M/s. Akshar World Travels, Gandhinagar V. The Income tax Officer,Ward-1, Gandhinagar

ITA 73/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94244 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 11-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Assessee Lawyers: M K PATEL
• Section: 143(3); 234B; 148; 6

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NO.73/AHD/2012 / ASSTT. YEAR: 2005-2006 M/S.AKSHAR WORLD TRAVELS PLOT NO.868 VISHWAKARMA SHOPPING ENTRE SECTOR 21 GANDINAGAR 382 021. VS ITO, WARD - 1 GANDHINAGAR. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL REVENUE BY : SHRI D.C. MISHRA, SR.DR / DATE OF HEARING : 11/08/2015 / DATE OF PRONOUNCEMENT: 13/08/2015 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF THE LD.CIT(A), GANDHINAGAR DATED 17.10.2011 PASSED FOR ASSTT.YEAR 2005- 06. 2. THE ASSESSEE HAS TAKEN SEVEN GROUNDS OF APPEAL. IN GROUND NO.1, THE ASSESSEE PLEADED THAT THE ASSESSMENT ORDER IS N OT SUSTAINABLE IN THE EYES OF LAW, BECAUSE NOTICE UNDER SECTION 143(2 ) WAS NOT ISSUED WITHIN THE STATUTORY TIME LIMIT. IN GROUND NO.2 AN D 3, THE ASSESSEE HAS CHALLENGED REOPENING OF THE ASSESSMENT BY ISSUANCE OF A NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THESE GROUNDS OF APPEAL, HENCE, THESE ARE REJECTED. ITA NO.73/AHD/2012 2 3. THE GROUND NOS.4 AND 5 ARE INTER-CONNECTED TO EA CH OTHER. IN THESE GROUNDS, THE ASSESSEE HAS PLEADED THAT THE LD .CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.2,91, 285/- AND REMUNERATION OF RS.3,13,430/- PAID TO THE PARTNERS. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 31.10.2005 DECLARING TOTAL INCOME AT RS.3 ,06,164/. THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) ON 17.9.2007. THE ASSESSMENT HAS BEEN REOPENED BY ISSUANCE OF NOTICE UNDER SECTION 148 ON 15.3.2010. ACCORDING TO THE AO, THERE WAS CHANG E IN THE PARTNERSHIP DEED. ONE OF THE PARTNERS DIED, AND ON 19.1.2005 A NEW PARTNER WAS ADMITTED IN PLACE OF ERSTWHILE PARTNER. THE ASSESSEE FAILED TO SUBMIT NEW PARTNERSHIP DEED ALONG WITH RETURN OF INCOME, THEREFORE, REMUNERATION PAID TO THE PARTNERS AND INTEREST, CAN NOT BE ALLOWED IN VIEW OF SECTION 184 R.W.S. 185 OF THE INCOME TAX AC T. THE LD.AO, IN THIS WAY DISALLOWED THE INTEREST PAID TO THE PARTNERS AT RS.2,91,2852/- AND REMUNERATION OF RS.3,13,430/-. 5. ON APPEAL, THE FIRST APPELLATE AUTHORITY HAS CON FIRMED THE DISALLOWANCE BY OBSERVING AS UNDER: . ONCE THE LAW IS SUCH THAT NON-FILING OF PARTNERSHI P DEED LEADS TO CONSEQUENTIAL MANDATORY ASSESSMENT AND DISALLOWANCE S U/S.185, THERE IS NO OTHER OPTION BUT TO DISALLOW THE CLAIM OF INTEREST AND REMUNERATION ETC. UNDER SEC. 185, THE DEDUCTION OF EXPENSES LIKE INTEREST, SALARY ETC., HAS TO BE DENIED FOR THE EN TIRE ASSESSMENT YEAR ONCE THE PROVISIONS OF SEC. 184 ARE NOT COMPLI ED. THERE IS NO AMBIGUITY IN THE PROVISIONS OF THIS SECTION. TH E APPELLANTS PLEA THAT SUCH EXPENSES COULD HAVE BEEN DISALLOWED ONLY FOR THE PERIOD AFTER CHANGE IN CONSTITUTION OF THE FIRM IS NOT LEGALLY VALID AND IS DISMISSED. 6. BEFORE US, THE LD.COUSNEL FOR THE ASSESSEE ON TH E STRENGTH OF JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT RENDERE D IN THE CASE OF CIT VS. S.R. BALIBOI & ASSOCIATES, 230 TAXMAN 438 (CALC UTTA) CONTENDED ITA NO.73/AHD/2012 3 THAT THE FILING OF PARTNERSHIP DEED ALONG WITH RETU RN OF INCOME IS DIRECTORY CONDITION. IF THE ASSESSEE HAS FILED IT DURING THE ASSESSMENT PROCEEDINGS, THEN IT WILL BE CONSTRUED AS SUFFICIEN T COMPLIANCE. HE PRAYED THAT THE INTEREST AND REMUNERATION PAID TO T HE PARTNERS AND DISALLOWED BY THE AO BE DELETED. 7. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDER OF THE AO. 8. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTAN CES, WE FIND THAT THE HONBLE CALCUTTA HIGH COURT HAS HELD THAT THE F ILING OF THE PARTNERSHIP DEED ALONG WITH RETURN AS CONTEMPLATED IN SECTION 184 IS A DIRECTORY. IF THE ASSESSEE HAS FILED THE PARTNERSH IP DEED DURING THE ASSESSMENT PROCEEDINGS, THEN, IT WILL BE CONSTRUED THAT THE ASSESSEE HAS COMPLIED WITH THE CONDITIONS OF SECTION 184. T HE ASSESSEE HAS FILED THE COPY OF NEW DEED DURING THE REGULAR ASSESSMENT PROCEEDINGS. IT IS DISCERNIBLE FROM THE SUBMISSION MADE BY THE ASSESSE E AND REPRODUCED BY THE LD.CIT(A). THE HONBLE HIGH COURT HAS TAKEN NOTE OF THE DISCUSSION MADE BY THE ITAT, AND THEREAFTER, OBSERV ED AS UNDER: ....... [ITAT ORDER] WE ARE ALSO OF THE CONSIDERED VIEW THAT THE FILING OF THE REVISED/CHANGED INSTRUMENT OF PARTNERSHIP DEED ALON G WITH THE RETURN IS DIRECTORY IN NATURE AND IT CAN BE FILED A T ANY TIME BEFORE COMPLETION OF THE ASSESSMENT BY THE A.O. WE DO NOT AGREE WITH THE LD. D.R. THAT AFTER THE AMENDMENT BY THE FINANC E ACT, 2003, NON FILING OF INSTRUMENT OF PARTNERSHIP DEED ALONG WITH THE RETURN WILL MAKE THE CLAIM OF THE ASSESSEE ILLEGAL SO AS T O DENY THE CLAIM OF THE ASSESSEE THOUGH THE REQUISITE DETAILS AND TH E EVIDENCE IS MADE AVAILABLE TO THE A.O. BEFORE HE COMPLETES THE ASSESSMENT. THE HON'BLE DELHI HIGH COURT HAS ALSO HELD IN THE C ASE OFREMFRY & SONS V. CIT [276 ITR - 1] THAT NON FILING OF THE PA RTNERSHIP DEED IS AN IRREGULARITY AND IS A CURABLE DEFECT, WHICH GETS CURED BY FILING THE SAME IN THE ASSESSMENT PROCEEDINGS. FURTHER THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JOSHI AND CO. V. CIT [162 ITR 268] HAS OBSERVED THAT NON-ACCOMPANYING OF THE INSTRUMENT OF PARTNERSHIP COULD ONLY BE HELD TO BE DEFECTIVE A ND THE INCOME TAX OFFICER OUGHT TO HAVE CALLED UPON THE ASSESSEE TO MAKE THE ITA NO.73/AHD/2012 4 DEFECT, THE HON'BLE GUJRAT HIGH COURT IN THE CASE O F BILLIMORA ENGINEERING MART V. CIT 153] OBSERVED AS UNDER HEAD NOTE : 'IN THE ACT OF 1961, THE REQUIREMENT IS THAT A PART NERSHIP DEED SHOULD BE EVIDENCED BY AN INSTRUMENT AND THE APPLICATION SHALL BE ACCOMPANIED BY THE ORIGINAL IN STRUMENT EVIDENCING THE PARTNERSHIP AT THE DATE OF THE APPLI CATION. THE WORDS, 'EVIDENCED BY AN INSTRUMENT OF PARTNERSH IP' DO NOT INDICATE NECESSARILY THAT THE EVIDENCE SHOULD B E A CONTEMPORANEOUS EVIDENCE WHEN THE APPLICATION IS MA DE, BECAUSE, IN THE ULTIMATE ANALYSIS, THE PURPOSE OF A NY EVIDENCE, AND FOR THAT MATTER THE INSTRUMENT OF PAR TNERSHIP, IS TO SATISFY THE AUTHORITY THAT THERE WAS A GENUIN E AND VALID PARTNERSHIP IN EXISTENCE IN THE ACCOUNTING YEAR. PR OCEDURAL LAW IS ALWAYS TO BE CONSTRUED AND APPLIED IN A MANN ER SO AS TO MAKE IT A HAND MAID TO THE CAUSE OF JUSTICE, AND IT CANNOT BE TREATED AS A SUBSTANTIVE PROVISION SO AS TO DEFE AT THE RIGHTS OF THE PARTIES. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE FINDING OF THE LD. CIT(A) TO HOLD THAT THE NON-FILING OF TH E INSTRUMENT OF CHANGE IN THE PARTNERSHIP DEED ALONG WITH THE RETUR N FILED BY THE ASSESSEE BUT FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WILL DISENTITLE THE ASSESSEE TO CLAIM THE REMUNERAT ION PAID TO THE PARTNERS, WHICH IS PAID IN ACCORDANCE WITH THE PROV ISIONS OF THE DEED OF PARTNERSHIP AND THE PROVISIONS OF THE ACT. IN VIEW OF THE ABOVE, WE HOLD THAT THE LD. CIT(A) H AS RIGHTLY DELETED THE DISALLOWANCE OF RS. 4,49,60,000/- MADE BY THE A.O. HENCE, WE REJECT THE GROUND NO.1 OF THE APPEAL TAKE N BY THE DEPARTMENT.' [HONBLE HIGH COURT ORDER] IT IS THIS ORDER WHICH IS UNDER CHALLENGE. 7. MRS. DAS DE, LEARNED ADVOCATE APPEARING FOR THE APPELLANT REITERATED THE SUBMISSIONS ADVANCED BEFORE THE LEAR NED TRIBUNAL THAT SECTION 185 IS EMPHATIC AND ALSO STARTS WITH A NON-OBSTANTE CLAUSE. THEREFORE, OMISSION ON PART OF THE ASSESSEE TO COMPLY WITH THE REQUIREMENT OF SUB-SECTION 4 OF SECTION 18 4 PRECLUDES THE ASSESSEE FROM CLAIMING ANY DEDUCTION BY WAY OF SALARY PAID TO THE PARTNERS. SHE CONTENDED THAT THE LEARNED TRIBUN AL ERRED IN TAKING A VIEW WHICH IS PLAINLY CONTRARY TO THE SECT ION NAMELY SECTION 185. WE HAVE NOT BEEN IMPRESSED BY SUCH SUB MISSION. 8. WE ARE OF THE OPINION THAT THE VIEW TAKEN BY THE LEARNED TRIBUNAL IS THE CORRECT VIEW. WE MAY ADD FURTHER RE ASONS WHY THE VIEW TAKEN BY THE LEARNED TRIBUNAL IS UNIMPEACHABLE . THE ASSESSEE IS REQUIRED TO FILE RETURN UNDER SUB-SECTI ON 1 OF SECTION ITA NO.73/AHD/2012 5 139 WITHIN THE TIME PRESCRIBED THEREIN. WHAT IS THE TIME PRESCRIBED HAS BEEN DEALT WITH IN EXPLANATION 2 APP ENDED TO SUB- SECTION 1 OF SECTION 139. THIS REQUIREMENT OF LAW H AS TO BE HELD SUBJECT TO THE PROVISION OF SUB-SECTION 4 WHICH PER MITS AN ASSESSEE TO FILE A RETURN AT ANY TIME BEFORE THE EX PIRY OF ONE YEAR FROM THE END OF RELEVANT ASSESSMENT YEAR OR EVEN BE FORE THE COMPLETION OF THE ASSESSMENT WHICHEVER IS EARLIER. 9. THE APEX COURT IN THE CASE OF CIT V. KULU VALLEY TRANSPORT CO. (P.) LTD., [1970] 77 ITR 518 HELD THAT SUB-SECT ION 3 OF SECTION 22 IS TO BE READ AS A PROVISO TO SUB-SECTION 1 OF S ECTION 22. SUB- SECTION 1 OF SECTION 22 IS IN PARI MATERIA WITH SUB -SECTION 1 OF SECTION 139. 10. THE RELEVANT PORTION OF THE SAID JUDGMENT READS AS FOLLOWS : 'IT CAN WELL BE SAID THAT SECTION 22(3) IS MERELY A PROVISO TO SECTION 22(1). THUS, A RETURN SUBMITTED AT ANY TIME BEFORE ASSESSMENT IS MADE IS A VALID RETURN. IN CONSIDERIN G WHETHER A RETURN MADE IS WITHIN TIME SUB-SECTION (1 ) OF SECTION 22 MUST BE READ ALONG WITH SUB-SECTION (3) OF THAT SECTION. A RETURN WHETHER IT IS A RETURN OF INCOME, PROFITS OR GAINS OR OF LOSS MUST BE CONSIDERED AS HAVING BEEN MADE WITHIN THE TIME PRESCRIBED IF IT IS MADE WITHIN THE TIME SPECIFIED IN SECTION 22(3). IN OTHER WORDS IF SECTI ON 22(3) IS COMPLIED WITH SECTION 22(1) MUST ALSO BE HELD TO HA VE BEEN COMPLIED WITH. IF COMPLIANCE HAS BEEN MADE WITH THE LATTER PROVISION THE REQUIREMENTS OF SECTION 22(2A) WOULD STAND SATISFIED.' 11. MRS. DAS DE HAS NOT DISPUTED BEFORE US THAT THE ASSESSEE COULD HAVE FILED HIS RETURN ALONG WITH THE CERTIFIE D COPY OF THE INSTRUMENT OF CHANGE WITHIN THE PERIOD PRESCRIBED B Y SUB-SECTION 4 OF SECTION 139. IN THAT CASE, THE RETURN WOULD HA VE BEEN PERFECTLY VALID AND THERE WOULD HAVE BEEN NO VIOLAT ION OF SUB- SECTION 4 OF SECTION 184. BUT BECAUSE THE ASSESSEE FILED THE INSTRUMENT OF CHANGE BEFORE THE DAY ON WHICH THE AS SESSEE COULD HAVE FILED UNDER SUB-SECTION 4 OF SECTION 139, THE RETURN IS TO BE TREATED AS INVALID, IS A SUBMISSION WHICH WE ARE IN A POSITION TO ACCEPT. 12. THE RECORDS REVEAL THAT A PRAYER WAS MADE BEFOR E THE ASSESSING OFFICER ON BEHALF OF THE ASSESSEE TO TREA T THE RETURN AS A DEFECTIVE RETURN BECAUSE THE INSTRUMENT OF CHANGE I N THE PARTNERSHIP DEED WAS NOT ANNEXED TO THE RETURN. IN THAT CASE, THE ASSESSEE WOULD BE ENTITLED TO AN OPPORTUNITY TO CUR E THE DEFECT. THE ASSESSING OFFICER REFUSED TO TREAT THE RETURN A S A DEFECTIVE RETURN. ONCE HE REFUSED TO TREAT THE RETURN AS A DE FECTIVE ONE HE COULD NOT HAVE ALSO HELD THAT THE RETURN WAS IN DER OGATION OF SUB- ITA NO.73/AHD/2012 6 SECTION 4 OF SECTION 184 OF THE ACT NOR COULD HE IN THAT CASE HAVE REFUSED TO ALLOW THE DEDUCTIONS. IF, ON THE CONTRAR Y, HE HAD HELD THAT THE RETURN WAS DEFECTIVE, THEN UNDER SUB-SECTI ON 9 OF SECTION 139 THE ASSESSEE WOULD GET A CHANCE TO CURE THE DEF ECT. IN EITHER CASE, THE RESULT IS THAT SECTION 185 READ WITH SECT ION 184, ALTHOUGH WORDED IN EMPHATIC TERMS, IS NOT INTENDED TO BE A MANDATORY PROVISIONS. 13. FOR THE AFORESAID REASONS, THE QUESTION IS ANSW ERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. 14. THE APPEAL IS, THUS, DISPOSED OF. 9. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONB LE CALCUTTA HIGH COURT IN THE CASE OF S.R.BALIBOI & ASSOCIATES (SUPR A), WE DELETE THE DISALLOWANCE MADE BY THE LD.AO. 10. IN GROUND NO.6 THE ASSESSEE HAS CHALLENGED THE CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT. THE CHARGI NG OF INTEREST IS CONSEQUENTIAL IN NATURE. HENCE, THIS GROUND IS REJ ECTED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 13 TH AUGUST, 2015 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER