Raviprasanna G. Hebbar, Uttarakannada V. ITO, Hubli

ITA 833/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5597 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 23-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: P C CHADAGA ITP

Judgement Text

PAGE 1 OF 7 ITA NOS.831 TO 833/BANG/2010 1 IN THE INOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SMT. P MADHAVI DEVI, J.M. AND SHRI A MOHAN ALANKAMONY, A.M. ITA NOS.831 TO 833/BANG/2010 (ASST. YEARS 2002-03 TO 2004-05) SHRI RAVIPRASANNA G HEBBAR, JOGADAMANE, POST : IDAGUNDI, TALUQ YELLAPUR, DISTRICT : UTTARAKANNADA. -APPELLANT VS THE INCOME TAX OFFICER, WARD-3(1), HUBLI-25. - RESPONDENT APPELLANT BY : SHRI P C CHADAGA, ITP RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI, ADDL. C IT O R D E R PER P MADHAVI DEVI : THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST T HE COMMON ORDER OF THE CIT(A), HUBLI DATED 23/3/2010 F OR THE ASST. YEARS 2002-03 TO 2004-05. 2. IN ALL THESE APPEALS, THE ASSESSEE IS COMMON AN D THE ISSUES ARE ALSO COMMON; THEREFORE, ALL THE THREE AP PEALS ARE HEARD TOGETHER AND ARE DISPOSED OFF BY THIS COMMON AND CON SOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. PAGE 2 OF 7 ITA NOS.831 TO 833/BANG/2010 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL AND FILED HIS RETURN OF INCOME FOR THE R ELEVANT ASST. YEARS DECLARING AN INCOME OF RS.70,000/-, RS.85,000/- AND RS.70,000/- RESPECTIVELY. LATER ON, DURING THE ASSESSMENT PROC EEDINGS U/S 143(3), IT WAS OBSERVED THAT THE ASSESSEE IS A PART NER IN M/S V V SHANBHAG, BPC DEALERS, YELLAPUR AS IS EVIDENT FROM THE PARTNERSHIP DEED EXECUTED ON 1/4/2000. THIS PARTNERSHIP DEED W AS FOUND DURING THE COURSE OF SURVEY, ACCORDING TO WHICH, THE ASSESSEE IS ENTITLED TO REMUNERATION OF RS.2000/- PER MONTH AND INTEREST ON CAPITAL AT 18%. HOWEVER, DURING THE COURSE OF ASSE SSMENT PROCEEDINGS U/S 143(3), THE ASSESSEE DISPUTED HIS P ARTNERSHIP IN THE SAID FIRM AND SUBMITTED THAT HE HAS ONLY ASSISTE D IN CONDUCTING THE FIRMS BUSINESS. THE AO, HOWEVER, WAS NOT CONV INCED WITH THIS ARGUMENT OF THE ASSESSEE AND HELD THAT FROM THE DEE D OF COMMITMENT AND RECEIPT OF MONEY EXECUTED ON 3 RD MARCH, 2005, THE PARTNERS HAVE RECEIVED BACK THEIR CAPITAL AND R EMUNERATION AS PER THIS DEED AND HAVE HANDED OVER THE POSSESSION O F THE PETROL BUNK TO THE LICENSEE SMT. USHA SHANBHAG FROM 31.3.2 005, WHICH CLEARLY SHOWS THAT THE ASSESSEE WAS A PARTNER IN THE SAID FIRM. HE THUS HELD THAT THE ASSESSEE IS A PARTNER OF M/S V V SHANBHAG FROM 1/4/2000 AND ACCORDINGLY, HAS RECEIVED REMUNERATION OF RS.24,000/- AND INTEREST ON CAPITAL OF RS.15,750/- DURING THE RELEVANT PREVIOUS YEAR AND BROUGHT TO TAX IN THE HAN DS OF THE ASSESSEE AS INCOME FROM BUSINESS. PAGE 3 OF 7 ITA NOS.831 TO 833/BANG/2010 3 3.1 IN ADDITION THERETO, THE AO ALSO OBSERVED THAT THE ASSESSEE HAS ADMITTED INCOME FROM OTHER SOURCES I N HIS RETURN OF INCOME AND THAT THE INCOME FROM OTHER SOURCES DECLA RED IS INCLUSIVE OF LORRY INCOME, BUT AS THE ASSESSEE DID NOT OWN ANY LORRY DURING THE ASSESSMENT YEAR 2002-03, THE ASSESSEES CONTENTI ON IS NOT CORRECT. HE, THEREFORE, BROUGHT THE INCOME ADMITTE D IN THE RETURN FOR THE ASST. YEAR 2002-03 ALSO TO BE TAXED AS INCOM E FROM OTHER SOURCES AND ARRIVED AT THE TOTAL INCOME OF RS.1,09, 750/-. 3.2 SIMILARLY FOR THE ASST. YEAR 2003-04 ALSO, HE BR OUGHT THE INCOME RETURNED BY THE ASSESSEE OF RS.85,000/- A S INCOME FROM OTHER SOURCES. FOR THE ASST. YEAR 2004-05, TH E AO FOUND THAT THE ASSESSEE HAD PURCHASED A LORRY DURING OCTOB ER 2003 AND WAS RUNNING IT ON HIRE AND THE ASSESSEE HAS NOT DEC LARED ANY INCOME FROM THE LORRY IN THE RETURN. HOWEVER, THE ASSESSEE HAD CONTENDED DURING THE ASSESSMENT PROCEEDINGS THAT THE INCOME F ROM OTHER SOURCES DECLARED IN THE RETURN IS INCLUSIVE OF LORR Y INCOME. THE AO WAS NOT CONVINCED WITH THIS ARGUMENT AND HELD THAT SINCE NO MENTION OF LORRY INCOME IS MADE IN THE RETURN, THE L ORRY INCOME IS SEPARATELY TAXABLE AND INCOME FROM THE SAID BUSINESS IS ADOPTED AT RS.21,000/- FOR SIX MONTHS U/S 44AE OF THE ACT. 3.3 AS REGARDS THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME OF RS.70,000/-, HE MADE AN ADDITIO N OF INCOME FROM REMUNERATION AND INTEREST ON CAPITAL AND ALSO INCOME FROM PAGE 4 OF 7 ITA NOS.831 TO 833/BANG/2010 4 OTHER SOURCES AND ARRIVED AT RS.1,30,750/- AS TAXAB LE INCOME FOR THE ASST. YEAR 2004-05. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A), WHO CONFIRMED THE ORDER OF THE AO AND T HE ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI P C C HADAGA REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFO RE THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE A LONG WITH OTHER PARTNERS HAD ENTERED INTO THE PARTNERSHIP DEED W.E. F. 1 ST APRIL, 2000 FOR TAKING OVER THE PETROL BUNK FROM SMT. USHA SHANBHAG. ON LEARNING THAT PARTNERSHIP FIRM WILL NOT GET LICE NCE FOR RUNNING OF THE PETROL BUNK AND THE LICENCE IN THE NAME OF SMT. USHA SHANBHAG IS NOT TRANSFERABLE, THE SAID FIRM WAS DISSOLVED ON THE SAME DATE VIDE THE DISSOLUTION DEED. THUS, ACCORDING TO HIM, THE ASSESSEE WAS NOT A PARTNER OF THE FIRM AFTER 1/4/2000 AND TH EREFORE, THERE WAS NO INCOME OR INTEREST ON CAPITAL FROM THE SAID BUSINESS. 5.1 AS REGARDS THE INCOME FROM OTHER SOURCES, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW. 6. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THOUGH THE ASSESSEE ALONG WITH OTHERS HAD ENTERED INTO PARTNER SHIP ON 1/4/2000, IT IS NOW STATED THAT THE SAID FIRM WAS D ISSOLVED ON PAGE 5 OF 7 ITA NOS.831 TO 833/BANG/2010 5 1/4/2000 ITSELF. A SEPARATE DEED OF COMMITMENT AN D RECEIPT OF MONEY HAD BEEN FOUND DURING THE COURSE OF SURVEY, ACCORDING TO WHICH, THE PARTNERSHIP DEED HAD BEEN ENTERED INTO O N 1/4/2000 AND THE PARTNERSHIP CONTINUED TILL 30 TH DAY OF MARCH, 2005 AND IT WAS AGREED THAT THEY ARE FULLY RESPONSIBLE FOR THE CHEQUE S ISSUED BY THEM DURING THE TENURE OF 1/4/2000 TO 16/3/2005. T HUS, ACCORDING TO THE LEARNED DR, IT IS CLEAR THAT THE B USINESS HAD BEEN CARRIED ON TILL 16 TH OF MARCH, 2005 AND THE ASSESSEE HAD RECEIVED THE REMUNERATION AS WELL AS THE INTEREST ON CAPITAL AND THE AO HAS CORRECTLY BROUGHT IT TO TAX. 7. IN THE REJOINDER, THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE SAID DOCUMENT DATED 3/3/2005 HAS NOT BEEN SIGNED BY SMT. USHA SHANBHAG, WHICH ITSELF CLEARLY SH OWS THAT THIS DOCUMENT HAS NEVER BEEN ACTED UPON AND CANNOT BE TA KEN INTO CONSIDERATION. 8. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THERE IS NO DOU BT WITH REGARD TO THE EXECUTION OF THE PARTNERSHIP DEED DATED 1/4/200 0. THE ONLY QUESTION BEFORE US IS AS TO THE DEED OF DISSOLUTION OF THE PARTNERSHIP. THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED BEFORE US THE COPY OF THE DISSOLUTION DEED DATED 1/4/2000. IT IS THE CASE OF THE ASSESSEE THAT AS SOON AS THE ASSESSEE ENTERE D INTO THE PARTNERSHIP DEED, IT HAD APPLIED FOR THE CHANGE OF THE LICENCE AND ONLY WHEN THEY WERE INFORMED THAT THE LICENCE IS NOT TRANSFERABLE, PAGE 6 OF 7 ITA NOS.831 TO 833/BANG/2010 6 DID THEY DISSOLVE THE PARTNERSHIP. THUS, IT IS NOT UNDERSTANDABLE AS TO HOW WITHIN THE SAME DAY THE ASSESSEE COULD OBTAIN ALL THESE INFORMATION AND IT EXECUTED INTO THE DISSOLUTION DE ED. THUS, IT CAN BE SAFELY PRESUMED THAT THE DISSOLUTION DEED CANNOT BE RELIED UPON. 8.1 COMING TO THE DEED OF COMMITMENT AND RECEIPT OF MONEY, IT IS SEEN THAT THIS PAYMENT HAS BEEN SIGNED BY ALL THE PARTNERS BUT IT IS NOT SIGNED BY THE PARTY NO.2 I.E. MRS. USHA SHANBHAG. THIS IS ONLY A XEROX COPY OF THE AGREEMENT AND WE DO NOT KNOW IF IT HAS BEEN, IN FACT, SIGNED IN THE ORI GINAL BY SMT. USHA SHANBHAG. ON PERUSING THE SIGNATURE OF THE PARTNE RS WITH THEIR SIGNATURES IN THE DISSOLUTION DEED AS ALSO IN THE P ARTNERSHIP DEED, WE FIND THAT THEY ARE IDENTICAL TO THE NAKED EYE. IF THE PARTNERSHIP DEED HAS ALREADY BEEN DISSOLVED ON 1/4/2 000, THEN THERE WAS NO NEED TO EXECUTE THIS DEED OF COMMITME NT AND RECEIPT OF MONEY WHEREIN IT IS CLEARLY STATED THAT THE PART NERSHIP FIRM CONTINUED UP TO 16/3/2005. THEREFORE, THE CREDENCE HAS TO BE GIVEN TO DEED DATED 3.3.2005. THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSEE WAS ENTITLED TO THE REMUNERATION AND INTEREST ON CAPITAL AS MENTIONED IN PARTNERSHIP DEED DATED 1/4/ 2000 AND THE AO HAS RIGHTLY MADE THE ADDITION ACCORDINGLY. THIS GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 8.2 AS REGARDS THE OTHER ADDITION ON ACCOUNT OF IN COME FROM OTHER SOURCES, WE FIND THAT THE ASSESSEE HAS H IMSELF DECLARED THIS INCOME AS INCOME FROM OTHER SOURCES AND THE IN COME FROM PAGE 7 OF 7 ITA NOS.831 TO 833/BANG/2010 7 BUSINESS IS SEPARATELY ADDED BY THE AO. THEREFORE, I T CANNOT BE SAID THAT THE INCOME FROM BUSINESS IS ALSO INCLUSIV E OF THE INCOME FROM OTHER SOURCES DECLARED BY THE ASSESSEE. HENCE, THE ADDITION ON ACCOUNT OF INCOME FROM OTHER SOURCES IS ALSO CON FIRMED. 8.3 FOR THE ASST. YEAR 2004-05, THE AO HAD ALSO MAD E AN ADDITION ON ACCOUNT OF INCOME FROM LORRY U/S 44AE OF THE ACT. SINCE IT IS NOT DISPUTED THAT THE ASSESSEE WAS OWNI NG A LORRY DURING THE RELEVANT PERIOD, WE DO NOT FIND ANY REASON TO DI STURB THIS ADDITION. 9. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSE SSEE ARE DISMISSED. THE ORDER PRONOUNCED ON THURSDAY, THE 26 TH DAY OF MAY, 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (P MADH AVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMB ER COPY TO : 1) THE ASSESSEE (2) THE REVENUE (3) THE CIT(A) CONCERNED. (4) THE CIT CONCERNED. (5) THE DR (6) GUARD FILE. MSP/25.5 BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.