City Wines, New Delhi V. ACIT, Circle-55(1), New Delhi

ITA 421/DEL/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9140 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 21-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH DUBEY
• Keywords: Set aside
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER ITA NO.421/DEL/2019 ASSESSMENT YEAR: 2014-15 M/S. CITY WINES D-112, VIVEK VIHAR, NEW DELHI-110095 PAN NO. AAHFC9504A VS ACIT CIRCLE 55 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. RAKESH DUBEY, ADVOCATE RESPONDENT BY SHRI S. L. ANURAGI, SR. DR DATE OF HEARING: 02/07/2019 DATE OF PRONOUNCEMENT: 09/07/2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 14.09.2018 OF THE CIT(A)-19, NEW DELHI RELATING TO A. Y. 2015-16. 2. THE ASSESSEE IN ITS VARIOUS GROUND OF APPEAL HAS CHALLENGED THE EXPARTE ORDER OF THE CIT(A) IN CONFI RMING THE DISALLOWANCE OF RS.6 LACS MADE BY THE ASSESSING OFF ICER U/S. 40 A(3) OF THE ACT ON ACCOUNT OF SALARY PAID TO THE PA RTNERS IN CASH. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A PAGE | 2 PARTNERSHIP FIRM AND FILED ITS RETURN OF INCOME ON 29.09.2015 DECLARING TOTAL INCOME OF RS.21,14,141/-. THE ASSES SING OFFICER COMPLETED THE ASSESSMENT U/S.143 (3) WHEREIN HE MAD E ADDITION OF RS.6 LACS BY OBSERVING THAT THE SALARY PAID TO THE PARTNERS IN CASH ARE IN CONTRAVENTION OF PROVISION OF SECTION 40A (3) OF THE IT ACT. SINCE NONE APPEARED BEFORE THE CIT(A), THE LD. CIT(A) IN THE EXPARTE ORDER PASSED BY HIM, DISMISSE D THE APPEAL FILED BY THE ASSESSEE AND THEREBY SUSTAINED THE ADD ITION. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT ALTHOUGH THIS IS AN EXPARTE ORDER BY THE CIT(A ), HOWEVER, THE ISSUE NEED NOT GO BACK TO HIM FOR FRESH ADJUDIC ATION SINCE THE ISSUE IS VERY SMALL. HE SUBMITTED THAT PROVISI ON OF SECTION 40A (3) SHOULD NOT BE APPLICABLE TO PAYMENT OF CASH TO PARTNERS TOWARDS THEIR SALARY IN VIEW OF THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. CHIDAMBARAM PILLAI REP ORTED IN 106 ITR 292 WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT PAYMENT OF SALARY TO A PARTNER REPRESENTS A SPECIAL SHARE OF THE PROFITS AND SALARY PAID TO A PARTNER RETAINS THE SA ME CHARACTER OF THE INCOME. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SHIV KUMAR VIDE ITA NO.279 OF 2010 ORDER DATED 11.02.2013. 6. THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER PAGE | 3 OF THE ASSESSING OFFICER. HE SUBMITTED THAT DUE TO NON APPEARANCE BEFORE THE CIT(A) HE HAS PASSED THE EXPA RTE ORDER AND THERE IS NO ADJUDICATION BY THE CIT(A) ON THIS ISSUE. THEREFORE, THIS MATTER MAY BE SET ASIDE TO THE FILE OF THE CIT(A). 7. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FACT THAT THE ASSESSING OFFICER INVOKING T HE PROVISIONS OF SECTION 40A(3) MADE ADDITION OF RS. 6 LACS BEING THE SALARY PAID TO PARTNERS IN CASH IN VIOLATION OF PROVISIONS OF SECTION 40A(3). I FIND DUE TO NON APPEARANCE DESPITE REPEAT ED OPPORTUNITIES, THE LD. CIT(A) DISMISSED THE APPEAL FOR WANT OF PROSECUTION AND THEREBY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DISALLOWANCE U/S. 40 A (3) CANNOT BE MADE FOR PAYMENTS IN CASH EXCEEDING OF RS.20,000/- AT A TIME TO THE PARTNERS TOWARDS HIS/HER SALARY / REMUNERATION. HO WEVER, I FIND DUE TO NON APPEARANCE BEFORE THE CIT(A) DESPIT E REPEATED OPPORTUNITIES HE HAS DISMISSED THE APPEAL AND HAS N OT ADJUDICATED THE ISSUE ON MERIT. 8. CONSIDERING THE TOTALITY OF THE FACTS OF THE CAS E AND IN THE INTEREST OF JUSTICE I DEEM IT PROPER TO RESTORE THI S ISSUE TO THE FILE OF THE CIT(A) WITH A DIRECTION TO GIVE ONE FINAL OP PORTUNITY TO THE ASSESSEE TO EXPLAIN HIS CASE AND DECIDE THE ISSUE A S PER FACT AND LAW. THE ASSESSEE IS ALSO HEREBY DIRECTED TO APPEA R BEFORE THE CIT(A) AND EXPLAIN ITS CASE FAILING WHICH THE LD. C IT(A) IS AT PAGE | 4 LIBERTY TO PASS APPROPRIATE ORDER AS PER LAW. I HO LD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 09.07.2019. SD/- (R.K PANDA) ACCOUNTANT MEMBER *NEHA* DATE:- 09.07.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 01.07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 02.07.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 09.07.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 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