SONI & ASSOCIATES, MUMBAI V. ASST CIT 25(2), MUMBAI

ITA 3651/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8587 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: S S PHADKAR
• Keywords: Business expenditure; Opportunity of being heard; Difference of opinion; Assessment record; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . , . / BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 3651/MUM/2011 / ASSESSMENT YEAR 2006-07 M/S. SONI & ASSOCIATES, 003, SHIVGANGA BUILDING NO.III, SONI COMPLEX, CHINCHOLI BUNDER ROAD, MALAD (W), MUMBAI-400 064. PAN: AAAFS 4432 Q VS. THE ASST. CIT - 25(2), FIRST FLOOR, C-11, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI 400 051. ( / APPELLANT ) ( ! / RESPONDENT ) APPELLANT BY : SHRI S.S. PHADKAR RESPONDENT BY : SHRI GIRIJA DAYAL ' #$% / DATE OF HEARING : 15 -10-2012 &' ' #$% / DATE OF PRONOUNCEMENT : 15 -10-2012 () / O R D E R PER RAJENDRA, A.M. THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER DT . 29-03-2011 PASSED BY THE CIT-25, MUMBAI U/S.263 OF THE INCOME-TAX ACT, 1961( ACT). FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY THE ASSESSEE: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED C.I.T.- 25, MUMBAI, ERRED IN PASSING ORDER U/S. 263 WITH DI RECTIONS TO PASS FRESH ASSESSMENT ORDER ON THE ISSUE OF CLAIM OF RS.1,03,51,756/- AFT ER TAKING INTO ALL FACTS OF THE CASE, MATERIALS AVAILABLE ON RECORD. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED C.I.T.-25, MUMBAI, ERRED IN REJECTING THE APPELLANTS SUBMISSI ON ON FACTS AND LAW REGARDING THE CHALLENGE TO THE PROCEEDINGS U/S. 263 ON THE GROUND THAT THERE BEING A CHANGE IN THE OPINION REGARDING ALLOWANCE OF THE CLAIM FOR DEDUCT ION AS BUSINESS EXPENDITURE OF RS.1,03,51,756/- PAID TO RETIRED PARTNER. ITA NO. 3651/MUM/2011 M/S. SONI & ASSOCIATES 2 III) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D OR DELETE ANY GROUND(S) OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF TH E APPEAL. 2. ASSESSEE-FIRM, ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS, FILED ITS RETURN OF INCOME ON 31-10-2006 DECLARING TOTAL INCO ME OF RS.2.15 CRORES. ASSESSMENT ORDER WAS FINALISED BY THE ASSESSING OFF ICER (AO) ON 30-12-2008, U/S.143(3) OF THE INCOME TAX ACT, 1961 (ACT), DETER MINING THE TOTAL INCOME AT RS. 2.26 CRORES. 3. AFTER GOING THROUGH THE PROPOSAL SUBMITTED BY THE A DDL. CIT, 25(2), MUMBAI WITH REGARD TO INVOKING OF PROVISIONS OF 263 OF THE ACT, CIT OBSERVED THAT ABOVE REFERRED ORDER OF THE AO WAS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE. HE FURTHER FOUND THAT THE CLAIM OF EXPENDITURE ON A CCOUNT OF COMPENSATION PAID TO THE RETIRING PARTNER, SHRI MOHAMMED IQBAL B ADGUJAR, WAS NOT ALLOWABLE AS SAME WAS OF THE NATURE OF CAPITAL EXPENDITURE, THAT THE SIMILAR CLAIM IN A.Y. 2007-08 HAD BEEN DISALLOWED IN ASSESSMENT. HE ISSUED A SHO W-CAUSE NOTICE DATED 24-02-2011 U/S. 263 OF THE ACT TO THE ASSESSEE ASKING IT TO SH OW A CAUSE AS TO WHY NOT PROVISIONS OF SECTION 263 SHOULD BE APPLIED; AS THE ORDER PAS SED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3.1. AFTER CONSIDERING THE SUBMISSION OF THE APPELLANT, HE HELD THAT THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF SALE CONSIDERAT ION OF OM ELEGANCE PROJECT TOWARDS COMPENSATION TO THE RETIRING PARTNER, THAT DURING THE A.Y. 2006-07, SUCH CLAIM OF THE ASSESSEE WAS ALLOWED BY THE AO WITHOUT ANY PROPER VERIFICATION OF SUCH CLAIM, THAT SIMILAR CLAIM HAD ALSO BEEN MADE IN THE A.Y. 2007-08 BUT SAME WAS DISALLOWED BY THE AO ON THE GROUND THAT THE COMPENS ATION PAID TO THE RETIRING PARTNER WAS CAPITAL EXPENDITURE, THAT SAME WAS NOT LIABLE T O BE ALLOWABLE AS REVENUE EXPENDITURE. HE FURTHER HELD THAT THE CLAIM OF DED UCTION ON ACCOUNT OF COMPENSATION PAID TO THE RETIRING PARTNERS WAS NOT A REVENUE EXP ENDITURE AND SHOULD HAVE BEEN DISALLOWED BY THE A.O. AT THE TIME OF ASSESSMENT, T HAT SIMILAR CLAIM WAS DISALLOWED IN A.Y. 2007-08 AND SAME HAD ALSO BEEN CONFIRMED BY TH E LD. CIT(A)-35, MUMBAI, THAT RELIANCE PLACED BY THE ASSESSEE ON SOME OF THE DECI SIONS OF THE ITAT, MUMBAI AS WELL AS THE DECISION OF THE HONBLE SUPREME COURT WAS NO T APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THIS CASE, THAT NOWHERE IN THE ASS ESSMENT ORDER A.O. HAS GIVEN ANY FINDING REGARDING EXAMINATION OF THE CLAIM OF THE A SSESSEE AND ITS GENUINENESS. WITH REGARD TO ORDER PASSED BY THE CIT-25, U/S. 263 OF T HE ACT ON 16-02-2010, HE STATED THAT THERE WAS NO FORCE IN THE CONTENTION OF THE AS SESSEE, THAT IN THE ORDER DT. 16-02- 2010, PASSED U/S. 263 OF THE I.T. ACT, ISSUE OF PAY MENT TO RETIRING PARTNER WAS CONSIDERED THAT ISSUES CONSIDERED THEREIN WERE QUIT E DIFFERENT. FINALLY HE HELD THAT THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I.T. ACT ON 30-12-2008 WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE RE VENUE. HE SET ASIDE THE ORDER OF THE AO TO THAT EXTENT WITH A DIRECTION TO THE A.O. TO P ASS A FRESH ORDER ON THIS ISSUE. HE FURTHER DIRECTED THE AO TO CONSIDER ALL THE MATERIA LS AVAILABLE ON RECORD AND ALSO THE ASSESSMENT RECORD OF A.Y. 2007-08 IN ACCORDANCE WIT H THE LAW AFTER ALLOWING FURTHER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4. BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT ORDER OF THE CIT PASSED U/S. 263 DT. 29-03-2011 WAS A RESULT OF CHAN GE OF OPINION, THAT DETAILS WITH REGARD TO COMPENSATION PAID TO THE RETIRING PARTNER WAS MADE AVAILABLE TO THE AO, THAT ITA NO. 3651/MUM/2011 M/S. SONI & ASSOCIATES 3 AO HAD PASSED ORDER U/S. 143(3) OF THE ACT. DEPART MENTAL REPRESENTATIVE (DR) SUBMITTED THAT ISSUE OF PAYMENT OF COMPENSATION TO RETIRING PARTNER WAS NEVER LOOKED INTO BY THE AO, THAT SAME ISSUE WAS DECIDED AGAINST THE ASSESSEE IN A.Y. 2007-08. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE THE MATERIAL BEFORE US. WE HAVE GONE THROUGH THE ORDER OF THE AO AND THE CIT. IT IS FOUND THAT IN THE ASSESSMENT ORDER, AO HAS NOWHERE DISCUSSED THE MATT ER RELATED TO THE REMUNERATION PAYMENT TO THE RETIRING PARTNER. AR WAS UNABLE TO FURNISH ANY DOCUMENT TO SHOW THAT AO HAD CALLED FOR DETAILS WITH REGARD TO THE SAID P AYMENT OR THAT THE ASSESSEE FIRM HAD SUPPLIED THE DETAILS PERTAINING TO THE PAYMENT IN Q UESTION. DURING THE ASSESSMENT PROCEEDINGS FOR THE AY 2007-08, DEPARTMENT CAME TO KNOW ABOUT THE PAYMENT OF REMUNERATION TO THE RETIRING PARTNER. THE ISSUE WA S CONSIDERED IN LENGTH AND PAYMENT WAS DISALLOWED. THE CIT WAS INFORMED THAT SIMILAR PAYMENT FOR THE AY UNDER CONSIDERATION WAS ALLOWED BY THE AO AS REVENUE EXPE NDITURE WITHOUT MAKING ANY FURTHER QUERIES. IT WAS IN THIS BACK GROUND THAT TH E CIT ISSUED THE NOTICE U/S. 263 OF THE ACT. AS FAR AS THE 263 PROCEEDINGS OF DTD. 16- 02-2010 ARE CONCERNED, IT IS CLEAR THAT THEY WERE NOT AT ALL RELATED TO PAYMENT TO THE RETIRING PARTNER. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT CIT HAS R IGHTLY INVOKED THE PROVISIONS OF SECTION 263 OF THE ACT. HE HAS RIGHTLY HELD THAT R EMUNERATION PAID TO THE RETIRING PARTNER BY THE AO WAS ERRONEOUS AS WELL AS PREJUDIC IAL TO THE INTEREST OF REVENUE. AS PER THE ESTABLISHED PRINCIPLES OF REVIEW (SEC.263) WHENEVER AN ASSESSMENT SUFFERS FROM CERTAIN INFIRMITIES THAT RESULTS IN LOSS TO RE VENUE, CIT CAN INVOKE THE PROVISIONS OF SECTION 263, PROVIDED THAT THE ORDER IS ALSO ERR ONEOUS. CHANGE OF OPINION OR ONLY LOSS TO THE REVENUE CANNOT BE THE BASIS FOR REVIEW. IN THE CASE UNDER CONSIDERATION ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE-AO HAD NOT APPLIED HIS MIND. BESIDES, CIT HAS SET-ASIDE T HE ORDER OF THE AO FOR THE LIMITED PURPOSE OF DECIDING THE ISSUE OF ALLOWABILITY OF EX PENDITURE ON ACCOUNT OF PAYMENT TO THE RETIRING PARTNER. ASSESSEE CAN LEAD THE EVIDENC E BEFORE THE AO DURING RE-HEARING OF THE CASE IN PURSUANCE OF THE ORDER PASSED BY THE CIT. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THERE IS NO NEED TO INTERFE RE WITH THE ORDER OF THE CIT PASSED U/S. 263 OF THE ACT. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH OCTOBER, 2012. SD/- SD/- ( . . / B.R. MITTAL ) ( / RAJENDRA ) (* / JUDICIAL MEMBER % (* / ACCOUNTANT MEMBER MUMBAI, +( DATE: 15 TH OCTOBER, 2012 TNMM ITA NO. 3651/MUM/2011 M/S. SONI & ASSOCIATES 4 () () () () ' '' ' #, #, #, #, -,# -,# -,# -,# / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE !,# # //TRUE COPY// () () () () / BY ORDER, . .. . / / / / / DY./ASSTT. REGISTRAR , / ITAT, MUMBAI