The ACIT, Sangli V. M/s. B.G. Chitale, Sangli

ITA 664/PUN/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3278 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 01-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Section: 147; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I.C. SUDHIR AND SHRI D. KARUNAKARA RAO ITA NO. 664/PN/09 (ASSTT. YEAR 2001-02) THE ASSTT. CIT CIRCLE-1, SANGLI .... APPELLANT VS. M/S. B.G. CHITALE, A.P. BHILAWADI STATION, DIST. SANGLI PAN NO. AABFB3828J . RESPONDENT APPELLANT BY : SHRI ABHAY DAMLE RESPONDENT BY : SHRI C.H. NANIWADEKAR ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF T HE CIT(A), KOLHAPUR DATED 27/02/2009 AND THE GROUNDS RAISED ARE AS FOL LOWS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT THE NOTICE U/S. 148 ISSUED BY THE ASSESSING OFFICER IS WITHIN THE MEAN ING OF CLAUSE (C) OF EXPLANATION 2 TO SECTION 147 OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE NOTICE U/S . 148 IS ISSUED BEYOND THE TIME OF FOUR YEARS AS PROVIDED IN SECTION 147 F IRST PROVISO AND THE ASSESSMENT IS VOID AB-INITO, WHEN IN FACT THAT THE NOTICE U/S. 148 ISSUED BY THE AO IS WITHIN THE TIME LIMIT AS PER THE PROVI SIONS OF SECTION 149 (1)(B) OF THE INCOME TAX ACT, 1961? 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E WHETHER CIT(A) IS RIGHT IN HOLDING THAT THE ASSESSEE HAS DISCLOSED ALL FACTS TRULY FULLY TO THE DEPARTMENT AND THERE IS NO FAILURE ON THE PART OF T HE ASSESSEE FOR ESCAPED ASSESSMENT. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BY VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE S TATED THAT THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2001-02. NOTICE U/S. 14 8 DATED 26-03-2008 WAS ISSUED ON THE ASSESSEE I.E., WITHIN 6 YEARS AND ACC ORDINGLY, THE FIRST PROVISO TO SEC. 148 APPLIES IN THIS CASE. FURTHER, LD COUNSEL MENTIONED THAT REASON FOR REOPENING FOR THE ASSESSMENT IS THAT THE INTEREST RECEIPTS WERE NOT EXCLUDED BY ITA NO. 664/PN/2009 A.Y 2001-02 PAGE 2 OF 3 THE A.O FROM THE SUM OF NET PROFIT FOR COMPUTING TH E ALLOWABLE DEDUCTION U/S. 40(B) OF THE I.T. ACT . IN THIS REGARD LD. COUNSEL RELIED ON VARIOUS DECI SIONS SUCH AS (2006) 99 TTJ 197 (RAJKOT) IN THE CASE OF ITO VS . JAMANADAS MULJIBHAI FOR THE PROPOSITION THAT ALLOWABLE DEDUCTION U/S. 40(B) SHO ULD BE COMPUTED ON THE NET PROFIT INCLUDING THE INCOME UNDER THAT HEAD OF INCO ME. THEREFORE NON EXCLUSION OF THE INTEREST RECEIPTS IN THE ORIGINAL ASSESSMENT IS IN ACCORDANCE WITH THE AVAILABLE LAW OF THE LAND. FURTHER THE COUNSEL ARGU ED THAT THE RETURN OF INCOME AND ANNEXURE THERE OF CONTAINS RELEVANT PARTICULARS NECESSARY RELATING TO IMPUGNED INTEREST INCOME AND THE NET PROFIT FOR THE PURPOSE OF APPLYING THE PROVISIONS OF SECTION 40(B) OF THE ACT. THEREFORE A SSESSEE IS NOT A DEFAULTER SO FAR AS THE DISCLOSURE OF THAT FACTS TRULY AND FULLY TO THE DEPARTMENT. IN SUCH CIRCUMSTANCES, AS PER THE ASSESSEE, THE ASSESSEE IS NOT ALLOWED TO ASSUME JURISDICTION U/S 147/148 IN VIEW OF THE RELEVANT PR OVISIONS OF THE SAID SECTION AND ALSO IN VIEW OF THE PLETHORA OF CITATION SUCH AS DR . AMINS PATHOLOGY LABORATORY 252 ITR 673 (BOM.), REVATHY CP EQUIPMENT LTD 241 IT R 856., CIT VS. UTTAM CHAND NAHAR 295 ITR 403 (RAJ). FURTHER IT IS MENTIO NED THAT WHEN THERE IS NO CONCEALMENT OF INCOME, THE REOPENING SHOULD BE INVA LID. IN THIS REGARD, LD COUNSEL MENTIONED THAT THE ISSUE UNDER CONSIDERATIO N STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF VARIOUS BENCHES OF THE TRIBUNAL. LD COUNSEL FOR THE ASSESSEE RELIED ON THE RAJKOT BENCH DECISIO N OF THE ITAT IN THE CASE OF ACIT VS. SHETH BROTHERS AND READ OUT THE CONCLUSION PORTION OF THE ORDER WHICH IS AS UNDER. WHOLE INCOME EMBEDDED IN THE NET PROFIT AS APPEARI NG IN THE P & L A/C OF THE ASSESSEE-FIRM IS TO BE TAKEN INTO CONSIDERATION FOR ALLOWING DEDUCTION OF REMUNERATION PAID TO PARTNERS UNDER S. 40(B) WIT HOUT EXCLUDING THE INTEREST INCOME WHICH FORMED PART OF THE BOOK PROFI T. FURTHER, THE COUNSEL FOR THE ASSESSEE ALSO RELIED O N THE DECISION OF JAIPUR BENCH IN THE CASE OF S.P. EQUIPMENT & SERVICES VS. ACIT, 128 TTJ 68, RELEVANT PORTION OF THE CONCLUSION IS READS AS UNDER. NET PROFIT SHOWN BY A FIRM IN ITS P & L A/C IS NOT TO BE CLASSIFIED INTO DIFFERENT HEADS OF INCOME UNDER S.14 FOR THE PURPOSE OF S. 40(B) AND, THEREFORE, INTEREST INCOME IS NOT TO BE EXCLUDED FROM THE NET PROFIT DECLARED BY THE ASSESSEE FOR COMPUTING BOOK PROFIT FOR THE PURPOSE OF DETERMINING THE ALLOWABLE DEDUCTION OF REMUNERATION PAYABLE TO THE PARTNERS UNDER S. 40(B). 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AND THE DECISIONS REPRODUCED ABOVE. IT IS OBVIOUS F ROM THE ABOVE CITATIONS THAT THE INTEREST INCOME IS NOT TO BE EXCLUDED FROM THE NET PROFIT DECLARED BY THE ASSESSEE FOR COMPUTING BOOK PROFIT FOR THE PURP OSE OF DETERMINING THE ITA NO. 664/PN/2009 A.Y 2001-02 PAGE 3 OF 3 ALLOWABLE DEDUCTION OF REMUNERATION PAYABLE TO THE PARTNERS UNDER S. 40(B). THUS, LEGALLY, THE REVENUE WRONGLY ASSUMED THAT THE INTEREST RECEIPTS ARE TO BE EXCLUDED FOR THE PURPOSES OF SECTION 40(B) OF THE A CT. CONSEQUENTLY, THE AO WRONGLY INVOKED THE PROVISIONS OF SECTION 147 OF TH E INCOME TAX ACT. FURTHER, WE FIND THAT THE ASSESSEE HAS NOT DEFAULTED SO FAR AS THE TRUE AND FULL DISCLOSURE OF THE RELEVANT FACTS. THUS, THE AO WRONGLY INVOKED TH E PROVISIONS OF THE FIRST PROVISO TO SECTION 147 OF THE ACT. THEREFORE, THE R EVENUE FAILS IN RESPECT OF ALL THE GROUNDS RAISED BY THEM. ACCORDINGLY, THE ALL THE GR OUNDS ARE DISMISSED . 4. IN THE RESULT APPEAL FILED BY THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON 24 TH SEPTEMBER, 2010. SD/- SD/- (I.C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 24 TH SEPTEMBER, 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ACIT, CIRCLE 1, SANGLI 2. ASSESSEE 3. CIT(A)-KOLHAPUR 4. CIT-I, KOLHAPUR 5. D.R. ITAT A BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE