M/s. Vaibhav Enterprise, Surat V. The ACIT.,Circle-3, Surat

ITA 430/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0987 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 14-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Income from undisclosed sources; Salary income; Deemed to accrue or arise in india
• Section: 69C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO.430/AHD/2011 ( / ASSESSMENT YEAR : 2007-08) M/S.VAIBHAV ENTERPRISES SHOP NO.1 & 2, GREEN PLAZA OPP. L.P. SAVANI SCHOOL ADAJAN, SURAT / VS. THE ASST.CIT CIRCLE-3 SURAT $ ./ ./ PAN/GIR NO. : AAFFV 7161 G ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) $&) / APPELLANT BY : SHRI MANISH J. SHAH, AR '($&*) / RESPONDENT BY : SHRI SANJAY KUMAR, SR.DR +* / DATE OF HEARING 14/07/2016 ,-./* / DATE OF PRONOUNCEMENT 28/07/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-II, SURAT DA TED 16/12/2010 FOR ASSESSMENT YEAR (AY) 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- ITA NO.430/AHD/ 2011 M/S.VAIBHAV ENTERPRISE VS. ASST.CIT ASST.YEAR 2007-08 - 2 - 2.2. ASSESSEE IS A PARTNERSHIP-FIRM STATED TO BE EN GAGED IN THE BUSINESS OF CONSTRUCTION. SURVEY PROCEEDINGS U/S.133A OF TH E INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') WAS CAR RIED OUT ON 23/03/2007 OF THE BUSINESS PREMISES OF THE ASSESSEE-FIRM AND A T THAT TIME IT WAS FOUND THAT ASSESSEE HAD RECEIVED UNACCOUNTED RECEIP TS AMOUNTING TO RS.1.75 CRORES. THE WORKING PARTNER OF THE FIRM IN HIS STATEMENT HAD ADMITTED TO HAVE RECEIVED THE AMOUNT IN CASH WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. ASSESSEE THEREAFTER FILED I TS RETURN OF INCOME FOR AY 2007-08 ON 25/10/2007 BY DECLARING THE TOTAL INC OME OF RS.1,52,96,800/-. THE CASE WAS TAKEN UP FOR SCRUTI NY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF THE ACT, VI DE ORDER DATED 30/12/2009 AND THE TOTAL INCOME WAS DETERMINED AT RS.1,75,00,000/- BEING THE INCOME THAT WAS DISCLOSED BY THE PARTNER AT THE TIME OF SURVEY. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (AO ), ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), WHO VIDE ORDER DAT ED 16/12/2010 (IN APPEAL NO.CAS-II/383/09-10/197) DISMISSED THE APPEA L OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), ASSESSEE I S NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE CIT(APPEALS) ERRED IN UPHOLDING THE DISALLOWAN CE OF DEDUCTION CLAIMED BY THE ASSESSEE OF RS.17,04,950/ -. 1.1.THE CIT(APPEALS) ERRED IN NOT APPRECIATING THE FACTUAL AS WELL AS THE LEGAL SUBMISSIONS MADE BY THE ASSESSEE AT TH E TIME OF HEARING. ITA NO.430/AHD/ 2011 M/S.VAIBHAV ENTERPRISE VS. ASST.CIT ASST.YEAR 2007-08 - 3 - 1.2.THE CIT(APPEALS) OUGHT TO HAVE APPRECIATED THAT THE DEDUCTION CLAIMED BY THE ASSESSEE WERE LEGALLY PERMISSIBLE CL AIMS UNDER THE INCOME TAX ACT, 1961 WHICH HAVE BEEN COMPLETELY OVERLOOKED BY THE ASSESSING OFFICER AS WELL AS THE CIT(APPEALS). 1.3.THE CIT(APPEALS) FURTHER ERRED IN OVERLOOKING T HE FACT THAT THE INCOME HAS BEEN OFFERED BY THE PARTNERS IN THEIR IN DIVIDUAL CAPACITY AND THEY HAVE BEEN TAXED ON THE SAME AS W ELL. 1.4.THE CIT(APPEALS) OUGHT TO HAVE KEPT IN MIND THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE EVIDEN CE PRODUCED BEFORE HIM WHILE DECIDING THE APPEAL OF THE ASSESSE E. 3. AT THE OUTSET, LD.AR SUBMITTED THAT THOUGH THE A SSESSEE HAS RAISED VARIOUS GROUNDS, BUT THE SOLE ISSUE IS WITH RESPECT TO THE DISALLOWANCE OF DEDUCTION OF RS.17,04,950/- BEING THE INTEREST ON C APITAL AND SALARY TO PARTNERS (WHICH WAS ADJUSTED AGAINST THE TOTAL INCO ME DISCLOSED OF RS.1.75 CRORES). 3.1. AO DURING THE COURSE OF ASSESSMENT PROCEEDING S NOTICED THAT THOUGH AT THE TIME OF SURVEY, THE PARTNER OF THE ASSESSEE- FIRM HAD ADMITTED THE UNDISCLOSED INCOME OF RS.1.75 CRORE BUT IN THE RETU RN OF INCOME, ASSESSEE HAD OFFERED ONLY RS.1,57,95,050/- FOR TAX AFTER CL AIMING EXPENSES OF RS.17,04,950/- TOWARDS INTEREST ON CAPITAL TO PARTN ERS AND SALARY TO PARTNERS. AO WAS OF THE VIEW THAT IN A SITUATION W HEN THE ASSESSEE HAS NOT SATISFACTORILY EXPLAINED THE SOURCE OF UNDISCLO SED INCOME THE ITA NO.430/AHD/ 2011 M/S.VAIBHAV ENTERPRISE VS. ASST.CIT ASST.YEAR 2007-08 - 4 - EXPENSES OF SALARY AND INTEREST TO PARTNERS, AGAINS T THE UNDISCLOSED SOURCES CANNOT BE ALLOWED. HE ACCORDINGLY DISALLOW ED THE EXPENSES OF RS.17,04,950/-. AGGRIEVED BY THE ORDER OF AO, ASSES SEE CARRIED THE MATTER BEFORE THE LD.CIT(A) WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER:- 3. DECISION : 3.1. I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELLANT. IN SO FAR AS DISCLOSURE OF 1.75 CRORE MADE BY THE APPELLANT VIDE THE STATEMEN T OF THE WORKING PARTNER RECORDED DURING THE COURSE O F SURVEY ON 23.3.2007 ON THE BUSINESS PREMISES OF THE APPELLANT IS CONCERNED, THE SAME IS NOT IN DISPUTE. IT IS ALSO NOT IN DISPUTE THAT THE ABOVE INCOME DISCLOSED BY THE APPELLANT IS ON THE BASIS OF UNDIS CLOSED RECEIPTS OF THE APPELLANT FIRM RECORDED IN A SMALL DIARY TITLED AS TRAL AQUARISIC FOUND IN 'ANNEXURE BF8' AT THE TIME OF SURVEY. TH E UNDISCLOSED RECEIPTS OF? 1.75 CRCRE ARE MENTIONED IN PAGES 2,3 AND 4 OF THE SAID DIARY. FURTHER, WHILE DISCLOSING THE ABOVE AMOUNT, THE WOR KING PARTNER IN HIS STATEMENT SAID THAT THE ENTIRE AMOUNT WAS RECEIVED IN CASH AND NOT RECORDED IN THE BOOKS OF A/C., AND WHILE DISCLOSING THE ABOVE UNACCOUNTED RECEIPTS OFF 1.75 CRORE, HE ADMITTED THAT THE SAID RECEIPTS WERE UNACCOUNTED INCOME OF THE FIRM FOR THE F.Y.200 6-07. ALL THE ABOVE FACTS ARE CORROBORATED BY THE FACT THAT OUT OF THE DISCLOSURE OF 1.75 CRORES MADE AT THE TIME OF SURVEY, THE APPELLANT HA S RETURNED INCOME OF 1,57,96,800/-. THE DISPUTE IS, THEREFORE, ONLY REGA RDING AN AMOUNT OF 17,04,950/- CLAIMED AS DEDUCTION AGAINST THE UNACCO UNTED INCOME OF 1.75 CRORE FROM UNDISCLOSED SOURCES. THE APPELLANT' S SUBMISSION REPRODUCED ABOVE IN SHORT IS THAT IN THE STATEMENT RECORDED AT THE TIME OF SURVEY, THE WORKING PARTNER STATED THAT FIGURES IN PAGES 2,3 & 4 OF THE DIARY (ANNEXURE BF8) RELATED TO CASH AMOUNT RECEIPT OF SALES FOR SHOPS AND OFFICES IN GREEN PLAZA COMPLEX, DURING THE F.Y. 2006-07 AND THE SAID AMOUNT HAS NOT BEEN RECORDED IN THE BOOKS OF A /C OF THE FIRM, AND THE PARTNERS HAVE WITHDRAWN THE SAME IN CASH FROM T HE FIRM. THE APPELLANT'S CONTENTION, THEREFORE, IS THAT THOUGH C ASH AMOUNT OF 1.75 CRORE HAS NOT BEEN ACCOUNTED FOR IN THE BOOKS OF A/ C., IT IS BUSINESS INCOME AND, THEREFORE, EXPENSES CLAIMED AGAINST THE SAME, INCLUDING ITA NO.430/AHD/ 2011 M/S.VAIBHAV ENTERPRISE VS. ASST.CIT ASST.YEAR 2007-08 - 5 - DEDUCTION U/S 40(B) OF THE ACT, IS ALLOWABLE. I HAV E DULY CONSIDERED THE ABOVE SUBMISSION OF THE APPELLANT. IN SO FAR AS SEC TION 40(B) OF THE ACT IS CONCERNED, INTEREST AND SALARY TO THE PARTNERS A RE ALLOWABLE FROM THE INCOME COMPUTED IN THE BOOKS OF A/C. AND NOT FROM T HE RECEIPTS WHICH HAVE NOT FOUND ENTRY IN THE BOOKS OF A/C. IN THE ST ATEMENT RECORDED DURING THE COURSE OF SURVEY, THE WORKING PARTNER AD MITTED THAT AN AMOUNT OF 1.75 CRORE HAS BEEN RECEIVED IN CASH AND NOT ACCOUN TED FOR. THE CONTENTION OF THE APPELLANT THAT THE ABOVE AMOU NT IS FROM SALE OF SHOPS & OFFICES IN GREEN PLAZA COMPLEX, IS NOT CORR OBORATED BY EITHER ANY DOCUMENTARY EVIDENCE, OR BY LEDGER A/C. OF THE APPELLANT FIRM. THE STATEMENT GIVEN BY THE WORKING PARTNER OF THE FIRM CLEARLY INDICATES THAT THE CASH RECEIPTS OF 1.75 CRORE ARE NOTHING BUT 'ON-MONEY' RECEIPTS FROM SALE OF OFFICE/SHOPS IN THE ABOVE COMPLEX. THU S, IT IS EVIDENT THAT THE ABOVE AMOUNT WAS NEVER ACCOUNTED FOR BY THE APP ELLANT FIRM IN THE BOOKS OF A/C. IT IS, THEREFORE, RELEVANT TO NOTE TH AT INCOME OF THE APPELLANT AS UNACCOUNTED INCOME DISCLOSED DURING TH E COURSE OF SURVEY IS IN THE NATURE OF 'DEEMED INCOME'. THE ISSUE OF H EAD OF 'DEEMED INCOME' U/S69,69A,69B AND 69C HAS SINCE BEEN CONSID ERED ON FIRST PRINCIPLES IN THE GUJARAT HIGH COURT DECISION IN TH E CASE OF FAKIR MOHAMED HAJI HASAN VS CIT (2001) 247 ITR 290 (GUJ). THE RELEVANT OBSERVATIONS OF THE HIGH COURT ARE EXTRACTED BELOW: - 'THE SCHEME OF SECTION 69, 69A, 693 AND 69C OF THE INCOME-TAX `ACT, 1961, WOULD SHOW THAT IN CASES WHERE THE NATU RE AND SOURCE OF INVESTMENTS MADE BY THE ASSESSEE OR THE N ATURE AND SOURCE OF ACQUISITION OF MONEY, BULLION ETC., OWNED BY THE ASSESSEE OR THE SOURCE OF EXPENDITURE INCURRED BY T HE ASSESSEE ARE NOT EXPLAINED AT ALL, OR NOT SATISFACTORILY EXP LAINED, THEN THE VALUE OF SUCH INVESTMENTS AND MONEY OR THE VALUE OF ARTICLES NOT RECORDED IN THE BOOKS OF ACCOUNT OR THE UNEXPLAINED EXPENDITURE MAY BE DEEMED TO BE THE INCOME OF SUCH ASSESSEE. IT FOLLOWS THAT THE MOMENT A SATISFACTORY EXPLANATION IS GIVEN ABOU T SUCH NATURE AND SOURCE BY THE ASSESSEE, THEN THE SOURCE WOULD S TAND DISCLOSED AND WILL, THEREFORE, BE KNOWN AND THE INC OME WOULD BE TREATED UNDER THE APPROPRIATE HEAD OF IN COME FOR ASSESSMENT AS PER PROVISIONS OF THE ACT, HOWEVER , WHEN THESE PROVISIONS APPLY BECAUSE NO SOURCE IS DISCLOSED AT ALL ON THE ITA NO.430/AHD/ 2011 M/S.VAIBHAV ENTERPRISE VS. ASST.CIT ASST.YEAR 2007-08 - 6 - BASIS OF WHICH THE INCOME CAN BE CLASSIFIED UNDER O NE OF THE HEADS OF INCOME UNDER SECTION 14 OF THE ACT, IT WOU LD NOT BE POSSIBLE TO CLASSIFY SUCH DEEMED INCOME UNDER ANY O F THESE HEADS INCLUDING INCOME FROM 'OTHER SOURCES' WHICH HAVE TO BE SOURCES KNOWN OR EXPLAINED. WHEN THE INCOME CANN OT BE CLASSIFIED UNDER ANY ONE OF THE HEAD OF INCOME UNDE R SECTION 14, IT FOLLOWS THAT THE QUESTION OF GIVING ANY DEDUCTIO NS UNDER THE PROVISIONS WHICH CORRESPOND TO SUCH HEADS OF INCOME WILL NOT ARISE....... THE OPENING WORDS OF SECTION 14 'SAV E AS OTHERWISE PROVIDED BY THIS ACT' CLEARLY LEAVE SCOPE FOR 'DEEM ED INCOME' OF THE NATURE COVERED UNDER THE SCHEME OF SECTIONS 69, 69A, 69B AND 69C BEING TREATED SEPARATELY, BECAUSE SUCH DEEM ED IS NOT INCOME FROM SALARY, HOUSE PROPERTY, PROFITS AND GAI NS OF BUSINESS OR PROFESSION, OR CAPITAL GAINS NOR IS IT INCOME FR OM 'OTHER SOURCES' BECAUSE THE PROVISIONS OF SECTION 69, 69A, 69B AND 69C TREAT UNEXPLAINED INVESTMENTS, UNEXPLAINED MONEY, B ULLION ETC. AND UNEXPLAINED EXPENDITURE AS DEEMED INCOME WHERE THE NATURE AND SOURCE OF INVESTMENT, ACQUISITION OR EXPENDITUR E, AS THE CASE MAY BE HAVE NOT BEEN EXPLAINED OR SATISFACTORILY EX PLAINED. THEREFORE, IN THESE CASES, THE SOURCE NOT BEING KNO WN, SUCH DEEMED INCOME WILL NOT FALL EVEN UNDER THE HEAD 'IN COME FROM OTHER SOURCES'. THEREFORE, THE CORRESPONDING DEDUCT IONS WHICH ARE APPLICABLE TO THE INCOMES UNDER ANY OF THESE VA RIOUS HEADS, WILL NOT BE ATTRACTED IN THE CASE OF DEEMED INCOME WHICH ARE COVERED UNDER THE PROVISIONS OF SECTION 69, 69A, 69B AND 69C OF THE ACT IN VIEW OF THE SCHEME OF THOSE PROVISIO NS.' FROM THE AFORESAID, IT FOLLOWS THAT SUCH AMOUNTS AS SESSED BY VIRTUE OF THE DEEMING PROVISIONS OF SECTION 68, 69, 69A, 69B AND 69C ALSO DO NOT FORM PART OF BOOK PROFIT' AS DEFINED IN EXPLANATIO N-3 BELOW SECTION 40(B), WHICH HAS TO BE COMPUTED UNDER THE HEAD 'PRO FITS AND GAINS OF BUSINESS OR PROFESSION.' THAT BEING THE CASE, SUCH INCOME WILL ALSO NOT ENTER INTO THE COMPUTATION OF THE AMOUNT OF INTERES T AND SALARY OF PARTNERS ALLOWABLE U/S 40(B)(IV)&(V) IN THE ASSESSM ENT OF PARTNERSHIP FIRMS. SIMILARLY, ANY BROUGHT FORWARD LOSS ALSO CAN NOT BE SET OFF AGAINST THE AMOUNT ASSESSED U/S 68, 69,69A, 69B AND 69C AS INCOME. ITA NO.430/AHD/ 2011 M/S.VAIBHAV ENTERPRISE VS. ASST.CIT ASST.YEAR 2007-08 - 7 - 3.2. IN THE ABOVE REFERRED DECISION OF THE GUJARAT HIGH COURT, IT WAS ALSO LAID DOWN THAT SUCH INCOME WOULD NOT BE ENTITL ED TO ANY DEDUCTION ADMISSIBLE UNDER DIFFERENT HEADS OF INCOME AS THE S AME DOES NOT FALL UNDER ANY HEAD AND IS ASSESSABLE AS SUCH BY VIRTUE OF THE WORDS 'SAVE OTHERWISE PROVIDED BY THE ACT' IN SECTION 14. IT MA Y BE ADDED THAT BY AN AMENDMENT MADE BY THE FINANCE (NO.2) ACT, 1998 WITH EFFECT FROM 01.4.1999, INSERTING A PROVISO TO SECTION 69C, IT H AS BEEN SPECIFICALLY ENJOINED THAT ANY EXPLAINED EXPENDITURE WHICH IS DE EMED TO BE INCOME OF THE ASSESSEE U/S 69C SHALL NOT BE ALLOWED AS A D EDUCTION UNDER ANY HEAD OF INCOME.' THE EFFECT OF THE GUJARAT HIGH COU RT DECISION IS THAT IT APPLIES THE SAME PRINCIPLES IMBIBED IN THE PROVISO TO SECTION 69C TO ALL SECTIONS IN CHAPTER VI DEALING WITH DEEMED INCOME. THE FACT IS THAT NO SPECIFIC PROVISION AKIN TO THE PROVISO TO SECTION 6 9C WAS NECESSARY IN RESPECT OF OTHER SECTIONS IN THIS CHAPTER BECAUSE T HE INCOME ADDED THEREIN AS UNEXPLAINED INVESTMENT, UNEXPLAINED VALU ABLES, ETC. IS EVEN OTHERWISE NOT ALLOWABLE AS DEDUCTION, UNLIKE UNEXPL AINED EXPENDITURE WHICH IS OTHERWISE ALLOWABLE AS DEDUCTION. 3.3. IN VIEW OF THE ABOVE DISCUSSION AND FOLLOWING THE RATIONALE OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF FAKIR MOHAMED HAJI HASAN(SUPRA), WHICH HAS ALSO BEEN RELIED UPON BY THE ASSESSING OFFICER, I HOLD THAT AGAINST THE DEEMED INCOME OF 1.75 CRORE ASSESSED IN THE HANDS OF THE APPELLANT, NO DEDUCTION OF WHAT SOEVER IN NATURE IS ALLOWABLE. I, ACCORDINGLY, UPHOLD THE ASSESSMENT OR DER AND DISMISS THE GROUND OF APPEAL TAKEN BY THE APPELLANT. 3.2. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 3.3. BEFORE US, LD.AR REITERATED THE SUBMISSIONS MA DE BEFORE THE AO AND LD.CIT(A). HE FURTHER SUBMITTED THAT THE ONLY BUSINESS OF THE ASSESSEE IS CONSTRUCTION AND THE ASSESSEE WAS HAVIN G NO OTHER BUSINESS AT THE RELEVANT TIME AND DURING THE COURSE OF SURVEY, IT WAS SUBMITTED THAT THE CASH AMOUNT WAS RECEIVED ON SALE OF SHOPS AND O FFICES OF GREEN PLAZA ITA NO.430/AHD/ 2011 M/S.VAIBHAV ENTERPRISE VS. ASST.CIT ASST.YEAR 2007-08 - 8 - COMPLEX. HE THEREFORE SUBMITTED THAT WHEN THE ASS ESSEE IS HAVING ONLY ONE BUSINESS AND WHEN THE INCOME FROM THAT BUSINESS IS DECLARED DURING THE COURSE OF SURVEY, AGAINST THAT INCOME THE ASSES SEE CAN CLAIM THE REMUNERATION AND INTEREST TO PARTNERS. HE FURTHE R PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHILPA DYEING & PRINTING MILLS (P.) LTD. REPORTED IN (2013 ) 39 TAXMANN.COM 3 (GUJ.) AND SUBMITTED THAT THE HONBLE GUJARAT HIGH COURT AFTER CONSIDERING THE DECISION IN THE CASE OF FAKIR MOHME D HAJI HASAN VS. CIT REPORTED IN (2001) 247 ITR 290 (GUJ.) DISMISSED THE APPEAL OF THE REVENUE. HE THEREFORE SUBMITTED THAT ASSESSEES CL AIM FOR DEDUCTION OF INTEREST AND SALARY TO PARTNERS BE ALLOWED. ON T HE OTHER HAND, THE LD.SR.DR SUPPORTED THE ORDERS OF AO AND LD.CIT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS ABOUT THE DISALLOW ANCE OF EXPENSES MADE IN RESPECT OF PARTNERS REMUNERATION U/S.40(B) OF TH E ACT. IT IS AN UNDISPUTED FACT THAT DURING THE COURSE OF SURVEY, A SSESSEE HAD DISCLOSED RS.1.75 CRORES AS UNACCOUNTED INCOME. WE FIND THAT BEFORE THE AO, ASSESSEE IN THE WRITTEN SUBMISSIONS HAD STATED THAT ASSESSEE-FIRM IS ENGAGED IN ONLY BUSINESS OF GREEN PLAZA PROJECT AND IT HAS ONLY ONE SOURCE OF INCOME BEING CONSTRUCTION ACTIVITY. THE AFORESAID SUBMISSION OF THE ASSESSEE HAS NOT BEEN CONTROVERTED BY REVENU E NOR THE REVENUE ITA NO.430/AHD/ 2011 M/S.VAIBHAV ENTERPRISE VS. ASST.CIT ASST.YEAR 2007-08 - 9 - HAS PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE TH AT ASSESSEE WAS HAVING ENGAGED IN OTHER THAN THE BUSINESS OF CONSTR UCTION. WE FIND THAT THE COORDINATE BENCH OF TRIBUNAL IN THE CASE OF SHR I LABDHI PRINTS IN ITA NO.3258/AHD/2011 ORDER DATED 18/05/2012 AFTER CONSIDERING THE VARIOUS DECISIONS CITED THEREIN HAD AGREED WITH TH E DECISION OF LD.CIT(A) THAT ONCE THE ADDITIONAL INCOME OFFERED FOR TAXATIO N DURING THE SURVEY IS ACCEPTED AND IT HAS BEEN EXPLAINED TO BE AS BUSINES S INCOME AS THE SOURCE THEN THERE IS NO BAR IN THE ACT FOR CLAIMING PARTNE RS REMUNERATION FROM SUCH ADDITIONAL BUSINESS INCOME. 4.1. WE FURTHER FIND THAT HONBLE CALCUTTA HIGH C OURT IN THE CASE OF MD.SERAJUDDIN & BROTHERS VS. CIT REPORTED IN (2012) 24 TAXMANN.COM 46 (CAL.) HAS HELD THAT EVEN IF THE INCOME FROM OTH ER SOURCES IS INCLUDED IN THE PROFIT AND LOSS ACCOUNTS, TO ASCERTAIN THE N ET PROFITS QUA BOOK PROFIT FOR COMPUTATION OF THE REMUNERATION OF THE P ARTNERS, THE SAME CANNOT BE DISCARDED. WE FURTHER FIND THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF J.K. CHOKSHI VS. ACIT (T.A. NO.149 OF 2003) ORDER DATED 22/12/2014 HELD AS UNDER:- 7. ONCE IT IS ESTABLISHED THAT THE ASSESSEE HAD NO OTHER SOURCE OF INCOME AT THE RELEVANT TIME OR IN THE PAST, IT CAN BE SAFELY CONC LUDED THAT THE ASSESSEE HAD NO OTHER INCOME OTHER THAN INCOME FROM BUSINESS NOW, W HEN THE BUSINESS ACTIVITY OF THE ASSESSEE HAS BEEN ACCEPTED AND NO OTHER SOURCE OF INCOME IS FOUND, THEN THERE WAS NO JUSTIFICATION FOR DISALLOWING THE SALARY PAI D TO PARTNERS AT RS.4.50 LACS. THEREFORE, THE DISALLOWANCE OF RS.4.50 LACS GRANTED BY THE A.O AND CONFIRMED BY THE TRIBUNAL IS ERRONEOUS AND DESERVES TO BE QUASHE D AND SET ASIDE. OUR VIEW IS BUTTRESSED BY THE PRINCIPLE RENDERED BY THE CALCUTT A HIGH COURT IN THE CASE OF ITA NO.430/AHD/ 2011 M/S.VAIBHAV ENTERPRISE VS. ASST.CIT ASST.YEAR 2007-08 - 10 - MD.SERAJUDDIN & BROS.V.CIT [2012] 24 TAXMANN.COM 46 (CAL.) IN VIEW OF THE ABOVE, THE QUESTION NO. 1 AS TO WHETHER THE TRIBUNA L IS RIGHT IN CONFIRMING DISALLOWANCE OF RS.4,50,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40(B) OF THE INCOME-TAX ACT, 1961 IS ANSWERED IN THE NEGATIV E IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 4.1. IN VIEW OF THE DECISIONS CITED HEREINABOVE WE ARE OF THE VIEW THAT NO DISALLOWANCE U/S.40(B) OF THE ACT ON ACCOUNT OF REMUNERATION AND SALARY TO PARTNERS CAN BE MADE IN THE PRESENT CASE AND THUS THE GROUND OF ASSESSEE IS ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 28/07/2016 SD/- SD/- () () (RAJPAL YADAV) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 28/ 07 /2016 3..,.../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 456 7 / CONCERNED CIT 4. 7 ( ) / THE CIT(A)-II, SURAT 5. 89:'56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<=+ / GUARD FILE. / BY ORDER, (8' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD