ITO, Sawai Madhopur V. M/S RIDHI CHAND JAGNNATH, Gangapur City

ITA 913/JPR/2011

• Counselvise Citation: 91323114 RSA 2011
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 01-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: S L PODDAR
• Section: 143(3); 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NOS. 913 & 914/JP/2011 ASSESSMENT YEARS : 2005-06 & 2006-07 PAN : AAFFR 0581 G THE ITO VS. M/S. RIDHI CHAND JAGANNATH WARD- SAWAI MADHOPUR OLD MANDI, GANGAPUR CITY (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI D.C. SHARMA ASSESSEE BY : SHRI S.L. PODDAR DATE OF HEARING: 12-06-2014 DATE OF PRONOUNCEMENT: 13-06-2014 ORDER PER R.P. TOLANI, JM THESE TWO APPEALS HAVE BEEN FILED BY THE REVENUE A GAINST DIFFERENT ORDERS OF THE LD. CIT(A), AJMER DATED 12-08-2011 A ND 16-08-2011 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY. 2.1 THE COMMON GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLDI NG THAT:- (I) THE STATUS OF THE ASSESSEE TO BE ADOPTED AS T HAT OF THE FIRM AS AGAINST AOP ADOPTED BY THE AO AS TH E RECONSTITUTION DEED OF THE FIRM WAS VIOLATIVE OF TH E TERMS OF THE AGREEMENT WITH HPCL OF THE ORIGINAL FIRM 2 (II) DELETING THE DISALLOWANCE OF REMUNERATION AND INTEREST PAID TO THE PARTNERS WHEN THE AO ADOPTED T HE STATUS AS AOP. (III) DELETING THE TRADING ADDITIONS OF RS. 2,93,1 56/- FOR ASSESSMENT YEAR 2005-06 AND RS. 3,96,790/- FOR ASSESSMENT YEAR 2006-07 2.2 THE ONLY OTHER GROUND RAISED IN ASSESSMENT YEAR 2005-06 BY THE REVENUE IS AS UNDER:- THE LD. CIT(A) ERRED IN DELETING THE ASSESSMENT O RDER FRAMED BY THE AO U/S 144 OF THE ACT AND HOLDING IT TO BE U/S 143(3) OF THE ACT. 2.3 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE FIRM IS A DEALER OF HINDUSTAN PETROLEUM. THE RETURNS OF INCOME ALONGWIT H REQUISITE ACCOUNTS STATEMENTS AND RECONSTITUTED COPY OF PARTNERSHIP DE ED WERE FILED BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, SHRI RAJIV PALIWAL, ONE OF THE PARTNERS INTIMATED THAT BY THAT TIME THE FIRM HAS BEEN DISSOLVED AS ANOTHER PARTNER SHRI SURESH CHAND HAD PASSED AWAY. ONE OF THE PARTNERS SHRI ARVIND JAIN APPEARED AND INTIMATED THAT CERTAI N DISPUTES HAD CROPPED UP BETWEEN THE PARTNERS. THESE CIRCUMSTANCES RESULTED IN NON-PRODUCTION OF ACCOUNT BOOKS AND IN THIS SITUATION, THE AO ISSUED SUMMONS U/S 131(1) OF THE ACT IN THE NAMES OF ALL THE PARTNERS TO APPEAR AND PRODUCE THE BOOKS OF ACCOUNT. ON THE APPOINTED DATES, EACH PARTNER PLEAD ED IGNORANCE ABOUT THE BOOKS AND PUT THE ONUS ON OTHER PARTNERS ABOUT POSS ESSION OF THE BOOKS. IN 3 THESE SITUATION, THE AO FRAMED ASSESSMENT U/S 144 A ND HELD THE STATUS OF THE ASSESSEE TO BE OF AN AOP AND NOT OF THE REGISTERED FIRM U/S 184 OF THE ACT AND DENIED THE BENEFITS OF CLAIM OF INTEREST AND RE MUNERATION PAID TO PARTNERS. FURTHER, THE AO IN THE ABSENCE OF ACCOUNT BOOKS ESTIMATED THE GROSS PROFIT AND MADE ABOVE ADDITION. IN ASSESSMENT YEAR 2006-07, THE SAME COURSE OF ACTION WAS REPEATED EXCEPT THAT THE ASSES SMENT WAS FRAMED U/S 143(3) OF THE ACT. 2.4 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL. BEFORE LD. CIT(A) , THE ASSESSEE FILED AN APPLICATION TO THE EFFECT THAT DI SPUTES BETWEEN THE PARTNERS WERE SETTLED AND THE BOOKS OF ACCOUNT WERE AVAILABL E AND SAME WERE READY TO BE PRODUCED BEFORE THE AO ALONGWITH THE RELEVANT IN FORMATION FOR ASSESSMENT. THE ADDITIONS WERE RESULT OF DISPUTES AMONGST PARTNERS, THE SAME HAVING BEEN RESOLVED, THE STATUS MAY BE HELD A S A FIRM AND OTHER ADDITIONS MAY BE DELETED. THE LD. CIT(A) THEREAFTER FORWARDED THE ASSESSEE'S REQUEST AND THE BOOKS OF ACCOUNT TO THE AO FOR SUBM ITTING THE REMAND REPORT U/S 250(4 ). IN COMPLIANCE THERETO, THE AO FURNISH ED HIS REPORT DATED 28-04- 2011 WHICH IS IN HINDI. THE SUMS AND SUBSTANCE OF T HE REMAND REPORT IS AS UNDER:- THE ASSESSEE WAS ISSUED NOTICE. IN COMPLIANCE THE REOF, THE PARTNER SHRI RAM SWAROOP RAWAT AND THE AUTHORIZ ED REPRESENTATIVE SHRI S.N. GUPTA, ADVOCATE APPEARED A LONGWITH 4 BOOKS OF ACCOUNT, BILLS AND VOUCHERS ETC. WHICH WER E EXAMINED. THE BOOKS OF ACCOUNT ARE FOUND TO BE MAINTAINED IN ORDER. THE SALARY & INTEREST HAS BEEN PAID AND PROFITS DISTRIB UTED IN ACCORDANCE WITH TERMS OF PARTNERSHIP DEED. NO INFIR MITY IS FOUND FROM THE BOOKS. THE LD. CIT(A) TOOK THE COGNIZANCE OF AOS REMAND R EPORT ACCEPTING THE MAINTENANCE OF BOOKS OF ACCOUNT, EXISTENCE OF DULY EXECUTED PARTNERSHIP DEED, THE VALIDITY OF LICENSE ISSUED BY THE DISTT. SUPPLY OFFICER AND THE AGREEMENT WITH HINDUSTAN PETROLEUM ALSO WERE FOUND TO BE IN ORDER. THE PARTNERSHIP DEED, TERMS OF THE SALARY AND INTEREST ALSO WERE FOUND TO BE PROPER. THE LD. CIT(A) THUS HELD THAT THE FIRM IS ELIGIBLE FOR STATUS OF FIRM AND NOT AS AOP AND THE CONSEQUENT BENEFITS OF SECTI ON 40A(2)(B) WERE TO BE ALLOWED. IT WAS FURTHER HELD THAT BOOKS OF ACCOUNTS ARE DULY MAINTAINED AND NO INFIRMITY IS FOUND THEREIN, CONSEQUENTLY THE GR OSS PROFIT ADDITIONS WERE DELETED. THUS, THE ASSESSEE'S APPEALS OF BOTH THE A SSESSMENT YEARS WERE ALLOWED. 2.5 AGGRIEVED, THE REVENUE IS BEFORE US. THE LD. DR SHRI D.C. SHARMA RELIED ON THE ORDERS OF THE AO. 2.6 THE LD. COUNSEL FOR THE ASSESSEE SHRI S.L. PODD AR CONTENDED THAT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSE SSEE HAVE BEEN PROPERLY DEALT WITH BY THE LD. CIT(A). DURING THE COURSE OF REMAND PROCEEDING, THE ASSESSEE WAS ABLE TO DEMONSTRATE THAT REGULAR BOOKS OF ACCOUNT, BILLS AND 5 VOUCHERS WERE DULY MAINTAINED. THE RECONSTITUTED PA RTNERSHIP DEED AND AGREEMENT WITH HPCL WAS VALID ON THE AUTHORITY OF L ICENSE ISSUED BY THE DISTT. SUPPLY OFFICER. THERE WAS INCONSISTENCY IN T HE BOOKS OF ACCOUNT AND THERE WAS NO OCCASION FOR ANY DISALLOWANCE. THE IN TEREST, SALARY AND PROFITS WERE DISTRIBUTED AMONGST PARTNERS IN ACCORDANCE WIT H TERMS OF RECONSTITUTED PARTNERSHIP DEED. IN CONSIDERATION OF THESE FACTS A ND THE REMAND REPORT ACCEPTING THE CLAIM OF THE ASSESSEE, THE LD. CIT(A) HELD THE STATUS TO BE OF FIRM ELIGIBLE FOR DEDUCTIONS OF INTEREST AND SALARY TO PARTNERS U/S 40A(2)(B) OF THE ACT AND THE GROSS PROFIT ADDITIONS HAVE RIG HTLY BEEN DELETED. THE ORDERS OF THE LD. CIT(A) ARE RELIED UPON BY THE LD. AR. 2.7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT CLEARLY EMERGES FROM THE RE CORD THAT EX-PARTE ASSESSMENT, DENIAL OF STATUS OF FIRM AND GROSS PROF IT ADDITIONS WERE CAUSED BY DISPUTES AMONGST THE PARTNERS WHO COULD NOT PROD UCE THE RELEVANT RECORDS DURING THE COURSE OF ORIGINAL ASSESSMENT. BY THE TI ME, THE ASSESSEE WAS IN APPEAL, THE DISPUTES WERE RESOLVED AND THE LD. CIT (A) DIRECTED THE AO TO VERIFY ALL THE ASPECTS IN THE COURSE OF REMAND PROC EEDINGS. IT CLEARLY EMERGES FROM THE REMAND REPORT THAT THE ASSESSEE'S BOOKS OF ACCOUNT WERE FOUND TO BE IN ORDER, INTEREST AND SALARY TO PARTNERS AND THE PROFITS OF THE FIRM ALLOCATED AS PER TERMS OF THE RECONSTITUTED PARTNERSHIP DEED. NO DEFECT OR DISALLOWABLE 6 EXPENDITURE WAS FOUND IN THE BOOKS OF ACCOUNT. THIS HAS BEEN SQUARELY ACCEPTED BY THE AO. BASED ON THE REMAND REPORT, THE LD. CIT(A) HAS GIVEN PROPER RELIEF. THUS, WE SEE NO INFIRMITY IN THE ORD ERS OF THE LD. CIT(A) WHICH ARE UPHELD AND THE REVENUES APPEALS ARE DISMISSED. 3.0 IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMISSED. . THE ORDER PRONOUNCED IN OPEN COURT ON 13 TH JUNE, 2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 13 TH JUNE, 2014 *MISHRA COPY FORWARDED TO:- 1. THE ITO, WARD-2 , SAWAI MADHOPUR 2. M/S. RIDHI CHAND JAGANNATH, OLD MANDI, GANGAPUR CITY 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR 5..THE LD. DR 6.THE GUARD FILE (IT NO. 913 & 914/JP/2011) BY ORDER AR ITAT, JAIPUR 7 8