Prasad Chuda Mill, Cuttack V. ITO, Cuttack

ITA 483/CTK/2013

• Counselvise Citation: 48322114 RSA 2013
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-10-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 11-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASIT KUMAR MOHAPATRA
• Assessee Lawyers: B PANDA
• Keywords: Opportunity of being heard; Principle of natural justice

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK . . , & , BEFORE S/SHRI P.M.JAGTAP, ACCOUNTANT M EMBER & PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ' ./ ITA NO. 483/CTK/2013 ( # # # # $% $% $% $% / ASSESSMENT YEAR :1997-1998) M/S. PRASAD CHUDA MILLS, AT: RANIHAT, CUTTACK-753001 VS INCOME TAX OFFICER, WARD - 2(1), CUTTACK ' ./ & ' ./PAN/GIR NO. AABFP 5824 C ( ' /APPELLANT ) .. ( ()' / RESPONDENT ) # , , , , /ASSESSEE BY : SHRI B.PANDA $ , , , , /REVENUE BY : SHRI ASIT KUMAR MOHAPATRA, CIT DR #$- / DATE OF HEARING : 26 TH OCT. 2015 ./% /DATE OF PRONOUNCEMENT 28 TH OCT. 2015 0 0 0 0 / O R D E R PER PARTHA SARATHI CHAUDHURY, JM CHALLENGING THE ORDER OF THE LD CIT(A), THE ASSESSE E HAS FILED THIS APPEAL BEFORE US ON THE FOLLOWING GROUNDS: (A) FOR THAT THE ORDERS OF THE FORUMS BELOW ARE HIG HLY ARBITRARY AND VIOLATIVE TO THE ORDER OF THE HON'BLE HIGH COURT OF ORISSA HE NCE TO BE QUASHED AND VACATED AND THE FACT OF ALLOWING THE INTEREST I N CONSIDERING THE STATEMENT OF ACCOUNTS FURNISHED DISCLOSED IN THE RE TURN FILED SHOULD HAVE BEEN ACCEPTED. (B) FOR THAT THE DETERMINATION OF INCOME AT RS.78,178/- AGAINST THE INCOME DISCLOSED BY THE APPELLANT RS.2,547.45 PAISE AFTER DEDUCTION OF SALARY/ REMUNERATION AND INTEREST TO THE PARTNERS HAS TO BE QUASHED. (C) FOR THAT THE CIRCULAR NO.739 DATED 25.03.96 SINCE H AD SPECIFICALLY STATED THAT THE PROVISION FOR CLAIM MADE IN THE DEED OF PA RTNERSHIP UNDER SECTION 40(B) HAS TO BE ALLOWED AND UNLESS IT IS AM ENDED OR MODIFIED BY SUBSEQUENT DEED OF PARTNERSHIPS SHOULD HAVE BEEN DU LY CONSIDERED. (D) FOR THAT THE FRESH ORDER OF 'ASSESSMENT' AS DIRECTE D BY THE HON'BLE HIGH COURT , ORISSA VIDE ORDER DATED 21.4.09 HAS NOT BEE N CARRIED OUT WHEN ITA NO. 483/CTK/2013 ASSESSMENT YEAR :1997-1998 2 THE NECKED VIOLATION OF THE DIRECTION OF THE HON'BL E COURT MADE BY THE FORUMS BELOW WHICH SHOULD BE PROPERLY CONSIDERED AN D ALLOWED. (E) FOR THAT THE ADDITION OF INTEREST OF RS.72,279/- MA DE WITHOUT CONSIDERING THE CLAUSE-15 OF THE DEED OF PARTNERSHIP STATING IN TER-ALIA THAT THE INTEREST SHALL BE CLAIMED UP TO 18% PER ANNUM AGAIN ST THE CAPITAL AVAILABLE IN THE FIRM ACCOUNT, THEREFORE THE ACCEPT ANCE OF THE PROVISION SHOULD HAVE BEEN MADE SINCE THE AMOUNT OF INTEREST OF THE PRECEDING YEAR HAS BEEN ACCEPTED AND SHOULD NOT HAVE BEEN DIS ALLOWED IN THE RELEVANT YEAR. (F) FOR THAT THE NOTICE ISSUED DATED 23.09.09 FOR FRESH ASSESSMENT HAD NO REASON TO DENY AND LEVY OF INTEREST UNDER SECTION 234(A), 234(B AND 220 MADE WITHOUT THE AUTHORITY OF LAW AND ALSO BEYO ND THE SCOPE AND PROVISIONS OF THE ACT AND ADEQUATE OPPORTUNITY AS H AS BEEN DIRECTED BY THE HONBLE HIGH COURT WAS NOT GRANTED TO JUSTIFY T HE CLAIM MADE BY THE APPELLANT, THEREFORE, THE ORDER OF THE AO AS WELL A S THE CIT(A) IS TOTALLY WHIMSICAL AND LIABLE TO BE DELETED AND VIOLATION MA DE TO BE TAKEN NOTE OF THE AUTHORITIES. (G) FOR THAT THE RESOLUTIONS DATED 1.04.96 AND 9.04 .96 SINCE HAS BEEN FILED SUBSEQUENTLY AND ORDER OF THE HON'BLE HIGH COURT OF ORISSA AND THE LD. CIT (A) SINCE HAS CATEGORICALLY STATED GIVING THE F ACTS OF THE CASE AND DIRECTED TO COMPLETE THE ASSESSMENT ON THE BASIS OF GRANTING DEDUCTION AND INTEREST PAID TO THE PARTNERS SHOULD NOT HAVE B EEN DISPUTED WITHOUT GIVING THE CHANCE OF CONFRONTATION AND VERIFICATION OF THE DETAILS AS DIRECTED BY THE HON'BLE COURT. THEREFORE THE ORDER OF THE HON'BLE COURT WAS DENIED. (H) FOR THAT THE FORUMS BELOW HAD PASSED THE ORDER IN AN IRRESPONSIBLE AND ILLEGAL MANNER AND LIGHT HEARTEDLY WITHOUT REJECTIN G THE STATEMENT OF INCOME FILED DISCLOSING THE PROFIT AND INTEREST AMO UNT DUE TO THE PARTNERS AND COMPLETED THE ASSESSMENT PRESCRIBING W RONG SECTION AND ADOPTED THE PROCEDURE IN THE MATTER AS WELL AS THE ORDER PASSED HAS TO BE QUASHED AND VACATED. (I) FOR THAT THE ORDER OF THE APPELLATE AUTHORITY IS TO TALLY BIASED AND MADE IN WRONG MANNER WHIMSICALLY AND NO SUCH ORDER IS RE QUIRED TO BE MADE WITHOUT VERIFICATION OF DETAILS AS DIRECTED AND NO OPPORTUNITY WAS GIVEN TO EXPLAIN THE FACTS IN RESPECT OF THE WRITTEN STAT EMENTS FILED, BEFORE THE CIT (A) HENCE THE ORDER IS LIABLE TO BE QUASHED AND VACATED. THUS, PASSING OF THE ORDER AS PER THE HON'BLE COURT'S DIR ECTION SHOULD HAVE BEEN MADE. OTHERWISE TO BE QUASHED WHEN WRONG ORDER PASSED BY THE FORUMS BELOW. (J) FOR THAT, THE FORUMS BELOW HAVE ERRED IN LAW BY DIS ALLOWING THE INTEREST OF RS.72,279/- PAID TO THE PARTNERS, WHICH HAVE ALR EADY BEEN SHOWN IN ITA NO. 483/CTK/2013 ASSESSMENT YEAR :1997-1998 3 THEIR RETURNS OF INCOME FOR THAT ASSESSMENT YEAR, H ENCE SUCH ADDITION IS AMOUNTS TO DOUBLE TAX ON ONE INCOME, THAT THE FIRM AS WELL AS THE PARTNERS. 2. IN THIS APPEAL, ALTHOUGH ASSESSEE HAS RAISED MUL TIPLE GROUNDS OF APPEAL, BUT THE SOLITARY DISPUTE IS WITH REGARD TO AN ADDITION OF RS.72,278/- MADE BY THE INCOME TAX AUTHORITIES ON ACCOUNT OF PAYMENT TO PARTNERS. 3. THE BRIEF FACTS OF THIS CASE ARE THE ASSESSEE IS A PARTNERSHIP FIRM DERIVED INCOME FROM SALE AND SUPPLY OF CHUDA MANUFACTURED IN OWN MILL. THE ASSESSEE FIRM WAS RECONSTITUTED W.E.F. 1.4.1995 AMONG THE PARTNER S NAMELY BRUNDABAD CHANDRA DAS, DURGA PRASAD DAS AND MRS SUBASINI DAS, HAVING 30%, 30% & 40% SHARED EACH RESPECTIVELY IN THE PARTNERSHIP BUSINESS. THE PART NERS OF THE FIRM IN CLAUSE 15 OF THE DEED OF PARTNERSHIP DRAWN THE PROVISION FOR PAYMENT OF INTEREST TO THE PARTNERS ON THEIR CAPITAL AVAILABLE UPTO 18% P.A. AND THE SAME WAS IN FACT PAID FOR THE ASSESSMENT YEAR 1996-97 AT RS.52,548/- AND ALSO FOR THE ASSESS MENT YEAR NOW UNDER CONSIDERATION AT RS.72,278/-, WHICH WAS NOT DISPUTED BUT ALLOWED BY THE AO AS ACCRUED TO THE PARTNERS AND TILL DATE NO DISPUTE ON PAYMENT OF INT EREST AT RS.72,278/- HAD CROPPED UP OBJECTING THE AMOUNT OF INTEREST PAID TO THE PARTNE RS. THAT FOR THE ASSESSMENT YEAR 1997-98, THE FIRM HAD COMMENCED THE BUSINESS FROM 0 1.04.96 TO 31.03.97 AND THIS WAS THE SECOND YEAR OF THE RECONSTITUTED PARTNERSHI P FIRM, WHEREIN, A RESOLUTION WAS FILED ON BEHALF OF THE PARTNERS STATING THAT NO INT EREST WILL BE DRAWN AGAINST THE CAPITAL STOOD AS ON 1.4.96. A COPY OF THE RESOLUTION WAS AL SO FILED ENCLOSING WITH THE RETURN FOR THE ASSESSMENT YEAR 1997-98. THEREAFTER ON 09.04.96 I.E. JUST AFTER 8 DAYS, THE PARTNERS MADE FURTHER RESOLUTION STATING THEREIN T O DRAW INTEREST AS PER THE PROVISION OF THE DEED OF THE PARTNERS AND THEY HAVE CHANGED T HE IDEA BECAUSE OF TO ACCUMULATE AND INFLATE THEIR CAPITAL. HOWEVER, THE SECOND RESO LUTION DRAWN ON 09.04.96 COULD NOT BE FILED IN THE RETURN. THE FACTS IN THIS CASE ALSO STATES THAT THERE IS A CIRCULAR NO.739 ITA NO. 483/CTK/2013 ASSESSMENT YEAR :1997-1998 4 DATED 25.3.96 OF THE CBDT WHICH DIRECTS THAT IN ORD ER TO AVOID FREQUENT RESOLUTIONS STATING THAT ONCE SPECIFIC PROVISION IS MADE IN THE DEED OF PARTNERSHIP THAT HAS TO BE ACCEPTED BY THE DEPARTMENT UNLESS THAT DEED IS AMEN DED OR MODIFIED. ACCORDINGLY, THE PROVISION OF THE PARTNERSHIP IS MADE FOR CHARGI NG INTEREST UP TO 18% P.A., WHICH WAS NEITHER AMENDED NOR REMOVED AND CONDITION HAD S TOOD AS IT WAS. THAT THE COPIES OF THE RESOLUTION DATED 09.04.96 WAS NOT FILED IN THE RETURN OF INCOME AND THE DEPARTMENT PROCESSED THE RETURN UNDER SECTION 143( 1)(A) OF THE ACT LEVYING ADDITIONAL TAX OF REMUNERATION OF RS.5,782/- DISALLOWING PAYME NT OF INTEREST CHARGE AND LEVIED TOTAL TAX AT RS.41,999/-. THAT THE STATEMENT OF M ANUFACTURING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.03.97 SCHEDULE -I OF THE CAPITAL AS ON 31.03.97 FILED SHOWED THE PAYMENT OF INTEREST AMOUNTING TO RS.72, 278/- , WHICH WAS ACCEPTED AND IN THE FIRST APPEAL BEFORE THE DEPUTY COMMISSIONER OF INCOME TAX (APPEALS) HAVING JURISDICTION THEN VIDE ITA NO.L25/CTK/1997-98 AND V IDE ORDER DATED 29.9.98, THE LD. DEPUTY COMMISSIONER OF INCOME TAX (APPEALS ) HELD T HAT THE SECOND RESOLUTION DATED 9.4.96 COULD NOT BE FILED BY MISTAKE AND SINCE THE OPPORTUNITY TO THE APPELLANT WAS NOT GRANTED, DEFICIENCY WAS NOT POINTED OUT EVEN THOUGH PROVISIONS AS PER THE CLAUSE-15 OF THE DEED HAD PRESCRIBED 18% INTEREST PAYABLE AND AC CORDINGLY, DIRECTED THE A.O. TO ALLOW INTEREST SINCE THE MISTAKE WAS BONAFIDE AND A S PER BOARD'S CIRCULAR EXISTED THEN, ALLOWED THE APPEAL OF THE ASSESSEE. 4. THAT IN THE SECOND APPEAL, THE ITAT VIDE ITA NO. 29/CTK/99 AND CO. NO.26/CTK/1999 HAD ALLOWED THE APPEAL OF THE DEPART MENT AND RESTORED THE SAME TO THE FILE OF THE A.O. AGAINST THE DECISION OF THE TR IBUNAL, THE ASSESSEE PREFERRED APPEAL UNDER SECTION 260(A) OF THE I.T. ACT BEFORE THE HON 'BLE HIGH COURT OF ORISSA AND THE HONBLE HIGH COURT VIDE ITS ORDER DATED 21.4.2009 H ELD THAT SINCE THE ASSESSEE HAD ADMITTEDLY NOT BEEN GRANTED ANY OPPORTUNITY TO EXPLAIN AS TO ON WH AT BASIS IT HAS CLAIMED DEDUCTION OF INTEREST PAID TO THE PARTNERS, THE TRIBUNAL OUGHT TO HAVE DEALT W ITH THIS ISSUE AND, THEREFORE, QUASHED THE ORDER OF THE TRIBUNAL RESTORING THE MATTER BACK TO THE ASSES SING OFFICER FOR A FRESH ASSESSMENT ORDER. ITA NO. 483/CTK/2013 ASSESSMENT YEAR :1997-1998 5 PURSUANT TO THE DIRECTION OF THE HONBLE HIGH COURT , THE ASSESSING OFFICER, IN THE FRESH ASSESSMENT U/S.143(1)(A)/260A DATED 23.9.2009 OBSERVED THAT TH E REVISED RESOLUTION MADE ON 9.4.1996 DID NOT FORM PART OF THE RETURN OF INCOME FILED ON 27.1 1.1997, THEREFORE, IT APPEARS TO BE AN AFTERTHOUGHT ACTION OF THE ASSESSEE AND, ACCORDINGLY, HE ADDED T HE SAID AMOUNT OF RS.72,278/- TO THE TOTAL INCOME OF THE ASSESEE. THEREAFTER, THE ASSESSEE FI LED SECOND APPEAL BEFORE THE LD CIT(A). HOWEVER, THE LD CIT(A) IN HER ORDER STATED TO FIND PRUDENCE IN THE DECISION OF THE ASSESSING OFFICER AND UPHELD THE ASSESSMENT ORDER. HENCE, THE ASSESSEE HAS FILE D APPEAL ON THIS ISSUE BEFORE US. 5. AT THE TIME OF HEARING, LD A.R. OF THE ASSESSEE RELIED ON THE DECISION DATED 21.4.2009 OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE AND ALSO THE CBDT CIRCULAR NO.739 DATED 25.3.1996. 6. ON THE OTHER HAND, LD D.R. VEHEMENTLY RELYING O N THE ASSESSMENT ORDER AND ALSO THE ORDER OF THE LD CIT(A) ARGUED THAT THE REVISED RESOLUTI ON MADE ON 9.4.1996 ALLOWING INTEREST ON CAPITAL ON PARTNERS INVESTMENT IS AN AFTERTHOUGHT ACTION BY T HE ASSESSEE. HE SUBMITTED THAT EVEN THOUGH THE HONBLE HIGH COURT AS JUDICIAL AUTHORITY HAD PRONO UNCED ITS DECISION IN THE CASE OF PRASAD CHUDA MILLS (SUPRA), THE SCOPE OF 143(1)(A) CANNOT BE EXT ENDED. 7. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AS WELL AS THE DECISION AND CIRCULAR CITED BEFORE US. IT IS THE CASE OF THE AS SESSEE THAT THEY HAD FILED RETURN OF INCOME ALONGWI TH AUDITED BOOKS OF ACCOUNT AND STATEMENT OF FACTS STA TING INTEREST ACCRUED AT RS.72,278/- AND CLAIMED IN THE MANUFACTURING PROFIT AND LOSS ACCOUNT STATIN G THEREIN THAT THE INTEREST TO PARTNERS AT RS.72,278/-. ON DECIDING THIS ISSUE, WE FIND IT A MPLE CLEAR THAT ON ONE HAND THERE IS A DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WHEREIN, IT HAS BEEN STATED THAT PRINCIPLE OF NATURAL JUSTICE H AS TO BE FOLLOWED AND IF THAT IS NOT DONE THEN SUCH DE CISION IS BAD IN LAW AND ON THE OTHER HAND THERE IS A CIRCULAR OF THE CBDT NO.739 DT.25.3.1996, WHEREIN , IT IS STATED THAT WHATEVER IS STATED IN THE PARTNERSHIP DEED THAT HAS TO BE FOLLOWED AT THE TIM E OF ASSESSMENT IRRESPECTIVE OF ANY RESOLUTION BEING PASSED THEREAFTER. HERE IS A CASE WHERE PART NERSHIP DEED CLEARLY MENTIONS INTEREST TO BE CHARGED @ 18% P.A. AND THIS CIRCULAR HAS TO BE FOLL OWED BY THE DEPARTMENT WHILE COMPLETING THE ITA NO. 483/CTK/2013 ASSESSMENT YEAR :1997-1998 6 ASSESSMENT. THAT AT THE SAME TIME, PRINCIPLE OF NA TURAL JUSTICE OF PROVIDING AN OPPORTUNITY OF BEING HEARD SHOULD BE THERE BEFORE PASSING SUCH ORDER. THAT CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THIS CASE, JUDICIAL PRONOUNCEMENT AND CIRCULAR OF CBDT, WE ARE OF THE CONSIDERED VIEW THAT THE DEPARTMENT AUTHORITIES ARE NOT JUSTIF IED IN DISALLOWING THE INTEREST AMOUNT OF RS.72,278/- PAID TO THE PARTNERS. ACCORDINGLY, WE DELETE THE SAME. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 /10/20 15 SD/- SD/- . . ,/P.M.JAGTAP , PARTHA SARATHI CHAUDHURY /ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK; #' DATED 30/10 /2015 B.K.PARIDA, SPS 0 0 0 0 ( ( ( ( 3% 3% 3% 3% / COPY OF THE ORDER FORWARDED TO : 0# 0# 0# 0# / BY ORDER, SR. PRIVATE SECRETARY, , / ITAT, CUTTACK 1. ' / THE APPELLANT : M/S. PRASAD CHUDA MILLS, AT: RANIHAT, CUTTACK-753001 . 2. ()' / THE RESPONDENT. INCOME TAX OFFICER, WARD- 2(1), CUTTACK 3. 4 ( ) / THE CIT(A), CUTTACK 4. 4 / CIT , CUTTACK 5. $5 (# , / DR, ITAT, CUTTACK 6. 6 7- / GUARD FILE. ) ( //TRUE COPY//