ACIT 11(2), MUMBAI V. KANGA & CO., MUMBAI

ITA 6088/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71976 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Diversion of income
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 6088/MUM/2012 ( ASSESSMENT YEAR: 2009-10) ASST. CIT 11(2), ROOM NO.479, 4 TH FLOOR AAYKAR BHAVAN, M. K. RD, MUMBAI-400 020 VS. KANGA & CO. READYMONEY MANSION, 43, VEER NARIMAN RAOD, MUMBAI 400 023 ! ' ./PAN/GIR NO. AAAFK 9525E ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#& / APPELLANT BY : SHRI M.L. PERUMAL $%!#'& / RESPONDENT BY : SHRI NISHANT THAKKAR ( )*'+, DATE OF HEARING : 04.12.2013 -./'+, / DATE OF PRONOUNCEMENT : 18.12.2013 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-3, MUMBAI (CIT(A) FOR SHO RT) DATED 20.07.2012, ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143 (3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 20 09-10.VIDE ORDER DATED 29.12.2011. 2. THE PRINCIPAL ISSUE ARISING IN THE INSTANT APPEA L IS THE DELETION OF THE ADDITION IN THE SUM OF RS.44,10,186/- MADE BY THE ASSESSING OFF ICER (A.O.) IN ASSESSMENT. THE 2 ITA NO.6088/MUM/2012 (A.Y. 2009-10) ASST. CIT V. KANGA & CO. ASSESSEE, A LAW FIRM, CLAIMS EXCLUSION OF THE SAID AMOUNT AS BEING RELATABLE TO THE SHARE IN THE INCOME OF THE FIRM OF THE RETIRED/DECEASED PART NER/S, SO THAT THERE WAS, BY VIRTUE OF THE PROVISIONS OF THE PARTNERSHIP DEED, A DIVERSION OF INCOME BY OVERRIDING TITLE IN FAVOUR OF THE EX-PARTNER/S OR THEIR HEIRS OR EXECUTORS. THE S AID SHARE, WHICH THOUGH IS BEING OFFERED TO TAX IN THE HANDS OF THE SAID PARTNER/S OR THEIR LEGAL HEIRS/EXECUTORS, WOULD NOT BE, AS PER THE ASSESSEE, THEREFORE, TAXABLE IN ITS HANDS. IT H AS BEEN ALLOWED RELIEF BY THE LD. CIT(A) FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL IN TH E ASSESSEES OWN CASE, AND WHICH HAS FOUND APPROVAL BY THE HON'BLE BOMBAY HIGH COURT (IN ITA NO.860 OF 2009 DATED 19.06.2009) AS WELL AS PER ITS DECISION IN THE CASE OF CIT VS. MULLA AND MULLA AND CRAIGIE, BLUNT AND CAROE , REPORTED AT [1991] 190 ITR 198 (BOM). 3.1 THE LD. AR, WHILE PLEADING THE ASSESSEES CASE, WOULD CLARIFY THAT THE LEAD ORDERS BY THE TRIBUNAL IN ITS CASE, ALSO REFERRED BY THE L D. CIT(A), ARE FOR A.YS. 1989-90 AND 1993-94, AS WELL AS BRING TO OUR NOTICE ITS DECISIO NS FOR A.YS. 2006-07 TO 2008-09 (AT PB PGS. 1-10). THE QUESTIONS OF LAW, REFERRED TO THE H ONBLE HIGH COURT, AS WELL AS ITS DECISION FOR AY 2001-02 REFERRED TO SUPRA, WERE ADVERTED TO BY HIM (PB PGS. 11-12). 3.2 THE LD. DR COULD NOT REBUT THESE CONTENTIONS BY THE LD. AR, MADE WITH REFERENCE TO THE MATERIAL ON RECORD. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. AS APPARENT, THIS IS A SUBSISTING ISSUE IN THE ASSESSEES CASE, WITH THE MATTER TRAVELLING TO THE TRIBUNAL ON EARLIER OCCASIONS AS WELL, AND WHICH HAS TAKEN A CO NSISTENT VIEW IN THE MATTER, WHICH FURTHER STANDS APPROVED BY THE HONBLE HIGH COURT F OLLOWING ITS DECISION IN THE CASE OF MULLA AND MULLA AND CRAIGIE, BLUNT AND CAROE (SUPRA). ON A QUESTION BY THE BENCH, IT WAS CLARIFIED BY THE LD. AR THAT THE PAYMENT/S UNDE R REFERENCE ARISES UNDER THE SAME/SIMILAR CLAUSE OF THE PARTNERSHIP AGREEMENT, S O THAT THE SAME, THOUGH IN RELATION TO DIFFERENT PARTNERS, I.E., VIS--VIS EARLIER YEARS, WOULD CONTINUE TO BE GOVERNED BY THE SAME/IDENTICAL PROVISIONS THEREOF AND, CONSEQUENTLY , THE SAME LAW. THE REVENUES CONTENTION OF HAVING PREFERRED AN SLP BEFORE THE AP EX COURT ON THIS ISSUE IN THE CASE OF C. 3 ITA NO.6088/MUM/2012 (A.Y. 2009-10) ASST. CIT V. KANGA & CO. C. CHOKSI & CO . (FOR A.YS. 2003-04 AND 2006-07), WHICH IS PENDING DISPOSAL BY THE APEX COURT, IS TO NO CONSEQUENCE INASMUCH AS THERE IS NO STAY OF THE OPERATION OF THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE SAI D CASE. IN VIEW OF THERE BEING NO DIFFERENCE IN FACT/S, THE MATTER IS ESSENTIALLY COVERED IN FAVOUR OF THE ASSESSEE, AND WE THEREFORE HAVE NO HE SITATION IN ACCEPTING ITS CLAIM/S. ACCORDINGLY, RESPECTFULLY FOLLOWING THE PRECEDENTS, WE DISMISS THE REVENUES APPEAL ON ITS GROUNDS #1 & 2. WE DECIDE ACCORDINGLY. 5. THE SECOND AND THE ONLY OTHER ISSUE RAISED BY TH E REVENUE IS THE ADDITION IN THE SUM OF RS.45,823/- TOWARD UN-RECONCILED ENTRIES IN THE ANNUAL INFORMATION REPORT (AIR). THE SAME STOOD DELETED BY THE LD. CIT(A) AS THE ASS ESSEE WAS ABLE TO RECONCILE AND, THUS, EXPLAIN RECEIPTS TO THE TUNE OF RS.25.91 CRORES SPE CIFIED IN THE AIR, SAVE THE TWO ENTRIES AGGREGATING TO THE IMPUGNED SUM. NO UNFAVOURABLE RE SPONSE FROM THE ASSESSEES BANKER, CANARA BANK, IN RESPECT THEREOF, I.E., IN RESPONSE TO NOTICE U/S. 133(6) BY THE A.O., HAD BEEN RECEIVED BY HIM. THE AIR INFORMATION MAY WELL NOT BE CORRECT, SO THAT THERE IS NO BASIS FOR THE ADDITION. AGGRIEVED, THE REVENUE IS I N APPEAL. 6. NO SPECIFIC ARGUMENTS WERE RAISED BY THE PARTIES BEFORE US, EACH RELYING ON THE ORDER BY THE AUTHORITY BELOW AS FAVOURABLE TO IT. 7. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE AIR IS ONLY ON THE BA SIS OF THE INFORMATION RECEIVED FROM THE BANKS, SO THAT IT IS ONLY THE BANKS WHICH ARE THE S OURCE OF THE INFORMATION THEREIN, AS IN THE INSTANT CASE (REFER PB PG.1). HIS SHIFTING THE ONUS ON THE A.O. IS THEREFORE MISCONCEIVED. FURTHER, THE VERY FACT THAT ENTRIES F OR 99.98% OF THE AMOUNT STATED THEREIN HAD BEEN FOUND CORRECT, THOUGH EXPLAINED BY THE ASS ESSEE WITH REFERENCE TO ITS ACCOUNTS, VALIDATES AND GIVES CREDENCE TO THE AIR, WHICH IS T HUS ONLY AN INFORMATION IN THE POSSESSION OF THE REVENUE. THIS IS NOT TO SAY THAT THE SAID INFORMATION COULD NOT POSSIBLY BEAR ANY MISTAKE. THE SAME, HOWEVER, CANNOT BE A MA TTER OF PRESUMPTION, AND HAS TO BE ESTABLISHED AS A FACT. THE ONUS, HOWEVER, TO SHOW T HE SAME, THEREBY REBUTTING THE 4 ITA NO.6088/MUM/2012 (A.Y. 2009-10) ASST. CIT V. KANGA & CO. INFORMATION IN POSSESSION WITH THE REVENUE AS NOT V ALID, WITH MATERIAL, IS ON THE ASSESSEE, WHICH WOULD, IN THAT CASE, ALSO POINT OUT THE MISTA KE OR ERROR IN THE SAID INFORMATION, AS WHERE THE SAME PERTAINS TO A DIFFERENT PARTY. THE A SSESSEES LETTER TO ITS BANK IN THIS REGARD, SENT PER REGISTERED POST, IS DATED 16.12.20 11, ONLY A FEW DAYS PRIOR TO THE DATE OF ASSESSMENT (29.12.2011). NO IMPROVEMENT IN ITS CASE HAS BEEN MADE BY THE ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY, SO THAT CLEAR LY THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS ON IT IN THIS RESPECT. THIS, IN FACT, IS THE R EVENUES GROUND NO.3 BEFORE US. FURTHER, EVEN NO PRAYER FOR FURTHER OPPORTUNITY TO SUBSTANTI ATE ITS CASE BEFORE THE A.O. HAS BEEN MADE BEFORE US. UNDER THE CIRCUMSTANCES, WE CONFIRM THE ADDITION IN VIEW OF OUR FINDING OF A FAILURE TO DISCHARGE THE ONUS ON IT QUA THE TWO ENTRIES UNDER REFERENCE BY THE ASSESSEE. WE DECIDE ACCORDINGLY. 8. IN THE RESULT, THE APPEAL BY THE REVENUE IS PART LY ALLOWED. 1/+2)' 30) 4 +'+5 ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 18, 2013 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER ( 6* MUMBAI; 7 DATED : 18.12.2013 )8 ROSHANI , SR. PS ! ' #$%& '&$ / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( 9+ ( ) / THE CIT(A) 4. ( 9+ / CIT CONCERNED 5. :);< $8+8=> , , =>/ , ( 6* / DR, ITAT, MUMBAI 6.