M/s Demarte Silk & Sarees, Ludhiana V. ITO, W-VII(1), Ludhiana

ITA 760/CHANDI/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4130 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 24-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHANDRAKANTA SR DR
• Keywords: Salary income; TDS
• Section: 40(b); 40(a)(ia); 194C; 143(1)

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CHES, SMC CHANDIGARH .., ! BEFORE: SHRI. N.K.SAINI, VICE PRESIDENT ./ ITA NO. 760/CHD/2018 / ASSESSMENT YEAR : 2012-13 M/S DEMARTE SILK AND SAREES, 92, SURYA KIRAN BUILDINGS, MALL ROAD, CIVIL LINES LUDHIANA THE ITO WARD-7(1) LUDHIANA ./ PAN NO:AADFD5948B / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI PARIKSHIT AGGARWAL, CA # ! ' / REVENUE BY : SMT. CHANDRAKANTA, SR. DR $ % ! &/ DATE OF HEARING : 17/07/2019 '()* ! &/ DATE OF PRONOUNCEMENT : 21/08/2019 '#/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DT. 05/03/2018 OF LD. CIT(A)-3, LUDHIANA. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THAT THE IMPUGNED ORDER IS AGAINST FACTS AND LAW . 2. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , THE WORTHY CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF SAL ARY TO PARTNERS OF RS. 2,52,000/- BY ERRONEOUSLY HOLDING THAT THE SAME HAS NOT BEEN P AID ACCORDING TO THE TERMS OF PARTNERSHIP DEED EVEN WHEN THE ORIGINAL PARTNERS HIP DEED AND ADDENDUM THERETO WERE DULY PRODUCED BY THE APPELLANT FIRM. 3. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RETAINERSHI P EXPENSES OF RS. 3,00,000/- PAID ON ACCOUNT OF TECHNICAL AND PROFESSIONAL SERVI CES TO 2 PERSONS NAMELY DALJEET SINGH AND PAWAN KUMAR EVEN WHEN THE SAME WE RE DULY OFFERED TO TAX IN THE RETURN OF INCOME BY THOSE PERSONS AND THE AMOUN TS WERE PAID IN LIEU OF SERVICES RENDERED BY THEM. 4. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF 1 / 5 TH OF THE TOTAL CLAIMED EXPENSES OF RS. 6,04,300/- I.E. RS. 1,20,860/- IN RELATION TO VEHIC LES OF THE APPELLANT FIRM BY HOLDING THEM TO BE OF PERSONAL NATURE. 5. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1,00,00 0/- OUT OF TOTAL CLAIMED EXPENSES OF RS. 6,13,924/- ON ESTIMATED BASIS RELAT ED TO VARIOUS OFFICE EXPENSES BY HOLDING THEM TO BE PARTIALLY UNVOUCHED. 2 6. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 19,68 3/- U/S 36(1)(III) ON ACCOUNT OF ADVANCE OF RS. 1,64,030/- BY APPLYING NOTIONAL INTE REST RATE OF 12% P.A. 7. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITION , DELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE SAME. 3. GROUND NOS. 1 & 7 ARE GENERAL IN NATURE AND GROU ND NO. 4 TO 6 WERE NOT PRESSED SO THESE GROUNDS DO NOT REQUIRE ANY COMMENT ON MY PART. 4. VIDE GROUND NO. 2, THE GRIEVANCE OF THE ASSESSEE RELATES TO THE CONFIRMATION OF DISALLOWANCE OF RS. 2,52,000/- PAID AS SALARY TO THE PARTNERS. 4.1 THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT THE ASSESSEE FILED ITS RETURN OF INCOME ON 28/09/2012 DECLARING THE INCOME OF RS. 5, 45,720/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX AC T, 1961 (HEREINAFTER REFERRED TO AS ACT), LATER ON THE CASE WAS SELECT ED FOR SCRUTINY. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE HAD DEBITED SALARY TO THE PARTNERS AT RS. 4,32,000/- I.E; RS. 1,44,000/- EACH TO SHRI JAIMAL SINGH, SHRI PARVINDERPAL SINGH AND SHRI AMANPREET SINGH. HE ASKED THE ASSESSEE TO FURNISH THE COPY OF THE PARTN ERSHIP DEED. FROM THE SAID PARTNERSHIP DEED THE A.O. NOTICED THAT AS PER TERMS OF THE PARTNERSHIP DEED SALARY TO EACH OF THE PARTNERS WOULD BE RS. 5,000/- PER MONTH. HE ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY EXCESS SALARY CLAI MED MAY NOT BE DISALLOWED. IN RESPONSE THE ASSESSEE SUBMITTED THAT ADDENDUM PA RTNERSHIP DEED WAS MADE ON 01/04/2011 TO INCLUDE A CLAUSE, ACCORDING T O WHICH SALARY @ RS. 12,000/- PER MONTH WAS ALLOWED (COPY OF THE SAID AD DENDUM PARTNERSHIP DEED WAS FURNISHED WHICH HAS BEEN REPRODUCED BY THE A.O. AT PAGE NO. 6 OF THE ASSESSMENT ORDER DT. 13/02/2015). IT WAS ALSO CLAIM ED THAT SALARY PAID BY THE ASSESSEE HAD BEEN SHOWN BY THE PARTNERS IN THEIR RE SPECTIVE RETURN OF INCOME. THE A.O. HOWEVER DID NOT FIND MERIT IN THE SUBMISSI ONS OF THE ASSESSEE AND MADE THE DISALLOWANCE OF RS. 2,52,000/- BY OBSERVING IN PARA 2.8 OF THE ASSESSMENT ORDER DT. 13/02/2015 AS UNDER: 2.8 FROM THE ABOVE FACTS, IT IS EVIDENT THAT THE CO NTENTION OF THE ASSESSEE IS NOT ACCEPTABLE AS THE SAME HAS NO FORCE. AS PER THE PROVISIONS OF SECTION 40(B)(V) OF THE INCOME TAX ACT 1961, NO DEDUCTION W ILL BE ADMISSIBLE IF THE AMOUNT OF REMUNERATION PAYABLE TO EACH WORKING PART NER IS NOT SPECIFIED IN THE PARTNERSHIP DEED. IN THE CASE OF THE ASSESSEE, AS P ER THE PARTNERSHIP DEED, IT HAS BEEN QUANTIFIED & SPECIFIED THAT SALARY OF RS. 5,00 0/- WILL BE GIVEN TO THE PARTNERS WHOSE NAMES HAVE BEEN ALSO MENTIONED THEREIN. THERE FORE, SALARY OF RS. 1,80,000/- ( 60,000 X3) IS ALLOWABLE TO THE ASSESSE E CONCERN IN ACCORDANCE WITH TERMS OF PARTNERSHIP DEED AND EXCESS SALARY CLAIMED AT RS. 2,52,000/-(4,32,000- 1,80,000) IS DISALLOWED AND ADDED BACK TO THE INCOM E OF THE ASSESSEE IN VIEW OF THE FOLLOWING FACTS:- 3 (I) LIMITS OF SALARY TO THE WORKING PARTNERS HAVE B EEN SPECIFIED IN THE PARTNERSHIP DEED THAT SALARY OF 5,000/- PER MONTH W ILL BE GIVEN TO THREE PARTNERS. HENCE, EXCESS SALARY CLAIMED IS TO DISALLOWED. (II) THE ASSESSEE HAS WILLFULLY FAILED TO PRODUCE T HE LEGIBLE COPY OF PARTNERSHIP DEED AND FURNISHED ONLY AFTER RECEIVING FINAL OPPORTUNITY-FROM THIS OFFICE. (III) THE ASSESSEE PRODUCED A COPY OF ADDENDUM ONLY AFTER RECEIVING THE FINAL SHOW CAUSE NOTICE THAT WHY EXCESS SALARY BE NOT DIS ALLOWED IN VIEW OF THE PROVISIONS OF THE PARTNERSHIP DEED. FROM THESE FACT S, IT IS EVIDENT THAT THE SO CALLED ADDENDUM HAS BEEN PREPARED AFTER THOUGHT. (IV) THE SAID ADDENDUM HAS BEEN CLAIMED TO MADE ON 01.04.2011 WHEREAS DOCUMENT ON WHICH THE SAME HAS BEEN WRITTEN IS PURC HASED ON 01.12.2002, THIS SHOWS THAT THIS IS AFTER THOUGHT EXERCISE. (V) THE ASSESSEE FAILED TO PRODUCE THE ORIGINAL ADD ENDUM IN THIS OFFICE FOR VERIFICATION. (VI) DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSE E WAS AGAIN 8S AGAIN REQUESTED TO FURNISH THE LEGIBLE COPY OF PARTNERSHI P DEED BUT THE ASSESSEE NEVER STATED THAT AN ADDENDUM IS ALSO MADE. THE ASSESSEE ONLY CAME OUT WITH THE PLEA THAT AN ADDENDUM WAS MADE AFTER RECEIVING THE SHOW CAUSE NOTICE FOR DISALLOWING THE EXCESS SALARY CLAIMED. 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND FURNISHED THE WRITTEN SUBMISSIONS WHICH HAD BEEN IN CORPORATED BY THE LD.CIT(A) IN PARA 4.1 OF THE IMPUGNED ORDER AND READ AS UNDER : IT IS SUBMITTED THAT DURING THE YEAR IN QUESTION TH E APPELLANT FIRM, DEBITED THE PARTNER'S SALARY OF RS. 4,32,000/- TO ITS PROFIT & LOSS A/C DULY CONFORMING TO THE PROVISIONS OF SECTION 40(B) OF THE ACT. THE SALARY AT THE RATE OF RS. 12,000/- PM TO THE PARTNERS WAS PAID AS PER THE TERMS OF THE PARTN ERSHIP DEED OF THE APPELLANT FIRM. THE ORIGINAL PARTNERSHIP DEED OF THE APPELLAN T FIRM WAS MADE ON 01.12.2002 WHICH INCLUDED THE TERM OF PARTNER'S SALARY @ RS. 5 000/- PM TO ALL THE THREE PARTNERS OF THE APPELLANT FIRM WITH THE CONDITION O F FREEDOM TO CHANGE THE AMOUNT OF SALARY AS PER THE MUTUAL UNDERSTANDING OF THE PARTNERS OF THE APPELLANT FIRM. ON THE SAME DAY I.E. 01.12.2002, AN ADDENDUM TO THE PARTNERSHIP DEED WAS ALSO MADE WHICH WAS MADE TO TAKE EFFECT FR OM THE DATE 01.04.2011. THE ADDENDUM TO THE PARTNERSHIP DEED WAS MADE TO IN CREASE/REVISE THE AMOUNT OF PARTNER'S SALARY TO THE VALUE OF RS. 12,000/- PM FROM THE ALREADY EXISTING RATE OF RS. 5,000/- PM. THE TERM/CAPTION OF THE ADDENDUM CL EARLY ENTAILS THAT THE ADDENDUM PARTNERSHIP IS MADE EFFECTIVE ON 01.04.201 1 (ALTHOUGH MADE ON 01.12.2002). IN THIS POSITION, DISALLOWANCE OF SALA RY OF RS. 2,52,000/- BY LD. AO IS UNJUSTIFIED. POINT WISE SUBMISSION ON THE ALLEGATIO NS OF THE LD. AO (AS PER THE PAGE-8 OF ASSESSMENT ORDER) IS AS FOLLOWS:- 1) IT IS SUBMITTED THAT THE SALARY OF RS. 4,32,000/- C REDITED AND PAID TO THE PARTNERS OF THE APPELLANT FIRM ACCORDING TO THE LEG AL DOCUMENT I.E. PARTNERSHIP DEED (EFFECTIVE FROM 01.12.2002) AND ADDENDUM PARTN ERSHIP DEED (EFFECTIVE FROM 01.04.2011) ONLY AND NOT ACCORDING TO WISHES O F THE APPELLANT FIRM. THE SALARY AMOUNT OF RS. 4,32,000/- IS DULY AN AUTHORIZ ED AMOUNT OF SALARY. THE ORIGINAL PARTNERSHIP DEED MADE ON 01.12.2002 AUTHORIZED SALA RY AT THE RATE OFRS. 5,000/- PM AND THE ADDENDUM PARTNERSHIP WAS MADE ON 01.04.2 011 ON THE LEGAL DOCUMENT PURCHASED ON THE SAME DAY AS ON THE DAY ON WHICH PARTNERSHIP DEED OF THE APPELLANT FIRM WAS MADE I.E. 01.12.2002 WHIC H WAS MADE TO INCREASE THE AMOUNT OF SALARY TO THE PARTNERS TO RS. 12,000/- PM W.E.F. 01.04.2011 ITSELF. AND HENCE FOR THE YEAR IN QUESTION CREDIT OF PARTNER'S SALARY OF RS. 12,000/- PM TO THE 3 PARTNERS EACH WAS DULY ACCORDING TO THE ADDENDUM PA RTNERSHIP DEED. 2) IT IS SUBMITTED THAT THE SALARY TO PARTNERS EXPENSE OF RS. 4,32,000/- IS GENUINELY CLAIMED EXPENSE AS THE SAME IS SUPPORTED BY LEGAL D OCUMENTS I.E. PARTNERSHIP DEED AND ADDENDUM TO PARTNERSHIP DEED. FURTHER, IT IS SUBMITTED THAT BOTH OF THE 4 DOCUMENTS ARE VALID DOCUMENTS SIGNED AND ATTESTED B Y ALL THE PARTNERS OF THE APPELLANT FIRM, BY WITNESSES AND BY NOTARY PUBLIC. FURTHER, BOTH OF THESE DOCUMENTS ARE PRESENT ON RECORD WITH THE APPELLANT AND DULY FILED DURING THE ASSESSMENT PROCEEDINGS BY THE APPELLANT. IT IS A SE TTLED LAW THAT WHEN THE EXPENSE IS SUPPORTED BY DOCUMENTS AND DOCUMENTS ARE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS BY THE ASSESSEE, NO DISALLOW ANCE OF THE EXPENSE CAN BE MADE BY THE ASSESSING OFFICER. 3) IT IS VERY IMPORTANT TO NOTE THAT PARTNERSHIP DEED DULY INCLUDES THE CLAUSE AT POINT NO. 10 THAT 'THE PARTNERS SHALL BE AT LIBERTY TO INCREASE OR DECREASE THE REMUNERATION AND INTEREST PAYABLE TO THEM FROM TIME TO TIME IN THE INTEREST OF THE PARTNERSHIP BUSINESS AND PROVISION OF SECTION 40(B) SHALL APPLY TO THESE PAYMENTS. THIS CLAUSE CLARIFIES THE FACT THAT THE SALARY TO P ARTNERS MAY CHANGE IN ANY YEAR(S) AT THE SOLE DISCRETION OF THE PARTNERS OF THE APPEL LANT MUTUALLY AGREED BETWEEN THEM. HENCE, AMOUNT OF SALARY IS NOT A SPECIFIC AMO UNT BUT IS THE AMOUNT ALLOWABLE AS PER THE SECTION 40(B) OF THE ACT. THIS CLAUSE IS ALSO WRITTEN IN THE ADDENDUM TO PARTNERSHIP DEED 'THAT ALL THE PARTNERS NOW AVAILABLE ENTITLED TO RECEIVE REMUNERATION TO THE TUNE OF RS. 12,000/- EA CH PER MONTH WITH RESPECT FROM V DAY OF APRIL 2011 OR IN ACCORDANCE WITH THE PROVISIONS OF SEC 40(B) OF THE INCOME TAX ACT.' IT IS CLEAR THAT BOTH OF THESE DOC UMENTS HOLD THAT THE SALARY TO THE PARTNERS IS ALLOWABLE AS PER THE PROVISIONS OF SECTION 40(B) OF THE ACT. FURTHER, IT IS STATED THAT AS PER THE CBDT CIRCULAR NO. 739 DT. 25.03.1996, IT IS CLARIFIED BY THE BOARD THAT THE REMUNERATION TO THE PARTNERS ARE ALL OWABLE, IF THE AMOUNT OF REMUNERATION IS STATED OR THE MANNER OF CALCULATION (I.E. ALLOWABILITY AS PER THE SECTION 40(B) OF THE ACT) IS STATED IN THE LEGAL DO CUMENT. COPY OF THE CIRCULAR IS ENCLOSED. IN THE CASE OF THE APPELLANT AMOUNT OF RE MUNERATION @ RS. 12,000/- PM TO EACH PARTNER IS ALSO STATED ALONG WITH 2 ND CONDITION (ADD ON WITH THE CONDITION EITHER OF THE CONDITIONS MAY BE FOLLOWED) CONDITION OF ALLOWABILITY OF SALARY U/S 40(B) OF THE ACT. HENCE, NO DISALLOWANCE OF SALARY IS WARRANTED. 4) THE PARTNERS WERE FREE TO INCREASE THEIR SALARIES A T MUTUAL AGREEMENT. SO THEY ALSO MADE AN ADDENDUM TO PARTNERSHIP DEED TO PUT TH E QUANTUM OF THE INCREASED SALARY AMOUNT PM TO ALL PARTNERS AT A FUT URE DATE. THE ADDENDUM WAS MADE PUTTING THE CLAUSE OF INCREASED AMOUNT OF SALA RY TO PARTNERS W.E.F 01.04.2011 TO AVOID ANY AMBIGUITY. SO ADDENDUM IS N OTHING BUT A LEGAL DOCUMENT CARRYING FORWARD THE CLAUSES WRITTEN IN TH E PARTNERSHIP DEED ITSELF OF THE APPELLANT FIRM 5) THE ALLEGATION OF LD. AO IS NOT CORRECT THAT THE AP PELLANT FIRM WILLFULLY FAILED TO PRODUCE THE LEGIBLE COPY OF PARTNERSHIP DEED AND FU RNISHED THE SAME ONLY AFTER RECEIVING THE FINAL OPPORTUNITY FROM THE LD. AO'S O FFICE. IN THIS REGARD IT IS SAID THAT THE APPELLANT DULY PROVIDED THE DOCUMENTS AS EARLIE ST AS IT COULD. ON VARIOUS DATES OF HEARING, THE COUNSEL OF THE APPELLANT AND APPELLANT WERE NOT THERE IN TOWN OR WERE OCCUPIED SOMEWHERE AND THEY DULY SOUGH T ADJOURNMENTS BY SENDING THEIR OFFICIAL TO LD. AO. WHEN, NO PROCEEDI NGS WERE ATTENDED IN BETWEEN, HOW COULD THERE BE FILED ANY DOCUMENT. FUR THER, IN STARTING OF THE ASSESSMENT PROCEEDINGS, THE COUNSEL PROVIDED THE XE ROX COPY OF THE PARTNERSHIP DEED OF THE APPELLANT FIRM, BUT THE SAME GOT PHOTOC OPIED ON LIGHTER INK MODE AND WAS NOT PROPERLY LEGIBLE. IT IS NOT LIKE A WILL FUL FAILURE TO PRODUCE THE PARTNERSHIP DEED. BUT LATER WHEN LD. AO ASKED FOR T HE CLEAR XEROX COPY OF THE PARTNERSHIP DEED, THEN COUNSEL AGAIN PROVIDED THE S AME WITH BETTER PHOTOCOPY WHICH WAS MORE LEGIBLE. HENCE, NO NEGATIVE INFERENC E SHOULD BE MADE BY THE LD. AO. 6) AS REGARDS THE ALLEGATION OF NOT PROVIDING OF COPY OF ADDENDUM TILL FINAL SHOW CAUSE, IT IS SUBMITTED THAT THE APPELLANT DULY PROV IDED THE COPY OF PARTNERSHIP DEED ALONG WITH ALL DOCUMENTS TO LD. AO AT THE STAR T OF THE ASSESSMENT PROCEEDINGS. IT IS ONLY WHEN, THE LD. AO ASKED THE CLARIFICATION ABOUT THE QUANTUM OF SALARY PAID TO PARTNER OF THE APPELLANT FIRM, THE APPELLANT SUBMITTED THE COPY OF ADDENDUM OF PARTNERSHIP DEED TO THE LD. AO. WHEN, THE LD. AO ASKED ABOUT THE COPY OF ADDENDUM DEED, THE APPELLAN T IMMEDIATELY PROVIDED THE SAME TO LD. AO. IN THIS CASE, NO NEGATIVE INFER ENCE BY LD. AO IS WARRANTED AT ALL. AND THE COPY OF ADDENDUM TO PARTNERSHIP DEED D ULY STATES THAT THE SAME IS MADE ON THE DATE 01.04.2011 (ON EGAL DOCUMENT PURCH ASED WITH PARTNERSHIP DEED DOCUMENTS ON 01.12.2002). WHEN THE DOCUMENT WA S MADE ON 01.04.2011 THEN HOW CAN SAME BE THE AFTERTHOUGHT OF THE APPELL ANT. ALLEGATION OF THE LD. AO IS UNJUSTIFIED. 5 7) AS REGARDS, THE ORIGINAL ADDENDUM TO PARTNERSHIP DE ED, IT IS SUBMITTED THAT THE APPELLANT SUBMITTED DURING THE ASSESSMENT PROCEEDIN GS TOO THAT THE ORIGINAL ADDENDUM OF PARTNERSHIP DEED GOT MISPLACED BY THE A PPELLANT. EVEN AFTER LOTS OF EFFORTS, THE SAME COULD NOT BE TRACED AND HENCE, COULD NOT BE SUBMITTED. THE COPY OF THE SAME COULD BE SUBMITTED WITH LD. AO BEC AUSE THE SCANNED COPY OF ADDENDUM WAS AVAILABLE IN THE APPELLANT'S RECORDS. 8) AS ALREADY SUBMITTED THE APPELLANT PROVIDED THE COP Y OF PARTNERSHIP DEED DURING ASSESSMENT PROCEEDINGS THOUGH 1' TIME XEROX COPY WAS OF POOR QUALITY AND BECAUSE OF THAT THE PARTNERSHIP DEED WAS NOT PR OPERLY LEGIBLE. BUT IT SUBMITTED THE COPY AGAIN WITH BETTER QUALITY OF XER OX WHICH WAS PROPERLY LEGIBLE BY THE LD. AO. IT DID NOT STRIKE TO THE APPELLANT A BOUT THE SUBMISSION OF ADDENDUM TOO TO LD. AO. IT IS AFTER THE NOTICE OF L D. AO, THE APPELLANT SUBMITTED THE COPY OF ADDENDUM TO LD. AO. IT IS SUBMITTED THA T THE APPELLANT AND EVEN EVERY ASSESSEE WHILE THE INCOME TAX PROCEEDINGS DOE S NOT AUTOMATICALLY SUBMITS THE DOCUMENTS WITH A PRE-KNOWLEDGE THAT THE ASSESSI NG OFFICERS WOULD BE NEEDING THOSE DOCUMENTS, IT IS ONLY AFTER THE NOTIC E FROM THE ASSESSING OFFICERS SEEKING SOME PARTICULAR DOCUMENTS, THE ASSESSES SUB MIT THE SAME DURING ASSESSMENT PROCEEDINGS. IN SUCH CASE, NO NEGATIVE I NFERENCE MUST BE MADE BY THE LD. AO. 9) CONCLUDING THE ABOVE, IT IS SUBMITTED THAT THE W HOLE ALLEGATION ON WHICH THE ADDITION OF RS. 2,52,000/- WAS MADE BY THE LD. AO I S THAT THE APPELLANT SUBMITTED NOT LEGIBLE COPY OF PARTNERSHIP DEED INITIALLY AND LEGIBLE COPY OF PARTNERSHIP DEED AFTER NOTICE OF LD. AO AND SUBMITTED COPY OF A DDENDUM OF PARTNERSHIP DEED AFTER THE NOTICE OF THE LD. AO. IN THIS REGARD , WE SUBMIT THAT APPELLANT DULY PROVIDED THE COPY OF PARTNERSHIP DEED TWICE TO THE LD. AO. AS ALREADY SUBMITTED THAT DUE TO POOR QUALITY XEROX ONCE THE SUBMITTED C OPY WAS NOT PROPERLY LEGIBLE BUT THE APPELLANT SUBMITTED THE PROPERLY LEGIBLE XE ROX COPY AGAIN ON THE REQUEST OF LD. AO. AND ADDENDUM COPY WAS ALSO SUBMITTED AS AND WHEN ASKED FOR BY THE LD. AO. WHAT IS THE POINT OF MAKING NEGATIVE IN FERENCE IN THESE FACTS? IN THE VERY FIRST SUBMISSION REGARDING SALARY EXPENSE, THE APPELLANT SUBMITTED THAT THE SALARY PAID @ RS. 12,000/- PM IS AUTHORIZED BY THE PARTNERSHIP DOCUMENTS. WHEN THE SALARY OF RS. 12,000/- PM IS DULY AUTHORIZED BY THE ADDENDUM TO PARTNERS OF THE APPELLANT FIRM AND COPY OF THE ADDENDUM WAS FIL ED WITH THE LD. AO, THEN HOW CAN THE SAME BE TREATED AS UNAUTHORIZED AMOUNT OF SALARY PAID? PARTNERSHIP DEED AS WELL AS ADDENDUM TO PARTNERSHIP DEED BOTH IS LEGAL AND VALID DOCUMENTS SIGNED AND PREPARED BY ALL THE 3 PA RTNERS OF THE APPELLANT FIRM AND THAT TOO IN PRESENCE OF WITNESSES AND THESE DOC UMENTS ARE DULY SIGNED AND ATTESTED BY THE NOTARY PUBLIC. COPY OF BOTH THESE D OCUMENTS WAS PLACED BEFORE THE LD. AO DURING THE ASSESSMENT PROCEEDINGS ARE PR ODUCED HEREWITH TOO. IT IS SUBMITTED THAT PARTNERSHIP DEED AS WELL AS ADDENDUM HAS THE CLAUSE OF SALARY TO PARTNERS SHOWING THE QUANTUM OF SALARY TO AVOID ANY AMBIGUITY. FURTHER, SALARY PAID OF RS. 4,32,000/- (RS. 1,44,000/- TO 3 PARTNER S EACH) IS FULLY ALLOWABLE BECAUSE:- THE SALARY PAID TO PARTNERS AND DEBITED TO P & L A/ C KEEPING IN MIND THE PROVISIONS AND CALCULATION U/S 40(B) OF THE ACT. SALARY OF RS. 1,44,000/- TO EACH PARTNER ANNUALLY I S AUTHORIZED BY ADDENDUM TO PARTNERSHIP DEED WEF01.04.2011. ALL THE PARTNERS ARE INCOME TAX ASSESSES AND DECLAR ED THE SALARY INCOME IN THEIR INCOME TAX RETURNS AND ALSO SUBMITTED THE CERTIFICATE TO THIS EFFECT DURING ASSESSMENT PROCEEDINGS BEFORE ID. AO. KEEPING IN MIND THE ABOVE FACTS, SUBMISSIONS AND LE GAL POSITION, THE GROUND OF THE APPELLANT FIRM MAY PLEASE BE ALLOWED. 7. THE LD. CIT(A) HOWEVER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND SUSTAINED THE DISALLOWANCE MADE BY THE A.O. BY OBSERVING IN PARA 4.2 OF THE IMPUGNED ORDER AS UNDER: 6 4.2 I HAVE CAREFULLY CONSIDERED RIVAL SUBMISSION. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. THE APPELLANT HAS VEHEMENTLY CONT ENDED THAT THE ORIGINAL PARTNERSHIP DEED OF THE APPELLANT FIRM WAS MADE ON 01.12.2002 WHICH INCLUDED THE TERM OF PARTNER'S SALARY @ RS. 5000/- PM TO ALL THE THREE PARTNERS OF THE APPELLANT FIRM WITH THE CONDITION OF FREEDOM TO CHA NGE THE AMOUNT OF SALARY AS PER THE MUTUAL UNDERSTANDING OF THE PARTNERS OF THE APPELLANT FIRM. ON THE SAME DAY I.E. 01.12.2002, AN ADDENDUM TO THE PARTNERSHIP DEED WAS ALSO MADE WHICH WAS TO TAKE EFFECT FROM THE DATE 01.04.2011. THE AS SESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS HAS NOT CONSIDERED THE AMEND ED PARTNERSHIP DEED DATED 01.12.2002. I HAVE ALSO GONE THROUGH THE PARTNERSHIP DATED 01.1 2.2002 AND ADDENDUM TO THE PARTNERSHIP DEED ALSO STATED TO BE DATED 01.12.2002 BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER I HAVE SE EN THE AMENDED PARTNERSHIP DEED IS DATED 01.04.2011 .WHEREAS THE D OCUMENT WAS PURCHASED ON 01.12.2002. THE ASSESSEE IN HIS WRITTEN SUBMISSION HAS MENTIONED, THAT THE ADDENDUM PARTNERSHIP DEED WAS ALSO WRITTEN ON 01.12 .2002, WHICH IS NOT THE CASE. AS ON A DATE OF PARTNERSHIP DEED IT IS CLEARL Y MENTIONED THAT THE ADDENDUM PARTNERSHIP DEED IS MADE ON 1 APRIL 2011. THEREFORE THERE IS MISMATCH OF STATEMENT GIVEN BY THE ASSESSEE DURING THE COURS E OF ASSESSMENT PROCEEDINGS WITH REGARD TO THE DATE OF WRITING OFF ADDENDUM OF PARTNERSHIP DEED, WHICH IS ALSO EVIDENT FROM THE PERUSAL OF THE COPY OF ADDEND UM PARTNERSHIP DEED FILED AT THE TIME OF APPELLATE PROCEEDINGS. IN MY CONSIDERED OPINION THE ASSESSEE HAS FAILED TO CLARIFY THIS DIFFERENCE AT THE TIME OF AS SESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAS DENIED TAKE COGNIZANCE OF THE ACT IN AN ADDENDUM PARTNERSHIP DEED, STATING THAT THE DOCUMENT WAS PUR CHASED ON 01.12.2002. IN MY CONSIDERED OPINION THE DIFFERENCE OF ADDENDUM OF PA RTNERSHIP DEED ,AS STATED BY THE ASSESSEE AND AS FOUND ON THE ADDENDUM PARTNE RSHIP DEED HAS NOT BEEN EXPLAINED BY THE ASSESSEE, THEREFORE DOCUMENT CANNO T BE RELIED UPON. ACCORDINGLY THE DISALLOWANCE OF RS. 2,52,000/- ON A CCOUNT OF DISALLOWANCE OF SALARY PAID TO THE PARTNERS IS SUSTAINED. THIS GROU ND OF APPEAL IS DISMISSED. 8. NOW THE ASSESSEE IS IN APPEAL. 9. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBM ISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT AS PER CLAUSE 10 OF THE PARTNERSHIP DEED DT. 01/12/2002 THE SALARY MAY BE INCREASED OR DECREASED FROM TIME TO TIME IN THE INTEREST OF PARTNERSHIP BUSINESS AND TH AT VIDE ADDENDUM DEED DT. 01/04/2011 THE SALARY WAS INCREASED TO RS. 12,000/- EACH OF THE PARTNERS PER MONTH WITH EFFECT FROM 01/04/2011. IT WAS ALSO STAT ED THAT IN THE SUBSEQUENT YEARS THE INCREASED SALARY HAD BEEN ACCEPTED AND NO DISALLOWANCE WAS MADE. THEREFORE THE DISALLOWANCE MADE BY THE A.O. A ND SUSTAINED BY THE LD. CIT(A) FOR YEAR UNDER CONSIDERATION WAS NOT JUSTIFI ED. 10. IN HER RIVAL SUBMISSIONS THE LD. SR. DR STRONGL Y SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE TH EORY OF THE ADDENDUM DEED WAS AN AFTERTHOUGHT. 11. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN TH E PRESENT CASE THE CONTENTION OF THE ASSESSEE THAT VIDE CLAUSE 10 OF THE PARTNERS HIP DEED DT. 01/12/2002 THE SALARY MAY BE INCREASED OR DECREASED FROM TIME TO T IME IN THE INTEREST OF PARTNERSHIP BUSINESS HAS NOT BEEN REBUTTED. IT IS A LSO NOTICED THAT THE A.O. 7 HIMSELF ADMITTED IN THE ASSESSMENT ORDER THAT THE A SSESSEE FURNISHED ADDENDUM PARTNERSHIP DEED WHICH HAS BEEN REPRODUCED AT PAGE NO. 6 OF THE SAID ASSESSMENT ORDER. IN THE SAID ADDENDUM TO PARTNERSH IP DEED IT HAS BEEN MENTIONED THAT THE PARTNERSHIP DEED WAS EXECUTED ON 01/12/2002 AND W.E.F FROM 01/04/2011, THE REMUNERATION TO THE PARTNERS H AD BEEN INCREASED TO RS. 12,000 EACH PER MONTH. THE A.O. DID NOT ACCEPT THE SAID ADDENDUM DEED FOR THE REASONS THAT THE STAMP PAPERS ON WHICH THE ADDE NDUM TO PARTNERSHIP DEED WAS WRITTEN WAS DT. 01/12/2002. IN MY OPINION IT CANNOT BE A GROUND TO DISALLOW THE CLAIM OF THE ASSESSEE PARTICULARLY WHE N THE REMUNERATION CLAIMED BY THE PARTNERS WAS NOT IN EXCESS OF THE AMOUNT PRE SCRIBED IN CLAUSE (B) TO SECTION 40 OF THE ACT. MOREOVER THE CLAIM OF THE AS SESSEE THAT IN THE SUBSEQUENT YEARS THE INCREASED SALARY HAD BEEN ACCEPTED WAS NO T REBUTTED, THEREFORE BY CONSIDERING THE TOTALITY OF THE FACTS THE DISALLOWA NCE MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) IS DELETED. 12. VIDE GROUND NO. 3 THE GRIEVANCE OF THE ASSESSEE RELATES TO THE DISALLOWANCE OF RETAINERSHIP EXPENSES AMOUNTING TO RS. 3,00,000/-PAID ON ACCOUNT OF TECHNICAL AND PROFESSIONAL SERVICES TO T WO PERSONS NAMELY SHRI DALJEET SINGH AND SHRI PAWAN KUMAR. 13. FACTS RELATING TO THE ISSUE IN BRIEF ARE THAT T HE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HA D DEBITED RS. 3,00,000/- IN THE PROFIT & LOSS ACCOUNT UNDER THE HEAD RETAINERS HIP EXPENSES PAID TO SHRI DALJEET SINGH AMOUNTING TO RS. 1,20,000/- AND SH. P AWAN KUMAR AMOUNTING TO RS. 1,80,000/-. HE ASKED THE ASSESSEE TO FURNISH TH E FOLLOWING INFORMATION: (A) COPY OF AGREEMENT ENTERED INTO FOR RETAINERSHIP WITH THE ABOVE SAID PERSONS. (B) NATURE OF SERVICES RENDERED BY THE THESE PERSON S. (C) WHETHER TAX HAS BEEN DEDUCTED ON RETAINERSHIP G IVEN TO THEM AS THE ASSESSEE CLAIMED THAT AMOUNT HAS BEEN GIVEN TO THES E PERSONS FOR TECHNICAL AND PROFESSIONAL SERVICES AND TAX IS TO DEDUCTED IN VIE W OF PROVISIONS OF SECTION 194C OF THE I.T. ACT 1961. 13.1 IN RESPONSE THE ASSESSEE SUBMITTED THAT THE TA X HAD NOT BEEN DEDUCTED ON RETAINERSHIP FEE AS THE SERVICES WERE COVERED UN DER SECTION 192B AND NOT UNDER SECTION 194C OF THE ACT. THE A.O. ASKED THE A SSESSEE TO PRODUCE THE PERSONS TO WHOM RETAINERSHIP FEE WAS PAID. IN RESPO NSE THE ASSESSEE SUBMITTED THAT DURING THE FESTIVE SEASON THE ASSESSEE USED TO APPOINT PERSONS ON DISPLAY, OUTFITS, IN FRONT OF CUSTOMER AND THE RETAINERSHIP WAS AS GOOD AS SALARY. THE A.O. WAS OF THE VIEW THAT THE ASSESSEE DIVERTED ITS INCO ME IN THE HANDS OF TWO PERSONS FOR THE FOLLOWING REASONS: 8 (A) THE ASSESSEE HAS FAILED TO PRODUCE THE PERSONS TO WHOM IT HAS CLAIMED THAT RETAINERSHIP AT RS. 3,00,000/- HAS BEEN PAID I N SPITE OF REPEATED OPPORTUNITIES ALLOWED TO IT. (B) IN ITS PRELIMINARY REPLY, THE ASSESSEE CONTENDE D THAT AMOUNT OF RS. 3,00,000/- WAS PAID TO THE TWO PERSONS FOR RENDERIN G PROFESSIONAL AND TECHNICAL SERVICES BY THE TWO PERSONS. WHEN POINTED OUT BY TH IS OFFICE THAT WHETHER ANY TAX HAS BEEN DEDUCTED ON THE TECHNICAL/PROFESSIONAL FEE GIVEN AS PER PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT 1961, THE ASSESS EE CHANGED ITS VERSION THAT THE AMOUNT PAID IS SALARY WHICH FALLS U/S 192B OF T HE ACT. (C) THE ASSESSEE HAS FAILED TO FURNISH COPY OF AGRE EMENT ENTERED INTO WITH THE TWO PERSONS FOR RETAINERSHIP. (D) THE ASSESSEE HAS STATED THAT SERVICES OF THE AB OVE MENTIONED TWO PERSONS WERE TAKEN DURING THE FESTIVE SEASON ONLY. PERUSAL OF COPIES OF RETURNS OF INCOME AND COMPUTATION CHART OF THE SAID PERSONS FI LED BY THE ASSESSEE REVEALS THAT THEY HAVE SHOWN RECEIPT OF AMOUNTS RECEIVED FR OM THE ASSESSEE ONLY IN THEIR RETURNS OF INCOME AND NO OTHER INCOME HAS BEEN SHOW N. IT IS BEYOND UNDERSTANDING THAT HOW THE PERSONS FROM WHOM THE AS SESSEE HAS TAKEN TECHNICAL/PROFESSIONAL SERVICES REMAINED VACANT AND NOT EARNED ANY INCOME OTHER THAN EARNED FROM THE ASSESSEE. THEREFORE, IT IS EVIDENT THAT THE ASSESSEE HAS DIVERTED ITS INCOME IN THE HANDS OF THESE TWO PERSO NS WHICH REMAINED BELOW TAXABLE AT RS. 1,80,000/- & RS. 1,20,000/-. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: SASSOON J. DAVID & CO. (P) LTD. VS. CIT (1979) 118 ITR 261 (SC) L.H. SUGAR FACTORY & OIL MILLS (P) LTD. VS. CIT [19 80] 125 ITR 293 (SC); AND CIT VS. IMPERIAL CHEMICAL INDUSTRIES (INDIA) (P) LT D. [1969] 74 ITR 17 (SC) JASWANT TRADING CO. VS. CIT, 1995 2012 ITR 24 (P&H) ACCORDINGLY, ADDITION OF RS. 3,00,000/- WAS MADE. 14. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: DISALLOWANCE OF RETAINERSHIP FEE OF RS. 3,00,000/- PAID TO FOLLOWING 2 PERSONS IS UNWARRANTED ON FOLLOWING COUNTS: NAME OF THE PERSONS AMOUNT OF RETAINERSHIP FEE PAID (RS.) DALJEET SINGH 1,20,000/- PAWAN KUMAR 1,80,000/- TOTAL 3,00,000/- A) IT IS SUBMITTED THAT FIRST OF ALL THE ALLEGATION OF LD. AO THAT THE RETAINERSHIP FEE OF RS. 3,00,000/- HAD BEEN PAID FOR TECHNICAL AND P ROFESSIONAL SERVICES TO THE PERSONS IN QUESTION NAMELY DALJEET SINGH & PAWAN KU MAR IS NOT CORRECT. AS SUBMITTED IN THE REPLY DT. 06.02.2015 DURING ASSESS MENT PROCEEDINGS BY THE APPELLANT THAT THESE 2 PERSONS WERE HIRED DURING TH E FESTIVE SEASON TO DISPLAY THE OUTFITS IN FRONT OF THE CUSTOMERS AND THE RETAINERS HIP IS AS GOOD AS SALARY. IT IS CLEAR THAT THESE 2 PERSONS WERE HIRED FOR THE SALES BOYS WORK DURING THE PEAK PERIOD OF THE BUSINESS WHEN THERE IS HUGE RUSH OF THE CUSTOME RS AT THE APPELLANT'S SHOWROOM AND THE SALES PEOPLE ALREADY WORKING WITHI N ARE NOT SUFFICIENT IN NUMBER TO HANDLE THE RUSH. SO THE APPELLANT SOMETIM ES HIRES SUCH SALES PEOPLE. IT 9 IS VERY MUCH CLEAR THAT THE AMOUNT PAID TO THE SALE S PEOPLE IS NEITHER A FEE FOR TECHNICAL SERVICES NOR A PROFESSIONAL FEE. FURTHER, IT IS IMPORTANT TO NOTE THAT THE QUALIFICATION OF THESE 2 PERSONS IS ONLY GRADUATION AND THE SERVICES OF GRADUATES ARE NOT COVERED IN THE TECHNICAL/PROFESSIONAL SERVI CES. HENCE, WHEN NO TECHNICAL/PROFESSIONAL FEE HAS BEEN PAID BY THE APP ELLANT FIRM TO THESE 2 PERSONS AND THE AMOUNT PAID IS ONLY SALARY, NO TDS PROVISIO NS OF SECTION 194J OF THE ACT WERE APPLICABLE. B) AS REGARDS AMBIGUITY WHETHER TDS PROVISIONS WERE AT TRACTED OR NOT ARISEN ONLY BECAUSE THE APPELLANT DEBITED THE SALARY EXPENSES O F RS. 3,00,000/- PAID IN RESPECT OF SALES BOYS SERVICES OF THESE 2 PERSONS T O RETAINERSHIP EXPENSES. AS ALREADY STATED RETAINERSHIP IS AS GOOD AS SALARY. B ECAUSE REMUNERATION PAID TO SALES FORCE OF THE APPELLANT FIRM IS NOTHING BUT SA LARY. THE ONLY REASON TO CHARGE THE SALARY OF THESE 2 PERSONS UNDER THE HEAD OF RET AINERSHIP EXPENSE IS THAT THESE 2 PERSONS WERE NOT THE REGULAR SALES EMPLOYEE OF TH E APPELLANT FIRM BUT WERE ONLY HIRED IN THE FESTIVE SEASON WHEN THE REGULAR WORKIN G SALES FORCE WERE NOT SUFFICIENT ENOUGH FOR THE WORK OF SHOWING OUTFITS IN FRONT OF CUSTOMERS. HENCE, AS THESE 2 PERSONS WERE HIRED FOR SHORT PERIOD OF TIME OF FEST IVE SEASON, THEIR REMUNERATION WAS NOT CHARGED UNDER HEAD SALARY BUT UNDER RETAINE RSHIP EXPENSE. ALSO, RETAINERSHIP EXPENSE BY ITS MEANING AND NATURE DENO TES THE PART TIME SERVICES FEES AND FEE TO RETAIN SOMEONE FOR SOME PARTICULAR TIME PERIOD. KEEPING IN MIND THESE FACTS, RETAINERSHIP EXPENSES MAY PLEASE BE TR EATED AS SALARY EXPENSES ONLY AND NO NEGATIVE INFERENCE MAY PLEASE BE MADE. C) THE APPELLANT FIRM HAS DULY CHECKED THE PROVISIONS OF TDS ON SALARY U/S 192B OF THE ACT. AS SALARY AMOUNT WAS LOWER THAN THE MINIMU M PRESCRIBED LIMIT FOR TAX DEDUCTION, NO TAX WAS DEDUCTIBLE U/S 192B OF THE AC T. D) FURTHER, IT IS SUBMITTED THAT THE APPELLANT FIRM DU LY PRODUCED THE COPY OF INCOME TAX RETURNS OF THESE PERSONS NAMELY SH. DALJ EET SINGH & SH. PAWAN KUMAR ALONG WITH THEIR CONFIRMED COPY OF LEDGER ACCOUNTS OF THOSE PERSONS. THESE CONFIRMS TO THE IDENTITY AND GENUINENESS OF THE PER SONS IN QUESTION. KEEPING IN MIND THESE FACTS, DISALLOWANCE OF THE RETAINERSHIP EXPENSE IS UNWARRANTED. E) ALSO, IT IS APPARENT FROM THE INCOME TAX RETURNS OF THE PERSONS IN QUESTION THAT THEY HAVE INCLUDED THE RETAINERSHIP FEE RECEIVED FR OM THE APPELLANT FIRM IN THEIR TOTAL INCOME. IT IS A SETTLED LAW THAT WHEN THE EXP ENSE CLAIMED BY AN ASSESSEE IS DULY SHOWN IN HIS/HER INCOME BY THE RECIPIENT, NO D ISALLOWANCE CAN BE MADE. F) IT IS IMPORTANT TO STATE THAT ID. AO HAS MADE THE D ISALLOWANCE OF RETAINERSHIP EXPENSES OF RS. 3,00,000/- BY CHARGING THE PROVISIO NS OF INCORRECT SECTION OF THE ACT I.E. 194C OF THE ACT. ON ONE HAND, LD. AO IS AL LEGING THAT THE PAYMENT OF RETAINERSHIP EXPENSES TO THESE 2 PERSONS HAVE BEEN MADE IN RESPECT OF FEE FOR TECHNICAL AND PROFESSIONAL SERVICES AND OTHER SIDE ALLEGING THAT THE APPELLANT SHOULD HAVE MADE A CONTRACT WITH THESE PERSONS AND SHOULD HAVE DEDUCTED TDS U/S 194C OF THE ACT ON THE PAYMENT OF RETAINERSHIP FEE PAID TO THEM. IN THIS REGARD, IT IS ALREADY SUBMITTED THAT THE PERSONS IN QUESTION ARE NEITHER TECHNICAL NOR PROFESSIONALS. HENCE, PAYMENT TO THEM DOES NOT ATTRACT THE PROVISIONS OF SECTION 194J OF THE ACT. G) FURTHER, IT IS SUBMITTED THAT THERE IS NO CONTRACT BETWEEN THE APPELLANT FIRM AND THE PERSONS IN QUESTION FOR THE PROVISIONS OF S ERVICES. HENCE, WHERE THERE IS NO CONTRACT ORAL OR WRITTEN, THERE DOES NOT ARISE ANY QUESTION OF DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT. KEEPING IN MIND THE ABOVE FACTS, SUBMISSIONS AND LE GAL POSITION, THE GROUND OF THE APPELLANT FIRM MAY PLEASE BE ALLOWED. 15. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD NOT BEEN ABLE TO EXPLAIN SATISFACT ORY NATURE AND NON APPLICABILITY OF THE TDS PROVISIONS AND THAT THE AS SESSEE HAD FAILED TO FURNISH ANY 10 WORK RELATION OR AGREEMENT WITH THOSE PARTIES TO WH OM RETAINERSHIP FEES CLAIMED TO HAVE BEEN PAID. 16. NOW THE ASSESSEE IS IN APPEAL. 17. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE GE NUINENESS OF THE EXPLANATION HAD NOT BE DOUBTED AND THAT THE ASSESSEE HIRED THE SALES MAN FROM THE MARKET TO WHOM RETAINERSHIP FEE WAS PAID BUT THERE WAS NO CONTRACTUAL OBLIGATION AND THAT THE PAYMENT WAS LIKE SALARY TO WHICH PROVISION S OF SECTION 40(A)(IA) WERE NOT APPLICABLE. IT WAS FURTHER SUBMITTED THAT THE P ERSONS TO WHOM THIS AMOUNT WAS PAID HAD SHOWN THE SAME AS SALARY IN THEIR RESP ECTIVE RETURN OF INCOME WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. MY ATTEN TION WAS DRAWN TOWARDS PAGE NO. 27 TO 30 OF THE ASSESSEES COMPILA TION WHICH ARE THE COPIES OF ACKNOWLEDGMENT OF THE INCOME TAX RETURNS AND COMPUT ATION OF INCOME. IT WAS FURTHER SUBMITTED THAT BOTH THE PERSONS SHRI PAWAN KUMAR AND SHRI DALJEET SINGH ALSO CONFIRMED THAT THEY HAD RECEIVED SUM OF RS. 1, 80,000/- AND RS. 1,20,000/- RESPECTIVELY FOR THE AFORESAID CONTENTION THE REFE RENCE WAS MADE AT PAGE 31 & 32 OF THE ASSESSEES COMPILATION. 18. IN HER RIVAL SUBMISSIONS THE LD. SR. DR SUPPORT ED THE ORDERS OF THE AUTHORITIES BELOW AND REITERATED THE OBSERVATIONS MADE IN PARA 5.4 OF THE IMPUGNED ORDER. 19. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE IT APPEARS THAT THE A.O. MADE THE DISALLOWANCE FOR THE REASONS THAT THE ASSE SSEE DID NOT DEDUCT TDS ON THE PAYMENTS MADE TO SHRI PAWAN KUMAR AND SHRI DALJ EET SINGH AMOUNTING TO RS. 1,80,000/- & RS. 1,20,000/- RESPECTIVELY. THE C ONTENTION OF THE ASSESSEE WAS THAT THE PAYMENTS WERE MADE DURING THE FESTIVE SEAS ON AND IT WAS REMUNERATION IN RESPECT OF SALES BOYS WHO WERE NOT THE REGULAR SALES EMPLOYEES OF THE ASSESSEE, BOTH THOSE PERSONS FILED THEIR INC OME TAX RETURN AND CLAIMED IN THE SAID RETURN THAT THE AMOUNT IN QUESTION WAS REC EIVED AS A SALARY FROM THE ASSESSEE AND FURNISHED COPIES OF THEIR RETURNS OF I NCOME BEFORE FINALIZATION OF THE ASSESSMENT PROCEEDINGS. IN THE PRESENT CASE THE RET URNS OF INCOME WERE FURNISHED BY SHRI DALJEET SINGH ON 30/03/2013 WHERE IN THE INCOME OF RS. 1,20,000/- HAS BEEN SHOWN AS SALARY RECEIVED FROM T HE ASSESSEE WHICH IS EVIDENT FROM PAGE NO. 27 & 28 OF THE ASSESSEES COMPILATION . SIMILARLY SHRI PAWAN KUMAR FURNISHED THE RETURN OF INCOME ON 07/05/2013 AND HA D SHOWN THE SALARY OF RS. 1,80,000/- RECEIVED FROM THE ASSESSEE WHICH IS EVID ENT FROM PAGE NO. 29 & 30 OF 11 THE ASSESSEES COMPILATION. IN THE PRESENT CASE WHE N THE INCOME SHOWN BY THE RECIPIENTS HAD BEEN ACCEPTED, THERE WAS NO REASON T O DOUBT EXPLANATION GIVEN BY THE ASSESSEE. I THEREFORE, BY CONSIDERING THE TO TALITY OF THE FACTS DEEM IT APPROPRIATE TO DELETE THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD.CIT(A). 21. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 21/08/2019 ) SD/- .., ( N.K. SAINI) ! / VICE PRESIDENT AG DATE: 21/08/2019 (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ / / CIT 4. $ / ()/ THE CIT(A) 5. -23 4, & 4, 67839/ DR, ITAT, CHANDIGARH 6. 38 :%/ GUARD FILE