M/s Naiyer Associates, Sitapur V. Income Tax Officer-3(2), Lucknow

ITA 832/LKW/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2036 (ITAT-LUCKNOW)
• Duration Of Justice: 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 18-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PINKI MAHAVAR
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.832/LKW/2014 ASSESSMENT YEAR 2010-11 INCOME TAX OFFICER - 3(2) LUCKNOW VS NAIYER ASSOCIATES, SITAPUR PAN AADFN 8688 C (RESPONDENT) (APPELLANT) SHRI M.T. RIZVI, ADVOCATE APPELLANT BY SMT. PINKI MAHAVAR, D.R. RESPONDENT BY 27/07/2015 DATE OF HEARING 31/08/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT (A)-I, LUCKNOW DATED 23/07/2014 FOR THE ASSESSMENT YEAR 20 10-11. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT THE ID. CIT (A) HAS ERRED IN LAW AND FACT : A) IN DISALLOWING INTEREST AND SALARIES PAID TO PA RTNERS WITHOUT ISSUE OF NOTICE TO THE APPELLANT, AS REQUIRED U/S 251(2) B) IN HOLDING THAT NO DEED OF PARTNERSHIP WAS FILE D & THAT THERE HAS BEEN NO EVIDENCE ABOUT MATERIAL SUPPLIED BY THE CON TRACTEE AT RS. 14,86,146/- C) IN IGNORING THE PAPERS WITH SUBMISSION NOTE FIL ED BEFORE HIM ON 20-06-2014 2 THAT ASSTT. ORDER HAS BEEN PASSED U/S 143(3) IN THE STATUS OF R.F. & DEDUCTION OF SALARIES & INTEREST TO PARTNERS FROM INCOME IS A NECESSARY COROLLARY UNLESS DENIED BY A.O IN HIS O RDER ITSELF LIKE A.Y 2012-13 U/S 143(3)/154 BY THE SAME I.T.O. 3 THAT THE NEW PARTNERS INTRODUCED ARE ALL QUALIFI ED AND EXPERIENCED PERSONS AND WERE ASSOCIATED WITH THE AP PELLANT FIRM 2 EARLIER AS WELL AND WERE CAPABLE TO CONTRIBUTE RS.1 ,25,858/-& HAS WRONGLY BEEN DISALLOWED 4 THAT THE ASSESSMENT ORDER IS NOT ONLY A NON-SPEA KING ONE BUT MISLEADING AND INTENTIONALLY RELEVANT PAPERS & DOCU MENTS FILED WERE LEFT TO HAVE BEEN MENTIONED IN THE ASSTT. ORDE R. CREDIT OF TDS GIVEN AT RS.1,51,463/- INSTEAD OF OVER RS.5,80, 384/- SPEAKS VOLUMES IN THIS REGARD. 3. REGARDING GROUNDS. NO. 1 AND 2, IT WAS THE SUBM ISSION OF LD. A.R. OF THE ASSESSEE THAT NO NOTICE REQUIRED U/S 251(2) OF THE ACT WAS GIVEN BY THE LD. CIT(A) TO THE ASSESSEE FOR ENHANCEMENT OF INCOME AND THERE FORE, ORDER OF THE CIT(A) ON THIS ASPECT IS NOT PROPER. REGARDING GROUNDS NO. 3 AND 4, HE SUBMITTED THAT THE ASSESSMENT ORDER IS NOT SPEAKING ON THIS ISSUE AND THEREFORE, MATTER MAY BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH DECIS ION BY WAY OF SPEAKING ORDER, AFTER CONSIDERING THE ARGUMENTS OF THE ASSESSEE. 4. LD. DR OF THE REVENUE SUPPORTED THE ORDER OF THE CIT(A). REGARDING GROUNDS NO. 1 AND 2 OF THE ASSESSEE, HE ALSO SUBMITTED THAT AS PER GROUND NO.1 RAISED BY THE ASSESSEE BEFORE LD. CIT(A) AND REPRODUCED BY HIM ON PAGE 2 OF HIS ORDER, IT MAY BE SEEN THAT THIS WAS THE CLAIM OF THE ASSESSEE BEFORE LD. CIT(A) THAT THE AO HAS ERRED IN NOT ALLOWING INTEREST AND SALARY PAID TO WORKING PARTNER AS DEDUCTION. HE SUBMITTED THAT THEREFORE, THIS IS ADMITTED POSITION THAT INTEREST AND SALARY TO PARTNERS WAS NOT ALLOWED BY THE AO AND THEREFORE, I T IS NO ENHANCEMENT BY LD. CIT(A) ON THIS ASPECT HAD BEEN CLAIMED BY THE ASSE SSEE IN GROUND NO.1 (A) RAISED BEFORE THE TRIBUNAL. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGARD ING GROUND NO.1 OF THE ASSESSEE, WE FIND FORCE IN THE SUBMISSION OF LD. DR OF THE REVENUE THAT IN THE PRESENT CASE, THERE IS NO ENHANCEMENT BY LD. CIT(A) IN RESPECT OF DISALLOWANCE OF INTEREST AND SALARIES PAID TO PARTNERS BECAUSE THE SAME WAS NOT ALLOWED BY THE AO ALSO AND THEREFORE, THERE WAS NO REQUIREMENT TO ISS UE NOTICE U/S 251(2) OF THE ACT BY LD. CIT(A). THEREFORE, GROUND NO.1 (A) OF THE AS SESSEE IS WITHOUT ANY MERIT. 3 6. REGARDING THE MERIT OF THE ALLOWABILITY OF DEDUC TION IN RESPECT OF INTEREST AND SALARY PAID BY THE ASSESSEE FIRM TO ITS PARTNERS, I T IS SEEN THAT THIS ASPECT WAS DECIDED BY LD. CIT(A) IN VIEW OF THE PROVISIONS OF SECTION 184(5) AND 185 OF THE ACT. WE ALSO FIND THAT IN THE ASSESSMENT ORDER, IT IS OB SERVED BY THE AO THAT NO BILLS/VOUCHERS AND BOOKS OF ACCOUNT OR ANY OTHER SU PPORTING VOUCHERS HAVE BEEN PRODUCED BEFORE HIM AND THEREFORE, HE HAD NO OPTION BUT TO ESTIMATE THE INCOME TO THE BEST OF HIS JUDGMENT. HE HAS INVOKED THE PROVIS ION OF SECTION 144 OF THE ACT ALTHOUGH NOT SPECIFICALLY STATED IN THE ASSESSMENT ORDER. AS PER SUB SECTION (5) OF SECTION 184, WHERE THERE IS ON THE PART OF FIRM ANY SUCH FAILURE AS MENTIONED IN SECTION 144, THE FIRM SHALL BE ASSESSED WITHOUT ALL OWING DEDUCTION OF ANY PAYMENT OF INTEREST AND SALARY ETC. TO ANY PARTNER OF THE F IRM IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD BUSINESS INCOME. HENCE, I N THE FACTS OF THE PRESENT CASE, SECTION 184(5) OF THE ACT IS APPLICABLE AND AS A CO NSEQUENCE, DEDUCTION ON ACCOUNT OF INTEREST AND SALARY PAYMENT TO PARTNERS IS NOT A LLOWABLE. HENCE, ON THIS ISSUE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, GROUND NO. 1 AND 2 ARE REJECTED. 7. REGARDING GROUNDS NO. 3 AND 4, WE FIND THAT ADDI TION WAS MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) OF RS.1,25,858/- BE ING FRESH CAPITAL INTRODUCED BY THE NEW PARTNERS WHO HAVE JOINED THE FIRM IN THE PR ESENT CASE. THIS ADDITION WAS MADE BY THE AO ON THIS BASIS THAT NO INFORMATION RE GARDING NEW SIX PARTNERS OF THE ASSESSEE FIRM IS AVAILABLE IN RESPECT OF THEIR PAN/ BANK ACCOUNT NUMBER, MOBILE NUMBER OR POSTAL ADDRESS BUT THERE IS NO MENTION IN THE ASSESSMENT ORDER THAT WHEN THE AO REQUIRED THE ASSESSEE TO FURNISH THESE INFORMATION AND THE ASSESSEE FAILED TO FURNISH THE SAME. IN THE PAPER BOOK, IN R ESPECT OF FOUR PARTNERS OUT OF SIX NEW PARTNERS, COPY OF ACKNOWLEDGEMENT/INTIMATION U/ S 143 (1) ALONG WITH PAN IS AVAILABLE ON PAGES 10 TO 13 OF THE PAPER BOOK. THE ADDRESS AND PAN OF THESE FOUR PARTNERS ARE AVAILABLE IN THE SAID ACKNOWLEDGMENT/I NTIMATION. 4 8. LD. CIT(A) ALSO CONFIRMED THESE ADDITIONS ON THI S BASIS THAT DURING THE ASSESSMENT PROCEEDINGS OR APPELLATE PROCEEDINGS, TH E ASSESSEE DID NOT FURNISH THEIR ADDRESSES PAN OR THEIR CONFIRMATION. IN VIEW OF THE SE FACTS THAT ACKNOWLEDGEMENT OF FILING INCOME TAX RETURN/INTIMATION IN RESPECT O F FOUR NEW PARTNERS OUT OF SIX NEW PARTNERS IS AVAILABLE IN PAPER BOOK, WE FEEL IT PRO PER THAT THIS MATTER SHOULD GO BACK TO THE FILE OF THE AO FOR FRESH DECISION. 9. SIMILARLY AS PER GROUND NO. 4, THIS IS CLAIMED B Y THE ASSESSEE THAT CREDIT OF TDS WAS ALLOWED BY THE AO OF ONLY RS.1,51,463/- INS TEAD OF RS. 5,80,384/-. IN THIS REGARD, WE FIND THAT THERE IS NO MENTION IN THE ASS ESSMENT ORDER FOR ALLOWING LESSER AMOUNT OF CREDIT FOR TDS. HENCE, WE FEEL THAT ON TH IS ISSUE ALSO, THE MATTER SHOULD GO BACK TO THE FILE OF THE AO FOR FRESH DECISION. H ENCE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THESE TWO ISSUES RAISED BY THE ASSESS EE AS PER GROUNDS NO. 3 AND 4. ACCORDINGLY, THE ORDER OF CIT (A) IS SET ASIDE ON B OTH ISSUES RAISED AS PER GROUNDS NO. 3 AND 4 AND BOTH THESE ISSUES ARE RESTORED BACK TO THE FILE OF THE AO FOR FRESH DECISION BY WAY OF PASSING A SPEAKING ORDER AFTER P ROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUNDS NO. 3 AND 4 ARE ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/- SD/- (SUNIL KUMAR YADAV) (A.K. GARODI A ) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: 31/08/2015 AKS COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGI STRAR