Shorewala Overseas, Delhi V. ITO, New Delhi

MA 387/DEL/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3319 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 7 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 07-07-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 26-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rectification of order
• Section: 40(b)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “FRIDAY-SMC” BENCH: NEW DELHI SHRI KUL BHARAT, JUDICIAL MEMBER M.A.No.-387/Del/2017 [In ITA No.5634/Del/2016] [Assessment Year : 2012-13] Shorewala Overseas, 9, Lancers Road, B.D.Estate, Timarpur, Delhi-110054. PAN-ABLFS0193A vs ITO, Ward-47(1), New Delhi. APPELLANT RESPONDENT Appellant by None Respondent by Shri Om Parkash, Sr.DR Date of Hearing 08.07.2022 Date of Pronouncement 04.08.2022 ORDER PER KUL BHARAT, JM : This Miscellaneous Application [“M.A”] has been filed on behalf of the assessee seeking rectification of mistake in order dated 12.06.2017 in ITA No.5634/Del/2016 passed by the Tribunal for the Assessment year 2012- 13. 2. At the time of hearing, no one attended the proceedings on behalf of the assessee. It is seen from the records that the assessee was given various opportunities and the notice sent through speed post is duly served upon the assessee by the Postal Authority. The assessee chose not to appear before this Tribunal. Therefore, the M.A. is taken up for hearing in the absence of the assessee on the basis of material available on records. The contentions as made in M.A. on behalf of the assessee are reproduced as under for the sake of clarity:- 2 | Page 1) “The Hon’ble ‘SMC’ Bench vide an order, dated 12-06-2017, affirm the order of CIT(A)-16, Delhi, regarding an addition of Rs.9,38,616/- to the income of the firm on account of interest on the debit balance of partners’ capital account by invoking the provision of Sec. 40(b)(iv) of the Income-tax Act, by making the following observations as per Para 13, Page no. 7- 8 of the said order: "... In the present case, since there is clear provision in the partnership deed for charging the interest on the debit balance of the partners and the assessee is also paying interest on the credit balance to the partners. I, therefore, do not see any infirmity in the impugned order by the Id. CIT(A) ...” 2) It is pertinent to note that no interest was ever given by the firm to the partners, even on credit balance, since the inception of the firm. 3) During the course of hearing, the attention of this Hon’ble Bench was drawn to such specific aspect by pointing out the Paper-book contents, as infra : S.No. Particulars Page No. 3. Submission to CIT(A)-16, New Delhi, dt. 16-8-2016 alongwith Chart; Income-tax returns & Computation; Balance Sheet; Profit & Loss A/c; Partners’s Capital Account from A.Y. 2001-02 to A.Y. 2012-13 [To substantiate that no interest was ever charged / given by firm on debit as well as credit balance of partners’ account’] 36-246 There is no finding of fact to the effect that the assessee had in fact received the interest or partners had in fact paid the interest and the interest was not reflected in the books of account of the firm. 4) Unfortunately, such facts on record were totally ignored, while passing final order by: i) Ld. CIT(A) - 16; Delhi. ii) Hon’ble ‘SMC’ Bench, Delhi. To recapitulate, it is fact that no interest was ever charged on the debit as well as credit balance of partners’ account since the formation of the firm. 3 | Page Such fact is glaring, self evident and does not call for any debate or discussion. 5) Under section 4 of the Income-tax Act, tax was chargeable on the total income. The ‘total income’ is defined under section 2(45) of the Income-tax Act, as infra : “total income means the total amount of income referred to In section 5, computed in the manner laid down in this Act. ” Section 5 of the Act states that the total income of a resident assessee from whatever source derived becomes chargeable either when it is received by him or when it accrues or arises to him during the previous year. The test of accrual is whether there is a right to receive the amount though later and such right is legally enforceable. In other words, whether on receipt basis or on accrual basis, it is the real income and not any hypothetical income which may have theoretically accrued that is subjected to tax under the Act. In the case of CIT v. Shoorji Vallabhdas and Co. [1962] 46 ITR 144 (SC)...The Supreme Court referred to the earlier decision of the Bombay High Court in CIT v. Chamanlal Mangaldas and Co. [1956] 29 ITR 987 (Bom), which was approved by the Supreme Court in CIT v. Chamanlal Mangaldas and Co. [1960] 39 ITR 8 (SC) and held as under: "Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be 4 | Page said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account...” 6) The following citations are pertinent to note in the context of Sec. 254(2) of the Income-tax Act, 1961 : a) ACIT vs. Saurashtra Kutch Stock Exchange Ltd. (2008) 305 ITR 227 I 173 Taxman 322 (SC) I DCIT vs. Daniel Measurement & Controls (India) (P) Ltd. (2013) 216 Taxman 53 (Guj.)(Mag.): Non-consideration of a decision of Jurisdictional High Court or of Supreme Court can be said to be a ‘mistake apparent from record’ which can be rectified u/s.254(2), being ‘mistake apparent from record’.. a) CIT vs. Steel Strips Ltd. (2011) 200 Taxman 368 (P&H) Overlooking a statutory provision is mistake apparent from record. 7) The issue is restored back to the file of the AO for the purpose of calculating interest to be charged on day to today basis. In view of above submission, it is most respectfully prayed that the matter be remanded back to the file of the Assessing Officer, in order to verify and consequential relief on such factual aspect, being a mistake apparent from record.” 3. Ld. Sr. DR opposed the submissions and stated that the assessee has not placed any evidences in support of his contention that the firm had not paid any interest on credit balance. He submitted that this contention of the assessee is misplaced and contrary to the records. 4. I have heard the contention of Ld. Sr. DR and perused the material available on record and gone through the orders of the authorities below. The assessee has not placed any material on record in support of his contention that no interest was ever paid by the firm on the credit balance of the partners since inception of the firm. The AO has given a finding on 5 | Page fact that on perusal of the capital account filed by the assessee revealed that the partners had made huge withdrawals by way of transfer to various individuals, firms and for various expenditure which resulted in negative balance that the partners have withdrawn the funds of the firm meant for working capital. However, no interest was paid to the firm. Therefore, addition was made under the provision of section 40(b) of the Act on account of interest payable by the partners at the rate of 12% whose account showed debit balance as on 31.03.2012. The assessee has not filed any evidence for rebuttal of such finding merely stating that no interest was also paid to partners on credit balance is not sufficient. The assessee is required to demonstrate from records that such evidence was placed on record. Therefore, in the absence of such material evidences, I do not see any merit in the M.A. filed by the assessee, the same is rejected. 5. In the result, the Miscellaneous Application filed by the assessee is dismissed. Order pronounced in the open Court on 04 th August, 2022. Sd/- (KUL BHARAT) JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI