The ACIT, Circle-1(1), Visakhapatnam V. M/s Visakha Bullion Corporation, Visakhapatnam

ITA 328/VIZ/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0797 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 29-06-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P SURYA RAO
• Keywords: Opportunity of being heard; Assessment record
• Section: 143(3); 12A; 144

Judgement Text

PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 328/VIZAG/2007 ASSESSMENT YEAR : 2004-05 ACIT, CIRCLE-1(1), VISAKHAPATNAM. VISAKHA BULLION CORPORATION, VISAKHAPATNAM. (APPELLANT) VS. (RESPONDENT) PAN : AABFV7324D REVENUE BY: SHRI GSSS GOPINATH ASSESSEE BY: SHRI P SURYA RAO ORDER PER SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) ON VARIOUS GROUNDS, WHICH ARE AS UNDER: 1. THE LD CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE REQUIREMENT OF FILING A CERTIFIED COPY OF THE PARTN ERSHIP DEED ALONG WITH THE RETURN OF INCOME IS NOT A MANDA TORY ONE SINCE THE PROVISIONS OF SECTION 184 ARE PROCEDU RAL IN NATURE. 2. THE LD CIT(A) OUGHT TO HAVE TAKEN NOTE OF THE PROVI SIONS OF SECTION 12A OF THE IT ACT, WHICH DEAL THE PROCED URE FOR FILING APPLICATION SEEKING REGISTRATION U/S 12A, WH ICH IS ALSO PROCEDURAL IN NATURE. A PROVISO / CLAUSE HAS BEEN PROVIDED TO THIS SECTION ALLOWING THE TRUSTS TO FIL E APPLICATION FOR REGISTRATION U/S 12A EVEN AFTER THE LAPSE OF PRESCRIBED PERIOD OF ONE YEAR FROM THE DATE OF CREATION OF THE TRUST SUBJECT TO CONDONATION OF THE DELAY BY THE CIT. HAD IT BEEN THE INTENTION OF THE LEGIS LATURE, SIMILAR CLAUSE COULD HAVE BEEN INSERTED IN SECTION 184 OF THE IT ACT ALLOWING THE ASSESSEES TO FILE CERTIFIE D COPY OF THE PARTNERSHIP DEED EVEN AFTER FILLING THE RETURN OF INCOME. ITA 328 OF 07 VISAKHA BULLION CORPORATION PAGE 2 OF 5 3. SINCE NO SUCH CLAUSE HAS BEEN PROVIDED IN SECTION 1 84 AS IN CASE OF SECTION 12A AND SINCE THE LANGUAGE USED IN SECTION 184 REGARDING FILING OF CERTIFIED COPY OF PARTNERSHIP DEED SEEMS TO BE MANDATORY IN NATURE, T HE LD CIT(A) OUGHT NOT TO HAVE HELD THAT THE REQUIREME NT OF FILING OF A COPY OF THE A CERTIFIED COPY OF PARTNER SHIP DEED IS NOT A MANDATORY ONE AND IT IS ONLY CURABLE DEFEC T. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2. THOUGH THE REVENUE HAS RAISED VARIOUS GROUNDS BU T THEY ALL RELATE TO THE STATUS OF THE ASSESSEE AND THE VALIDITY OF THE ASSESSMENT. WE HAVE, HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED T HE ORDERS OF THE LOWER AUTHORITIES AND WE FIND THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ADMITTING TOTAL INCOME AT RS.5,46,670/- IN THE STAT US OF THE FIRM. WHILE CALCULATING THE FIRMS TOTAL INCOME, THE ASSESSEE H AS SHOWN 5 PARTNERS INSTEAD OF 4 PARTNERS AS STATED IN THE EARLIER PARTNERSHIP DEED AND REPORTED A CHANGE IN THE PROFIT SHARING RATIO AND REMUNERATION TO THE PARTNERS. BUT THE ASSESSEE HAS NOT FURNISHED THE REVISED INSTRUMENT OF PARTNER SHIP DEED ALONG WITH THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. IN CONSEQUENCE THEREOF, AS PER THE PROVISIONS OF SECTION 185, DEDUCTION FOR ANY PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION, ETC MADE BY THE FIRM TO ANY PARTNER SO THAT FIRM IS NOT ALLOWABLE WHEN THE ASSE SSEE DOES NOT COMPLY WITH THE PROVISIONS OF SECTION 184(4) OF THE ACT. 3. BEFORE PASSING AN ORDER U/S 185, THE AO ISSUED A NOTICE TO THE ASSESSEE CALLING HIS OBJECTIONS ON THE PROPOSED DIS ALLOWANCE OF REMUNERATION, INTEREST ON PARTNERS CAPITAL PAID TO THE PARTNERS. IN RESPONSE THERETO, THE ASSESSEE HAS SUBMITTED THAT NON-ENCLOSURE OF THE RE VISED INSTRUMENT WAS A CLERICAL MISTAKE. HOWEVER, THE GIST OF CONTENTS OF THE REVISED INSTRUMENT WAS SUBMITTED IN DETAIL ALONG WITH THE RETURN OF INCOME . THE ASSESSEE DID NOT FILE THE REVISED PARTNERSHIP DEED BEFORE THE AO AND THE AO HAS DISALLOWED THE CLAIM OF REMUNERATION, INTEREST ON CAPITAL PAID TO THE PARTNERS. ACCORDINGLY ASSESSED THE TOTAL INCOME AT RS.17,10,480/-. THE A SSESSEE PREFERRED AN ITA 328 OF 07 VISAKHA BULLION CORPORATION PAGE 3 OF 5 APPEAL BEFORE THE CIT(A) WITH THE SUBMISSIONS THAT THE ASSESSEE SUBMITTED A COPY OF THE DEED OF THE RECONSTRUCTED PARTNERSHIP V IDE LETTER DATED 25.05.2005. IT WAS ALSO CONTENDED THAT FILING A CE RTIFIED COPY OF THE PARTNERSHIP DEED ALONG WITH THE RETURN OF INCOME IS NOT MANDATORY. SINCE THE SAME WAS FILED BEFORE THE AO DURING THE COURSE OF PROCEEDINGS U/S 185 THE REQUIREMENT OF FILING A CERTIFIED COPY OF THE D EED WAS SATISFIED. THE LD COUNSEL FOR THE ASSESSEE, FURTHER OBJECTED THE ASSE SSMENT FRAMED U/S 185 OF THE ACT WITH THE SUBMISSIONS THAT THE ASSESSMENT CA N ONLY BE FRAMED EITHER U/S 143(3) OR 144 OF THE ACT. THE ASSESSEE HAS NOT BEEN SERVED WITH A NOTICE U/S 143(2) OF THE ACT AS SUCH THE SO CALLED ASSESSM ENT FRAMED IS ALSO NOT VALID IN THE EYES OF LAW. 4. THE CIT(A) ADJUDICATED THE ISSUE WITH THE REGARD TO FILING OF THE INSTRUMENT OF PARTNERSHIP DEED AND HAS OBSERVED TH AT THE ASSESSEE HAS FILED A CERTIFIED COPY OF THE PARTNERSHIP DEED BEFORE THE AO AND BY DOING SO HE HAS CURED THE DEFECT WHICH WAS NOTED BY THE AO WHIL E PROCESSING U/S 185 OF THE ACT. THE CIT(A) HAS ALSO ANNULLED THE ASSESSME NT ON THE GROUND THAT THE ASSESSMENT CAN ONLY BE FRAMED U/S 143(3) OR 144 OF THE ACT AND NOT U/S 185 OF THE ACT. 5. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE T HE TRIBUNAL WITH THE SUBMISSIONS THAT THE ASSESSEE HAS NOT FILED THE COP Y OF THE PARTNERSHIP DEED BEFORE THE AO DESPITE A SPECIFIC NOTICE ISSUED BY T HE AO. THE LD DR HAS ALSO PRODUCED THE ASSESSMENT RECORD AND ON ITS PERUSAL I T WAS NOTICED THAT NO PARTNERSHIP DEED WAS EVER FILED BY THE ASSESSEE EIT HER ALONG WITH THE RETURN OF INCOME OR THEREAFTER DURING THE PROCEEDINGS U/S 185 OF THE ACT. THE LD DR HAS SUBMITTED THAT IT IS ONLY A MISTAKE OF THE AO T HAT HE HAS NOT MENTIONED THE SECTION 143(3) OF THE ACT ALONG WITH SECTION 18 5. THE LD DR FURTHER ARGUED THAT THERE IN THE COMPUTATION OF INCOME THER E WAS NO OTHER DISALLOWANCE EXCEPT THE CLAIM RAISED U/S 40(B) OF T HE ACT WHICH WAS ITA 328 OF 07 VISAKHA BULLION CORPORATION PAGE 4 OF 5 DISALLOWED ON ACCOUNT OF CHANGE OF STATUS OF ASSESS EE FROM PARTNERSHIP FIRM TO AOP. WHEN THE ASSESSEE HIMSELF HAS APPEARED BEF ORE THE AO, THERE WAS NO REQUIREMENT FOR ISSUING A SPECIFIC NOTICE U/S 14 3(2) OF THE INCOME TAX ACT. THE LD DR FURTHER SUBMITTED THAT THE CIT(A) HAS WRO NGLY ANNULLED THE ASSESSMENT. 6. THE LD COUNSEL FOR THE ASSESSEE BESIDE PLACING R ELIANCE UPON THE CIT(A)S ORDER, HAS EMPHATICALLY ARGUED THAT HE HAS FILED THE COPY OF THE PARTNERSHIP DEED BEFORE THE JT COMMISSIONER AND TO THIS EFFECT HE HAS ALSO FILED AN AFFIDAVIT. HE HAS SHOWN IGNORANCE AS TO HO W IT IS NOT AVAILABLE IN THE ASSESSMENT RECORD. HE FURTHER SUBMITTED THAT THE A SSESSMENT CAN ONLY FRAMED EITHER U/S 143(3) OR SECTION 144 OF THE ACT AND NOT U/S 185 OF THE ACT AS SUCH THE ASSESSMENT FRAMED U/S 185 DESERVES TO B E ANNULLED. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THOU GH THE ASSESSEE CLAIMED THAT HE HAS FILED THE COPY OF THE PARTNERSHIP DEED BEFORE THE AO BUT ON VERIFICATION FROM THE ASSESSMENT RECORD IT IS NOT A VAILABLE IN THE ASSESSMENT RECORD. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT SINCE FILING OF THE PARTNERSHIP DEED, IN CASE OF CHANGE IN CONSTITUTION OF THE FIRM, IS MANDATORY BEFORE THE AO AND THE ASSESSEE HAS NOT FILED THE SA ME BEFORE THE AO, THE AO IS RIGHT IN TREATING THE STATUS OF THE FIRM AS AN A OP. SO FAR AS THE ASSESSMENT/COMPUTATION OF INCOME IS CONCERNED, THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE RAISED U/S 40(B) OF THE ACT O N ACCOUNT OF NON-FURNISHING OF THE COPY OF THE PARTNERSHIP DEED. THOUGH THE AS SESSMENT WAS NOT FRAMED U/S 143(3) OF THE ACT, THE COMPUTATION U/S 185 AFTE R DISALLOWING THE CLAIM U/S 40(B) DOES NOT APPEARS TO BE ILLEGAL. BUT IN ANY C ASE, WHEN THE ASSESSEE CLAIMS THAT HE HAS FILED COPY OF THE PARTNERSHIP DE ED BEFORE THE AO AND TO THIS EFFECT HE ALSO FILED AN AFFIDAVIT. HIS CONTENT IONS SHOULD NOT OUT-RIGHTLY BE IGNORED. WE THEREFORE, OF THE VIEW THAT IN PECULIA R CIRCUMSTANCES, THE ENTIRE ITA 328 OF 07 VISAKHA BULLION CORPORATION PAGE 5 OF 5 ISSUE REQUIRES RE-LOOK BY THE AO. WE THEREFORE, SE T ASIDE THE ORDER OF THE CIT(A) AS WELL AS THE AO AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO RE-EXAMINE THE STATUS OF THE FIRM IN THE LIGHT OF PARTNERSHIP DEED, TO BE FILED BY THE ASSESSEE AND THEREAFTER TO FRAME THE ASSESSMENT IN ACCORDANCE WITH THE LAW. AO IS ALSO DIRECTED TO OF FER A PROPER OPPORTUNITY OF BEING HEARD WHILE FRAMING THE ASSESSMENT. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOW ED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 29-4-2010. SD/- SD/- (BR BASKARAN) (SUNIL K UMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PVV/SPS VISAKHAPATNAM, DATED 29 TH APRIL, 2010 COPY TO 1 ACIT, CIRCLE-1(1), O/O ADDL COMMISSIONER OF INCOME TAX, RANGE-1, VSKP 2 M/S VISAKHA BULLION CORPORATION, MVR COMPLEX, DWA RAKANAGAR, VSKP 3 CIT-I, VISAKHAPTNAM. 4 CIT(A)-II, VISAKHAPTNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM