M/s. Solanki Jewellers, Pune V. Deputy Commissioner of Income-tax,

ITA 858/PUN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0453 (ITAT-PUNE)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 29-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMITRA BANERJI
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Business income; Principle of natural justice; Bonafide belief; Deemed to accrue or arise in india; Condonation of delay
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 271(1)(c); 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 40(b); 69B; 201; 13

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 858 /PN/201 6 / ASSESSM ENT YEAR : 20 1 0 - 1 1 M/S. SOLANKI JEWELLERS, MZSK & ASSOCIATES, CHARTERED ACCOUNTANTS LEVEL 3, BUSINESS BAY, PLOT NO.84, WELLESLEY ROAD, NEAR RTO, PUNE 411001 . / APPELLANT PAN: A BLPS3964M VS. THE DY. COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE 2(1) , PUNE . / RESPONDENT / APPELLANT BY : SHRI NILESH KHANDELWAL / RESPONDENT BY : SMT. SUMITRA BANERJI / DATE OF HEARING : 1 9 . 1 0 .201 6 / DATE OF PRONOUNCEMENT: 18 . 1 1 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - 1 2 , PUNE , DATED 1 0 . 02 .20 1 5 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOM E - TAX ACT , 1961 (IN SHORT THE ACT) . ITA NO. 858 /PN/20 1 6 M/S. SOLANKI JEWELLERS 2 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL : - 1 . THERE IS DELAY IN FILING APPEAL AGAINST THE ORDER OF CIT(APPEALS) - 12 PASSED BY HIM ON 10/02/2015 & RECEIVED BY THE APPELLANT ON 12/03/2015. DUE TO REASON S BEYOND HIS CONTROL THE APPEAL ORDER REMAINED TO BE HANDED OVER TO THE TAX CONSULTANT FOR FILING APPEAL AGAINST THE SAME BEFORE THE ITAT. AN AFFIDAVIT EXECUTED BY THE APPELLANT GIVING THE REASONS FOR DELAY IS ENCLOSED HEREWITH. THE APPELLANT PRAYS THAT THE DELAY IN FILING THE APPEAL BE CONDONED & BE ADMITTED & ADJUDICATED. 2. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS & SCHEME OF THE ACT IT BE HELD THAT, THE AO HAS ERRED IN TAXING THE ADDITIONAL INCOME OF RS.35,25,387/ - DECL ARED BY THE FIRM IN THE COURSE OF SURVEY AS DEEMED INCOME BY WRONGLY APPLYING THE PROVISIONS OF SEC. 69 / 69B OF THE ACT. IT FURTHER BE HELD THAT THE 1 ST APPELLATE AUTHORITY IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN THIS RESPECT. JUST AND PR OPER RELIEF BE GRANTED TO THE APPELLANT IN THE RESPECT. 3. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND OF APPEAL WHICH READS AS UNDER: - ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS OF LAW IT BE HELD THAT THE DISALLOWANC E MADE OF REMUNERATION COMPUTED APPELLANT U/S 40(B) OF THE ACT SHOULD HAVE BEEN ALLOWED IN FULL. IT FURTHER BE HELD THAT THE ALLOWANCE MADE BY THE AO IS NOT AS PER THE PROVISIONS OF THE ACT. JUST AND PROPER RELIEF MAY BE GRANTED TO THE APPELLANT IN THIS RESPECT. 4. THE PRESENT APPEAL IS FILED AFTER DELAY OF 354 DAYS. THE PARTNER OF ASSESSEE FIRM FILED AN AFFIDAVIT IN THIS REGARD, WHICH READS AS UNDER: - AFFIDAVIT I, PRAVIN G. SOLANKI, RESIDENT OF CITY WOODS, OPP. POONAWALA GARDEN, FLAT NO.404, 4 T H FLOOR, MAPLE BUILDING, PUNE 411037 DO HEREBY STATE ON SOLEMN AFFIRMATION AS UNDER: I AM A PARTNER OF M/S SOLANKI JEWELLERS & I LOOK AFTER THE DAY TO DAY BUSINESS ACTIVITIES INCLUDING TAXATION MATTERS OF THE FIRM SINCE PAST SEVERAL YEARS. ORDER OF THE CIT(APPEALS) - 12 FOR THE AY 2010 - 11 WAS RECEIVED BY ME ON 12/03/2015. THE SAID ORDER WAS HANDED OVER TO ONE OF MY EMPLOYEES MR. RAJU MOHANLAL JAIN FOR THE PURPOSE OF HANDING OVER THE SAME TO MY CHARTERED ACCOUNTANT FOR FILING APPEAL AGAINST THE SAID ORDER . I PROCEEDED TO THE USA TO VISIT MY DAUGHTER THEREAFTER & RETURNED BACK WITHIN MONTHS TIME. WHEN I RETURNED BACK TO INDIA, MY EMPLOYEE MR. RAJI MOHANLAL JAIN HAD PROCEEDED TO HIS NATIVE PLACE AS HE HAD CERTAIN PERSON FAMILY PROBLEMS & HE DID NOT RETURN BACK FOR MONTHS TOGETHER. FINALLY HE LEFT THE JOB & RETURNED BACK TO HIS PLACE PERMANENTLY. I WAS UNDER THE BONAFIDE BELIEF THAT THE SAID DOCUMENT HANDED OVER TO HIM BY ME WAS DELIVERED TO MY CHARTERED ACCOUNTANT AT THAT POINT OF TIME ITSELF & NECESSARY COMPLIANCE WITH RESPECT TO THE APPEAL WAS ALREADY DONE & COMPLETED. ITA NO. 858 /PN/20 1 6 M/S. SOLANKI JEWELLERS 3 I, HOWEVER, REALIZED THAT MR. RAJU MOHANLAL JAIN FAILED TO DELIVER THE AFORESAID DOCUMENT TO MY CHARTERED ACCOUNTANT ONLY WHEN PENALTY PROCEEDINGS INITIATED U/S 271(1)(C) WAS FIXED FOR HE ARING BY THE AO IN THE MONTH OF FEBRUARY, 2016 & U/S 271(1)(C) WAS FIXED FOR HE ARING BY THE AO IN THE MONTH OF FEBRUARY, 2016 & CONCLUDED ON 31/03/2016. THE DELAY IN FILING THE APPEAL BEFORE THE ITAT IS DUE TO AFORESAID REASON WHICH WAS BEYOND MY CONTROL & IS UNINTENTIONAL. IT IS PRAYED THAT THE DELAY IN FILING THE APPEAL MAY KINDL Y BE CONDONED. WHATEVER STATED ABOVE IS TRUE TO THE BEST OF MY KNOWLEDGE AND BELIEF. SD/ - PLACE: PUNE PRAVIN SOLANKI DATE: 26/04/2016 (AFFIANT) 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURNISHED TAB ULATED DETAILS OF REASONS FOR DELAY IN FILING THE APPEAL LATE WHICH ARE AS UNDER: - NOTE ON REASONS FO R DELAY IN FILING OF APPEAL : 1 . ORDER OF THE HON'BLE CIT(A) WAS RECEIVED ON 12 / 03 / 2015. 2 . DUE DATE FOR FILING OF APPEAL BEFORE ITAT BEING 12 / 05 / 2015. 2 . DUE DATE FOR FILING OF APPEAL BEFORE ITAT BEING 12 / 05 / 2015. 3 . THE ORDER WAS RECEIVED BY MR PRAVEEN SOLANKI (PARTNER OF THE APPELLANT FIRM) AND WAS HANDED OVER TO ONE MR RAJESH MOHANLAL JAIN (ALIAS RAJESH SETHIYA). MR RAJESH WAS SUPPOSED TO FORWARD THE ORDER TO THE CHARTERED ACCOUNTANT (AR) LOOKING AFTER THE CASE. 4 . THERE AFTE R , MR PRAVEEN SOLANKI PROCEEDED TO USA TO VISIT HIS DAUGHTER ON 21/04/2015. A COPY OF PASSPORT STAMPING IS ENCLOSED HEREWITH. 5 . MR PRAVEEN SOLANKI RETURNED BACK TO INDIA ON 10 / 05 / 2015. 6 . MR PRAVEEN SOLANKI WAS UNDER THE IMPRESSION THAT MR RAJESH MUST HAVE FORWARDED THE ORDER TO THE CHARTERED ACCOUNTANT AND FURTHER ACTION MUST HAVE BEEN TAKEN BY HIM. HAVE BEEN TAKEN BY HIM. 7 . MR RAJESH HAD BEEN TO HIS NATIVE PLACE DUE TO SOME PERSONAL PROBLEMS FROM 30 / 06/2015 TO 14/07/2015 . THEREAFTER HE LEFT THE JOB SINCE 16/09/2015. A COPY O F MUSTER ROLL HAS BEEN ENCLOSED HEREWITH FOR REFERENCE. 8 . MR PRAVEEN SOLANKI THEREAFTER RECEIVED THE NOTICE OF PENALTY U / S 271(1)(C) FOR THE ABOVE REFERRED CASE. AFTER ENQUIRY HE GOT TO KNOW THAT FURTHER APPEAL HAS NOT BEEN FILED AGAINST THE CIT(A) ORDER R ECEIVED BY HIM. THE PENALTY PROCEEDINGS WAS FIXED FOR HEARING DURING THE MONTH OF FEBRUARY 2016 AND CONCLUDED IN THE MONTH OF MARCH 2016. 9 . THEREAFTER, MR PRAVEEN SOLANKI APPROACHED THE CHARTERED ACCOUNTANT FOR FILING OF FURTHER APPEAL AND THE APPEAL WAS F ILED ON 29/4/2016. ITA NO. 858 /PN/20 1 6 M/S. SOLANKI JEWELLERS 4 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE DELAY IN FILING OF APPEAL LATE WAS BEYOND THE CONTROL OF ASSESSEE BECAUSE OF THE AFORESAID REASONS AND HENCE, THE SAME MAY BE CONDONED. HE ALSO POINTED OUT THAT THE ADDITIONAL GROUND OF APPEAL WHICH WAS PURELY LEGAL IN NATURE AND THE SAME MERITS TO BE ADJUDICATED. HE FURTHER STATED THAT THE SAID LEGAL GROUND OF APPEAL WAS RAISED IN THE CASE OF SISTER CONCERN M/S. SUREKH JEWELLERS VS. DCIT IN ITA NO.18/PN/201 6, RELATING TO ASSESSMENT YEAR 2010 - 11 , VIDE ORDER DATED 12.08.2016 HAD ALLOWED THE SAID CLAIM OF ASSESSEE. HE STRESSED THAT ENDS OF JUSTICE WOULD BE MET IN CASE GROUND OF APPEAL NO.2 AND ALTERNATE PLEA IS ALLOWED IN THE HANDS OF ASSESSEE. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT(A). 8. ON PERUSAL OF RECORD AND AFTER HEARING BOTH THE LEARNED AUTHORIZED REPRESENTATIVES, THE ISSUE WHICH ARISES IN THE PRESENT CASE IS THE ASSESSABILITY OF ADDITIONAL INCOM E DECLARED BY THE ASSESSEE D URING THE COURSE OF SURVEY . THIS IS THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE . THE SECOND ISSUE RAISED BY WAY OF ADDITIONAL GROUND OF APPEAL IS AGAINST THE DISALLOWANCE MADE OF REMUNERATION UNDER SECTION 40(B) OF THE AC T. 9. THE FIRST GROUND OF APPEAL RAISED BY THE ASSESSEE IS AGAINST CONDONATION OF DELAY IN FILING THE APPEAL LATE BEFORE THE TRIBUNAL. THE ASSESSEE HAS EXPLAINED THE REASONS FOR SAID DELAY WHICH HAVE BEEN REPRODUCED IN THE PARAS HEREINABOVE. FURTHER, TH E ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN SISTER CONCERN CASE AND FOLLOWING THE ITA NO. 858 /PN/20 1 6 M/S. SOLANKI JEWELLERS 5 PRINCIPLE OF NATURAL JUSTICE, I AM OF THE VIEW THAT THE DELAY IN FILING THE PRESENT APPEAL LATE BY 354 DAYS MERITS TO BE CONDONED, SI NCE ON IDENTICAL FACTS, RELIEF HAS BEEN ALLOWED TO THE SISTER CONCERN. ACCORDINGLY, ACCEPTING THE REASONS FILED FOR CONDONATION OF DELAY IN FILING THE APPEAL LATE BEFORE THE TRIBUNAL , THE APPEAL IS TAKEN ON RECORD FOR ADJUDICATION. 10. NOW, COMING TO THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE AGAINST THE ASSESSABILITY OF ADDITIONAL INCOME DECLARED DURING THE COURSE OF SURVEY AT RS. 35,25,387/ - AND CONSEQUENT ALLOWANCE OF PARTNERS REMUNERATION UNDER SECTION 50B OF THE ACT , T HE ISSUE WHICH IS RAISED BY WAY OF ADDITIONAL GROUND OF APPEAL , THE ISSUE IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN M/S. SUREKH JEWELLERS VS. DCIT (SUPRA) . THE TRIBUNAL VIDE PARA 13 HAS HELD AS UNDER: - 13. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE ME. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE, WHICH IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINES S OF MANUFACTURING AND TRADING IN GOLD AND SILVER ORNAMENTS AND ARTICLES AND DIAMOND JEWELLERY, HAD DECLARED ADDITIONAL INCOME OF RS.41 LAKHS ON ACCOUNT OF EXCESS STOCK. I FIND THE ASSESSEE IN THE RETURN OF INCOME WHILE CREDITING THE AMOUNT OF ADDITIONAL I NCOME TO THE PROFIT AND LOSS ACCOUNT, HOWEVER, HAS CLAIMED REMUNERATION TO PARTNERS AND INTEREST ON CAPITAL AND THEREBY DECLARED THE NET INCOME OF RS.34,70,590/ - WHICH IS LESS THAN THE ADDITIONAL INCOME OF RS.41 LAKHS DECLARED DURING THE COURSE OF SURVEY. I FIND THE AO HELD THAT THE AMOUNT OF RS.41 LAKHS DECLARED DURING THE COURSE OF SURVEY IS TO BE TREATED AS DEEMED INCOME U/S.69B OF THE I.T. ACT AND THE ASSESSEE IS NOT ENTITLED TO ANY REMUNERATION OR INTEREST AS PER THE PROVISIONS OF SECTION 40(B) OF THE I.T. ACT. I FIND IN APPEAL THE CIT(A), FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHAMED HAJI HASAN (SUPRA) AND THE DECISION OF HONBLE CHATTISGARH HIGH COURT IN THE CASE OF DHANUSH GENERAL STORES (SUPRA) HELD THAT INVESTM ENT IN EXCESS STOCK FOUND DURING THE COURSE OF SURVEY WOULD CONSTITUTE DEEMED INCOME U/S.69B OF THE ACT AND THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S.40(B) OF THE I.T. ACT. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SUCH EXCESS STOC K FOUND DURING THE COURSE OF SURVEY WHICH WAS OFFERED AS ADDITIONAL INCOME BY THE ASSESSEE CONSTITUTES BUSINESS INCOME AND THE ASSESSEE IS ENTITLED TO GET DEDUCTION TOWARDS REMUNERATION TO PARTNERS AND INTEREST ON CAPITAL AS PER PROVISIONS OF SECTION 40(B) OF THE I.T. ACT. ITA NO. 858 /PN/20 1 6 M/S. SOLANKI JEWELLERS 6 11. THE ISSUE IN THE PRESENT APPEAL IS SIMILAR TO THE ISSUE BEFORE THE TRIBUNAL AND FOLLOWING THE SAME PARITY OF REASONING, I HOLD THAT SUM OF RS. 35,25,387/ - DECLARED BY THE ASSESSEE DURING THE COURSE OF SURVEY IS TO BE ASSESSED AS BUS INESS INCOME AND THE ASSESSEE IS ENTITLED TO THE CLAIM OF REMUNERATION AS INTEREST IN CAPITAL UNDER THE PROVISIONS OF SECTION 40(B) OF THE ACT ON SUCH ADDITIONAL INCOME. THE ASSESSING OFFICER IS DIRECTED TO RE - COMPUTE THE INCOME IN THE HANDS OF ASSESSEE. HENCE, THE GROUNDS OF APPEAL AND ADDITIONAL GROUND OF APPEAL RAISED ARE DECIDED IN FAVOUR OF ASSESSEE. 1 2 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 18 TH DAY OF NOVEMBER , 201 6 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 18 TH NOVEMBER , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1 2 , PUNE ; 4. / THE CIT , CENTRAL, PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE