEE FIRM WAS R ECORDED IN WHICH HE HAS ACCEPTED THAT NO BOOKS OF ACCOUNT HAVE BEEN PREPARE D. THEREAFTER, SEVERAL STATUTORY NOTICES WERE ISSUED TIME TO TIME REQUIRING THE ASSE SSEE TO PRODUCE COMPLETE DETAILS, ITA NO. 313/AGRA/2012 3 BUT NONE HAVE BEEN COMPLIED WITH BY THE ASSESSEE AN D ACCORDINGLY, SHOW CAUSE NOTICE U/S. 144 WAS ALSO ISSUED AS TO WHY INCOME OF THE ASSESSEE BE NOT COMPUTED EXPARTE U/S. 144 OF THE IT ACT. IT WAS INTIMATED TH AT IT IS NOT POSSIBLE FOR THE ASSESSEE TO PRODUCE THE DESIRED DETAILS AS THE CONC ERNED PARTNER IS NOT AVAILABLE. THUS, THE ASSESSEE DID NOT COMPLY WITH ANY OF THE S TATUTORY NOTICES. THEREFORE, THE AO ON THE BASIS OF THE MATERIAL ON RECORD PASSED EX PARTE ASSESSMENT ORDER U/S. 144 OF THE IT ACT. ON THE BASIS OF RECORD/INFORMATION A VAILABLE WITH THE REVENUE DEPARTMENT, IT WAS FOUND THAT THE ASSESSEE FIRM HAS ALSO PAID SALARY / REMUNERATION TO THE PERSONS MENTIONED BELOW DURING THE ASSESSMEN T YEAR UNDER APPEAL : (I). SMT. POOJA BHATNAGAR SALARY RS.72,000/- (II). SHRI RACHIT BHATNAGAR REMUNERATION RS.24,00 0/- (III). SHRI ANURAG BHATNAGAR REMUNERATION RS.24,0 00/- THE AO, THEREFORE, TREATED THE SAME AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE IT ACT, AS NO RETURN OF INCOME WAS FILED. THEREFORE, A DDITION OF RS.1,20,000/- WAS ACCORDINGLY MADE. ADDITION WAS CHALLENGED BEFORE TH E LD. CIT(A) AND IT WAS SUBMITTED THAT THE ORDER OF THE AO IS NON-SPEAKING AND NO DETAILS WERE PROVIDED FOR MAKING ADDITION AND THE REMUNERATION IS ALLOWAB LE U/S. 40(B) OF THE IT ACT. THE LD. CIT(A), HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE. THE LD. CIT(A) FOUND THAT THE ASSESSEE FIRM CAME INTO EXISTENCE VI DE PARTNERSHIP DEED DATED 04.01.2000 AND SALARY AND REMUNERATION IS PAID AS P ER THE DEED. RS.72,000/- WAS ITA NO. 313/AGRA/2012 4 PAID TO SMT. POOJA BHATNAGAR, WHICH WAS ALSO DECLAR ED IN HER RETURN OF INCOME FILED WITH THE DEPARTMENT AND SIMILARLY IN THE OTHE R CASE OF REMUNERATION TO OTHER PARTNERS, THEY HAVE DECLARED REMUNERATION RECEIVED FROM ASSESSEE FIRM. THE ASSESSEE, HOWEVER, FAILED TO GIVE ANY DOCUMENTARY E VIDENCE AND FAILED TO PRODUCE BOOKS OF ACCOUNT TO SUBSTANTIATE THESE PAYMENTS. SI MILARLY, NO DOCUMENTS AND MATERIAL WAS PRODUCED AT THE ASSESSMENT STAGE DESPI TE GIVING OPPORTUNITY. THE LD. CIT(A) IN THE ABSENCE OF ANY DETAILS WAS OF THE VIE W THAT NO BUSINESS EXPENDITURE IS ALLOWABLE TO THE ASSESSEE FIRM AND ACCORDINGLY I N THE ABSENCE OF ANY EVIDENCE FOR PAYMENT OF SALARY AND REMUNERATION TO THE PARTN ERS, ADDITION WAS CONFIRMED AND APPEAL OF THE ASSESSEE WAS ACCORDINGLY DISMISSE D. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO EXPENSES HAVE BEEN DISALLOWED BY THE AO AND NO SPECIFIC NOTICE U/S. 14 4 HAS BEEN GIVEN. PB-3 IS THE LETTER OF THE AO WHICH DID NOT CONTAIN ANY SPECIFIC MATERIAL FOR MAKING ADDITION AGAINST THE ASSESSEE. HE HAS RELIED UPON THE DECISI ON OF HONBLE KERALA HIGH COURT IN THE CASE OF T.C.N. MENON VS. ITO, 96 ITR 148 IN WHICH IT WAS HELD THAT IN THE BEST JUDGMENT ASSESSMENT, THE ASSESSEE IS ENTITLED TO SHOW CAUSE WHY ON THE MATERIALS GATHERED BY THE ITO, HIS TOTAL INCOME SHO ULD NOT BE ASSESSED IN THE MANNER PROPOSED BY THE ITO. HE HAS FURTHER SUBMITTE D THAT THE CONDITIONS OF SECTION 69C ARE NOT SATISFIED IN THIS CASE BECAUSE NO PROPER EXPLANATION OF THE ITA NO. 313/AGRA/2012 5 ASSESSEE WAS CALLED FOR AND THERE SHOULD BE ACTUAL EXPENSES INCURRED BY THE ASSESSEE SO THAT ADDITION COULD BE MADE. IN THE CAS E OF THE FIRM, AS ASSESSED BY THE AO, THE DEDUCTION SHOULD BE ALLOWED AS SUCH. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD. THE RELEVANT PROVISIONS TO DEAL WITH THE MATTER IN ISSU E ARE REPRODUCED AS UNDER. SECTION 144 OF THE ACT PROVIDES AS UNDER : 144. (1)] IF ANY PERSON (A) FAILS TO MAKE THE RETURN REQUIRED UNDER SUB-SE CTION (1) OF SECTION 139 AND HAS NOT MADE A RETURN OR A REVISED RETURN UNDER SUB-SECTION (4) OR SUB-SECTION (5) OF THAT SECTION, OR (B) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR FAILS TO COMPLY WITH A DIRECT ION ISSUED UNDER SUB- SECTION (2A) OF THAT SECTION], OR (C) HAVING MADE A RETURN, FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (2) OF SECTION 143, THE ASSESSING OFFICER, AFTER TAKING INTO ACCOUNT AL L RELEVANT MATERIAL WHICH THE ASSESSING OFFICER HAS GATHERED, SHALL, AF TER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE THE AS SESSMENT OF THE TOTAL INCOME OR LOSS TO THE BEST OF HIS JUDGMENT AN D DETERMINE THE SUM PAYABLE BY THE ASSESSEE ON THE BASIS OF SUCH ASSESS MENT : PROVIDED THAT SUCH OPPORTUNITY SHALL BE GIVEN BY THE ASSESS ING OFFICER BY SERVING A NOTICE CALLING UPON THE ASSESSEE TO SH OW CAUSE, ON A DATE AND TIME TO BE SPECIFIED IN THE NOTICE, WHY THE ASS ESSMENT SHOULD NOT BE COMPLETED TO THE BEST OF HIS JUDGMENT : ITA NO. 313/AGRA/2012 6 PROVIDED FURTHER THAT IT SHALL NOT BE NECESSARY TO GIVE SUCH OPPORTUNITY IN A CASE WHERE A NOTICE UNDER SUB-SECT ION (1) OF SECTION 142 HAS BEEN ISSUED PRIOR TO THE MAKING OF AN ASSES SMENT UNDER THIS SECTION.] (2) THE PROVISIONS OF THIS SECTION AS THEY STOOD IM MEDIATELY BEFORE THEIR AMENDMENT BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 (4 OF 1988), SHALL APPLY TO AND IN RELATION TO ANY ASSESS MENT FOR THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR AND REFERENCES IN THIS SECT ION TO THE OTHER PROVISIONS OF THIS ACT SHALL BE CONSTRUED AS REFERE NCES TO THOSE PROVISIONS AS FOR THE TIME BEING IN FORCE AND APPLI CABLE TO THE RELEVANT ASSESSMENT YEAR. SECTION 184 OF THE IT ACT PROVIDES AS UNDER : 184. (1) A FIRM SHALL BE ASSESSED AS A FIRM FOR THE PUR POSES OF THIS ACT, IF (I) THE PARTNERSHIP IS EVIDENCED BY AN INSTRUMENT ; AND (II) THE INDIVIDUAL SHARES OF THE PARTNERS ARE SPE CIFIED IN THAT INSTRUMENT. (2) A CERTIFIED COPY OF THE INSTRUMENT OF PARTNERSH IP REFERRED TO IN SUB- SECTION (1) SHALL ACCOMPANY THE RETURN OF INCOME OF THE FIRM OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMME NCING ON OR AFTER THE 1ST DAY OF APRIL, 1993 IN RESPECT OF WHICH ASSE SSMENT AS A FIRM IS FIRST SOUGHT. EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION, THE COPY OF THE INSTRUMENT OF PARTNERSHIP SHALL BE CERTIFIED IN WRI TING BY ALL THE PARTNERS (NOT BEING MINORS) OR, WHERE THE RETURN IS MADE AFTER THE DISSOLUTION OF THE FIRM, BY ALL PERSONS (NOT BEING MINORS) WHO WERE PARTNERS IN THE FIRM IMMEDIATELY BEFORE ITS DISSOLU TION AND BY THE LEGAL REPRESENTATIVE OF ANY SUCH PARTNER WHO IS DECEASED. (3) WHERE A FIRM IS ASSESSED AS SUCH FOR ANY ASSESS MENT YEAR, IT SHALL BE ASSESSED IN THE SAME CAPACITY FOR EVERY SUBSEQUE NT YEAR IF THERE IS ITA NO. 313/AGRA/2012 7 NO CHANGE IN THE CONSTITUTION OF THE FIRM OR THE SH ARES OF THE PARTNERS AS EVIDENCED BY THE INSTRUMENT OF PARTNERSHIP ON TH E BASIS OF WHICH THE ASSESSMENT AS A FIRM WAS FIRST SOUGHT. (4) WHERE ANY SUCH CHANGE HAD TAKEN PLACE IN THE PR EVIOUS YEAR, THE FIRM SHALL FURNISH A CERTIFIED COPY OF THE REVISED INSTRUMENT OF PARTNERSHIP ALONG WITH THE RETURN OF INCOME FOR THE ASSESSMENT YEAR RELEVANT TO SUCH PREVIOUS YEAR AND ALL THE PROVISIO NS OF THIS SECTION SHALL APPLY ACCORDINGLY. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WHERE, IN RESPECT OF ANY ASSESSMENT YEAR, THER E IS ON THE PART OF A FIRM ANY SUCH FAILURE AS IS MENTIONED IN SECTION 14 4, THE FIRM SHALL BE SO ASSESSED THAT NO DEDUCTION BY WAY OF ANY PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION, BY WHATE VER NAME CALLED, MADE BY SUCH FIRM TO ANY PARTNER OF SUCH FIRM SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PRO FITS AND GAINS OF BUSINESS OR PROFESSION' AND SUCH INTEREST, SALAR Y, BONUS, COMMISSION OR REMUNERATION SHALL NOT BE CHARGEABLE TO INCOME-TAX UNDER CLAUSE (V) OF SECTION 28. SECTION 185 OF THE IT ACT PROVIDES AS UNDER : 185. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION OF THIS ACT, WHERE A FIRM DOES NOT COMPLY WITH THE PROVISIONS OF SECTION 184 FOR ANY ASSESSMENT YEAR, THE FIRM SHALL BE SO ASSESSED THAT NO DEDUCTION BY WAY OF ANY PAYMENT OF INTEREST, SAL ARY, BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED , MADE BY SUCH FIRM TO ANY PARTNER OF SUCH FIRM SHALL BE ALLOWED I N COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AND SUCH INTEREST, SALARY, BONUS, COMMI SSION OR REMUNERATION SHALL NOT BE CHARGEABLE TO INCOME-TAX UNDER CLAUSE (V) OF SECTION 28. 5.1 CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE PROVISIONS, IT IS CLEAR THAT THE ASSESSEE FAILED TO COMPLY WITH THE P ROVISIONS OF SECTION 144 OF THE IT ITA NO. 313/AGRA/2012 8 ACT. WHATEVER RETURN OF INCOME WAS FILED ORIGINALLY WAS DECLARED INVALID BECAUSE THE ASSESSEE FAILED TO REMOVE THE DEFICIENCY IN THE RETURN. THE ASSESSEE ALSO FAILED TO FILE THE RETURN OF INCOME AS REQUIRED U/S. 142(1 ) OF THE IT ACT AND ALSO FAILED TO COMPLY WITH THE NOTICE U/S. 144 OF THE IT ACT. THER EFORE, THE PROVISION OF SECTION 144 OF THE IT ACT HAS BEEN RIGHTLY INVOKED AGAINST THE ASSESSEE FOR FRAMING THE EXPARTE ASSESSMENT ORDER. SUB-SECTION (5) OF SECTIO N 184 OF THE IT ACT IS EXCEPTION TO RULE AND WOULD CLEARLY DISENTITLE THE ASSESSEE F OR CLAIMING DEDUCTION BY WAY OF SALARY AND REMUNERATION ETC. IN CASE THE ASSESSEE M ADE A FAILURE AS PROVIDED U/S. 144 OF THE IT ACT. SIMILARLY, THE ASSESSEE HAS ALSO FAILED TO PROVE OTHER INGREDIENTS OF SECTION 184 OF THE IT ACT BEFORE THE AO. THEREFO RE, THE PROVISIONS OF SECTION 185 OF THE IT ACT WOULD ALSO APPLY IN THE CASE OF T HE ASSESSEE. THUS, ACCORDING TO SECTION 184(5), THE ASSESSEE WOULD NOT BE ENTITLED FOR DEDUCTION BY WAY OF SALARY AND REMUNERATION. THESE PROVISIONS HAVE NO CONCERN WHATSOEVER EVEN IF THE STATUS OF THE ASSESSEE IS NOTED AS FIRM IN THE BODY OF T HE ORDER. THE ENTIRE CRUX OF THE FACTS HAS TO BE APPLIED AGAINST THE RELEVANT PROVIS ION OF LAW FOR MAKING ASSESSMENT. SINCE THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE OR MATERIAL AT ANY STAGE AND THERE IS NO DENIAL EVEN BEFORE US THAT THE ASSESSEE CLAIM ED DEDUCTION ON ACCOUNT OF SALARY AND REMUNERATION IN THE ORIGINAL RETURN OF I NCOME, THE AO WAS JUSTIFIED IN HOLDING THE EXPENDITURE TO BE UNEXPLAINED. FURTHER, THE FINDINGS OF THE AO ARE SUPPORTED BY THE DETAILS FILED IN THE RETURN OF INC OME BY THE PARTNERS IN WHICH THEY ITA NO. 313/AGRA/2012 9 HAVE DECLARED THE AMOUNT OF SALARY RECEIVED FROM TH E ASSESSEE FIRM AND AS SUCH SPECIFIC MATERIAL WAS AVAILABLE WITH THE REVENUE DE PARTMENT TO PROVE THAT THE ASSESSEE PAID SALARY TO THESE PARTNERS FOR WHICH DE DUCTION HAS BEEN CLAIMED. CONSIDERING THE ABOVE DISCUSSION IN THE LIGHT OF TH E ABOVE PROVISIONS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW. THE FINDINGS OF FACT RECORDED BY THE AUTHORITIES BELOW ARE ACCORDINGLY CONFIRMED AND THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED . 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY