R.P. APPARELS, MUMBAI V. ASST CIR 16(2), MUMBAI

ITA 7188/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2981 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 09-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Non-deduction of tax
• Section: 143(3)

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.7188 /MUM/2013 ( / ASSESSMENT YEAR : 2008-09) M/S R.P. APPARELS, C/O R.C. RESHAMWALA & CO., CHARTERED ACCOUNTANTS, 323, VARMA CHAMBERS, 11 HOMJI STREET, FORT, MUMBAI 400 001. / V. THE ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 16(2), MATRU MANDIR, 2 ND FLOOR, ROOM NO. 207, OPP BHATIA HOSPITAL, TARDEO ROAD, MUMBAI 400 007. ./ PAN : AAAFR1692K ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI KIRIT SANGHAVI REVENUE BY : SHRI SANJEEV KASHYAP (D.R.) / DATE OF HEARING : 18-04-2016 / DATE OF PRONOUNCEMENT : 29-06-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE-FIRM, BEING ITA NO. 7188/MUM/2013, IS DIRECTED AGAINST THE ORDER DATED 27-09-2013 PASS ED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 27, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2008-09, THE APPE LLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDE R DATED 24-12-2010 PASSED BY THE LEARNED ASSESSING OFFICER (HEREINAFTE R CALLED THE AO) U/S 143(3) OF THE INCOME TAX ACT,1961 (HEREINAFTER CALL ED THE ACT). ITA 7188/MUM/2013 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE-FIR M IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL , MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- REMUNERATION TO PARTNERS S. 40(B)(V) 1. THE LEARNED CIT(A) ERRED ON FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.68, 23,498/- BEING REMUNERATION TO WORKING PARTNERS ALLOWABLE UNDER S.37 READ WITH S.40(B)(V) OF THE INCOME-TAX ACT, 1961. RELIEF CLAIMED: THE SAID REMUNERATION BE DIRECTED TO BE ALLOWED. INCORRECT FINDING OF FACT 2. THE LEARNED CIT(A) ERRED ON FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW IN CONFIRMING THE FINDING OF FACT ARRIVE D AT BY THE LEARNED AO THAT SMT. KIRAN PURI WAS NOT A WORKING PARTNER OF THE APPELLANT FIRM. RELIEF CLAIMED: THE SAID FINDING OF FACT BE REVERSE D. DISALLOWANCE OF RS.63,650/- UNDER S.40(A)(IA) READ WITH S.194J 3. THE LEARNED CIT(A) ERRED ON FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.63,6 50/- BY INVOKING S.40(A)(IA) READ WITH S.194J. RELIEF CLAIMED: ADDITION BE DIRECTED TO BE DEDUCTED HOLDING THAT S.40(A)(IA) READ WITH S.194J IS NOT APPLICABLE TO THE FACTS OR FOR ANY OTHER REASON AS MAY BE ARGUED. DISALLOWANCE FOR MOTOR CAR EXPENSES - RS.1,19,201/- 4. THE LEARNED CIT(A) ERRED ON FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.1,1 9,201/- OUT OF MOTOR CAR EXPENSES. RELIEF CLAIMED: ALLOWANCE OF THE ENTIRE AMOUNT OR A PART THEREOF BE DIRECTED TO BE MADE. DISALLOWANCE OF FOR TELEPHONE EXPENSES - RS.95,680 /- ITA 7188/MUM/2013 3 5. THE LEARNED CIT(A) ERRED ON FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.95, 680/- OUT OF TELEPHONE EXPENSES. RELIEF CLAIMED: ALLOWANCE FOR THE ENTIRE AMOUNT OR A P ART THEREOF BE DIRECTED TO BE MADE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM AND THE MAIN SOURCE OF INCOME OF THE ASSESSEE-FIRM IS BUSINESS PROFIT FROM TRADING OF GARMENTS AND INTENDING COMMISSION. DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS PAID RS. 68,47,498/ - TOWARDS REMUNERATION TO PARTNERS OUT OF WHICH RS.41,08,499/- WAS PAID TO PARTNER SHRI RAJNISH R. PURI AND RS. 27,38,999/- WAS PAID TO PARTNER SMT. K AVITA R. PURI. THE ASSESSEE WAS ASKED BY THE AO VIDE LETTER DATED 20 TH OCTOBER, 2010 TO PRODUCE THE COPY OF PARTNERSHIP AUTHORIZING PAYMENT OF REMU NERATION TO THE PARTNERS. THE LEARNED COUNSEL FOR THE ASSESSEE FILED COPY OF PARTNERSHIP DEED DATED 27 TH MARCH, 1995 VIDE LETTER DATED 2 ND NOVEMBER, 2010. IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THERE WAS NO CHANGE IN THE PARTNERSHIP DEED, HENCE, COPY OF PARTNERSHIP DEED DATED 27-03-1 995 FILED VIDE LETTER DATED 2 ND NOVEMBER, 2010 BE TREATED AS LAST DEED OF PARTNERS HIP AND THERE ARE NO OTHER PARTNERSHIP DEED. THE A.O. OBSERVED THAT THE PARTNERSHIP DEED DATED 27-03-1995 AUTHORIZES PAYMENT OF REMUNERATION TO TH E PARTNERS TO THE TUNE OF RS. 24,000/- PER ANNUM , WHEREAS THE REMUNERATIO N ALLOWED AND PAID TO THE PARTNERS DURING THE YEAR WAS RS. 68,47,498/-. W HEN THE LEARNED COUNSEL FOR THE ASSESSEE WAS CONFRONTED WITH THE ABOVE FACT , IT WAS SUBMITTED BY THE LEARNED COUNSEL OF THE ASSESSEE THAT THE DEED OF PA RTNERSHIP DATED 27-03- 1995 FILED EARLIER WAS NOT A FINAL DEED AND THERE I S ONE MORE SUPPLEMENTARY PARTNERSHIP DEED. THE ASSESSEE-FIRM SUBMITTED THE XEROX COPY OF FAX OF THE SUPPLEMENTARY PARTNERSHIP DEED DATED 2 ND APRIL, 2003 WHICH WAS NOT CERTIFIED BY THE PARTNERS AND WAS ALSO NOT LEGIBLE. THE A.O. OBSERVED THAT U/S 184(4) OF THE ACT, THE ASSESSEE WAS TO FILE NEW DEED OF PA RTNERSHIP WHENEVER THERE WERE CHANGE IN THE PARTNERSHIP DEED. THE A.O. ASKE D THE ASSESSEE TO PRODUCE ITA 7188/MUM/2013 4 EVIDENCE OF FILING OF NEW SUPPLEMENTARY PARTNERSHIP DEED DATED 02-04-2003 WITH THE REVENUE IN THE YEAR WHEN THERE WAS CHANGE IN PARTNERSHIP DEED AND TO FILE CERTIFIED TRUE COPY OF PARTNERSHIP DEED. S HOW CAUSE NOTICE WAS ALSO ISSUED DATED 16 TH DECEMBER, 2010 ASKING THE ASSESSEE TO FILE THE PAR TNERS CAPITAL ACCOUNT W.E.F. FINANCIAL YEAR 2002-03, TO A SCERTAIN THE AUTHENTICITY OF THE PARTNERSHIP DEED. THE ASSESSEE DID NOT SUBMIT ANY DETAIL WITH THE AO AND THE A.O. REJECTED THE XEROX COPY OF THE PARTNER SHIP DEED FILED BY THE LD. COUNSEL FOR THE ASSESSEE AND ACCORDINGLY THE PARTNE RS REMUNERATION TO THE TUNE OF RS. 24,000/- WAS ALLOWED, AS AGAINST 68,47 ,498/- CLAIMED BY THE ASSESSEE, VIDE ASSESSMENT ORDERS DATED 24.12.2010 P ASSED BY THE AO U/S 143(3) OF THE ACT. 4. WITH RESPECT TO THE REMUNERATION PAID TO PARTNER SMT. KAVITA R. PURI, THE ASSESSEE WAS ASKED TO JUSTIFY THE EXPENSES AS R EMUNERATION TO THE PARTNERS. DETAILS OF EXPERIENCE, EDUCATIONAL QUALIF ICATION IN THE LINE OF BUSINESS WAS ENQUIRED BY THE AO TO ENQUIRE ABOUT RE ASONABLENESS OF THE EXPENSES, HOWEVER, NO JUSTIFICATION WAS FILED BY TH E ASSESSEE. THE A.O. OBSERVED THAT ONLY REASONABLE EXPENSE WAS ELIGIBLE FOR DEDUCTION AND THE SAME IS APPLICABLE TO REMUNERATION TO THE PARTNERS ALSO. SECTION 40(B) OF THE ACT PROVIDES THE METHOD OF CALCULATION OF MAXIMUM R EMUNERATION TO THE PARTNERS AND ONLY IF THE PARTNERS ARE PROVIDING THA T MUCH VALUE OF SERVICES. NOTHING WAS BROUGHT ON RECORD TO PROVE THAT PARTNER IS CAPABLE AND FURTHER WHETHER THE PARTNER HAD PROVIDED SERVICES TO THE AS SESSEE FIRM TO JUSTIFY THE EXPENSES CLAIMED . THE A.O. OBSERVED THAT THERE IS ONLY A GENERAL STATEMENT THAT THE PARTNER MRS. KAVITA R. PURI LOOKS AFTER T HE WORK OF ADMINISTRATION AND DAY TO DAY AFFAIRS OF THE FIRM IN MUMBAI. THUS , THE A.O. HELD THAT THE REMUNERATION OF RS.27,38,999/- PAID TO MRS. KAVITA R. PURI WAS ALSO EXCESSIVE U/S 40 OF THE ACT AND THE AO DISALLOWED THE REMUNERATION OF RS.27,38,999/- PAID TO PARTNER MRS. KAVITA PURI ON ACCOUNT OF THE REASONS AS ITA 7188/MUM/2013 5 STATED ABOVE VIDE ASSESSMENT ORDERS DATED 24.12.201 0 PASSED BY THE AO U/S 143(3) OF THE ACT. 5. WITH RESPECT TO THE NON-DEDUCTION OF TAX AT SOUR CE U/S 40(A)(IA) READ WITH SECTION 194J OF THE ACT, THE A.O. OBSERVED THA T THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE FROM THE PROFESSIONAL FEES P AYMENT OF RS. 63,650/- AND ACCORDINGLY THE AO DISALLOWED THE PROFESSIONAL FEE OF RS.63,650/- U/S 40(A)(IA) OF THE ACT WITH THE REMARKS THAT THE SAME SHALL BE ALLOWED IN THE YEAR OF PAYMENT OF THE TAX DEDUCTED AT SOURCE AS PR OVIDED U/S 40(A)(IA) OF THE ACT , VIDE ASSESSMENT ORDERS DATED 24.12.2010 PASSE D BY THE AO U/S 143(3) OF THE ACT. 6. FURTHER , IT WAS OBSERVED BY THE AO THAT THE AS SESSEE-FIRM HAS INCURRED MOTOR CAR EXPENSES OF RS. 5,96,004/-. IT WAS FURTH ER OBSERVED BY THE AO THAT THE CAR IS PURCHASED IN THE NAME OF THE PARTNER AND NOT IN THE NAME OF ASSESSEE FIRM. THE ASSESSEE WAS ASKED TO PRODUCE T HE LOG BOOK OR OTHER RECORD FOR VERIFICATION, HOWEVER, NO LOG BOOK OR OT HER RECORD WAS PRODUCED BY THE ASSESSEE. THE AO OBSERVED THAT THE ASSESSEE-FI RM SHOULD HAVE DISALLOWED REASONABLE EXPENSES ON ITS OWN AND IN THE ABSENCE O F THIS SUO-MOTU DISALLOWANCE , THE AO DISALLOWED MOTOR CAR EXPENSES OF RS.1,19,201/- BEING 20% EXPENSES OF RS.5,96,004/- I.E. RS. 1,19,201/-WE RE ESTIMATED AS PERSONAL EXPENSES AND WERE DISALLOWED , VIDE ASSESSMENT ORDE RS DATED 24.12.2010 PASSED BY THE AO U/S 143(3) OF THE ACT. 7. SIMILARLY, THE A.O. DISALLOWED AN AMOUNT OF RS. 95,680/- BEING 20% OF EXPENSES OF RS.4,78,401/- TOWARDS PERSONAL USE OF T ELEPHONE BY PARTNERS WHICH IS NOT RULED OUT IN THE ABSENCE OF SUO MOTU D ISALLOWANCE BY THE ASSESSEE ON ITS OWN, VIDE ASSESSMENT ORDERS DATED 2 4.12.2010 PASSED BY THE AO U/S 143(3) OF THE ACT. ITA 7188/MUM/2013 6 8. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 24.12.2 010 PASSED BY THE A.O. U/S 143(3) OF THE ACT, THE ASSESSEE-FIRM FILED ITS FIRST APPEAL BEFORE THE LEARNED CIT(A). 9. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTE D THAT THE ASSESSEE IS PARTNERSHIP FIRM CARRYING ON THE BUSINESS OF TRADIN G IN GARMENTS AND INDENTING COMMISSION SINCE 1992 HAVING TWO PARTNERS VIZ. SHRI RAJNISH R. PURI AND SMT. KIRAN R. PURI. THE PARTNERS ARE MOTH ER AND SON AND BOTH ARE ACTIVELY INVOLVED IN THE BUSINESS. THE ASSESSEE SU BMITTED THAT DURING THE LAST FEW YEARS, LOT OF TRAVELLING TO CHINA AND OTHER FAR EASTERN COUNTRIES WAS REQUIRED FOR THE BUSINESS OF THE ASSESSEE TO PROCUR E MATERIAL OR THE SELLERS HAS THEIR OFFICES AND PLACES WHERE THE END USER IS LOCATED. THE ENTIRE TRAVELLING ASPECT WAS LOOKED AFTER BY THE YOUNGER P ARTNER I.E. MR. RAJNISH R. PURI , WHEREAS THE OTHER PARTNERS MRS. KIRAN R. PUR I WAS LOOKING AFTER THE INDIA OPERATIONS AND HANDLING THE OFFICE. THE ASSE SSEE SUBMITTED THAT THE FIRST PARTNERSHIP DEED IS DATED 2ND NOVEMBER, 1991 AND THE SECOND PARTNERSHIP DEED IS DATED 1ST APRIL, 1995 (IN THIS DEED STAMP PAPERS DATE IS 27-03-1995 WHILE DATE OF PARTNERSHIP IS 01-04-1995- FILED WITH THE TRIBUNAL IN PAPER BOOK PAGE 7-10) WITH SUPPLEMENTARY DEEDS D ATED 1ST OCTOBER, 2001 AND 2 ND APRIL, 2003. THE SUPPLEMENTARY PARTNERSHIP DEED D ATED 2-4-2003 WAS EXECUTED FOR THE SPECIFIC PURPOSE OF PAYMENT OF REMUNERATION TO THE PARTNERS. IT WAS SUBMITTED THAT WHEN THE A.O. ASKE D DURING COURSE OF ASSESSMENT PROCEEDINGS TO SUBMIT THE PARTNERSHIP DE ED AUTHORIZING PAYMENT OF REMUNERATION, IN FACT, THERE WAS NO DEED ON RECO RD AT THAT TIME AVAILABLE WITH THE AR OF THE ASSESSEE. THE LEARNED COUNSEL SU BMITTED THAT THE AR WAS NOT AWARE OF THE FULL DETAILS. FURTHER, BOTH THE P ARTNERS AT THAT TIME WERE OUT OF INDIA , TRAVELING IN THE INTERIORS OF CHINA AND THUS IT WAS NOT POSSIBLE TO CONTACT THEM. WHEN THE CONTACT OF THE AR WAS ESTABL ISHED WITH THE PARTNERS, IT WAS STATED BY THE PARTNERS THAT THERE IS A SUPPL EMENTARY PARTNERSHIP DEED DATED 2 ND APRIL, 2003 AND THE SAID DEED WAS IN SAFE DEPOSIT LOCKER IN MUMBAI ITA 7188/MUM/2013 7 BUT THE PARTNER HAD SCANNED COPY OF THE SAID SUPPLE MENTARY PARTNERSHIP DEED DATED 02-04-2003 IN THEIR LAPTOP WHICH WAS E-M AILED TO THE AR WHICH WAS SUBMITTED BY THE AR BEFORE THE A.O. ON 7 TH DECEMBER, 2010. SINCE BOTH THE PARTNERS WERE OUT OF INDIA, IT WAS NOT POSSIBLE TO FURNISH CERTIFIED COPY OF THE PARTNERSHIP DEED AND ACCORDINGLY THE A.O. WAS I NFORMED THAT THE PARTNERS WERE RETURNING ON OR AROUND 22 ND DECEMBER, 2010 AND THE AO WAS PROMISED THAT THE PARTNER WOULD APPEAR AND MEET THE A.O. PER SONALLY. ACCORDINGLY, MR. RAJNISH R. PURI APPEARED BEFORE THE A.O. ON 27 TH DECEMBER, 2010 I.E. MONDAY BUT BY THAT TIME THE ASSESSMENT ORDER DATED 24-12-2 010 U/S 143(3) OF THE ACT WAS ALREADY PASSED. A LETTER WAS ALSO SUBMITTE D TO THE A.O. BY MR. RAJNISH R. PURI DURING HIS MEETING WITH AO ON 27-12 -2010 EXPLAINING THE FACTS AND COPY OF THE SAID LETTER WAS ALSO FURNISHE D BEFORE THE LEARNED CIT(A). IT WAS ALSO SUBMITTED BEFORE THE LEARNED CIT(A) THA T THE YOUNGER PARTNER MR. RAJNISH R. PURI WAS SHIFTING HIS BASE FROM INDIA TO CHINA TO TAKE UP EMPLOYMENT IN CHINA TO FURTHER THE BUSINESS THAT WA S BEING DONE, AND W.E.F. AUGUST, 2010 THE ENTIRE FAMILY INCLUDING THE CHILDR EN WERE IN CHINA WHO HAVE ALSO TAKEN UP SCHOOLING IN CHINA, THUS, IT WAS POSSIBLE TO RETURN TO INDIA ONLY IN CHRISTMAS VACATION AFTER 22 ND DECEMBER, 2010. THE REVENUE HAS COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT IN T HE MEANTIME ON 24-12- 2010 AND ONLY CERTIFIED PARTNERSHIP DEED WAS TO BE SUBMITTED AND ALL OTHER SUBMISSIONS WERE MADE. THE A.O. HAD REJECTED THE C ONTENTIONS OF THE ASSESSEE AS THE SUPPLEMENTARY DEED OF PARTNERSHIP D ATED 02-4-2003 IS NOT VALID AS PER THE AO AND THE AO DISALLOWED THE REMUN ERATION TO PARTNERS TO THE TUNE OF RS. 68,23,498/- AFTER ALLOWING ONLY RS. 24,000/- AS SALARY TO MR. RAJNISH R. PURI VIDE PARTNERSHIP DEED 01-04-1995. THE ASSESSEE PRAYED THAT THE REMUNERATION MAY BE ALLOWED IN FULL. THE ASSESS EE SUBMITTED THE COPY OF THE BALANCE SHEET, P&L ACCOUNT AND TAX AUDIT REPORT ALONG WITH COPY OF RETURN OF INCOME AND ALSO THE RELEVANT PARTNERSHIP DEEDS BEFORE THE LEARNED CIT(A). ITA 7188/MUM/2013 8 10. WITH RESPECT TO THE DISALLOWANCE OF REMUNERATIO N OF RS. 27,38,999/- TO MRS. KIRAN R. PURI, THE A.O. DISALLOWED THE SAME ON THE GROUND THAT THE PARTNERS EXPERIENCE, EDUCATIONAL QUALIFICATION ETC . ARE INADEQUATE FOR SUCH REMUNERATION AND THERE IS NO JUSTIFICATION FOR THE REMUNERATION PAYABLE TO THE PARTNER. THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE A.O. ONLY ASKED INFORMATION REGARDING THE JOB PROFILES OF ALL THE PARTNERS AND NO QUESTIONS WERE ASKED ABOUT SPECIFIC DETAILS ABOUT M RS. KIRAN R PURI AND HER WORKING IN THE ASSESSEE FIRM. THE ASSESSEE SUBMITT ED THAT MRS. KIRAN PURI IS PARTNER SINCE INCEPTION OF THE FIRM AND IS LOOKING AFTER THE FINANCE AND ADMINISTRATION ASPECTS OF THE BUSINESS AND ALL OTHE R ASPECTS WHENEVER THE OTHER PARTNER IS OUT OF MUMBAI FOR BUSINESS. IT WA S SUBMITTED THAT MR. KIRAN R. PURI WAS INVOLVED IN THE BUSINESS SINCE DAY ONE AND HAS BEEN HANDLING THE BUSINESS WHICH WAS STARTED BY HER LATE HUSBAND AND SHE RAN THE ENTIRE BUSINESS ON THE DEATH OF HER HUSBAND TILL HER SON W AS CAPABLE OF RUNNING THE BUSINESS WITH HER. IT WAS SUBMITTED THAT THE REMUN ERATION WAS ALLOWED IN THE PAST YEARS AND THE SAME HAS BEEN SHOWN AS PART OF HER TAXABLE INCOME. THIS IS THE FIRST YEAR WHEN THE REMUNERATION WAS DI SALLOWED BY REVENUE. IT WAS SUBMITTED THAT FOR DOING BUSINESS IN INDIA, NOW HERE ANY STIPULATED DEGREE OF EDUCATION IS PRESCRIBED WHICH IS REQUIRE D TO RUN THE BUSINESS AND THE AO HAS MINDSET THAT LADY CANNOT MANAGE BUSINESS AND CAN ONLY DO HOUSEHOLD JOB AND HENCE IT WAS SUBMITTED THAT THE A O ERRED IN DISALLOWING THE REMUNERATION PAID TO MRS KIRAN R. PURI WITHOUT ANY JUSTIFICATION OR BASIS. MRS. KIRAN R. PURI, BY EDUCATION IS BACHELOR IN ART S WITH HONOURS. IT WAS SUBMITTED THAT THE AO DISALLOWED REMUNERATION PAID TO MRS. KIRAN R. PURI WITHOUT ANY DISCUSSIONS AND ARRIVED AT CONCLUSION W ITHOUT ANY BASIS OR JUSTIFICATIONS. WITH THESE SUBMISSIONS, THE ASSESSE E PRAYED BEFORE THE LEARNED CIT(A) TO ALLOW THE REMUNERATION IN FULL TO THE PAR TNER INCLUDING REMUNERATION PAID TO PARTNER MRS. KIRAN R. PURI OF RS. 27,38,999 /- , AGGREGATING AMOUNTING TO RS. 68,23,498/-. ITA 7188/MUM/2013 9 11. WITH RESPECT TO THE DISALLOWANCE FOR NON-PAYMEN T OF TAX DEDUCTED AT SOURCE ON PROFESSIONAL FEES AMOUNTING TO RS. 63,650 /-, IT WAS SUBMITTED BY THE ASSESSEE BEFORE LEARNED CIT(A) THAT IN THE TAX AUDIT REPORT IN ANNEXURE-6 IT HAS BEEN STATED THAT TAX DEDUCTED AT SOURCE OF R S. 4,629/- ON PROFESSIONAL FEES HAD NOT BEEN PAID. THE ASSESSEE SUBMITTED THA T OUT OF THE TOTAL TAX DEDUCTED AT SOURCE AMOUNT FOR THE MONTH OF MARCH OF RS. 5659/- , OUT OF WHICH AN AMOUNT OF RS. 1,030/- HAD BEEN PAID ON 15 TH MAY, 2011 AND THUS THE REMAINING WAS ONLY RS. 4629/- WHICH HAD BEEN MI SSED OUT TO BE PAID. ON THE TDS OF RS. 4629/-, IT AMOUNTS TO A FEE OF R S. 44,944/- AS PER PRESCRIBED RATES OF TAX DEDUCTED AT SOURCE U/S 194J OF THE ACT BY MAKING REVERSE CALCULATION WHICH NEEDS TO BE DISALLOWED. I T WAS SUBMITTED THAT IN THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURN O F INCOME WITH THE REVENUE, THE SAID AMOUNT HAD BEEN PAID WITHOUT DEDU CTION OF TAX AT SOURCE, HENCE, THE ASSESSEE DISALLOWED THE SAME OF HIS OWN IN THE COMPUTATION OF INCOME FILED WITH RETURN OF INCOME FILED WITH THE R EVENUE OF ITS OWN AND THUS THERE IS NOW DOUBLE DISALLOWANCE OF THE AMOUNT WHIC H IS NOT PERMISSIBLE UNDER THE ACT. THE AMOUNT HAS ALREADY BEEN DISALLO WED, THE SAME CANNOT BE DISALLOWED AGAIN. IT WAS ALSO SUBMITTED THAT IS NO T KNOWN HOW THE A.O. ARRIVED AT THE FIGURE OF RS. 63,650/- AS NO DETAILS WERE GIVEN BY THE AO IN THE ASSESSMENT ORDERS DATED 24-12-2010 U/S 143(3) OF TH E ACT NOR IT WAS EXPLAINED TO THE ASSESSEE DURING THE COURSE OF ASSE SSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 143(2) OF THE ACT. 12. WITH REGARD TO THE MOTOR CAR EXPENSES AND TELEP HONE EXPENSES OF RS. 1,19,201/- AND RS. 95,680/- RESPECTIVELY BEING 20% OF THE EXPENSES, IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THESE EXPE NSES WERE INCURRED FOR THE PURPOSES OF BUSINESS. THE ASSESSEE FURTHER SUBMITT ED THAT FRINGE BENEFIT TAX HAD ALREADY BEEN PAID @ 20% ON MOTOR CAR EXPENSES A ND TELEPHONE EXPENSES AND SINCE THE ASSESSEE IS LIABLE TO PAY FRINGE BENE FIT TAX(FBT) AND HAS IN-FACT PAID FBT ON THE ABOVE EXPENDITURE, DISALLOWANCE OF 20% BY THE AO IS LIKE ITA 7188/MUM/2013 10 TAXING THE SAME INCOME TWICE ONCE AS FBT AND ALSO A S AN INCOME UNDER THE PROVISIONS OF THE ACT AND HENCE IT WAS PRAYED BEFOR E THE LEARNED CIT(A) TO DELETE THE DISALLOWANCE. 13. THE LEARNED CIT(A) CONSIDERED THE CONTENTIONS O F THE ASSESSEE AND THE FACTUAL MATRIX OF THE CASE AND OBSERVED THAT WITH R EGARD TO REMUNERATION PAID TO SHRI RAJNISH R. PURI AND SMT. KIRAN R. PURI, THA T AS PER THE FINAL CONFIRMED PARTNERSHIP DEED DATED 27-03-1995( THE CORRECT DATE 01-04-1995) , PAYMENT OF REMUNERATION OF ONLY RS. 24,000/- PER ANNUM WAS AUTHORIZED AS AGAINST REMUNERATION TO PARTNERS OF RS. 68,47,498/- PAID BY THE ASSESSEE-FIRM. THE FACT OF PARTNERSHIP DEED DATED 27-03-1995(THE CORRE CT DATE 01-04-1995) BEING THE LAST PARTNERSHIP DEED WAS ADMITTED BY LEARNED C OUNSEL FOR THE ASSESSEE BEFORE THE AO. IT WAS OBSERVED THAT WHEN IT WAS CON FRONTED TO THE ASSESSEE, THE ASSESSEE CHANGED THE TRACK AND STATED THAT THER E COULD BE ANOTHER SUPPLEMENTARY PARTNERSHIP DEED DATED 02-04-2003 OF WHICH XEROX COPY WAS PRODUCED BUT THE SAME WAS NOT CERTIFIED BY THE PART NERS . SHOW CAUSE NOTICE WAS ALSO ISSUED TO THE ASSESSEE DATED 15 TH DECEMBER, 2010 ASKING FOR THE PARTNERS CAPITAL ACCOUNT FROM FINANCIAL YEAR 2002-0 3 TO ASCERTAIN THE AUTHENTICITY OF THE PARTNERSHIP DEED, HOWEVER, NO S UBMISSION WAS MADE BY THE ASSESSEE. THE AO ALSO REQUIRED THE ASSESSEE TO SUBMIT PROOF OF FILING THE SUPPLEMENTARY DEED OF PARTNERSHIP DEED DATED 02-04- 2003 BEFORE THE REVENUE WITH THE RETURN OF INCOME FOR ASSESSMENT YE AR 2004-05 AS PROVIDED U/S 184(4) OF THE ACT. HOWEVER, NO SUBMISSIONS WERE MADE BEFORE THE AO AND HE DID NOT TOOK COGNIZANCE OF THE XEROX COPY OF THE PARTNERSHIP FILED BY THE ASSESSEE AND MADE THE ADDITIONS AS PER ASSESSMENT O RDERS DATED 24.12.2010 PASSED U/S 143(3) OF THE ACT. THE ASSESSEE FILED COPY OF SUPPLEMENTARY PARTNERSHI P DEED DATED 2-4-2003 NOW SIGNED BY THE PARTNERS BEFORE THE LEARNED CIT(A ), WHICH AS PER LEARNED CIT(A) IS A FRESH EVIDENCE WHICH WAS NOT AVAILABLE BEFORE THE A.O. . THE ITA 7188/MUM/2013 11 LEARNED CIT(A) CALLED FOR THE REMAND REPORT FROM TH E A.O. , WHEREBY THE A.O. REITERATED SAME FINDINGS AS WAS GIVEN EARLIER ON TH IS ISSUE VIDE ASSESSMENT ORDERS DATED 24.12.2010 PASSED U/S 143(3) OF THE AC T. IN THE REJOINDER, THE ASSESSEE SUBMITTED THAT THE A.O. HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE AND HENCE AGAIN FRESH REMAND REPORT WAS CA LLED BY THE LEARNED CIT(A) FROM THE AO. AGAIN THE SAME FINDING WAS REI TERATED BY THE A.O. AND SINCE THERE WAS CHANGE IN THE ADDRESS OF THE ASSESS EE , THE ASSESSEE COULD NOT BE CONTACTED AGAIN IN REMAND REPORT PROCEEDINGS. T HE ASSESSEE REITERATED THE SAME SUBMISSION AS WERE GIVEN EARLIER BEFORE THE LE ARNED CIT(A) VIDE REJOINDER OF THE REMAND REPORT AND SUBMITTED THAT COGNIZANCE SHOULD BE TAKEN OF THE FACT THAT THE SUPPLEMENTARY PARTNERSHIP DEED DATED 2 ND APRIL, 2003 IS IN EXISTENCE AND IF THIS IS DONE THEN REMUNERATION TO THE PARTNERS HAVE TO BE DIVIDED ONLY ON THE BASIS OF THE PARTNERSHIP DEED D ATED 2 ND APRIL, 2003. THE LEARNED CIT(A) REJECTED THE CONTENTIONS OF THE ASSE SSEE AND OBSERVED THAT SINCE THE PROOF OF FILING OF SUPPLEMENTARY PARTNERS HIP DEED WITH THE REVENUE ALONG WITH THE RETURN OF INCOME FOR ASSESSMENT YEAR 2004-05 HAS NOT BEEN FILED IN THE RELEVANT ASSESSMENT YEAR I.E. 2004-05 AS REQUIRED U/S 184(4) OF THE ACT, THE A.O. IS QUITE RIGHT TO HOLD THAT NO RE MUNERATION COULD BE ALLOWED OTHER THAN THAT APPEARING IN THE ORIGINAL PARTNERSH IP DEED DATED 27-03- 1995(THE CORRECT DATED IS 01-04-1995) I.E RS. 24,00 0/- PER ANNUM AND ACCORDINGLY DENIED THE EXPENDITURE TOWARDS THE REMU NERATION PAID TO THE PARTNERS IN EXCESS OF RS.24,000/- AS PROVIDED UNDER PARTNERSHIP DEED DATED 27-03-1995(THE CORRECT DATED IS 01-04-1995). 14. SIMILARLY, IT WAS OBSERVED BY THE LEARNED CIT(A ) THAT NO EVIDENCE HAS BEEN FILED REGARDING THE JUSTIFICATION OF THE REMUN ERATION PAID TO MRS. KIRAN R. PURI. THE LD. CIT(A) HELD THAT MERELY BECAUSE S HE IS A PARTNER WHO HANDLED ADMINISTRATION COULD NOT GIVE RISE TO JUSTIFICATION FOR SUCH AN EXCESSIVE PAYMENT AND DISMISSED THE CLAIM OF THE ASSESSEE. ITA 7188/MUM/2013 12 15. WITH RESPECT TO THE DISALLOWANCE ON MOTOR CAR E XPENSES AND TELEPHONE EXPENSE BEING 20% OF THE ACTUAL EXPENDITURE INCURRE D BY THE ASSESSEE, IT WAS OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED THE LOG BOOK. THE ONUS IS ON THE ASSESSEE TO PROVE THE CLAIM OF EXPENSES. SINCE THE ASSESSEE FAILED TO DO SO, THE ACTION OF THE A.O. WAS CONFIRMED BY LEARNED CIT(A). 16. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE A SSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. WITH REGARD TO THE REMUNERATI ON TO THE PARTNERS, THE LD. COUNSEL SUBMITTED THAT THE A.O. HAS DISALLOWED THE REMUNERATION TO THE PARTNERS TO THE TUNE OF RS. 68,23,498/-. THE LD. C OUNSEL DREW OUR ATTENTION TO THE ASSESSMENT ORDERS DATED 24-12-2010 PASSED U/ S 143(3) OF THE ACT BY THE A.O. . IT WAS SUBMITTED THAT THE SUPPLEMENTARY PARTNERSHIP DEED DATED 02-04-2003 WAS DULY PRODUCED. THE INITIAL PARTNERS HIP DEED WAS DATED 27 TH MARCH, 1995(CORRECT DATED 01-04-1995) AND THEREAFTE R SUPPLEMENTARY DEED DATED 2 ND APRIL, 2003 WAS EXECUTED WHICH WAS ALSO PRODUCED. THE FAX COPY OF SUPPLEMENTARY PARTNERSHIP DEED DATED 02-04-2003 WAS PRODUCED BEFORE THE AO AS THE PARTNERS WERE TRAVELLING TO CHINA AND SOO N AFTER THEIR ARRIVAL IN INDIA, ON 27-12-2010 THE PARTNER MR. RAJNISH R. PUR I DULY APPEARED BEFORE THE AO WITH THE ORIGINAL SUPPLEMENTARY DEED OF PART NERSHIP DEED DATED 02- 04-2003 AND ALSO CERTIFIED COPY OF PARTNERSHIP DEED BUT BY THAT TIME THE AO HAD PASSED THE ASSESSMENT ORDERS U/S 143(3) OF THE ACT ON 24-12-2010. THE SAID SUPPLEMENTARY DEED OF PARTNERSHIP DATED 02-04- 2003 WAS PRODUCED BEFORE THE LEARNED CIT(A) DURING THE FIRST APPELLAT E PROCEEDINGS. IT WAS SUBMITTED THAT THE REVENUE HAS ACCEPTED THE SUPPLEM ENTARY PARTNERSHIP DEED DATED 2 ND APRIL, 2003 IN PRECEDING ASSESSMENT YEARS WHEREBY THE HIGHER REMUNERATION PAID TO THE PARTNERS HAS BEEN ALLOWED SINCE THE ASSESSMENT YEAR 2004-05 BASED UPON THE SUPPLEMENTARY PARTNERSH IP DEED DATED 02-04- 2003 TILL THE ASSESSMENT YEAR 2007-08 AND THIS IS T HE FIRST YEAR THE DISALLOWANCE HAS BEEN MADE BY THE REVENUE. THE REVE NUE HAS ALSO NOT DISTURBED THE REMUNERATION ALLOWED TO PARTNERS IN T HE EARLIER YEARS. THERE IS ITA 7188/MUM/2013 13 NO CHANGE IN THE PARTNERSHIP DEED DURING THE IMPUGN ED ASSESSMENT YEAR. THE LD. COUNSEL DREW OUR ATTENTION TO THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THERE IS NO CHANGE IN THE CONSTITUTI ON OF THE FIRM. TAX AUDIT REPORT AND AUDITED BALANCE SHEET , PROFIT AND LOSS ACCOUNT WERE DULY SUBMITTED AND THE DETAILS OF PARTNERSHIP DEED ARE I NCORPORATED IN THE TAX- AUDIT REPORT. THE COPIES OF INCOME TAX RETURNS FOR ASSESSMENT YEAR 2005-06 AND 2006-07 ALONG WITH COMPUTATION OF INCOME WERE A LSO FILED BEFORE THE TRIBUNAL WHICH ARE PLACED IN THE FILE TO ESTABLISH THAT THE HIGHER REMUNERATION WAS CLAIMED BY THE ASSESSEE AS PER SUP PLEMENTARY PARTNERSHIP DEED DATED 02-04-2003 WHICH IT WAS CONTENDED THAT T HE SAME HAS BEEN ACCEPTED BY THE REVENUE AND NO ADDITIONS HAVE BEEN MADE. IT WAS SUBMITTED THAT IN EACH YEAR, THROUGH TAX AUDIT REPORT THE CON TENTS OF PARTNERSHIP DEED ARE NOTIFIED TO THE REVENUE. THE LD. COUNSEL DREW OUR ATTENTION TO THE PAPER BOOK PAGE 21 WHEREBY THE TAX AUDIT REPORT IS PLACED PARTICULARLY TO SERIAL NO. 7 (A) & &(B) , WHEREBY IT IS REFLECTED THAT THERE I S NO CHANGE IN PARTNERSHIP DEED DURING THE YEAR UNDER CONSIDERATION. IT WAS S UBMITTED THAT PARTNERSHIP DEED WAS DULY SUBMITTED DURING THE ASSESSMENT PROCE EDINGS. IN ASSESSMENT YEAR 2008-09 THERE IS NO CHANGE IN THE CONSTITUTION OF THE FIRM. THE REMUNERATION PAID IN THE EARLIER YEARS WAS ALLOWED. IT WAS SUBMITTED THAT MRS. KIRAN R. PURI IS A WORKING PARTNER OF THE FIRM . SHE IS LOOKING AFTER THE DAY TO DAY AFFAIRS OF THE FIRM, HENCE, PRAYED THAT THE REMUNERATION PAID SHOULD BE ALLOWED. WITH RESPECT TO THE NON-DEDUCTION OF TDS U/S 194J O F THE ACT ON THE PROFESSIONAL AMOUNTING TO RS. 63,650/- AS ADDED BY THE REVENUE, THE LD. COUNSEL SUBMITTED THAT THE AMOUNT OF RS.44,950/- WA S VOLUNTARILY DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE IN THE RETU RN OF INCOME FILED WITH THE REVENUE , AND HENCE ADDITION OF RS. 63,650/- IS A D OUBLE ADDITION WHICH IS NOT PERMISSIBLE IN LAW. NO DETAILS OF DISALLOWANCE OF RS 63,650/- WAS PROVIDED BY THE AO AND THE ASSESSEE IS NOT AWARE OF THE DETAILS/BREAK-UP OF ITA 7188/MUM/2013 14 RS.63,650/- OF PROFESSIONAL FEE DISALLOWED BY THE A O U/S 40(A)(IA) OF THE ACT READ WITH SECTION 194J OF THE ACT AS THE SAME WAS N EITHER DISCUSSED DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SEC TION 143(2) OF THE ACT NOR IN THE ASSESSMENT ORDER DATED 24-12-2010 FRAMED BY THE AO U/S 143(3) OF THE ACT. IN THIS CONNECTION THE LD. COUNSEL DREW OUR ATTENTION TO PAPER BOOK PAGE 38 WHICH IS PLACED ON RECORD AND IT WAS S UBMITTED THAT THE ASSESSEE IS NOT AWARE OF THE BREAK-UP OF DISALLOWAN CE OF RS.63,650/-- U/S 40(A)(IA) OF THE ACT READ WITH SECTION 194 J OF THE ACT. WITH RESPECT TO THE MOTOR CAR AND TELEPHONE EXPENSE S OF 20% DISALLOWED BY THE AO, IT WAS SUBMITTED THAT FBT WAS DULY PAID ON THESE EXPENSES AND HENCE FURTHER DISALLOWANCE IS NOT WARRANTED . IT W AS SUBMITTED THAT THE MATTER CAN BE DECIDED BASED ON THE MATERIAL PLACED ON RECORD. 17. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT SECTION 184(4) OF THE ACT HAS NOT BEEN COMPLIED WITH AND HENCE DISALLOWAN CE OF THE REMUNERATION PAID TO THE PARTNERS WERE RIGHTLY MADE BY THE AO AS CONTEMPLATED U/S 185 OF THE ACT. THE ASSESSEE HAS NOT SUBMITTED THE SUPPLE MENTARY PARTNERSHIP DEED DATED 2 ND APRIL, 2003 IN THE YEAR OF CHANGE AS WELL DURING T HE ASSESSMENT PROCEEDINGS BEFORE THE AO AND ONLY UN-AUTHENTICATED COPY WAS SUBMITTED BEFORE THE AO DURING ASSESSMENT PROCEEDINGS U/S 143 (3) OF THE ACT READ WITH SECTION 143(2) OF THE ACT. NO EVIDENCE HAS BEEN BR OUGHT ON RECORD REGARDING SUBMISSION OF THE PARTNERSHIP DEED DURING THE YEAR OF CHANGE I.E. ASSESSMENT YEAR 2004-05 ALONG WITH THE RETURN OF INCOME FILED WITH THE REVENUE. THE ONUS IS ON THE ASSESSEE TO SUBMIT THE PARTNERSHIP D EED TO THE REVENUE IN THE YEAR OF CHANGE WHICH HAS NOT BEEN SUBMITTED. THE LE ARNED DR RELIED UPON THE ORDERS OF THE LEARNED CIT(A) WITH RESPECT TO THE OTHER DISALLOWANCE, THE LD. D.R . SUBMITTED THAT THE VOLUNTARY DISALLOWANCE IS WITH RESPECT TO THE SHORT DEDUCTION OF TAXES ON ITA 7188/MUM/2013 15 PROFESSIONAL FEE U/S 194J OF THE ACT AND HE RELIED UPON THE ORDERS OF THE LEARNED CIT(A). THE LD DR ALSO SUBMITTED THAT EXPENSES @20% OF MOTO R CAR EXPENSES AND TELEPHONE EXPENSES WERE RIGHTLY DISALLOWED BY THE A O AND CONFIRMED BY THE LEARNED CIT(A) AS THE PERSONAL ELEMENT OF EXPENSES ARE NOT RULED OUT. THE LD. D.R. FURTHER RELIED ON THE ORDERS OF AUTHORITIES BE LOW. 18. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND AL SO PERUSED THE MATERIAL PLACED ON RECORD. WE HAVE OBSERVED THAT THE ASSESS EE IS A PARTNERSHIP FIRM WHICH WAS ESTABLISHED IN THE YEAR 1992 HAVING TWO P ARTNERS I.E. SHRI RAJNISH R. PURI AND SMT. KIRAN R. PURI. THE FIRM IS DEALIN G IN TRADING IN GARMENTS AND INDENTING COMMISSION. IT IS OBSERVED THAT DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(2) READ WITH SECTION 143(3) OF THE ACT, THE ASSESSEE SUBMITTED BEFORE THE AO THE PARTNERSHIP DE ED DATED 27 TH MARCH, 1995 ( CORRECT DATE 01-04-1995) AND HAS CONTENDED T HAT THIS IS THE LAST PARTNERSHIP DEED. DURING THE PERIOD WHEN ASSESSMEN T PROCEEDINGS WERE GOING ON, BOTH PARTNERS WERE STATED TO BE OUT OF IN DIA TO CHINA TO PROMOTE THE BUSINESS OF THE FIRM . IT WAS ALSO SUBMITTED THAT THE YOUNGER PARTNER SHRI RAJNISH R. PURI WAS CONTEMPLATING TO SETTLE IN CHIN A ALONG WITH THE CHILDREN AND HIS CHILDREN HAD ALSO TAKEN UP SCHOOLING IN CHI NA. IT WAS SUBMITTED THAT HE WAS PLANNING TO COME DOWN IN INDIA ONLY IN THE C HRISTMAS VACATION STARTING 22 ND OF DECEMBER, 2010 AS HE HAS ALSO TAKEN UP EMPLOYME NT IN CHINA IN FURTHERANCE OF HIS BUSINES. FAX COPY OF T HE XEROX OF THE SUPPLEMENTARY PARTNERSHIP DEED DATED 2.4.2003 WAS D ULY SUBMITTED BY THE COUNSEL OF THE ASSESSEE BEFORE THE AO DURING THE AS SESSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 143(2) OF THE ACT, AS SCA NNED COPY OF THE SAID SUPPLEMENTARY PARTNERSHIP DEED DATED 02-04-2003 WAS SENT BY THE PARTNERS VIA EMAIL , WHILE ORIGINAL COPY WAS STATED TO BE IN LOCKER IN MUMBAI WHILE PARTNERS WERE IN CHINA WHEN ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH ITA 7188/MUM/2013 16 SECTION 143(2) OF THE ACT, WERE GOING ON BEFORE THE AO BUT THE SAME COPY WAS NOT CERTIFIED AND WAS ALSO NOT LEGIBLE. WHEN THE P ARTNER MR RAJNISH R PURI RETURNED TO INDIA AND APPEARED BEFORE THE REVENUE A UTHORITIES ON 27-12-2010 AND PRODUCED THE DULY SIGNED AND CERTIFIED COPY OF THE PARTNERSHIP DEED ALONG WITH THE LETTER BEFORE THE AO , BUT BY THAT TIME TH E ASSESSMENT ORDER DATED 24-12-2010 U/S 143(3) OF THE ACT WAS ALREADY PASSED AND THE REVENUE HAS DISALLOWED THE REMUNERATION PAID TO THE PARTNERS OF RS. 68,23,498/- FOR THE REASONS AS SET OUT ABOVE. THE ASSESSEE ALSO PRODUC ED THE CERTIFIED COPY OF THE SUPPLEMENTARY PARTNERSHIP DEED DATED 02-04-2003 BEF ORE THE LEARNED CIT(A) AND ALSO IN THE REMAND PROCEEDINGS. FROM THE AVERM ENTS MADE BY THE ASSESSEE WHICH HAS REMAINED UNCONTROVERTED BY THE R EVENUE AS WELL INCOME TAX RETURNS PLACED ON RECORD FOR THE ASSESSMENT YEA R 2005-06 AND 2006-07 WHICH ARE PLACED IN FILE, WE HAVE OBSERVED FROM THE APPRECIATION OF THE FACTS AS EMERGING FROM THE RECORDS THAT THE ASSESSEE HAD CLAIMED THE DEDUCTION OF HIGHER REMUNERATION OF PARTNERSHIP BASED ON SUPPLEM ENTARY PARTNERSHIP DEED DATED 02-04-2003 IN THE ASSESSMENT YEARS 2005- 06 AND 2006-07, IT IS AVERRED BY THE ASSESSEE AND NOT CONTROVERTED BY TH E REVENUE THAT NOW THE REVENUE HAS DISALLOWED THE REMUNERATION PAID TO PAR TNERS AS SET OUT ABOVE FOR THE FIRST TIME ON THE GROUNDS THAT THE CERTIFIED PA RTNERSHIP DEED DATED 2-4- 2003 WAS NOT PRODUCED BEFORE THE AO DURING THE ASS ESSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 143(2) OF THE ACT AND ALSO IN THE YEAR OF CHANGE IN PARTNERSHIP DEED ON 02-04-2003 IN THE ASSESSMENT YEAR 2004-05, WHILE THE ASSESSEE HAS SUBMITTED THAT THE CHANGED PARTNER SHIP DEED WAS DULY FURNISHED TO THE REVENUE IN THE YEAR OF CHANGE AS W ELL IN THE ASSESSMENT PROCEEDINGS AS WELL IN APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) AS WELL BEFORE THE TRIBUNAL. IT IS THE SAY OF THE ASSESSEE WHICH IS NOT CONTROVERTED BY THE REVENUE THAT ALL THESE YEARS, THE REMUNERATION SO CLAIMED PER SUPPLEMENTARY PARTNERSHIP DEED DATED 02-04-2003 STO OD ALLOWED BY THE REVENUE AND NO DISALLOWANCE HAS BEEN MADE BY THE RE VENUE AUTHORITIES. IN OUR CONSIDERED VIEW KEEPING IN VIEW THE FACTS AND C IRCUMSTANCE OF THE CASE, ITA 7188/MUM/2013 17 THERE IS NO REASON TO DISALLOW THE REMUNERATION PAI D TO THE PARTNERS IN THE IMPUGNED ASSESSMENT YEAR ON THE GROUNDS THAT THE PA RTNERSHIP DEED DATED 02-04-2003 WAS NOT FILED BY THE ASSESSEE AS CONTEMP LATED BY THE REVENUE ON THE FACTS AS ARE EMERGING FROM THE RECORDS AND THE DISALLOWANCE MADE BY THE REVENUE AUTHORITIES IS NOT SUSTAINABLE BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IS ORDERED TO BE DELETED SUBJECT T O VERIFICATION THAT THE SAID REMUNERATION PAID TO BOTH THE PARTNERS AGGREGATING TO RS. 68,47,498/- HAVE BEEN OFFERED TO TAX BY THE RESPECTIVE PARTNERS IN T HEIR INDIVIDUAL RETURN OF INCOME FILED WITH THE REVENUE AND DUE TAXES WERE PA ID BY THEM TO THE REVENUE IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESS EE IS DIRECTED TO APPEAR BEFORE THE AO AND PRODUCE PROOF OF FILING OF RETURN OF INCOME BY THE BOTH THE PARTNERS IN THEIR INDIVIDUAL CAPACITY WHEREBY THE R EMUNERATION PAID TO THEM AS THE PARTNERS OF THE ASSESSEE FIRM WAS DULY INCLU DED AND DUE TAXES PAID TO THE REVENUE. THE AO SHALL PROVIDE PROPER AND ADEQUA TE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH THE PRINCI PLES OF NATURAL JUSTICE. OUR VIEW IS CONSISTENT WITH DECISIONS OF THE HONBLE AL LAHABAD HIGH COURT IN THE CASE OF CIT V. GREAT CITY MANUFACTURING COMPANY (20 13) 33 TAXMANN.COM 258(ALL.) AND DECISION OF HONBLE RAJASTHAN HIGH CO URT IN THE CASE OF CIT V.ASIAN MARKETING (2013) 31 TAXMANN.COM 136(RAJ.).W E ORDER ACCORDINGLY. THE OTHER CONTENTION OF THE ASSESSEE IS WITH RESPE CT TO THE REMUNERATION PAID TO MRS. KIRAN R. PURI WHICH WAS DISALLOWED ON THE G ROUNDS OF THAT THE SAID MRS KIRAN R PURI IS NOT A WORKING DIRECTOR AND THE REMUNERATION IS EXCESSIVE. WE HAVE OBSERVED THAT IT IS STATED THAT MRS. KIRAN R. PURI WAS LOOKING AFTER THE DAY-TO-DAY AFFAIRS OF THE FIRM. IT IS STATED T HAT SHE WAS PARTNER SINCE INCEPTION OF THE FIRM AND LOOKING AFTER ALL THE FIN ANCE AND ADMINISTRATIVE MATTERS OF THE BUSINESS AFTER THE DEATH OF HER HUSB AND TILL HER SON WAS CAPABLE OF RUNNING THE BUSINESS. NO COGENT INCRIMI NATING MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SUBSTANTIATE TH EIR FINDINGS THAT THE REMUNERATION IS EXCESSIVE OR THE SAID MRS KIRAN PUR I IS NOT A WORKING PARTNER ITA 7188/MUM/2013 18 , WHILE THE ASSESSEE IS FURTHER CONTEMPLATING THAT WHEN THE OTHER PARTNER MR RAJNISH R. PURI IS OUT OF MUMBAI FOR BUSINESS, THE ENTIRE BUSINESS ACTIVITIES ARE LOOKED AFTER BY MRS. KIRAN R. PURI. IT IS ALSO THE CASE OF THE ASSESSEE THAT FOR ALL THE YEARS THE REVENUE HAS ALLOWED THE REMUN ERATION PAID TO MRS KIRAN R PURI WHILE THIS IS THE ONLY YEAR WHEN DISALLOWANC E OF THE REMUNERATION PAID TO MRS KIRAN R PURI WAS MADE BY THE REVENUE. IT IS BROUGHT ON RECORD VIDE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 AN D 2006-07 THAT THE REMUNERATION WAS CLAIMED BY THE SAID MRS KIRAN R PU RI. THE EXPLANATION SUBMITTED BY THE ASSESSEE IS BONA FIDE WHICH HAS NO T BEEN CONTROVERTED BY THE REVENUE AND THERE IS NO VALID REASON TO DISALLO W THE REMUNERATION PAID TO SMT. KIRAN R. PURI IN THIS YEAR ALONE BASED ON THE BALD STATEMENT WITHOUT BRINGING ON RECORD COGENT INCRIMINATING MATERIAL ON RECORD.NO ENQUIRY HAS EITHER BEEN CONDUCTED BY THE REVENUE NOR ANY INCRIM INATING MATERIAL IS BROUGHT ON RECORD TO SUPPORT THE CONTENTION OF THE REVENUE. IT IS ALSO THE AVERMENT WHICH HAS REMAINED UNCONTROVERTED BY THE R EVENUE THAT THE REVENUE HAS ALLOWED THE HIGHER AMOUNT OF REMUNERATI ON PAID TO MRS KIRAN R PURI IN THE PRECEDING YEARS AND THE SAID MRS KIRAN R PURI HAS DULY PAID TAXES IN HER PERSONAL RETURN OF INCOME FILED WITH THE REV ENUE. HENCE, IN OUR CONSIDERED VIEW, THE ADDITION MADE BY THE REVENUE N EEDS TO BE DELETED ON THIS GROUND, HOWEVER FOR LIMITED PURPOSES WE HAD AL READY REMITTED THE MATTER BACK TO THE FILE OF AO FOR VERIFICATION THAT THE SA ID REMUNERATION PAID TO BOTH THE PARTNER HAVE BEEN OFFERED TO TAX BY THEM IN THE IR INDIVIDUAL RETURN OF INCOME FILED WITH THE REVENUE AND DUE TAXES PAID BY THEM TO THE REVENUE IN THE IMPUGNED ASSESSMENT YEAR AS ALREADY SET OUT ABO VE. WE ORDER ACCORDINGLY. WITH RESPECT TO THE OTHER DISALLOWANCE OF RS.63,650 /- FOR NON-PAYMENT OF TDS U/S 40(A)(IA) OF THE ACT READ WITH SECTION 194J OF THE ACT, WE HAVE OBSERVED THAT THE ASSESSEE ITSELF VOLUNTARILY DISALLOWED TH E AMOUNT OF RS. 44,944/- PAID FOR PROFESSIONAL FEE IN THE COMPUTATION OF INC OME FILED WITH THE REVENUE, ITA 7188/MUM/2013 19 WHILE THE REVENUE HAS DISALLOWED RS.63,650/- TOWARD S PROFESSIONAL FEE BY INVOKING SECTION 40(A)(IA) OF THE ACT READ WITH SEC TION 194J OF THE ACT. WE HAVE OBSERVED THAT BOTH THE FIGURES COULD NOT BE RE CONCILED IN THE ABSENCE OF COMPLETE DETAILS OF THE BREAK-UP OF RS.63,650/- ALB EIT THE ASSESSEE IS CONTENDING THAT THE SAID DISALLOWANCE IS A DOUBLE A DDITION WHICH IS NOT PERMISSIBLE.IN OUR CONSIDERED VIEW, THIS MATTER NE EDS TO BE SET ASIDE TO THE FILE OF THE A.O. AND THE ASSESSEE IS DIRECTED TO A PPEAR BEFORE THE A.O. WITH ALL THE SUPPORTING MATERIAL TO PROVE THE BASIS AND WORK ING OF VOLUNTARY DISALLOWANCE OF PROFESSIONAL FEE OF RS. 44.950/- U/ S 40(A)(IA) OF THE ACT READ WITH SECTION 194J OF THE ACT SO THAT THE DOUBLE ADD ITIONS CAN BE ELIMINATED. THE A.O. IS ALSO DIRECTED TO PROVIDE THE DETAILS AN D WORKING OF DISALLOWANCE OF PROFESSIONAL FEE OF RS. 63,650/- SO THAT THE RECONC ILIATION OF BOTH THE WORKINGS IS UNDERTAKEN AND NO DOUBLE ADDITIONS OF THE SAME I NCOME BE MADE WHICH IS NOT PERMISSIBLE UNDER THE PROVISIONS OF THE ACT. W E ORDER ACCORDINGLY. WITH RESPECT TO THE OTHER EXPENSES PERTAINING TO MO TOR CAR AND TELEPHONE OF 20% DISALLOWED BY THE REVENUE, IT IS OBSERVED THAT THE ASSESSEE FIRM HAS DULY PAID THE FBT ON THESE EXPENSES , THE DETAILS OF WHI CH ARE PRODUCED VIDE PAPER BOOK PAGE 31 AND PLACED ON RECORD WHICH IS PART OF THE TAX AUDIT REPORT. IN OUR CONSIDERED VIEW, IF THE SAID EXPENSES ARE SUBJE CTED TO FBT , NO FURTHER DISALLOWANCE IS CALLED FOR IN THE ABSENCE OF ANY IN CRIMINATING MATERIAL ON RECORD. NO DEFECTS HAVE BEEN POINTED OUT BY THE A. O. IN THE ASSESSMENT ORDER DATED 24-12-2010 U/S 143(3) OF THE ACT WHILE MAKING DISALLOWANCE WHICH WAS MADE BASED ON ESTIMATES AND THE SAME WAS CONFIRMED BY THE LD. CIT(A) IN HIS APPELLATE ORDER WITHOUT BRINGING ON RECORD ANY COGENT INCRIMINATING MATERIAL ON RECORD MERELY ON ESTIMATES, HENCE IN O UR CONSIDERED VIEW ON THE FACTS AND CIRCUMSTANCES OF THE CASE, NO DISALLOWANC E IS CALLED FOR AND IS ORDERED TO BE DELETED. WE ORDER ACCORDINGLY. ITA 7188/MUM/2013 20 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FIRM IN ITA N0. 7188/MUM/2013 FOR THE ASSESSMENT YEAR 2008-09 IS PA RTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE , 2016. # $% &' 29-06-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 9-06-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI DB BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI