Aman Tandon, New Delhi V. ACIT, New Delhi

ITA 3469/DEL/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1559 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: GAUTAM JAIN SHRI LALIT MOHAN
• Keywords: Business income; Salary income; Opportunity of being heard; Rule of consistency; Corroborative evidences; Tax effect; Set aside
• Section: 43; 147; 263; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER AND. SH. KULDIP SINGH, JUDICIAL MEMBER ITA NO.3469/DEL/2015 ASSESSMENT YEAR: 2011-12 AMAN TANDON 143, SUNDER NAGAR, NEW DELHI PAN NO. AACPT7285N VS. ACIT CIRCLE 52 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SHRI GAUTAM JAIN, ADVOCATE SHRI LALIT MOHAN, CA RESPONDENT BY SH. S. S. RANA, CIT(DR) DATE OF HEARING: 05/12/2019 DATE OF PRONOUNCEMENT: 13/12/2019 ORDER PER R.K PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 10.03.2015 OF THE CIT(A)-18, NEW DELHI RELATI NG TO A.Y.2011- 12. 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THE GR OUNDS OF APPEAL RELATES TO THE DISALLOWANCE OF BUSINESS EXPE NSES OF RS.1,80,000/- FROM THE REMUNERATION OF RS.34,61,241 /- EARNED BY PAGE | 2 THE ASSESSEE FROM THE PARTNERSHIP FIRM ASSESSED AS BUSINESS INCOME U/S. 28 (V) OF THE IT ACT, 1961. 3. FACTS OF THE CASE, IN BRIEF ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND DERIVES INCOME FROM SALARY FROM PARTNERSHIP FIR M HOUSE PROPERTY AND OTHER SOURCES. HE FILED HIS RETURN OF INCOME ON 30.09.2011 DECLARING TOTAL INCOME OF RS.46,53,350/- . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS CLAIMED BUSINESS EXPENSE OF RS. 1,80,000/- AGAI NST REMUNERATION OF RS. 34,61,241/- RECEIVED FROM THE F IRM M/S. WENGER & CO. HE ASKED THE ASSESSEE TO JUSTIFY THE A LLOWABILITY OF SUCH EXPENSES AGAINST REMUNERATION. THE ASSESSEE VI DE HIS REPLY DATED 20-12-2013 SUBMITTED THAT REMUNERATION FROM P ARTNERSHIP FIRM IS CONSIDERED AS BUSINESS INCOME AS PER SECTIO N 28(V) OF THE INCOME TAX ACT. HE HAS EMPLOYED TWO PERSONS TO LOOK AFTER THE INTEREST OF THE FIRM'S BUSINESS, THEREFORE, THESE E XPENSES ARE FULLY ALLOWABLE FROM THE BUSINESS INCOME OF THE ASSESSEE. 4. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE REMUNERATION REC EIVED BY THE PARTNERS FROM THE FIRM IS ACCORDING TO THE PARTNERS HIP DEED AND THE WORK DONE BY THEM FOR THE BUSINESS OF THE FIRM. THI S HAS NOTHING TO DO WITH THE PERSONS EMPLOYED BY EACH OF THE PARTNER IN HIS/HER PERSONAL CAPACITY. FURTHER, THE PARTNERS OF THE FIR M ARE NOT LIABLE TO EMPLOY WORKERS FOR THE PURPOSE OF EARNING INCOME BY THE FIRM. THE LIABILITY TO INCUR SUCH EXPENDITURE LIES WITH THE F IRM ITSELF. IN VIEW OF THE ABOVE THE AO DISALLOWED THE EXPENSE OF RS.1,80, 000/- CLAIMED BY THE ASSESSEE AGAINST THE REMUNERATION AND ADDED BACK TO THE INCOME OF THE ASSESSEE. PAGE | 3 5. IN APPEAL THE LD. CIT(A) UPHELD THE ACTION OF TH E AO BY OBSERVING AS UNDER :- 2.3 I HAVE CONSIDERED THE CONTENTIONS OF THE APPEL LANT HOWEVER I FIND THAT THE SAID REMUNERATION RECEIVED BY THE PAR TNER FROM THE FIRM IS ACCORDING TO THE PARTNERSHIP DEED AND THE WORK D ONE BY HIM FOR THE BUSINESS OF THE FIRM. THIS HAS NOTHING TO DO WI TH THE PERSONS EMPLOYED BY THE PARTNER IN HIS PERSONAL CAPACITY. F URTHER, THE PARTNER OF THE FIRM IS NOT LIABLE TO EMPLOY WORKERS FOR THE PURPOSE OF EARNING INCOME BY THE FIRM. THE LIABILITY TO INCUR SUCH EXPENDITURE LIES WITH THE FIRM ONLY. HENCE, THE EXPENDITURE INC URRED BY THE APPELLANT ON BEHALF OF THE FIRM IN THE FORM OF EMPL OYING WORKERS TO HELP IN THE BUSINESS OF THE FIRM CANNOT BE ALLOWED IN THE NAME OF THE APPELLANT. ACCORDINGLY, IN MY CONSIDERED OPINION, T HE CLAIM OF SUCH EXPENDITURE AMOUNTING TO RS. 1,80,000/- CLAIMED BY THE APPELLANT AGAINST THE REMUNERATION RECEIVED BY HIM AS PARTNER OF THE FIRM HAS BEEN CORRECTLY DISALLOWED. THE CASE LAWS RELIED UPO N BY THE APPELLANT ARE DISTINGUISHABLE ON FACTS OF THE CASE. THE SAME IS CONFIRMED IN APPEAL. GROUND RAISED IN APPEAL IS DIS MISSED. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A) IN SUSTAINING THE DISALLOWANCE MADE BY THE AO. HE SUBMITTED THAT THE PAYMENT OF SALARY TO THE ABOV E TWO EMPLOYEES IS NOT IN DISPUTE. HOWEVER, THE LOGIC GIVEN BY THE REVENUE THAT THE PAGE | 4 LIABILITY TO INCUR SUCH EXPENDITURE LIES WITH THE F IRM ONLY IS INCORRECT. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAMLIK LAL KOTHARI REPORTED IN 74 ITR 57 HE SUBMITTED THAT IN THE SAID DECISION IT IS HELD THAT THE EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING THE SHARE INCOM E FROM THE FIRM IS AN ALLOWABLE EXPENDITURE. REFERRING TO THE COPY OF THE ASSESSMENT ORDER FOR A.Y.2008-09 TO 2014-15 HE SUBMITTED THAT EXCEPT FOR THE YEAR UNDER CONSIDERATION THE EXPENSES CLAIMED ON AC COUNT OF REMUNERATION TO THE EMPLOYEES HAS BEEN ALLOWED AS A N EXPENDITURE IN RESPECT OF INCOME FROM THE PARTNERSHIP FIRM FOR ALL THE YEARS ALTHOUGH THE ASSESSMENTS HAVE BEEN COMPLETED U/S. 1 43 (1). REFERRING TO THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LIMITED REPORTED IN 358 IT R 395 AND THE DECISION IN THE CASE OF RADHA SOAMI SATSANG VS. CIT REPORTED IN 193 ITR 321 HE SUBMITTED THAT THE RULE OF CONSISTEN CY SHOULD BE FOLLOWED. HE SUBMITTED THAT IDENTICAL DISALLOWANCE WAS MADE IN THE HANDS OF THE OTHER PARTNER NAMELY SH. O.P. TANDON O F M/S. WENGER AND CO. FOR A.Y. 2004-05 AND THE APPEAL FILED BY TH E REVENUE WAS DISMISSED BY THE TRIBUNAL ALTHOUGH ON ACCOUNT OF LO W TAX EFFECT. RELYING ON VARIOUS OTHER DECISIONS HE SUBMITTED THA T THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE CI T(A) IS NOT JUSTIFIED. 8. THE LD. DR ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF THE AO AND THE CIT(A). PAGE | 5 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE AO IN THE INSTANT CASE DISALLOWED AN AMOUNT OF RS.1,80,000/- BEING TH E EXPENDITURE CLAIMED BY THE ASSESSEE TOWARDS SALARY TO TWO EMPLO YEES FROM THE REMUNERATION OF THE PARTNERSHIP FIRMS. WE FIND THE LD. CIT(A) UPHELD THE ACTION OF THE AO, THE REASON OF WHICH HA VE ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT WHEN THE REMUNERA TION PAID TO THE EMPLOYEES HAS NOT BEEN DOUBTED, THEREFORE, THE LD. CIT(A) CANNOT ALTER THE NATURE OF EXPENDITURE. FURTHER TH E AO IN ASSESSEES OWN CASE FOR THE PRECEDING AND SUBSEQUEN T ASSESSMENT YEARS HAS ACCEPTED SUCH REMUNERATION TO THE EMPLOYE ES AS AN ALLOWABLE EXPENDITURE ALTHOUGH THE ASSESSMENTS HAVE BEEN COMPLETED U/S. 143 (1). IT IS ALSO HIS SUBMISSION THAT IN ANOTHER PARTNERS CASE SUCH REMUNERATION WAS ALLOWED BY CIT( A) AS AN ALLOWABLE EXPENDITURE AND THE APPEAL BY THE REVENUE WAS DISMISSED BY THE TRIBUNAL ON ACCOUNT OF LOW TAX EFFECT. 10. WE FIND SOME FORCE IN THE ABOVE ARGUMENTS OF TH E LD. COUNSEL FOR THE ASSESSEE. AS MENTIONED EARLIER THE REVENUE IN THE PRECEDING AND SUBSEQUENT YEARS HAS ACCEPTED SUCH RE MUNERATION TO THE EMPLOYEES AS AN ALLOWABLE EXPENDITURE FROM THE REMUNERATION FROM THE PARTNERSHIP FIRMS WHICH HAS BEEN TAXED AS BUSINESS INCOME. IT IS ALSO AN ADMITTED FACT THAT IN CASE O F ANOTHER PARTNER SUCH SALARY PAID TO THE EMPLOYEES WAS ALLOWED BY TH E LD. CIT(A) AS PAGE | 6 AN EXPENDITURE FROM THE REMUNERATION OF THE PARTNE RSHIP FIRM. FURTHER THE PAYMENT OF SALARY OF THE TWO EMPLOYEES IS NOT IN DISPUTE. WE, THEREFORE, FIND MERIT IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE CIT(A) CANNOT ALT ER THE NATURE OF EXPENDITURE. THE HONBLE SUPREME COURT IN THE CASE OF RAMLIK KOTHARI (SUPRA) HAS HELD THAT EXPENDITURE INCURRED BY THE PARTNER FOR EARNING INCOME FROM THE PARTNERSHIP FIRM IS AN ALLOWABLE EXPENDITURE. THE VARIOUS OTHER DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CASE LAW COMPILATIO N ALSO SUPPORTS HIS CASE. FURTHER THE RULE OF CONSISTENCY ALSO IS I N FAVOUR OF THE ASSESSEE, SINCE IN THE PRECEDING AND SUBSEQUENT YEA RS SUCH SALARY PAID TO EMPLOYEES WERE ALLOWED AS BUSINESS EXPENDIT URE FROM THE SALARY INCOME RECEIVED FROM THE PARTNERSHIP FIRM. N O PROCEEDINGS U/S. 147 OR 263 HAVE BEEN INITIATED IN SUBSEQUENT Y EARS AFTER THE ORDER OF THE CIT(A), REJECTING THE CLAIM OF THE ASS ESSEE. IN VIEW OF THE ABOVE DISCUSSION WE ARE OF THE CONSIDERED OPINION T HAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISALLOWA NCE MADE BY THE AO. ACCORDINGLY THE ORDER OF THE CIT(A) ON THIS ISS UE IS SET ASIDE AND THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ALLOWED. 11. THE OTHER ISSUE RAISED BY THE ASSESSEE IN THE G ROUNDS OF APPEAL RELATES TO THE ORDER OF THE CIT(A) IN CONFIR MING THE ADDITION OF RS.5,25,000/- UNDER THE HEAD INCOME FROM THE HOUSE PROPERTY. 12. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS DECLARED INCOME FROM HOUSE PROPERTY AT RS.4,24,270/- FROM H OUSE PROPERTY PAGE | 7 NO-801, CENTRAL PARK GURGAON AFTER DEDUCTING HOUSE TAX AND STANDARD DEDUCTION U/S 24(A) OF THE IT ACT. HOWEVER , FROM THE PERUSAL OF RENT AGREEMENT THE AO NOTED THAT INITIAL LY ASSESSEE HAD RENTED THE PREMISES TO SINCLAIR KNIGHT MERZ CONSULT ING (INDIA) PVT. LTD. ON A MONTHLY RENT OF RS. 1,40,000/- WITH EFFEC T FROM MARCH 2009 WHICH WAS VALID TILL 9TH MARCH 2011. HOWEVER, THE ASSESSEE HAS CONTENDED THAT THE PREMISES WAS VACATED DURING THE YEAR AND WAS AGAIN RENTED TO ROBBINS TUNNELING & TRENCHLESS TECHNOLOGY (INDIA) PVT. LTD. ON A MONTHLY RENT OF RS.90,000/- WITH EFFECT FROM 1ST OCTOBER 2010. SINCE, THE ASSESSEE DID NOT SUBMI T ANY DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM THAT T HE PREMISES WAS VACATED BY SINCLAIR KNIGHT MERZ CONSULTING (INDIA) PVT.LTD, THE AO COMPUTED THE INCOME FROM HOUSE PROPERTY AS UNDER:- RENT FROM APRIL 2010 TO SEPTEMBER 2010 RS.1,40,000/- P.M. X 6 RS.8,40,000/- RENT FROM OCTOBER 2010 TO MARCH 2011 RS.90,000/- P.M. X 6 RS.5,40,000/- GROSS RENT RS.13,80,000/- LESS HOUSE TAX RS.13,56,100/- LESS DEDUCTION U/S. 24 A RS.4,06,830/- INCOME FROM HOUSE PROPERTY RS.9,49,270/- THE AO ACCORDINGLY MADE ADDITION OF RS.5,25,000/- T O THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PR OPERTY. 13. IN APPEAL THE LD. CIT(A) UPHELD THE ACTION OF T HE AO BY OBSERVING AS UNDER :- PAGE | 8 3.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT, HOWEVER, AS THE ASSESSEE HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM THAT T HE PREMISES WAS VACATED BY THE SAID TENANT, THE CONTEN TION HAS BEEN REJECTED. DURING THE APPEAL PROCEEDINGS A LSO THE APPELLANT HAS NOT JUSTIFIED HIS CONTENTIONS HENCE, I AM FORCED TO ACCEPT THE ASSESSING OFFICERS STAND. TH E GROUND RAISED IN APPEAL IS DISMISSED. 14. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 15. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO MAD E ADDITION OF RS.5,25,000/- TO THE TOTAL INCOME OF THE ASSESSEE O N THE GROUND THAT THE ASSESSEE DID NOT SUBMIT ANY DOCUMENTARY EVIDENC E IN SUPPORT OF HIS CLAIM THAT THE PREMISES WAS VACATED BY SINCLAIR KNIGHT MERZ CONSULTING (INDIA) P. LTD. EVEN BEFORE THE CIT(A) A LSO THE ASSESSEE DID NOT GIVE ANY SUPPORTING EVIDENCE THAT THE PREMISES WAS VACATED BY THE SAID TENANT FOR WHICH HE UPHELD THE ACTION OF THE A O. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT GIVEN AN OPPORTUNITY THE ASSESSEE IS IN A POSITION TO SUBSTA NTIATE THE CLAIM BY PRODUCING NECESSARY EVIDENCE. CONSIDERING THE TOTAL ITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO GRA NT AN OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS S ATISFACTION THAT THE PAGE | 9 TENANT HAD IN FACT VACATED THE PREMISES FOR THE INT ERVENING PERIOD. NEEDLESS TO SAY THE AO SHALL DECIDE THE ISSUE AS PE R FACT AND LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. WE HOLD AND DIRECT ACCORDINGLY. THE SECOND ISSUE RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13.12.2019 . SD/- SD/- (KULDIP SINGH) (R.K PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* DATE:- 13.12.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 05.12.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 06.12.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS 13.12.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 13.12.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 13.12.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 13.12.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.12.2019 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER