M/s. Surbhi Construction Co., Tapi V. The Dy.CIT.,Circle-6, Surat

ITA 821/AHD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80405 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 21-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KULSHRESTHA
• Keywords: Income from undisclosed sources; Charitable institution; Bonafide belief; Period of limitation; Reasonable cause; Time period of passing order; Revised return
• Section: 143(3); 133A; 139(5); 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , , BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.821/AHD/2013 ( / ASSESSMENT YEAR : 2008-09) M/S.SURBHI CONSTRUCTION CO. SURBHI TOWER LAXMI SAW MILLS COMPOUND NR.VAIBHAV CINEMA NAVA FALIA, VYRA DISTRICT : TAPI / VS. THE DCIT CIRCLE-6 SURAT ' ./ ./ PAN/GIR NO. : AATFS 5178 A ( '% / APPELLANT ) .. ( &''% / RESPONDENT ) '%( / APPELLANT BY : (NONE) WRITTEN SUBMISSIONS &''%)( / RESPONDENT BY : SHRI B. KULSHRESTHA, SR.DR *) / DATE OF HEARING 12/09/2014 +,-.) / DATE OF PRONOUNCEMENT 15/10/2014 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-I, SURAT (CIT(A) IN SHORT) DATED 21/01/2013 PERTAINING TO ASSESSMENT YEAR (AY) 2008-09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEA L:- ITA NO.821/AHD/ 2013 M/S. SURBHI CONSTRUCTION CO. VS. DCIT ASST.YEAR 2008-09 - 2 - 1. THE ASSESSMENT OF ASSESSEE FIRM FOR AY 2008-09 WAS COMPLETED BY DY CIT CIRCLE-6 SURAT ON 21.12.2010 UNDER S. 143(3) . THE ASSESSMENT ORDER WAS SERVED ON 04.01.2011. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AP PELLANT VOLUNTARILY SUBMITTED THAT DUE TO INADVERTENT AND T YPOGRAPHICAL ERROR, THE INCOME DECLARED DURING SURVEY AT RS.82,0 0,000 WAS WRONGLY TYPED AT RS.32,00,000/-. HENCE REVISED CAL CULATION WITH REVISED PROFIT & LOSS ACCOUNT SHOWING DISCLOSURE OF RS.82,00,000 WAS FURNISHED. 3. CONSEQUENTLY, THE PARTNERS REMUNERATION AS PER DEED AND AS PER LAW CORRESPONDINGLY CAME TO BE REVISED AND CLAIMED AT E NHANCED FIGURE OF RS.20,00,000 AS AGAINST RS.3,00,000 ORIGINALLY C LAIMED BEFORE THE A.O. 4. THE LD A.O. HOWEVER, THOUGH ACCEPTED THE REVISED PR OFIT & LOSS ACCOUNT AND REVISED INCOME, IN THE HANDS OF THE APP ELLANT FIRM WHILE MAKING ASSESSMENT, HE DID NOT ACCEPT THE REVISED RE MUNERATION TO PARTNERS AND THUS ACCEPTED ONLY ONE SIDE OF THE PRO FIT & LOSS ACCOUNT BY IGNORING AND DISALLOWING THE BALANCE REMUNERATIO N OF RS.17,00,000 WHICH WAS CLAIMED AS A RESULT OF REVIS ED PROFIT WHICH WAS SHOWN IN THE FIRMS INCOME. THE LD A.O. HELD T HAT AS NO INFORMATION ABOUT THE PARTNERS SHOWING SUCH PAYMENT AND TAX PAYMENT WAS AVAILABLE, THE REMUNERATION COULD NOT B E ALLOWED TO THE FIRM. 5. THE APPELLANT THEREFORE PREFERRED RECTIFICATION APP LICATION UNDER S. 154 ON 11.01.2011 (WITHIN 7 DAYS ON RECEIPT OF ASSE SSMENT ORDER) ON THE GROUND THAT PARTNERS FILED REVISED RETURNS OFFE RING ADDITIONAL REMUNERATION AS PER REVISED CALCULATION. 6. THOUGH ASSESSMENT ORDER WAS SERVED ON 04.01.2011 AS THE APPELLANT HAD FILED RECTIFICATION APPLICATION AND EXPECTED TH AT ITS GRIEVANCE OF DISALLOWANCE OF PARTNERS REMUNERATION WILL BE RESOL VED BY ACCEPTING RECTIFICATION APPLICATION, NO APPEAL TO THE HONBLE CIT (APPEALS) WAS FILED. 7. HOWEVER, EVEN AFTER REPEATED REMINDERS, THE RECTIFI CATION WAS NOT CARRIED OUT, THE APPELLANT ULTIMATELY PREFERRED APP EAL TO THE CIT(APPEALS) IV SURAT WITH A REQUEST TO CONDONE DEL AY DUE TO ABOVE CIRCUMSTANCES AND REASONABLE CAUSE IN THE BEST INTE REST OF JUSTICE. 8. THE LD.CIT(APPEALS) CONSIDERED THE MERITS OF THE CL AIM OF DEDUCTION OF ADDITIONAL CONSEQUENTIAL REMUNERATION AND REJECT ED THE SAME BUT STILL, IN PARA 10.1 OF HIS ORDER DATED 21.01.2013 S ERVED ON 31.01.2013 HELD THAT PENDENCY OF APPLICATION U/S.15 4 DOES NOT AMOUNT TO SUFFICIENT CAUSE. ITA NO.821/AHD/ 2013 M/S. SURBHI CONSTRUCTION CO. VS. DCIT ASST.YEAR 2008-09 - 3 - 9. HENCE THE APPELLANT BEING AGGRIEVED BY SAID ORDER O F CIT(APPEALS) PREFERS THIS APPEAL. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE, BUT TH E WRITTEN SUBMISSIONS ARE PLACED ON RECORD. A REQUEST HAS BE EN MADE BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE TO DECIDE THE PRESENT APPEAL ON THE BASIS OF THE WRITTEN SUBMISSIONS. THEREFORE, THE APPEAL WAS TAKEN UP FOR HEARING IN THE ABSENCE OF THE ASSESSEE. 3. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT. A SURVEY ACTION U/S.133A OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS CONDUCTED AT THE CONSTRUCTION SITE PREMISES OF THE ASSESSEE ON 19.02 .2008. DURING THE COURSE OF SURVEY PROCEEDINGS, A STATEMENT UNDER OAT H OF SHRI DAHYABHAI MANIBHAI PATEL, PARTNER OF THE ASSESSEE-CONCERN WAS RECORDED AND HE HAS VOLUNTARILY DISCLOSED INCOME OF RS.82,00,000/- AS U NACCOUNTED INCOME OF THE ASSESSEE RELATING TO THE FINANCIAL YEAR UNDER C ONSIDERATION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICE D BY THE AO THAT IN PLACE OF RS.82 LACS, THE INCOME WAS SHOWN AS RS.32 LACS. SUBSEQUENTLY, THE ASSESSEE VOLUNTARILY CAME FORWARD AND SUO MOTU FILED A REVISED P&L ACCOUNT OFFERING THE ENTIRE AMOUNT OF RS.82 LACS TO TAX AS INCOME FROM UNDISCLOSED SOURCES, OVER AND ABOVE REGULAR INCOME AND OFFERED GROSS PROFIT OF RS.97,93,007/-. IN THE REVISED P&L ACCOUN T, THE ASSESSEE CLAIMED ENHANCED DEDUCTION OF RS.17 LACS TOWARDS PA RTNERS REMUNERATION. THE AO DISALLOWED THIS CLAIM AND ADD ED THE SAME INTO THE INCOME OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE FILED A RECTIFICATION APPLICATION. AS PER THE ASSESSEE THE SAME HAS NOT BEEN DECIDED BY THE ITA NO.821/AHD/ 2013 M/S. SURBHI CONSTRUCTION CO. VS. DCIT ASST.YEAR 2008-09 - 4 - AO. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD .CIT(A). THE GRIEVANCE RAISED BEFORE THE LD.CIT(A) WAS THAT THE AO DID NOT DISPOSE OF THE APPLICATION FOR RECTIFICATION WITHIN SIX MONTHS AS PRESCRIBED U/S.154(8) OF THE ACT AND PRAYED THAT DEDUCTION OF RS.17 LACS U/S.40(B) OF SALARY TO PARTNERS BE ALLOWED FROM TOTAL INCOME AND THE REVISED TOTAL INCOME OF RS.70,83,940/- BE ACCEPTED. 3.1. THE LD.CIT(A) IN HIS ORDER IN PARA-9 AFTER CON SIDERING THE SUBMISSIONS OBSERVED THAT THE CLAIM OF THE ASSESSEE WAS NOT ALLOWABLE AS THE REVISED RETURN OF INCOME FILED IN THE CASE OF A PPELLANT-FIRM ON 26/11/2010 AND IN THE CASE OF PARTNERS ON 28/11/201 0 WHICH WERE BEYOND THE LIMITATION PERIOD AND, THEREFORE, ARE NON-EST. THE LD.CIT(A) ALSO REJECTED THE APPEAL ON THE BASIS BEING BARRED BY TI ME AND THE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT ACCEPTED. 4. THE LD.COUNSEL FOR THE ASSESSEE HAS PLACED ON RE CORD THE WRITTEN SUBMISSIONS AND SUBMITTED THAT THE APPEAL BE DECIDE D ON THE BASIS OF THE WRITTEN SUBMISSIONS. 4.1. ON THE CONTRARY, LD.SR.DR SHRI B.KULSHRESTHA V EHEMENTLY ARGUED THAT THERE IS NOTHING ILLEGALITY IN THE ORDERS OF T HE AUTHORITIES BELOW. HE SUBMITTED THAT THE AUTHORITIES BELOW HAVE RIGHTLY C AME TO THE CONCLUSION THAT THE REVISED RETURN WAS BEYOND TIME, THEREFORE, THE CLAIM OF THE ASSESSEE QUA THE PARTNERS SALARY WAS NOT ADMISSIB LE. HE SUBMITTED THAT THE ASSESSEE OUGHT TO HAVE BEEN VIGILANT IN MAKING THE CLAIM, IF ANY. HE FURTHER SUBMITTED THAT THE LD.CIT(A) HAS RIGHTLY RE JECTED THE APPEAL ITA NO.821/AHD/ 2013 M/S. SURBHI CONSTRUCTION CO. VS. DCIT ASST.YEAR 2008-09 - 5 - OBSERVING THAT IN TERMS OF SECTION 139(5) OF THE AC T, THE LIMITATION FOR FILING THE REVISED RETURN EXPIRED ON 31/03/2010. 5. WE HAVE HEARD THE LD.SR.DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS MADE THE FOLLOWING WRITTEN SUBMISSIONS: MAY IT PLEASE TO YOUR HONOUR THE APPEAL IS DIRECTED AGAINST THE ORDER OF CIT(A) PASSED ON 21.01.2013 RAISING FOLLOWING GROUNDS OF APPEAL: I. THE ID. CIT(A) ERRED IN LAW AND ON FACTS IN NOT CONDONING THE DELAY THROUGH THERE WAS SUFFICIENT CAUSE FOR DELAY IN FILING THE APPEAL. THE FACTUAL POSITION ABOUT APPELLANT BEING UNDER BONAFIDE BELIEF THAT ITS RECT IFICATION APPLICATION WILL BE CONSIDERED AND GRIEVANCE RESOLVED BY THE AO BEING N OT IN DOUBT, THE ABOVE CAUSE OUGHT TO HAVE BEEN CONSIDERED JUDICIOUSLY IN THE BE ST INTEREST OF JUSTICE. II. THAT THE DCIT ERRED IN NOT PASSING ORDER OF RECTIFICATION U/S. 154 AS PER TIME LIMIT PRESCRIBED U/S. 154(8) I.E. WITHIN 6 MONTHS I N WHICH RECTIFICATION APPLICATION IS MADE. THE ASSESSEE HAS MADE RECTIFICATION APPLICATI ON ON 11/01/2011. NON PASSING OF ORDER U/S. 154(8) EITHER REJECTING O R ACCEPTING THE APPLICATION SHOULD BE ADHERED TO AS HELD IN S. LAKHA SINGH (2011) 139 TTJ (ASR) 636. III. THE ID. CIT(A) ALSO ERRED BOTH IN LAW AND ON FACTS IN HOLDING THAT ON MERIT, THE CLAIM OF ENHANCED DEDUCTION OF PARTNERS REMUNERATIO N WAS RIGHTLY DISALLOWED. THE ID. CIT(A) FAILED TO APPRECIATE THAT AO HAVING ACCE PTED THE REVISED PROFIT AND LOSS ACCOUNT AND REVISED INCOME OF THE FIRM FURNISHED TO HIM BY APPELLANT VOLUNTARILY ON ITS OWN, THE CORRESPONDING DEDUCTION OF REMUNERATIO N WHICH IS MERELY CONSEQUETIONAL OUGHT TO HAVE BEEN ALLOWED AS SHOWN IN THE VERY SAM E PROFIT AND LOSS ACCOUNT. V. THE ID. CIT(A) OUGHT TO HAVE DIRECTED THE AO TO ALLOW THE REMUNERATION AT RS. 20,00,000/- AND ALSO ALLOW THE RECTIFICATION APPLIC ATION IN TERMS OF SECTION 154(8). 2. THE ONLY GRIEVANCE IN ALL THE ABOVE GROUNDS IS THAT THE ID. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN DISAL LOWING REMUNERATION TO PARTNERS OF RS. 17 LACS ON MERITS AND BY NOT ADMITTING THE APPE AL BY REFUSING THE CONDONATION IN FILING THE APPEAL. THE FACTS IN REGARD TO ABOVE GRO UNDS ARE DESCRIBED AS UNDER: ITA NO.821/AHD/ 2013 M/S. SURBHI CONSTRUCTION CO. VS. DCIT ASST.YEAR 2008-09 - 6 - 3. THE ASSESSEE ELECTRONICALLY FILED THE RETURN O F INCOME FOR A.Y. 2008-09 SHOWING TOTAL INCOME OF RS.37,83,940/- ON 30.09.2008 VIDE E -FILING ACKNOWLEDGEMENT NO. 45209170300908. THE ASSESSEE DERIVES INCOME FROM BUILDING AND CONSTRUCTION ACTIVITIES. A SURVEY ACTION U/S. 133A OF THE INCOME TAX ACT, 1961 WAS CONDUCTED AT THE CONSTRUCTION SITE PREMISES OF THE ASSESSEE ON 1 9.02.2008. DURING THE COURSE OF SURVEY PROCEEDINGS, A STATEMENT UNDER OATH OF SH. D AHYABHAI MANIBHAI PATEL, PARTNER OF THE ASSESSES CONCERN WAS RECORDED AND IN REPLY TO QUESTION NO. 17 OF THE STATEMENT RECORDED DURING THE SURVEY PROCEEDINGS U/ S. 133A OF THE I. T. ACT, 1961, SH. DAHYABHAI MANIBHAI PATEL VOLUNTARILY DISCLOSED INCO ME OF RS. 82,00,000/- AS UNACCOUNTED INCOME OF ASSESSEE CONCERN FOR THE RELE VANT FINANCIAL YEAR UNDER CONSIDERATION. ALTHOUGH THE DISCLOSURE OF RS. 82 LA CS WAS MADE IN THE COURSE OF SURVEY ACTION, ASSESSEE IN THE ORIGINAL RETURN OF I NCOME FILED WITH THE ORIGINAL ACCOUNTS DISCLOSED ONLY RS. 32 LACS AS ADDITIONAL I NCOME. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, O N 06.11.2010, SH. VIRESH I. RUDALAL (CA) AND SH. DAHYABHAI M PATEL (PARTNER) AP PEARED AND SUBMITTED THAT THE INCOME AS SHOWN IN THE P&L ACCOUNT AND } BALANCE SH EET FOR A.Y. 2008-09 HAS BEEN ERRONEOUSLY PREPARED AND INADVERTENTLY THE INCOME D ECLARED 1 DURING THE SURVEY HAS BEEN SHOWN AT RS. 32,00,000/- IN PLACE OF RS. 82,00 ,000/-. IT HAS BEEN LAID DOWN (THAT SUCH MATTER HAS OCCURRED DUE TO TYPOGRAPHICAL ERROR OF WRONGLY PUTTING '8' AS '3' IN THE BOOK OF ACCOUNT BY THE ACCOUNTANT/DATA ENTRY PE RSON. ON THE FACTS OF THE CASE, SUCH A DISCREPANCY HAS BEEN DISCOVERED SUO MOTO BY THE ASSESSEE AND UPON DETECTION, SH. D. M. PATEL (PARTNER) HAS COME FORWARD WITH REC TIFIED FIGURES OF INCOME. 5. ALSO THAT IN THE COURSE OF PROCEEDINGS, THE ASS ESSEE FIRM HAS FILED A RETURN OF INCOME ON 26.11.2010 VIDE ACKNOWLEDGEMENT NO. 0601 000085 SHOWING INCOME OF RS. 70,83,940/-. HENCE, AS PER FACTS OF THE CASE, I NITIALLY, IN THE ORIGINAL RETURN OF INCOME THE ASSESSEE HAD SHOWN DISCLOSED INCOME OF R S. 32.00,000/- AND THE GROSS PROFIT SHOWN WAS TO THE TUNE OF RS. 47,93,007/-. HO WEVER, SUBSEQUENTLY, THE ASSESSEE VOLUNTARILY CAME FORWARD AND SUO MOTO FILED A REVIS ED P&L ACCOUNT OFFERING THE ENTIRE AMOUNT RS. 82,00,000/- TO TAX AS INCOME FROM UNDISCLOSED SOURCES, OVER AND ABOVE REGULAR INCOME AND OFFERED GROSS PROFIT OF RS . 97,93,007/- AND NET TAXABLE PROFIT OF RS. 37,85,435/- IN THE P&L ACCOUNT. 6. AS BROADLY STATED ABOVE, IN THE COURSE OF ASSES SMENT PROCEEDINGS, ASSESSEE OFFERED THE ENHANCED INCOME OF RS. 50 LACS AND ALSO CLAIMED THE FURTHER DEDUCTION OF THE SALARY PAID TO PARTNERS OF RS. 17 LACS. WITH THE RE VISED RETURN, ASSESSEE ALSO FILED THE COMPUTATION OF REVISED TOTAL INCOME AND JUSTIFIED T HAT REMUNERATION PAID OF RS. 20 LACS TO THE PARTNERS IS WITHIN THE LIMITS LAID DOWN U/S. 40(B) BY SHOWING THE WORKING OF CALCULATION OF REMUNERATION ALLOWED U/S. 40(B). ASSESSING OFFICER ACCEPTED THE ENHANCED INCOME BY RS. 50 LACS BUT DIDN'T ALLOW THE ENHANCED REMUNERATION PAID TO PARTNERS. IN THE ORIGINAL ACCOUNT, ASSESSEE CLAIMED THE PARTNER'S SALARY OF RS. 3 LACS BUT IN THE REVISED ACCOUNTS ASSESSEE CLAIMED THE PA RTNER'S SALARY OF RS. 20 LACS. THE ASSESSING OFFICER DISALLOWED THE ADDITIONAL CLAIM O F PARTNER'S REMUNERATION OF RS. 17 LACS ON THE GROUND THAT NO EVIDENCE OF PAYMENT OF S UCH ADDITIONAL SUMS OF RS. 17 LACS AS MADE TO THE PARTNERS AND THE TAX PAYMENT BY THE PARTNERS THEREON HAVE BEEN ITA NO.821/AHD/ 2013 M/S. SURBHI CONSTRUCTION CO. VS. DCIT ASST.YEAR 2008-09 - 7 - FURNISHED TILL DATE OF THIS ORDER. THEREFORE, THE D EDUCTION IN RESPECT OF SUCH ADDITIONAL CLAIMS OF UNESTABLISHED AND UNSUPPORTED PARTNER'S S ALARY IS DISALLOWED AND DEDUCTION IN RESPECT OF THE PARTNER'S SALARY WAS RESTRICTED T O RS. 3 LACS ONLY. 7. HOWEVER, IN FACT THE EVIDENCE OF PAYMENT OF PAR TNER'S REMUNERATION IS ALREADY ON RECORD IN FORM PARTNERSHIP DEED AND ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE FIRM FOR PAYMENT OF THE REMUNERATION TO PARTNERS. A LL THE PARTNERS ARE ASSESSED TO TAX BY THE SAME ASSESSING OFFICER AND THE PARTNERSHIP D EED WAS ON RECORD AND REMUNERATION TO PARTNERS WAS WORKED OUT ON THE BASI S OF THE CLAUSE IN THE PARTNERSHIP DEED. 8. ASSESSEE HAS THEREFORE APPLIED FOR THE RECTIF ICATION APPLICATION U/S. 154 ON 11.01.2011 WHICH WAS NOT DISPOSED OFF BY THE ASSESS ING OFFICER. 9. A S ASSESSEE'S RECTIFICATION APPLICATION WAS NOT DISPOS ED OFF, THE ASSESSEE FILED THE APPEAL BEFORE CIT(A) BELATEDLY ON 05.03.2012. IN ME ANWHILE, ASSESSEE REMINDED THE ASSESSING OFFICER ON 16.08.2011 AND I13.09.2011 ABO UT ITS PENDING APPLICATION U/S. 154 FILED ON 11.01.2011. 10. THE LD. CIT(A) DISMISSED ASSESSEE'S APPEAL BY NOT CONDONING THE DELAY AND ALSO ON MERITS BY HOLDING THAT THE REVISED RETURN FILED BY THE PARTNERS WAS NON-ES T BEING FILED BEYOND THE LIMITATION PERIOD AND NO ADDITION AL TAX HAS BEEN PAYED BY ANY PARTNER'S IN RESPECT OF ADDITIONAL SALARY PAID TO P ARTNERS OF RS. 17 LACS. IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE HONOU RABLE TRIBUNAL THE FOLLOWING SUBMISSIONS ARE MADE: 11.1 THE DELAY IN FILING THE APPEAL IS JUSTIFIED ON THE GROUND THAT ASSESSEE'S RECTIFICATION APPLICATIONS WERE NOT DISPOSED OFF BY THE ASSESSING OFFICER WHICH WAS FILED IMMEDIATELY ON 11.01.2011 AFTER RECEIPT OF TH E ASSESSMENT ORDER. ASSESSEE ALSO FILED THE REMINDERS FOR DISPOSAL OF APPLICATIONS VI DE LETTERS DATED 16.08.2011 AND 13.09.2011. SO THE ID. CIT(A) SHOULD HAVE CONDONED THE DELAY IN FILING THE APPEAL. 11.2 AS PER CLAUSE (II) OF S. 40(B) OF THE I. T. ACT, 1961, ANY PAYMENT OF REMUNERATION TO ANY PARTNER WHO IS WORKING PARTNER IS TO BE DISALLOWED IF IT IS NOT AUTHORIZED, OR IS NOT IN ACCORDANCE WITH THE TERMS OF PARTNERSHIP DEED. THE CLAUSE (V) OF SAID SECTION PROVIDES THE CEILING FOR PAYMENT OF THE REMUNERATION TO THE PARTNERS. THE PARTNERSHIP DEED WAS EXECUTED ON 06.02.2003 WHE N THE FIRM CAME INTO EXISTENCE ON 01.04.2002. THE CLAUSE 4 OF THE SAID PARTNERSHIP DEED PROVIDES FOLLOWING: '4. THE REMUNERATION PAYABLE TO THE WORKING PARTNER S SHALL BE COMPUTED IN THE FOLLOWING MANNER AS LAID DOWN IN SECTION 40(B) OF THE INCOME TAX ACT, 1961 AND SUCH AMOUNT SHALL BE DISTRIBUTED BETWEEN T HE SAID WORKING PARTNERS IN EQUAL PROPORTION: BOOK PROFIT REMUNERATION 1. FIRST RS.75,000/- 90% OF BOOK PROFIT ITA NO.821/AHD/ 2013 M/S. SURBHI CONSTRUCTION CO. VS. DCIT ASST.YEAR 2008-09 - 8 - 2. SECOND RS.75,000/- 60% OF PROFIT ABOVE RS.75,000/- 3. ABOVE RS.1,50,000/- 40% OF PROFIT ABOVE RS.1,50,000 /- NO REMUNERATION SHALL BE PAID OVER AND ABOVE THE AM OUNT CALCULATED IN THE ABOVE MANNER. SUCH REMUNERATION SHALL BE CALCULATED AT TH E CLOSE OF THE ACCOUNTING YEAR AND SHALL BE CREDITED TO THE ACCOUNT OF WORKING PAR TNERS. THE WORKING PARTNERS SHALL BE ENTITLED TO WITHDRAW AMOUNT OF REMUNERATION FOR THEIR PERSONAL NEEDS FROM TIME TO TIME. NO REMUNERATION AND INTEREST SHALL BE PAID TO THE PARTNERS IF BOOKS OF ACCOUNTS SHOW LOSS BEFORE INTEREST AND REMUNERATION. THE CLAUSE 5 OF THE SAID PARTNERSHIP DEED PROVIDES THE EQUAL PROFIT SHARING RATIO BETWEEN ALL THE FIVE PARTNERS. THIS PARTNERSHIP DEE D WAS FILED WITH THE FIRST RETURN OF INCOME AND IT WAS ALSO FILED IN THE COURSE OF THE S URVEY PROCEEDINGS. THERE IS NO DISPUTE THAT THE PARTNERSHIP DEED WAS NOT ON RECORD . 11.3 THE MAXIMUM REMUNERATION AS PER THE CEILING OF CLAUSE (V) LAID DOWN IN S. 40(B) COMES TO RS. 36,84,674/- BUT AS ASSESSEE PAID THE R EMUNERATION OF RS. 20 LACS, IT IS MUCH BELOW THE LIMIT. THE WORKING OF THE PERMISSIBL E DEDUCTION U/S. 40(B) IS REFLECTED IN THE REVISED COMPUTATION OF INCOME. SO ASSESSING OFFICER HAS ERRED IN HOLDING THAT NO EVIDENCE WAS PRODUCED FOR ALLOWANCE OF REMUNERAT ION PAID TO PARTNERS. THE ONLY RELEVANT EVIDENCE IS ENTRIES IN THE BOOKS OF ACCOUN TS FOR THE PAYMENT OF THE REMUNERATION AND PARTNERSHIP DEED. ASSESSEE FILED T HE REVISED PROFIT AND LOSS ACCOUNT SHOWING THE REMUNERATION PAID TO THE PARTNERS AND A S STATED ABOVE THE COPY OF PARTNERSHIP DEED WAS IN THE POSSESSION OF THE ASSES SING OFFICER AND THE PART OF THE INCOME TAX RECORDS. 11.4 THERE IS NO CONDITION FOR PAYMENT OF TAX BY TH E PARTNERS FOR ALLOWANCE OF THE REMUNERATION. SO THE NON PAYMENT OF ADDITIONAL TAX ON ENHANCED REMUNERATION CANNOT BE THE GROUND FOR REJECTING ASSESSEE'S CLAIM . 11.5 THE ID. CIT(A) ALSO RAISED THE ISSUE THAT THE REVISED RETURN FILED BY THE ASSESSEE'S FIRM WAS NOT WITHIN THE TIME LIMIT AND THEREFORE IT IS NON EST. IN THIS CONNECTION, IT IS SUBMITTED THAT ASSESSING OFFICER DIDN'T DENY THE DE DUCTION ON THIS GROUND. ASSESSING OFFICER ACCEPTED THE REVISED RETURN OF INCOME, SHOW ING ADDITIONAL INCOME OF RS. 50 LACS AND SO BOTH LOWER AUTHORITIES WERE DUTY BOUND TO GRANT ENHANCED DEDUCTION OF RS. 17 LACS PAID TO WORKING PARTNERS. 11. 6 SO ASSESSEE'S CONTENTION IS THAT THAT THER E IS NO BAR TO THE ASSESSEE FOR MAKING AN ADDITIONAL CLAIM IN THE COURSE OF ASSESSMENT PRO CEEDINGS AND EVEN ASSUMING THAT ASSESSING OFFICER IS NOT ENTITLED TO CONSIDER THE C LAIM AND TO ADJUDICATE THE SAME, THE APPELLATE AUTHORITIES ARE BOUND TO ENTERTAIN SUCH A DDITIONAL CLAIM. THE RELIANCE IS PLACED ON THE DECISION OF HIGH COURT OF BOMBAY IN C ASE OF CIT V/S. PRUTHVI BROKERS & SHAREHOLDERS (P) LTD. - 349 ITR 336 (BOM.) WHERE THE DECISION OF THE SUPREME COURT IN CASE OF NTPC V/S. CIT - 229 ITR 383, JUTE CORPORATION OF INDIA LTD. V/S. ITA NO.821/AHD/ 2013 M/S. SURBHI CONSTRUCTION CO. VS. DCIT ASST.YEAR 2008-09 - 9 - CIT & ANR - 187 ITR 688 AND ACIT V/S. GURJARGRAVURE S P. LTD. -111 ITR 1 (SC) WERE FOLLOWED. 11.7. THE ASSESSING OFFICER CANNOT PLAY HOT AND COL D WATER AT THE SAME TIME. ON ONE HAND HE ACCEPTED THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS AND ON THE OTHER HAND HE D ISALLOWED THE REMUNERATION FROM ENHANCED INCOME OF RS. 50 LACS. THE CRITERIA FOR P AYMENT OF THE REMUNERATION AS LAID DOWN IN THE PARTNERSHIP DEED WAS INCOME AND EVEN TH E CLAUSE (V) OF S. 40(B) PROVIDES CEILING BASED ON THE INCOME. 11.8 EVEN OTHERWISE AS ASSESSEE'S RECTIFICATION W AS NOT DISPOSED OFF WITHIN TIME LIMIT LAID DOWN U/S. 154, ASSESSEE'S CLAIM IS DEEMED TO H AVE BEEN ALLOWED BY THE REVENUE AS HELD BY THE HONOURABLE TRIBUNAL IN THE CASE OF S . LAKHA SINGH (2011) - 133 ITD 201 (ASR.). SINCE A TIME LIMIT IS STIPULATED BY THE STATUE, WHERE THERE HAS BEEN NO RESPONSE WITHIN TIME PRESCRIBED FOR DISPOSAL, THERE COULD BE VALID INFERENCE THAT THE ASSESSEE'S PETITION FOR RECTIFICATION SHOULD BE TRE ATED AS ALLOWED. SUCH AN ARGUMENT WAS ACCEPTED IN THE CASE OF SIMILAR TIME LIMIT FOR PURPOSES OF GRANT OF REGISTRATION OF A CHARITABLE TRUST OR INSTITUTION BY THE TRIBUNAL U PHOLDING THE INFERENCE OF GRANT OF REGISTRATION AS IN KARNATAKA GOLF ASSOCIATION V/S. DIRECTOR OF INCOME TAX (EXEMPTIONS) - 91 ITD 1(BANG) AND BHAGWAD SWARUP SH RI SHRI DEVRAHA BABA MEMORIAL SHRI HARI PARMARTH DHAM TRUST V/S. CIT - 1 11 ITD 175(DEL)(SB). IN VIEW OF THE ABOVE IT IS PRAYED TO HONOURABLE TRIBUNAL TH AT ASSESSEE'S CLAIM FOR FURTHER DEDUCTION OF RS.17 LACS AS ADDITIONAL REMUN ERATION TO PARTNERS MAY PLEASE BE ALLOWED. OTHERWISE THE MATTER MAY BE SET ASIDE TO T HE FILE OF CIT(A) TO ADMIT THE APPEAL BY CONDONING THE DELAY AND DECIDE THE APPEAL AFRESH. DATE: 09.09.2014 PLACE: SURAT SD/- (RASESH SHAH) 5.1. THE GRIEVANCE OF THE ASSESSEE IN THE PRESENT A PPEAL IS IN TWO FOLDS; FIRSTLY, THE LD.CIT(A) OUGHT TO HAVE CONDONED THE D ELAY IN FILING THE APPEAL AND SECONDLY THE LD.CIT(A) OUGHT TO HAVE ADM ITTED THE CLAIM OF THE ASSESSEE WITH REGARD TO REMUNERATION TO PARTNER S. WE FIND THAT THE EXPLANATION OF THE ASSESSEE FOR DELAY IN FILING THE APPEAL BEFORE THE LD.CIT(A) WAS THAT A RECTIFICATION APPLICATION WAS PENDING BEFORE THE AO AND THE SAME WAS NOT DECIDED BY THE LD.CIT(A). A S PECIFIC GROUND WAS ALSO TAKEN BY THE ASSESSEE THAT THE AO HAS NOT DISP OSED OF THE ITA NO.821/AHD/ 2013 M/S. SURBHI CONSTRUCTION CO. VS. DCIT ASST.YEAR 2008-09 - 10 - RECTIFICATION APPLICATION WITHIN THE PERIOD OF SIX MONTHS. THIS GROUND OF THE ASSESSEE WAS NOT DECIDED BY THE LD.CIT(A) IN HI S ORDER. SO FAR AS THE FINDING OF THE LD.CIT(A) THAT THE PENDENCY OF APPLI CATION U/S.154 CANNOT BE TERMED AS A SUFFICIENT CAUSE FOR FILING THE APPE AL IS CONCERNED, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO INFIRMITY O F SUCH FINDING SINCE THE PROVISIONS OF SECTION 250 AND SECTION 154 OF THE AC T, OPERATE IN DIFFERENT FIELD. HOWEVER, IT IS A SETTLED LAW THAT WHILE CON SIDERING THE QUESTION OF LIMITATION IN TAXING MATTER, A LIBERAL APPROACH HAS TO BE ADOPTED. THE HONBLE SUPREME COURT IN THE CASE OF N.BALAKRISHNAN VS. M.KRISHNAMURTHY REPORTED AT (1998) 7 SCC 123 HAS H ELD AS UNDER:- IT MUST BE REMEMBERED THAT IN EVERY CASE OF DELAY, THERE CAN BE SOME LAPSE ON THE PART OF THE LITIGANT CONCERNED. THAT ALONE IS NOT ENOUGH TO TURN DOWN HIS PLEA AND TO SHUT THE DOOR AGAINST HIM . IF THE EXPLANATION DOES NOT SMACK OF MALA FIDES OR IT IS NOT PUT FORTH AS PART OF A DILATORY STRATEGY, THE COURT MUST SHOW UTMOST CONSIDERATION TO THE SUITOR. BUT WHEN THERE IS REASONABLE GROUND TO THINK THAT THE D ELAY WAS OCCASIONED BY THE PARTY DELIBERATELY TO GAIN TIME, THEN THE CO URT SHOULD LEAN AGAINST ACCEPTANCE OF THE EXPLANATION. WHILE CONDONING THE DELAY, THE COURT SHOULD NOT FORGET THE OPPOSITE PARTY ALTOGETHER. I T MUST BE BORNE IN MIND THAT HE IS A LOSER AND HE TOO WOULD HAVE INCUR RED QUITE LARGE LITIGATION EXPENSES. IT WOULD BE A SALUTARY GUIDEL INE THAT WHEN COURTS CONDONE THE DELAY DUE TO LACHES ON THE PART OF THE APPLICANT, THE COURT SHALL COMPENSATE THE OPPOSITE PARTY FOR HIS LOSS. 5.2. THE REVENUE COULD NOT POINT OUT THAT THERE WAS ANY DELIBERATE ACT FOR DELAY OR THE ASSESSEE HAS TRIED TO TAKE ADVANTA GE OF DELAY. THE REVENUE ALSO COULD NOT POINT OUT ANY MALA FIDE ON T HE PART OF THE ASSESSEE. 5.3. IN VIEW OF THE ABOVE JUDGEMENT OF THE HONBLE APEX COURT, THE LD.CIT(A) OUGHT TO HAVE EXAMINED WHETHER THERE IS A DELIBERATE ATTEMPT ITA NO.821/AHD/ 2013 M/S. SURBHI CONSTRUCTION CO. VS. DCIT ASST.YEAR 2008-09 - 11 - ON THE PART OF THE ASSESSEE TO AVOID LIABILITY OF T AX IN MAKING BELATED CLAIM AND THEREBY FILING THE APPEAL AFTER PRESCRIBE D PERIOD. THEREFORE, WE FIND THAT THE DELAY IN FILING OF THE APPEAL IS A BOUT A MONTH. THEREFORE, TAKING A LIBERAL VIEW AS HELD BY THE HONBLE APEX C OURT, WE HEREBY CONDONE THE DELAY AND RESTORE THE APPEAL TO THE FIL E OF LD.CIT(A) FOR FRESH ADJUDICATION. MOREOVER, LD.CIT(A) HAS NOT ADJUDICA TED THE GROUND NO.3 RAISED BEFORE HIM. THEREFORE, LD.CIT(A) IS HEREBY DIRECTED TO DECIDE THE ISSUE ON MERIT ALONG WITH OTHER GROUNDS. THE APPEA L OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDIC ATED HEREINABOVE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( ) ( ) ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 15/ 10 /2014 2..,.../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-I, SURAT 5. 78& 45 , 45. , 3 / DR, ITAT, AHMEDABAD 6. 8:;<* / GUARD FILE. / BY ORDER, '7 & //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD