M/s Balaji Solvents, Hyderabad V. ITO, Hyderabad

ITA 742/HYD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59097 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-12-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 03-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.M. & SMT. ASHA VIJAYARAGHAVAN, J.M. ITA NO.742/HYD/2009 ASSESSMENT YEAR 2005-06 M/S BALAJI SOLVENTS, HYDERABAD VS THE ITO, WARD 11(4), HYDERABAD (PAN AAFB6161C) APPELLANT RESPONDENT APPELLANT BY : SHRI K.A. SAI PRASAD RESPONDENT BY : SMT. NIVEDITA BISWAS, DR DATE OF HEARING : 19.12.2011 DATE OF PRONOUNCEMENT : 6.1.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT(A) VI, HYDERABAD DATED 13.3.2009 AND IT PERTAINS TO THE ASSESSMENT YEAR 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF PURIFICATION OF METHANOL AND MANUFACTUR E OF DRUG INTERMEDIARIES. IT HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 ON 01.11.2005 DECLARING TOTAL INCOME OF RS. 3,62,160/- SINCE THE ASSESSEE DID NOT COMPLY WITH THE NUMBER OF NOTICES THE ASSESSING OFFICER, BASED ON HIS BEST JUDGEMENT DISALLOWED DEPRECIATION AMOUNTING TO RS.13,42,725/, DISALLOWED 5% OF THE EXPENDITURE CLA IMED IN TRADING AND PROFIT AND LOSS ACCOUNT AMOUNTING TO RS.7,23,427/- AND ALSO INVOKED THE PROVISIONS OF SECTION 184(5) AND DISALLOWED INTERES T AMOUNTING TO RS.13,01,767/- AND REMUNERATION TO PARTNERS AMOUNTI NG TO RS.3,60,000/- ITA NO.742/HYD/2009 M/S BALAJI SOLVENTS, HYDERABAD 2 3. THE CIT(A) PARTLY CONFIRMED THE ORDER OF THE A SSESSING OFFICER AND GAVE RELIEF TO THE ASSESSEE WITH RESPECT TO CLA IM OF DEPRECIATION WITH RESPECT OF OLD ASSETS. THE CIT(A) CONFIRMED DISALLO WANCE WITH REGARD TO REMUNERATION PAID TO PARTNERS AND INTEREST PAID TO PARTNERS AND ALSO CONFIRMED DISALLOWANCE OF 5% OF THE TOTAL EXPENSES MADE BY THE ASSESSING OFFICER. 4. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEF ORE US. 5. THE AO HAS NOT REJECTED THE ACCOUNTS. HE HAS N OT ESTIMATED THE PROFITS OF THE ASSESSEE BUT HAS ACCEPTED THE ASSESS EES COMPUTATION OF INCOME BUT HAS MERELY DISALLOWED DEPRECIATION, 5% O F EXPENDITURE, INTEREST AND REMUNERATION PAYABLE TO THE PARTNERS FOR WANT O F PARTICULARS. HENCE THE AO WAS NOT RIGHT IN MAKING THE ASSESSMENT BUT SHOUL D HAVE MADE THE ASSESSMENT U/S 143(3), SUBJECT TO THE DISALLOWANCES . HE WAS NOT RIGHT IN APPLYING THE PROVISIONS OF SEC 185(4). THE CIT(A) H AS DIRECTED THE ALLOWANCE OF DEPRECIATION, WHICH HAS BEEN ACCEPTED BY THE DEP ARTMENT. AS REGARDS 5% DISALLOWANCE OF EXPENDITURE, SINCE THE ASSESSEE FAI LED TO PRODUCE THE BOOKS NOR EVIDENCE FOR VERIFICATION OF THE EXPENSES, ESTI MATION MADE BY THE AO AND CONFIRMATION WITH THE CIT(A) IS REASONABLE. NO FURT HER EVIDENCE WAS FURNISHED AND HENCE ADDITION OF RS.723427/- BY WAY OF DISALLOWANCE OF 5% OF THE EXPENSES IS CONFIRMED. 6. THIS LEAVES US WITH DISALLOWANCE OF REMUNERATI ON AND INTEREST PAYABLE TO PARTNERS. WE FIND THAT ONE OF THE PARTNE RS SRI V.VENKATESWARLU (INDL) HAS INVESTED RS.12,40,000/- DURING THE FY 20 04-05. COPY OF THE SAID PARTNERS BANK ACCOUNT NO. 14698 IN ANDHRA BANK ENCL OSED IN THE PAPERS BOOK, WHEREIN RS.15,00,000/- WITHDRAWN BY HIM FROM M/S. BALAJI PHARMACEUTICALS IS REFLECTED AND WITHDRAWALS WHEREF ROM WHERE INVESTED IN M/S. BALAJI SOLVENTS. THEREFORE THE SOURCE OF PARTN ERS INVESTMENT HAS BEEN PROVED. THE AO SHALL VERIFY WHETHER THE PAYMENT WAS IN ACCORDANCE WITH THE TERMS OF THE PARTNERSHIP DEED AND IF SO ALLOW THE S AME. ITA NO.742/HYD/2009 M/S BALAJI SOLVENTS, HYDERABAD 3 7. WE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. WE DIRECT THE AO TO MAKE THE ASSESSMENT U/S 143(3): VERIFY THE PAYMENTS OF INTEREST AND REMUNERATION PAYABLE TO TH E PARTNERS U/S 40(B) AND IF THEY IN ACCORDANCE WITH THE TERMS OF PARTNER SHIP ALLOW THE SAME. HE SHALL GIVE REASONABLE OPPORTUNITY TO THE ASSESSEE A ND THE ASSESSEE SHALL COOPERATE WITH THE AO AND FILE NECESSARY DOCUMENTS / EVIDENCE IN SUPPORT OF THE SAME. 8. IN THE RESULT THE ASSESSEE APPEAL IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT 6. 1.2012 SD/- SD/- (CHANDRA POOJARI) ( (ASHA VIJAYA RAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 6 TH JANUARY, 2012 COPY FORWARDED TO: 1. C/O CH. PARTHASARATHY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1, HYDERABAD 2. THE ITO, WARD 11 (4), HYDERABAD 3. THE CIT(A)-VI, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/