ACIT, New Delhi V. M/s Channel Technologies, New Delhi

ITA 3187/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5537 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-01-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 10-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEILA CHOPRA
• Keywords: Additional evidence
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HON'BLE VICE- PRESIDENT & SHRI RAJPAL YADAV: JUDIIAL MEMBER I.T.A. NO. 3187/DEL/2009 ASSESSMENT YEAR: 2004-05 ASSISTANT COMMISSIONER OF IT, VS. M/S. CHANNEL TECHNOLOGIES, CIRCLE 24(1), C-1/1, VASANT VIHAR, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: MS. SHEILA CHOPRA, SR. DR RESPONDENT BY: SHRI RAJEEV MAGO , CA ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LEARNED CIT(APPEALS) DATED 24.04.2009 PASSED FOR ASSESSMENT YEAR 2004-05. IN GROUND NOS. 1 AND 2, THE GRIEVANCE OF THE REVENUE I S THAT LEARNED CIT(APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSIN G OFFICER HAS WRONGLY REJECTED THE BOOKS OF ACCOUNT AND APPLIED SECTION 1 45(3) OF THE INCOME-TAX ACT, 1961 FOR COMPUTING THE INCOME OF THE ASSESSEE, RESULTANTLY THE LEARNED FIRST APPELLATE AUTHORITY DELETED THE ADDITION OF R S.39,92,354. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM HAS FILED ITS RETURN OF INCOME ON 30 TH OCTOBER, 2004 DECLARING TOTAL INCOME OF RS.22,43,8 70. IT 2 WAS ENGAGED IN THE BUSINESS OF EVENT MANAGEMENT. IT HAS SHOWN TOTAL RECEIPTS FROM EXHIBITION AND SERVICES AT RS.3,19,38 ,838. IT HAS DEBITED EXPENSES OF RS.2,38,65,434 UNDER THE HEAD EXHIBITI ON & OTHER EXPENSES. ASSESSING OFFICER PASSED AN ASSESSMENT UNDER SEC. 1 44 OF THE ACT AND HELD THAT ASSESSEE FAILED TO PRODUCE COMPLETE BOOKS OF A CCOUNT I.E. PRIMARY ACCOUNT, CASH BOOK, BANK BOOK AND JOURNAL WERE NOT PRODUCED. HE MADE A REFERENCE TO THE PERIPHERAL DETAILS I.E. CONTRACT N OTE WHICH IS AN AGREEMENT REACHED WITH THE CLIENTS BY THE ASSESSEE IN RESPECT OF SERVICES TO BE PROVIDED AND THE NEGOTIATIONS OF PRICE, AND OBSERVED THAT TH ESE DETAILS WERE NOT FILED BY THE ASSESSEE. WHATEVER DETAILS FILED BY IT ARE N OT SUFFICIENT TO DEMONSTRATE THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE AND THE EXPENDITURE FOR PROVIDING SUCH SERVICES. HE REJECTED THE BOOK RESUL T OF THE ASSESSEE AND ESTIMATED THE PROFIT AT 12.7% OF THE TOTAL RECEIPT. IN THIS WAY, HE DETERMINED THE PROFIT AT RS.39,92,354. 3. ON APPEAL, LEARNED CIT(APPEALS) RECORDED A FINDI NG THAT ASSESSEE HAS SUBMITTED THE REQUISITE DETAILS AND ALSO PRODUCED T HE BOOKS OF ACCOUNT. THE DOCUMENTS WHICH WERE SOUGHT BY THE ASSESSING OFFICE R AND ALLEGED TO HAVE NOT BEEN PRODUCED BY THE ASSESSING OFFICER WERE PRO DUCED BEFORE THE LEARNED CIT(APPEALS), HE CALLED FOR A REMAND REPORT FROM THE ASSESSING 3 OFFICER. ASSESSING OFFICER IN THE REMAND PROCEEDING S DID NOT FIND ANY DEFECTS AND THE LEARNED CIT(APPEALS) DELETED THE AD DITION. THE OBSERVATIONS OF THE LEARNED FIRST APPELLATE AUTHORITY RECORDED I N PARAGRAPH 5 READ AS UNDER: 5. I HAVE CONSIDERED FACTS OF THE CASE. IT IS OBVI OUS FROM THE REPORT OF THE A.O. THAT THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE HIM. MOREOVER, THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY DISCREPANCY IN THE DETAILS/BOOKS OF ACCOUNT FURNISH ED BY THE APPELLANT. THE APPELLANT HAS EXPLAINED THE DISCREPANCIES NOTED IN THE ASSESSMENT ORDER AND THE EXPLANATION HAS NOT BEEN REBUTTED BY THE A.O. IN HIS REPORT. IN VIEW OF THESE FACTS, THE ADDITION BY APP LYING NET PROFIT RATE OF 12.5% DOES NOT APPEAR TO BE JUSTIFIED AND IS, AC CORDINGLY, DELETED. 4. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. LEARNED DR WAS UNABLE TO REFU TE THE FINDING OF FACT RECORDED BY THE LEARNED CIT(APPEALS) IN PARAGRAPH 5 EXTRACTED SUPRA. ACCORDING TO THIS FINDING, THE BOOKS OF ACCOUNT WER E PRODUCED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER WAS UNA BLE TO POINT OUT ANY DISCREPANCY IN THE DETAILS IN THE REMAND PROCEEDING S. LEARNED DR DURING THE COURSE OF HEARING SOUGHT TO RELY UPON THE ORDER OF THE ASSESSING OFFICER BUT WE CONFRONTED HER AND POINTED OUT THAT, THAT ORDER WAS PASSED UNDER SEC. 4 144. IN THE APPELLATE PROCEEDINGS BEFORE THE LEARNE D CIT(APPEALS) ASSESSEE HAS FILED ADDITIONAL EVIDENCE WHICH WAS ENTERTAINED UNDER RULE 46A OF THE ACT. LEARNED CIT(APPEALS) HAS CALLED FOR A REMAND R EPORT AND THE PORTION OF THE REMAND REPORT HAS BEEN REPRODUCED IN PARAGRAPH 4 OF THE IMPUGNED ORDER. ON THE BASIS OF THIS REMAND REPORT, LEARNED FIRST APPELLATE AUTHORITY HAS DELETED THE ADDITION. IF SHE CAN POINT OUT ANY FACTUAL ERROR IN THIS FINDING OF THE LEARNED CIT(APPEALS) THEN THAT HAS TO BE BRO UGHT TO OUR NOTICE. LEARNED DR WAS UNABLE TO POINT OUT ANY FACT WHICH C AN SUGGEST THAT THE FINDINGS OF THE LEARNED CIT(APPEALS) IS FACTUALLY I NCORRECT OR BASED ON MISCONSTRUCTION OF REMAND REPORT. ONCE THE ASSESSIN G OFFICER HIMSELF WAS UNABLE TO FIND OUT ANY DISCREPANCY IN THE REMAND PR OCEEDINGS THEN THERE IS NO JUSTIFICATION TO DISPUTE THE FINDINGS OF THE LEA RNED CIT(APPEALS) ON THE BASIS OF SUCH REMAND REPORT. 5. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN GROUND NOS. 1 AND 2 RAISED BY THE REVENUE IN ITS APPEAL. T HESE GROUNDS ARE REJECTED. 6. IN GROUND NO.3, THE REVENUE HAS PLEADED THAT LEA RNED CIT(APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.13,80, 000. THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS.13,80,000 UNDER SEC. 40(B ) OF THE INCOME-TAX ACT, 1961WHICH IS THE REMUNERATION BOOKED FOR PAYMENT TO THE PARTNERS. 5 ASSESSING OFFICER DISALLOWED THIS CLAIM ON THE GROU ND THAT THERE IS NO STIPULATION IN THE PARTNERSHIP DEED. HE RECORDED TH AT IN THE PARTNERSHIP DEED, SALARY PAYABLE TO THE PARTNERS HAS NOT BEEN QUALIFI ED. LEARNED CIT(APPEALS) ON APPRECIATION OF THE PARTNERSHIP DEED ARRIVED AT A CONCLUSION THAT IN PARAGRAPH NO.6(1)(I) OF THE PARTNERSHIP DEED, ASSES SEE HAS SPECIFICALLY PROVIDED HOW THE SALARY PAYABLE TO THE PARTNER IS T O BE CALCULATED. ACCORDING TO THE LEARNED CIT(APPEALS), THE SALARY TO THE PART NERS HAS, THEREFORE, TO BE ALLOWED IN TERMS OF THE SEC. 40-B OF THE ACT AS WEL L AS IN TERMS OF THE CIRCULAR OF THE CBDT BEARING NO. 739 DATED 25.3.199 6. HE DIRECTED THE ASSESSING OFFICER TO VERIFY THIS ASPECT AND GRANT T HE DEDUCTION. LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET DREW O UR ATTENTION TOWARDS PARTNERSHIP DEED AVAILABLE AT PAGE 40 OF THE PAPER BOOK. HE TOOK US THROUGH PARAGRAPH NO. 6.1(I) OF THE PARTNERSHIP DEED AVAILA BLE AT PAGE 42 OF THE PAPER BOOK AND APPRAISED US HOW IT HAS SPECIFICALLY BEEN PROVIDED IN THE PARTNERSHIP DEED THAT SALARY TO THE PARTNERS WOULD BE COMPUTED. LEARNED DR WAS UNABLE TO POINT OUT ANY CIRCUMSTANCE WHICH CAN PERSUADE US TO SET ASIDE THE ORDER OF THE LEARNED CIT(APPEALS). LEARNED FIRS T APPELLATE AUTHORITY HAS DIRECTED THE ASSESSING OFFICER FOR ALLOWANCE OF SAL ARY TO THE PARTNERS IN ACCORDANCE WITH THE PROVISIONS OF SEC. 40-B OF THE ACT AFTER GOING THROUGH 6 THE PARTNERSHIP DEED. ASSESSING OFFICER HAS TOTALLY MISCONSTRUED THIS DOCUMENT WHILE ARRIVING AT A CONCLUSION THAT IN THE PARTNERSHIP DEED QUANTIFICATION OF SALARY IN TERMS OF SEC. 40B OR CI RCULAR NO.739 ARE NOT PROVIDED. THESE OBSERVATIONS OF THE ASSESSING OFFIC ER ARE FACTUALLY INCORRECT. 7. IN VIEW OF THE ABOVE DISCUSSION, THIS GROUND OF APPEAL IS ALSO REJECTED. 8. GROUND NO.4 IS GENERAL IN NATURE AND DOES NOT RE QUIRE ANY SPECIFIC ADJUDICATION. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 12.02.2010 ( G.E. VEERABHADRAPPA ) ( RAJPAL YAD AV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 12/02/2010 MOHAN LAL COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR:ITAT ASSISTANT REGISTRAR