Appeal Details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 0352 (ITAT-AGRA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 year(s) 1 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
16-05-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
30-05-2013
Assessment Year
2006-2007
Appeal Filed On
08-04-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 80/AG./ 2010 ASSESSMENT YEAR 2006-07 M/S BHAGWAT PRASAD SHARMA VS. JOINT COMMIS SIONER OF INCOME TAX CONTRACTORS, RANGE II, GWALIOR GWALIOR. (PAN AAFFB 6203 R) ITA NO. 93/AGRA/ 2010 ASSESSMENT YEAR 2006-07 JOINT COMMISSIONER OF INCOME TAX VS. M/S BHAGWAT PRASAD SHARMA, RANGE 2, CONTRACTOR, GOLE KA MANDIR, GWALIOR. GWALIOR. (PAN AAFFB 6203 R) (APPELLANTS) (RESPONDENTS) REVENUE BY : SHRI RAJENDRA SHARMA, ADV. ASSESSEE BY : SHRI WASEEM ARSHAD, SR.D.R. DATE OF HEARING : 30.05.2013 DATE OF PRONOUNCEMENT : 21.06.2013 ORDER PER A.L. GEHLOT,ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER DATED 22.01.2010 PASSED BY THE LEARNED CIT(A) , GWALIOR FOR A.Y. 2006-07. ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 2 2. THE GROUNDS RAISED IN THESE APPEALS ARE REPROD UCED AS BELOW:- ITA NO. 80/AGRA/2010 BY THE ASSESSEE:- GROUND NO.1: ON THE FACTS & IN CIRCUMSTANCES OF TH ECASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) WAS NOT JUSTIFIED IN UPHOLDING THE EXPARTE ASSESSMENT DESPITE ALL POS SIBLE COMPLIANCE MADE BY THE APPELLANT IN ASSESSMENT PROC EEDING & THEREBY UPHOLDING DISALLOWANCE OF INTEREST & SALARY TO PARTNERS. GROUND NO.2 :- ON THE FACTS & IN CIRCUMSTANCES OF T HECASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED I N LAW & ON FACTS IN CONFIRMING THE ADDITION OF RS.1183637/- ON ACCOUNT OF UNSECURED LOAN ADVANCED BY THE PARTNER SHRI PRAT AP SHARMA WHO HAD ACKNOWLEDGED THE AFORESAID LOAN TO THE APPE LLANT FIRM BY A FILING AN AFFIDAVIT. GROUND NO.3:- ON THE FACTS & IN CIRCUMSTANCES OF TH ECASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) WAS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE OF RS.100000/-OUT OF THE DEPRECIATION ALLOWANCE. GROUND NO.4:- ON THE FACTS & IN CIRCUMSTANCES OF TH ECASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) WAS NOT JUSTIFIED IN RETAINING AN ADHOC ADDITION OF RS.2.50 LAC OUT O F THE ADDITION OF RS.15,00,000/- MADE BY THE A.O. WITHOUT ANY BASIS, REASON OR RHYME. ITA. NO. 93/AGRA/2010 BY THE REVENUE :- I) ON THE FACTS & IN CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN DE LETING THE ADDITION OF RS.5,74,565/- MADE ON ACCOUNT OF REFUND OF COMMERCIAL TAX. II) ON THE FACTS & IN CIRCUMSTANCES OF THE CASE THE CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 36,551/- MADE ON ACCOUNT OF EXCESS COMMERCIAL TAX DEBITED TO P&L ACCOUNT. ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 3 III) ON THE FACTS & IN CIRCUMSTANCES OF THE CASE TH E CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 97,800/- OUT OF ADDITION OF RS.17,13,367/- MADE ON ACCOUNT OF UN EXPLAINED CASH CREDIT. IV) ON THE FACTS & IN CIRCUMSTANCES OF THE CASE THE CIT (APPEALS) HAS ERRED IN RESTRICTING THE ADDITION OF RS.2,50,000/- OUT OF ADDITION OF RS.15,00,000/- MADE ON ACCOUNT O F DISALLOWANCE OUT OF VARIOUS EXPENSES. 3. FIRST WE TAKE UP ITA NO.80/AGRA/2010 APPEAL FILED B Y THE ASSESSEE. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F IRM IS A CONTRACTOR EXECUTING CONTRACTS FOR VARIOUS GOVT. DEPARTMENTS. IN RESPONS E TO STATUTORY NOTICES THE ASSESSEE FURNISHED REQUIRED INFORMATION AND PRODUCE D BOOKS OF ACCOUNT. THE A.O. MADE ASSESSMENT UNDER SECTION 144 OF THE ACT O N THE GROUND THAT THE HEARING WAS ADJOURNED TO 22.12.2008 BUT THE ASSESSE E DID NOT APPEAR NOR ANY APPLICATION FOR ADJOURNMENT WAS FILED. THE A.O. NOT ICED THAT THIS BEING A TIME BARRING CASE, THEREFORE, THERE IS NO ALTERNATI VE BUT TO COMPLETE THE ASSESSMENT ON THE BASIS OF MATERIAL AVAILABLE ON RE CORD. THE ASSESSEE HAS FAILED TO COMPLY WITH THE REQUIREMENTS OF NOTICE UN DER SECTION 142(1) OF THE ACT, THEREFORE, THE ASSESSMENT ORDER WAS FRAMED UND ER SECTION 144 OF THE ACT. SINCE THE A.O. MADE ASSESSMENT UNDER SECTION 1 44 OF THE ACT, THEREFORE, HE INVOKED PROVISIONS OF SUB SECTION (5) OF SECTION 184 OF THE ACT AND DISALLOWED RS.8,56,315/- AS INTEREST PAID TO TH E PARTNERS AND RS.2,40,000/-AS SALARY PAID TO PARTNERS. ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 4 4. THE CIT(A) CONFIRMED THE ACTION OF THE A.O. 5. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE A.O. DID NOT PROVIDE ANY OPPORTUNITY OF HEARING BEFORE MAKING AS SESSMENT UNDER SECTION 144 OF THE ACT. THE LD. AUTHORIZED REPRESENTATIVE S UBMITTED THAT NOTICE ISSUED UNDER SECTION 142(1) WAS COMPLIED WITH BY TH E ASSESSEE VIDE ASSESSEES LETTER DATED 01.09.2008. THE LD. AUTHORI ZED REPRESENTATIVE SUBMITTED THAT THE A.O. DID NOT ISSUE ANY OTHER NOT ICE STATING REQUIREMENT OF THE A.O. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTE D THAT A.O. HAS WRONGLY MADE ASSESSMENT UNDER SECTION 144 AND WRONGLY DISAL LOWED INTEREST AND SALARY TO PARTNERS. 6. LD. D.R. ON THE OTHER HAND, RELIED UPON THE ORDE R OF THE CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS FAILED TO COMPLY WI TH THE NOTICE UNDER SECTION 142(1), THEREFORE, THE A.O. HAS RIGHTLY MAD E ASSESSMENT UNDER SECTION 144 OF THE ACT. HE FURTHER SUBMITTED THAT S INCE THE ASSESSMENT WAS MADE UNDER SECTION 144, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR INTEREST AND SALARY TO PARTNERS IN ACCORDANCE WITH SECTION 1 84(5) OF THE ACT. 7. WE HAVE HEARD LD. REPRESENTATIVES OF THE PARTIES AND RECORDS PERUSED. BEFORE CONSIDERING THE FACTS OF THE CASE, UNDER CON SIDERATION, WE WOULD LIKE TO REFER THE SCHEME OF ASSESSMENT AS FIRM AND RELEV ANT SECTIONS. SECTIONS 184 & 185 OF THE ACT READS AS UNDER :- ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 5 [ ASSESSMENT AS A FIRM. 184. (1) A FIRM SHALL BE ASSESSED AS A FIRM FOR THE PUR POSES OF THIS ACT, IF (I) THE PARTNERSHIP IS EVIDENCED BY AN INSTRUMENT AND (II) THE INDIVIDUAL SHARES OF THE PARTNERS ARE SPE CIFIED IN THAT INSTRUMENT. (2) A CERTIFIED COPY OF THE INSTRUMENT OF PARTNERSH IP REFERRED TO IN SUB- SECTION (1) SHALL ACCOMPANY THE RETURN OF INCOME OF THE FIRM OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 1993 IN RESPECT OF WHICH ASSESSMENT AS A FIR M IS FIRST SOUGHT. EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION, THE COPY OF THE INSTRUMENT OF PARTNERSHIP SHALL BE CERTIFIED IN WRI TING BY ALL THE PARTNERS (NOT BEING MINORS) OR, WHERE THE RETURN IS MADE AFTER TH E DISSOLUTION OF THE FIRM, BY ALL PERSONS (NOT BEING MINORS) WHO WERE PARTNERS IN THE FIRM IMMEDIATELY BEFORE ITS DISSOLUTION AND BY THE LEGAL REPRESENTAT IVE OF ANY SUCH PARTNER WHO IS DECEASED. (3) WHERE A FIRM IS ASSESSED AS SUCH FOR ANY ASSESS MENT YEAR, IT SHALL BE ASSESSED IN THE SAME CAPACITY FOR EVERY SUBSEQUENT YEAR IF THERE IS NO CHANGE IN THE CONSTITUTION OF THE FIRM OR THE SHARES OF TH E PARTNERS AS EVIDENCED BY THE INSTRUMENT OF PARTNERSHIP ON THE BASIS OF WHICH THE ASSESSMENT AS A FIRM WAS FIRST SOUGHT. (4) WHERE ANY SUCH CHANGE HAD TAKEN PLACE IN THE PR EVIOUS YEAR, THE FIRM SHALL FURNISH A CERTIFIED COPY OF THE REVISED INSTR UMENT OF PARTNERSHIP ALONG WITH THE RETURN OF INCOME FOR THE ASSESSMENT YEAR R ELEVANT TO SUCH PREVIOUS YEAR AND ALL THE PROVISIONS OF THIS SECTION SHALL A PPLY ACCORDINGLY. [(5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, WHERE, IN RESPECT OF ANY ASSESSMENT YEAR, THERE IS ON THE PART OF A FIRM ANY SUCH FAILURE AS IS MENTIONED IN SECTION 144, THE FI RM SHALL BE SO ASSESSED THAT NO DEDUCTION BY WAY OF ANY PAYMENT OF INTEREST, SAL ARY, BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, MADE BY S UCH FIRM TO ANY PARTNER OF SUCH FIRM SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION' AND SUCH INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION SHALL NOT BE CHARGEABLE TO INCOME-TAX UNDER CLAUSE (V) OF SECTION 28. ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 6 ASSESSMENT WHEN SECTION 184 NOT COMPLIED WITH. 185. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION OF THIS ACT, WHERE A FIRM DOES NOT COMPLY WITH THE PROVISIONS OF SECTION 184 FOR ANY ASSESSMENT YEAR, THE FIRM SHALL BE SO ASSESSED THAT NO DEDUCTION BY WAY OF ANY PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, MADE BY SUCH FIRM TO ANY PART NER OF SUCH FIRM SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AND SUCH INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION SHALL NOT BE CHARGEABLE TO INCOME-TAX UNDER CLAUSE (V) OF SECTION 28. 8. THE FINANCE ACT 1992 HAS BROUGHT FOURTH A CONCEP TUAL CHANGE IN THE SCHEME ASSESSMENT OF FIRMS W.E.F. 1 ST APRIL, 1993 THE SCHEME OF REGISTRATION OF FIRMS HAS BEEN DONE AWAY WITH AND HENCE THERE WO ULD NO LONGER THE DISTINCTION FROM THE POINT OF VIEW OF REGISTRATION FIRMS AND URFS. EITHER A PARTNERSHIP FIRM WILL BE ASSESSED AS A FIRM BY VIRT UE OF SECTION 184 OR ELSE, IT WILL BE ASSESSED AS ON AOP ON ACCOUNT OF SECTION 18 5. A PARTNERSHIP CONCERN ASSESSED AS A FIRM UNDER SECTION 184 IS GIV EN SOME TAX ADVANTAGES. THE INTEREST PAID TO ANY PARTNER COMPUTED AT A PRES CRIBED RATE AND REMUNERATION PAID TO WORKING PARTNER WOULD BE ALLOW ABLE UNDER SECTION 40(B) OF THE ACT. IF THE ASSESSMENT WERE TO BE MADE IN THE STATUS OF AN AOP, SUCH INTEREST OR REMUNERATION GIVEN TO ANY PARTNER, WILL NOT BE ALLOWABLE DEDUCTION. SUB SECTION (5) STARTS WITH AN NON-OBSTA NTE CLAUSE AND IS OF OVERRIDING NATURE. WHERE THE FIRM, DESPITE COMPLYIN G WITH OTHER PROCEDURAL ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 7 FORMALITIES, IS GUILTY OF CONTUMACIOUS CONDUCT IN C OURTING A BEST JUDGMENT, THE FIRM SHALL NOT BE ASSESSED AS SUCH FOR SUCH ASS ESSMENT YEAR. IT WOULD BE ASSESSED IN THE STATUS OF AN AOP AND ALL OTHER PROV ISIONS OF THE I.T. ACT WOULD APPLY ACCORDINGLY, AS IF IT WAS AN AOP. THE W ORDS USED IN THE NEW SECTION 184(5) ARE SHALL SIGNIFYING THE INTENTION OF THE LEGISLATURE THAT IT IS USED IN THE MANDATORY SENSE ONLY. THUS, WHERE THERE IS A BEST JUDGMENT ASSESSMENT UNDER SECTION 144 THE STATUS WOULD BE AO P ONLY AND IT CANNOT BE CONTENDED THAT INASMUCH AS THE PROCEDURAL FORMALITI ES PRESCRIBED BY SECTION 184 HAVE BEEN COMPLIED WITH, IT SHOULD BE ASSESSED IN THE STATUS OF FIRM ONLY. 9. FOR FURTHER APPRECIATING THE SCHEME OF ASSESSMEN T OF FIRM, WE WOULD LIKE TO REFER SECTION 144 WHICH READS AS UNDER :- 144. [(1)] IF ANY PERSON (A) FAILS TO MAKE THE RETURN REQUIRED UNDER SUB-SE CTION (1) OF SECTION 139 AND HAS NOT MADE A RETURN OR A REVISED RETURN UNDER SUB-SECTION (4) OR SUB- SECTION (5) OF THAT SECTION, OR (B) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142[OR FAILS TO COMPLY WITH A DIRECTION ISSUED UNDER SUB-SECTION (2A) OF THAT SECTION], OR (C) HAVING MADE A RETURN, FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (2) OF SECTION 143, THE[ASSESSING] OFFICER, AFTER TAKING INTO ACCOUNT A LL RELEVANT MATERIAL WHICH THE[ASSESSING] OFFICER HAS GATHERED, [SHALL, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE THE ASSESSMENT] OF THE TOTAL INCOME OR LOSS ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 8 TO THE BEST OF HIS JUDGMENT AND DETERMINE THE SUM P AYABLE BY THE ASSESSEE [* * *] ON THE BASIS OF SUCH ASSESSMENT : [ PROVIDED THAT SUCH OPPORTUNITY SHALL BE GIVEN BY THE ASSESS ING OFFICER BY SERVING A NOTICE CALLING UPON THE ASSESSEE TO SHOW CAUSE, ON A DATE AND TIME TO BE SPECIFIED IN THE NOTICE, WHY THE ASSESSMENT S HOULD NOT BE COMPLETED TO THE BEST OF HIS JUDGMENT : PROVIDED FURTHER THAT IT SHALL NOT BE NECESSARY TO GIVE SUCH OPPORT UNITY IN A CASE WHERE A NOTICE UNDER SUB-SECTION (1) OF SECTIO N 142 HAS BEEN ISSUED PRIOR TO THE MAKING OF AN ASSESSMENT UNDER THIS SEC TION.] [(2) THE PROVISIONS OF THIS SECTION AS THEY STOOD I MMEDIATELY BEFORE THEIR AMENDMENT BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1 987 (4 OF 1988), SHALL APPLY TO AND IN RELATION TO ANY ASSESSMENT FO R THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1988, OR ANY EA RLIER ASSESSMENT YEAR AND REFERENCES IN THIS SECTION TO THE OTHER PROVISI ONS OF THIS ACT SHALL BE CONSTRUED AS REFERENCES TO THOSE PROVISIONS AS FOR THE TIME BEING IN FORCE AND APPLICABLE TO THE RELEVANT ASSESSMENT YEAR.] 10. ON PLAIN READING OF SECTIONS 144, 184 AND 185 OF THE ACT, WE NOTICED THAT THE A.O. IS EMPOWERED TO DISALLOW THE INTEREST AND REMUNERATION OF PARTNERS ONLY UNDER THE CONSIDERATION THAT THE ASSE SSMENT WAS MADE UNDER SECTION 144 OF THE ACT. THE ASSESSMENT UNDER SECTIO N 144 OF THE ACT CAN BE MADE ONLY ON THE FOLLOWING CIRCUMSTANCES :- (1) FAILS TO MAKE THE RETURN REQUIRED UNDER SUB-SE CTION (1) OF SECTION 139 AND HAS NOT MADE A RETURN OR A REVISED RETURN UNDER SUB-SECTION (4) OR SUB- SECTION (5) OF THAT SECTION, OR ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 9 (2) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142[OR FAILS TO COMPLY WITH A DIRECTION ISSUED UNDER SUB-SECTION (2A) OF THAT SECTION], OR (3) HAVING MADE A RETURN, FAILS TO COMPLY WITH ALL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (2) OF SECTION 143, (4). THE A.O. SHALL PROVIDE AN OPPORTUNITY OF HEARI NG TO THE ASSESSEE. 11. IN THE LIGHT OF THE ABOVE DISCUSSION, IF WE CON SIDER THE FACTS OF THE CASE UNDER CONSIDERATION, THE ADMITTED FACTS OF THE CASE ARE THAT THE ASSESSEE MADE COMPLIANCE AND FURNISHED INFORMATION REQUIRED BY THE A.O. THE BOOKS OF THE ACCOUNT WAS ALSO PRODUCED BY THE ASSESSEE BE FORE THE A.O. AS NOTED BY THE A.O. IN PARA 2 OF HIS ORDER. THE LD. AUTHORI ZED REPRESENTATIVE ALSO DEMONSTRATED THAT THE NOTICE ISSUED UNDER SECTION 1 42(1) OF THE ACT WITH QUERIES WERE COMPLIED BY THE ASSESSEE. THE CASE OF THE A.O. IS THAT THE ASSESSEE HAS FAILED TO COMPLY THE CONDITION NO.2, W HICH IS AS UNDER:- (B) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTIC E ISSUED UNDER SUB-SECTION (1) OF SECTION 142[OR FAILS TO COMPLY WITH A DIRECT ION ISSUED UNDER SUB- SECTION (2A) OF THAT SECTION], OR 12. BUT IT IS RELEVANT TO STATE THAT THE REVENUE HA S FAILED TO POINT OUT WHETHER THE NOTICE ISSUED UNDER SECTION 142(1) WAS WITH ANY QUERY OR WITH THE TERMS OR WAS ISSUED WITHOUT TERMS OF THE NOTICE . THE REVENUE HAS FAILED ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 10 TO POINT OUT THAT THE NOTICES ISSUED UNDER SECTION 142(1) WAS WITH SOME TERMS OF THE NOTICES. THUS, MERELY NON COMPLIANCE O F A NOTICE UNDER SECTION 142(1) OF THE ACT HAVING NO TERMS OR REQUIREMENTS I S NOT SUFFICIENT REASON FOR MAKING ASSESSMENT UNDER SECTION 144 PARTICULARL Y IN CASE PARTNERSHIP FIRM WHERE THE A.O. WANT TO INVOKE SECTION 184(5) A ND SECTION 185 OF THE ACT, DISALLOWING THE INTEREST AND REMUNERATION TO P ARTNERS FIRM, THE ASSESSMENT MADE BY A.O. UNDER SECTION 144 IS NOT IN ACCORDANCE WITH THE CONDITIONS LAID DOWN IN SECTION 144 OF THE ACT. WE, THEREFORE, FIND THAT THE A.O. HAS WRONGLY MADE ASSESSMENT UNDER SECTION 144 THOUGH IN CLAUSE 5 OF THE ASSESSMENT ORDER HE HAS TAKEN THE STATUS AS A FIRM NOT AS AOP. WE, THEREFORE, SET ASIDE THE ORDERS OF REVENUE AUTHORIT IES AND ALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF INTEREST PAID TO PARTNER S OF RS.8,56,315/-, AND SALARY TO PARTNERS RS.2,40,000/-. THUS, ADDITION OF RS.8,56,315/- AND RS.2,40,000/- MADE BY THE A.O. ARE DELETED. 13. THE SECOND GROUND OF ASSESSEES APPEAL IS IN RE SPECT OF ADDITION OF RS.11,83,637/- CONFIRMED BY THE CIT(A) ON ACCOUNT O F UNSECURED LOAN GIVEN BY THE PARTNER. DURING THE ASSESSMENT PROCEEDING, T HE A.O. NOTICED THAT THE ASSESSEE HAS TAKEN FRESH LOANS AGGREGATING TO RS.16 ,83,637/- INCLUDING LOANS OF RS.15,000/- EACH IN THE NAME OF BRIJ RAJ SINGH R AJAWAT AND SOMENDRA SINGH WHICH HAVE BEEN SQUARED UP DURING THE YEAR. T HE ASSESSEE FAILED TO ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 11 COMPLY WITH THE REQUIREMENT OF THE A.O. THE ASSESSE E HAS FAILED TO PROVE THE GENUINENESS OF THE LOAN AND CREDITWORTHINESS OF THE LENDER WHICH LIES ON THE ASSESSEE. THE A.O. MADE ADDITION OF RS.17,13,637/- UNDER SECTION 68 OF I.T. ACT. THE CIT(A) AFTER CONSIDERING THE ASSESSEES S UBMISSION DELETED THE ADDITION OF RS.97,800/- ON THE GROUND THAT IN RESPE CT OF THIS AMOUNT RS.97,800/- THE ASSESSEE HAS SATISFIED THE CONDITIO N LAID DOWN UNDER SECTION 68 OF THE ACT. HOWEVER, THE CIT(A) CONFIRMED THE ADDITION TO THE EXTENT OF RS.16,15,837/-. 14. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THA T THE ASSESSEE IS CHALLENGING THE ADDITION OF RS.11,83,637 WHICH IS T HE LOAN ADVANCED BY THE PARTNER SRI UDAY PRATAP SHARMA. THE BALANCE AMOUNT IS NOT CHALLENGED. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE AS SESSEE MAINTAINED TWO CAPITAL ACCOUNTS, ONE IS FIXED FOR CAPITAL AND ANOT HER IS CURRENT CAPITAL ACCOUNT. THIS AMOUNT OF RS.11,83,637/- IS ON ACCOU NT OF CURRENT CAPITAL ACCOUNT. HE FURTHER SUBMITTED THAT THE TITLE OF THE ACCOUNT LOAN WAS INADVERTENTLY USED AS PER PREVAILING PRACTICE BUT I N FACT IT IS A CURRENT CAPITAL ACCOUNT OF THE PARTNER IN THE BOOKS OF THE FIRM. TH E LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS FURN ISHED CONFIRMATION, IDENTITY AND OTHER RECORDS TO ESTABLISH THAT IN FAC T THE AMOUNT WAS GIVEN TO THE FIRM BY THE PARTNER AS A CURRENT CAPITAL. HE SU BMITTED THAT UNDER THE ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 12 CIRCUMSTANCES, ADDITION CANNOT BE MADE IN THE HANDS OF THE FIRM. THE LD. AUTHORIZED REPRESENTATIVE IN SUPPORT OF HIS CONTENT ION RELIED UPON THE ORDER OF HONBLE M.P. HIGH COURT IN THE CASE OF COMMISSIO NER OF INCOME TAX VS. METACHEM INDUSTRIES, 345 ITR 160 (MP), HONBLE ALLA HABAD HIGH COURT IN THE CASES OF INDIA RICE MILLS VS. COMMISSIONER OF I NCOME TAX 218 ITR 508 (ALL.), SURENDRA MAHAN SETH VS. COMMISSIONER OF INC OME TAX (1996) 221 ITR 239 (ALL) AND ITAT AGRA BENCH, IN ITA NO. 654/A GR/2008 VIDE ORDER DATED 25.05.2010. 15. THE LD. D.R., ON THE OTHER HAND, RELIED UPON TH E ORDER OF THE LD. CIT(A). 16. WE HAVE HEARD LD. REPRESENTATIVES OF THE PARTIE S AND RECORDS PERUSED. IN THE LIGHT OF THE JUDGMENTS OF HONBLE ALLAHABAD HIGH COURT AND MADHYA PRADESH HIGH COURT IN THE CASES OF INDIA RICE MILLS ,_SURENDRA MAHAN SETH (SUPRA) AND COMMISSIONER OF INCOME TAX VS. METACHEM INDUSTRIES (SUPRA), WE ARE OF THE VIEW THAT THE CURRENT CAPITAL INTRODU CED BY PARTNER IN FIRM IS ESTABLISHED AND THUS THE ADDITION CANNOT BE MADE IN THE HANDS OF THE FIRM. FOLLOWING THE ABOVE JUDGMENT THE ADDITION OF RS.11, 83,637/- IS DELETED AND BALANCE ADDITION OF RS.4,32,200/- (16,15,837-11,83, 637/-) SUSTAINED BY THE LD. CIT(A) IS ALSO DELETED. ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 13 17. GROUND NO.3 IS IN RESPECT OF ADDITION OF RS.1,0 0,000/- OUT OF DEPRECIATION ALLOWANCE. THIS GROUND HAS NOT BEEN PR ESSED BY LD. AUTHORIZED REPRESENTATIVE, THEREFORE, THE SAME IS DISMISSED. 18. GROUND NO.4 IS IN RESPECT OF ADHOC DISALLOWANCE OUT OF EXPENSES. THE A.O. MADE ADDITION OF RS.15,00,000/- WHICH HAS BEEN REDUCED BY THE LD. CIT(A) TO RS.2,50,000/- WHICH IS REPRODUCED AS UNDE R:- (PAGE NO.10 CIT(A) 10.2 APPELLANTS SUBMISSIONS ALONGWITH THE ASSESSM ENT ORDER HAVE BEEN CONSIDERED CAREFULLY. THERE IS NO D ENYING THE FACT THAT FOR PRECEDING ASSTT. YEA, THE APPELLANT HAS SU RRENDERED AN AMOUNT OF RS.15 LAKHS WHICH HAVE BEEN MADE THE BASI S BY THE A.O. FOR MAKING THE ADDITION THIS YEAR ALSO. HOWEVER, THE A. O. HAS NOT POINTED OUT THE ITEMS OF EXPENDITURE WHICH HAVE BEEN FOUND TO BE UNVERIFIABLE OR NOT INCURRED. THUS, THE A.O. WAS NOT JUSTIFIED I N MAKING ADHOC ADDITION OF RS.15 LAKHS DURING THE CURRENT YEAR. HO WEVER, SINCE THE APPELLANT HAS NOT BEEN ABLE TO PRODUCE COMPLETE BIL LS AND VOUCHERS ALONGWITH ITS BOOKS OF ACCOUNTS AS MENTIONED BY TH E A.O. VIDE ORDER SHEET ENTRY DTD. 19.12.2008, IT WILL BE THE IN INTE REST OF JUSTICE AND REVENUE TO RESTRICT THE SAID DISALLOWANCE TO RS.2.5 LAKHS CONSIDERING THE TOTAL TURNOVER OF THE APPELLANT AND VARIOUS DIS ALLOWANCE ALREADY MADE AS ABOVE. 19. WE HAVE HEARD LD. REPRESENTATIVES OF THE PARTIE S AND RECORDS PERUSED. CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE AND FACT THAT THE ASSESSEE FAILED TO PRODUCE COMPLETE BILLS, VOUC HERS, THE ADDITION HAS BEEN SUSTAINED BY THE LD. CIT(A). THE CIT(A) HAS RI GHTLY SUSTAINED THE ADDITION OF RS.2,50,000/-. SINCE THIS IS A MATTER OF ESTIMATION AND THE ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 14 ASSESSEE AND REVENUE BOTH HAVE FAILED TO POINT OUT ANY CONTRARY MATERIAL BASED ON WHICH A DIFFERENT ESTIMATION CAN BE MADE A T THIS STAGE, IN THE LIGHT OF THE FACT, ORDER OF THE CIT(A) IS CONFIRMED . 20. NOW WE TAKE UP ITA NO. 93/AGRA/2010 APPEAL FILE D BY THE REVENUE. THE FIRST GROUND IS IN RESPECT OF ADDITION OF RS.5, 74,656/- MADE BY THE A.O. INVOKING SECTION 43B ON ACCOUNT OF COMMERCIAL TAXES . BEFORE THE LD. CIT(A) THE ASSESSEE HAS DEMONSTRATED THAT THE A.O. HAS ADDED THE AMOUNT WITHOUT APPRECIATING THE FACTS AND ACCOUNTING PRINC IPLE. THE LD. CIT(A) REPRODUCED THE RECONCILIATION AND EXPLANATION OF TH E ASSESSEE AT PAGE NO.6 OF HIS ORDER. THE CIT(A) AFTER CONSIDERING THE ASSESSE ES SUBMISSION HELD AS UNDER :- 7.2 APPELLANTS SUBMISSION ALONGWITH ASSESSMENT ORD ER AND ASSESSMENT RECORDS HAVE BEEN CONSIDERED CAREFULLY A ND THE APPELLANTS CONTENTION IN THIS REGARD IS FOUND TO BE CORRECT. N O. VIOLATION OF PROVISIONS OF SECTION 43-B OF THE I.T. ACT IS MADE BY THE APPE LLANT ON THE BASIS OF ACCOUNTING ENTRIES MADE BY IT IN ITS BOOKS OF ACCOU NTS. THE SAID ADDITION OF RS.5,74,656/- IS HEREBY, DELETED. 21. WE HAVE HEARD LD. REPRESENTATIVES OF THE PARTIE S AND RECORDS PERUSED. WE NOTICED THAT THE LD. CIT(A) HAS RIGHTLY APPRECIA TED THE FACT AND RECONCILIATION AND DETAILED FILED OF THE ASSESSEE W AS FOUND CORRECT. THE LD. CIT(A) HELD THAT THERE WAS NO VIOLATION OF SECTION 43B OF THE ACT. THE ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 15 REVENUE HAS FAILED TO POINTED OUT ANY CONTRARY MATE RIAL TO THE FINDING OF THE LD. CIT(A). IN THE LIGHT OF THESE FACTS, THE ORDER OF THE CIT(A) IS CONFIRMED AND ADDITION OF RS.5,74,656/- IS DELETED. 22. THE SECOND GROUND IS IN RESPECT OF ADDITION OF RS.36,551/- WHICH IS INTERLINKED TO GROUND NO.1. SINCE GROUND NO.1 HAS B EEN REJECTED, THEREFORE, GROUND NO2 IS ALSO REJECTED. 23. THE THIRD GROUND PERTAINING TO DELETION OF ADDI TION OF RS.97,800/- IS A COMMON GROUND AS RAISED BY THE ASSESSEE IN GROUND N O.2 IN ITS APPEAL WHICH HAS BEEN DECIDED IN PARA NO.13 OF THIS ORDER. FOLLOWING THE SAID DETAILED DISCUSSIONS, WE CONFIRM THE ORDER OF CIT(A ) IN THIS REGARD. THUS, THIS GROUND OF REVENUE IS DISMISSED. 24. GROUND NO.4 OF REVENUES APPEAL PERTAINS TO ADH OC DISALLOWANCE OF VARIOUS EXPENSES. THIS IS ALSO A COMMON GROUND TO G ROUND NO.4 RAISED THE ASSESSEE IN ITS APPEAL. GROUND NO.4 OF ASSESSEES APPEAL HAS BEEN DECIDED AFTER DETAILED DISCUSSION IN PARA NO. 18 & 19 OF TH IS ORDER. FOLLOWING THE SAID DISCUSSION, THIS GROUND OF REVENUE IS ALSO DIS MISSED. ITA NOS.80 & 93/AGRA/2010, A.YS. 2006-07 16 25. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTA NT MEMBER AMIT/ COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY
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