Atma Ram & Sons, Ranchi V. ITO, Ranchi

ITA 44/RAN/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0357 (ITAT-RANCHI)
• Duration Of Justice: 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 13-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHOUDHARY ORAON
• Assessee Lawyers: V K JALAN
• Keywords: Principle of natural justice

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL: CIRCUIT BENCH : RANCHI [BEFORE HONBLE S/SHRI N. S. SAINI, AM AND GEORGE MATHAN, JM] ITA NO. 44/RAN/2015 ASSESSMENT YEAR: 2006-07 ATMARAM & SONS RADHESHYAM LANE,MAIN ROAD,RANCHI PAN NO. AAHFA 2326G VS THE INCOME TAX OFFICER, WARD -1(1), ANNEXEE BUILDING, MAIN ROAD, RANCHI, JHARKHAND 834 001 (APPELLANT) (RESPONDENT) APPELLANT BY S/SHRI V .K. JALAN, FCA RESPONDENT BY SHRI CHOUDHARY ORAON, DR DATE OF HEARING: 28-10-2015 DATE OF PRONOUNCEMENT: 28-10-2015 O R D E R PER GEORGE MATHAN, JM: ITA NO.44/RAN/2015 IS AN APPEAL FILED BY THE ASSESS EE AGAINST THE ORDER OF THE LEARNED CIT(A), RANCHI IN APPEAL NO.206/RAN/OTH /08-09 DATED 10-12-2014 FOR THE ASSESSMENT YEAR 2006-07. 2. SHRI V.K. JALAN, FCA REPRESENTED ON BEHALF OF T HE ASSESSEE AND SHRI CHOUDHAY ORAON, DR REPRESENTED ON BEHALF OF REVENUE . 3. IT WAS SUBMITTED BY THE LEARNED AR THAT THE LEAR NED CIT(A) CONFIRMED THE DISALLOWANCE OF RS. 60,000/- MADE BY THE AO ON ACC OUNT OF SALARY PAID TO ITS EMPLOYEES BY HOLDING THAT SALARY EXPENSES CAN ONLY BE TREATED AS ADMISSIBLE ON THE BASIS OF EVIDENCE IN REGARD TO PAYMENT MADE TO ITS EMPLOYEES AND THE SERVICES OF THE EMPLOYEES HAD BEEN USED FOR EARNING INCOME BY T HE ASSESSEE DURING THE YEAR. 2 4. IT WAS SUBMITTED THAT THE ASSESSEE IS A PARTNERS HIP FIRM IS DOING BUSINESS OF FINANCING. THE ASSESSEE WAS EARNING INTEREST INCOME . IT WAS SUBMISSION THAT OTHER THAN PARTNER OF THE ASSESSEE FIRM, THE ASSESSEE HAD HIRED ONE EMPLOYEE TO WHOM SALARY OF RS. 60,000/- WAS PAID DURING THE YEAR. IT WAS SUBMISSION THAT THE AO HAS DISALLOWED THE SALARY PAID HOLDING THAT THERE WAS N O REAL BUSINESS CARRIED OUT BY THE ASSESSEE FIRM AND INCOME EARNED WAS ON ACCOUNT OF INTEREST ON DEPOSITS AND LOANS. IT WAS A SUBMISSION THAT THE REMUNERATION AN D INTEREST TO THE PARTNERS OF THE ASSESSEE FIRM HAS BEEN ALLOWED. THE LEARNED CIT(A) CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE FAILED TO PROVE THE NE XUS BETWEEN THE INTEREST INCOME EARNED AND PAYMENT OF SALARY. IT WAS SUBMISSION TH AT THE ASSESSEE FIRM HAS ONLY ONE EMPLOYEE OTHER THAN WORKING PARTNERS AND THIS E MPLOYEE WAS FOR LOOKING AFTER THE AFFAIRS OF THE ASSESSEE FIRM INCLUDING GOING TO BANK AND VARIOUS OTHER DUTIES. IT WAS SUBMISSION THAT SALARY PAID IS LIABLE TO BE ALL OWED. 5. IN REPLY, THE LEARNED DR SUPPORTED THE ORDER OF THE AO AND THE LEARNED CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE A SSESSEE ADMITTEDLY IS DOING A BUSINESS OF FINANCING. A PERUSAL OF THE ASSESSMEN T ORDER SHOWS THAT THE AO HAS ADMITTED THE FACT THAT THE ASSESSEE HAS EARNED INTE REST INCOME ON DEPOSITS AND LOANS. THE ASSESSEE HAS ONLY ONE EMPLOYEE WHO IS NO T A PARTNER OF THE ASSESSEE FIRM. TO DISALLOW THE SALARY PAID TO THE SINGLE EMP LOYEE WOULD BE ARBITRARY. THE EMPLOYEE WOULD NEVER HAVE BEEN APPOINTED, IF HIS RE QUIREMENT IS NOT THERE. THE EMPLOYEE IS NOT A RELATIVE OF THE PARTNERS OF THE A SSESSEE FIRM OR THE CLAIM OF SALARY IS BOGUS. IN THESE CIRCUMSTANCES, WE ARE OF THE CON SIDERED OPINION THAT IN THE INTEREST OF NATURAL JUSTICE, THE ADDITION AS MADE B Y THE AO AND CONFIRMED BY THE LEARNED CIT(A) REQUIRES TO THE DELETED. ACCORDINGLY , WE DIRECT THE AO TO DELETE THE SAME. 3 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE C LOSE OF HEARING ON 28-10-2015. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (GEORGE MATHAN) JUDICIAL MEMBER DATE : 28.10.15 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) - 5. THE DR, ITAT, RANCHI 6. GUARD FILE BY ORDER 4 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 28.10.15 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 28.10.15 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 28.10.15 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 28.10. 15 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 28.10.15 SR.PS 6. DATE OF PRONOUNCEMENT 28.10.15 SR.PS 7. FILE SENT TO THE BENCH CLERK 28.10.15 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER