Makson Disttibutors, Yamunanagar V. DCIT, Yamunanagar

ITA 53/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5456 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 19-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: RAVINDER BINDLISH
• Keywords: Unexplained expenditure; Business income; Deemed to accrue or arise in india
• Section: 69C; 143(3); 40(b); 133A; 69B; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 53/CHD/2011 ASSESSMENT YEAR:2006-07 M/S MAKSON DISTRIBUTORS, VS. THE DCIT, YAMUNANAGAR YAMUNANAGAR PAN NO. AABFM 7598C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAVINDER BINDLISH RESPONDENT BY: SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), KARNAL DATED 29.10.2010 RELATING TO ASSESSMENT YEAR 2006-0 7 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- 2. THAT THE WORTHY CIT(A) HAS ERRED IN SUSTAINING THE ORDER OF LD. ASSESSING OFFICER THEREBY SUSTAINED TH E ASSESSED INCOME ASSESSMENT RS. 8,74,570/- AS AGAINS T GENUINELY DECLARED ASSESSMENT RS. 5,11,880/-. 3. THAT THE WORTHY CIT(A) HAS ERRED IN DISALLOWING THE CLAIM OF PARTNERS SALARY AT RS. 2,92,000/- OUT OF THE INCOME SURRENDERED DURING SURVEY U/S 133A AT RS. 8,50,000/- 2 3. THE ASSESSEE THOUGH HAS RAISED THE ISSUE AGAINST THE INVOKING OF PROVISIONS OF SECTION 69 A, 69B & 69C OF THE INCOME TAX ACT VIDE GROUND NO.5 BUT IN THE ABSENCE OF ANY SUBMISSIONS MADE IN CONNECTION WITH THE SAID GROUND OF APPEAL BY THE LD. AR FOR THE ASSESSE E AND EVEN IN THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, THE GROU ND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 4. THE ONLY ISSUE RAISED FOR DETERMINATION IN THE P RESENT APPEAL IS AGAINST THE DISALLOWANCE OF SALARY PAID TO THE PART NERS OUT OF THE INCOME SURRENDERED DURING THE COURSE OF SURVEY U/S 133A OF THE ACT. 5. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF SURVEY OPERATIONS CONDUCTED AT THE BUSINESS PREMISES OF TH E ASSESSEE ON 18.1.2006, THE ASSESSEE MADE A SURRENDER OF RS. 8,5 0,000/- WHICH COMPRISED OF CASH OF RS. 3,50,000/-, STOCK OF RS. 3 ,50,000/- AND HOUSE HOLD EXPENSES INCURRED BY THE PARTNERS AT RS. 1,50, 000/-. THE SAID SURRENDERED INCOME WAS OFFERED TO TAX IN ADDITION T O THE INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE SAID SURRENDER WAS DECLARED AS MISC. INCOME IN THE PROFIT AND LOSS ACC OUNT BY THE ASSESSEE. THE ASSESSING OFFICER TREATED THE SAME AS DEEMED IN COME U/S 69A, 69B & 69C OF THE ACT, WHICH HAS BEEN UPHELD BY THE CIT(A) . THE ASSESSEE IS AGGRIEVED BY THE NON ALLOWANCE OF THE DEDUCTION ON ACCOUNT OF SALARY PAID TO THE PARTNERS AS PER THE PROVISIONS OF SECTION 40 (B) OF THE ACT AGAINST THE SAID SURRENDER. . THE LD. AR POINTED OUT THAT THE TOTAL DISCLOSURE OF RS. 8,50,000/-, RS. 3,50,000/- EACH WAS MADE ON ACC OUNT OF EXCESS STOCK AND THE EXCESS CASH RESPECTIVELY AND THE CLAIM OF T HE SALARY IS ALLOWABLE AGAINST THE ADDITIONAL INCOME PARTICULARLY THE STOC K SURRENDERED BY THE ASSESSEE. RELIANCE WAS PLACED ON THE SERIES OF DEC ISIONS IN THIS REGARD 3 INCLUDING RATIO LAID DOWN BY THE CHANDIGARH BENCH O F THE TRIBUNAL IN M/S BANU MAL INDER LAL V DCIT IN ITA NO. 1016/CHD/2009 RELATING TO ASSESSMENT YEAR 2006-07. THE LD. DR PLACED RELIANC E ON THE ORDER OF CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. DURING THE COURSE OF SURVEY PROCEEDINGS U/S 133A OF THE ACT, EXCESS CASH, STOCK AND CERTAIN UNEXPLAINED HOUSEHOLD EXPEN SES WERE DETECTED AGAINST WHICH THE ASSESSEE MADE A SURRENDER OF RS. 8,50,000/-. THE SAID SUM WAS DECLARED AS ADDITIONAL INCOME FOR THE YEAR UNDER CONSIDERATION AS MISC. INCOME IN THE PROFIT AND LOSS FILED BY THE AS SESSEE. THE ASSESSING OFFICER OBSERVED THAT AS THE ASSESSEE HAD FAILED TO BRING ON RECORD ANY EVIDENCE EITHER DURING THE ASSESSMENT PROCEEDINGS O R DURING THE COURSE OF SURVEY INDICATING THE SOURCES OF THE SAID INVESTMEN T / EXPENDITURE, THEN SUCH INCOME WAS ASSESSABLE U/S 69A, 69B & 69C OF TH E ACT. THE ASSESSING OFFICER NOTED THAT THERE WAS NO SUBMISSIO N REGARDING ANY PARTICULAR PURCHASES OR SALE TRANSACTIONS WHICH WAS BUSINESS IN NATURE, WHICH GENERATED THE SAID EXCESS ON ACCOUNT TO STOCK / CASH OR UNEXPLAINED EXPENDITURE. FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE GUJRAT HIGH COURT IN FAKIR MOHD. HAZI HASAN [247 ITR 290 (GUJRA T)], THE SAID INCOME WAS ASSESSED U/S 69A, 69B & 69C OF THE ACT AND NO S ET OFF OF ANY KIND OR DEDUCTION OF ANY KIND WAS HELD TO BE ADMISSIBLE AGA INST THE SAID INCOME. THE ASSESSING OFFICER THEREAFTER OBSERVED THAT NO D EDUCTION INCLUDING PAYMENT OF SALARY TO THE WORKING PARTNERS WAS ALLOW ABLE AGAINST THE SAID ADDITIONAL INCOME OF RS. 8,50,000/-. HOWEVER, INTE REST PAID TO THE PARTNERS WAS ALLOWED AS A DEDUCTION THE SALARY PAI D TO THE WORKING PARTNERS WAS FOUND ADMISSIBLE TO THE EXTENT OF RS. 50,000/- IN VIEW OF PROVISIONS OF SECTION 40(B)(II) OF THE INCOME TAX A CT. ACCORDINGLY, 4 BALANCE SALARY OF RS. 2,92,000/- WAS HELD TO BE NOT ADMISSIBLE. THE GRIEVANCE OF THE ASSESSEE IS AGAINST THE SAID DISAL LOWANCE OF SALARY IN VIEW OF THE INCLUSION OF THE ADDITIONAL INCOME SURR ENDERED BY THE ASSESSEE AT RS. 8,50,000/-. THE CIT(A) VIDE PARA 1.08 HAS OBSERVED THAT THE ASSESSEE HAD NOT ADDRESSED / REBUTTED THE FINDINGS OF THE ASSESSING OFFICER IN RESPECT OF THE ADDITIONAL INCOME DECLARED DURING THE SURVEY NOT TO BE TAKEN AS BUSINESS INCOME. THE CIT(A) FURTHER NOTES THAT THE ASSESSING OFFICER HAD PRIMARILY A DOUBT AGAINST THE GENUINENE SS OF THE AMENDMENT TO THE PARTNERSHIP DEED VIDE WHICH ALL THE THREE PA RTNERS WERE MADE WORKING PARTNERS AND A CLAIM OF SALARY PAID TO THE PARTNERS WAS MADE AT RS. 3,42,000/- AS AGAINST RS. 43,200/- CLAIMED IN T HE LAST YEAR. FURTHER, THE SALARY WAS FOUND CREDITED TO THE ACCOUNT OF THE PARTNERS ON THE LAST DAY OF THE FINANCIAL YEAR AS AGAINST THE PROVISIONS OF PARTNERSHIP DEED WHICH PROVIDED THE SALARY TO BE PAID PER MONTH. UPHOLDIN G THE ORDER OF THE ASSESSING OFFICER IN ASSESSING THE INCOME UNDER THE PROVISIONS OF SECTION 69A, 69B & 69C OF THE ACT, THE CIT(A) OBSERVED THAT AS THE ASSESSEE NEITHER BEEN ABLE TO ESTABLISH THE GENUINENESS OF T HE ALLEGED AMENDMENT MADE TO THE PARTNERSHIP DEED NOR JUSTIFIED THE STEE P INCREASE IN THE SALARY TO THE PARTNERS AND AS THE ADDITIONAL INCOME DECLAR ED WAS ASSESSED AS DEEMED INCOME OF THE ASSESSEE, NO DEDUCTION ON ACC OUNT OF INTEREST AND SALARY PAID TO THE PARTNERS COULD BE ALLOWED AGAINS T SUCH INCOME. 7. UNDER THE PROVISIONS OF INCOME TAX ACT, THE INTE REST AND SALARY PAID TO THE PARTNERS IS TO BE ALLOWED AS PER THE PR OVISIONS OF SECTION 40(B) OF THE ACT WHICH IS IN CONNECTION WITH THE DETERMIN ATION OF BUSINESS INCOME. ONCE INCOME IN THE HANDS OF THE ASSESSEE H AS BEEN ASSESSED AS DEEMED INCOME BY INVOKING THE PROVISIONS OF SECTION 69A, 69B & 69C OF THE ACT AND IS NOT ASSESSED AS INCOME FROM BUSINESS UNDER INCOME TAX 5 ACT, THE PROVISIONS OF SECTION 40(B) OF THE ACT IN CONNECTION WITH THE ALLOWANCE OF SALARY PAID TO THE PARTNERS CANNOT BE INVOKED TO ALLOW THE DEDUCTION ON ACCOUNT OF SUCH SALARY BEING PAID TO T HE PARTNERS OF THE FIRM. THE ASSESSEE HAS RELIED UPON THE RATIO LAID DOWN B Y THE CHANDIGARH BENCH OF THE TRIBUNAL IN BHANU MAL INDER LAL (SUPRA ) WHEREIN VIDE ORDER DATED 22.10.2010, THE TRIBUNAL HAD DIRECTED THE ALL OWANCE OF SALARY IN RESPECT OF THE BUSINESS INCOME ASSESSED IN THE HAND S OF THE ASSESSEE. THE SAID RATIO WAS LAID DOWN BY THE TRIBUNAL IN THE FAC TS OF THE CASE WHERE THERE WAS A SURVEY AND CERTAIN INCOME WAS SURRENDER ED, PART OF WHICH WAS ASSESSED AS BUSINESS INCOME IN THE HANDS OF THE ASS ESSEE AND PART AS ADDITIONAL INCOME OF THE ASSESSEE U/S 69A, 69B & 69 C IN THE HANDS OF THE ASSESSEE. THE DIRECTION WAS GIVEN BY THE TRIBUNAL TO ALLOW THE SAID CLAIM OF SALARY PAID TO THE PARTNERS AGAINST THE BUSINESS INCOME EARNED BY THE ASSESSEE. IN THE FACTS OF THE CASE BEFORE US, THE SURRENDERED INCOME WAS ASSESSED AS ADDITIONAL INCOME U/S 69A, 69B & 69C OF THE ACT AND HENCE NO CLAIM OF SALARY PAID TO THE PARTNERS IS TO BE AL LOWED AGAINST THE SAID INCOME. FURTHER, IN THE PRESENT CASE, ASSESSEE HAS FAILED TO CONTRAVENE THE OBSERVATIONS OF ASSESSING OFFICER AND CIT(A) IN RES PECT OF GENUINENESS OF THE AMENDMENT DEED, UNDER WHICH THE SALARY IS ALLE GED TO BE PAID TO THE PARTNERS. UPHOLDING THE ORDER OF THE CIT(A), WE FI ND NO MERIT IN THE CLAIM OF ASSESSEE AND HENCE THE SAME IS REJECTED. THE GROUND OF APPEAL NOS. 2 & 3 RAISED BY THE ASSESSEE ARE THUS DISMISSE D 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF MAY, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13THE MAY, 2011 RKK 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH