M/s. Alankar Complex, v. ITO,

ITA 10/LKW/2011 | 2005-2006
Pronouncement Date: 03-03-2011

Appeal Details

RSA Number 1023714 RSA 2011
Bench Lucknow
Appeal Number ITA 10/LKW/2011
Duration Of Justice 1 month(s) 22 day(s)
Appellant M/s. Alankar Complex,
Respondent ITO,
Appeal Type Income Tax Appeal
Pronouncement Date 03-03-2011
Appeal Filed By Assessee
Bench Allotted SMC
Date Of Final Hearing 03-03-2011
Next Hearing Date 03-03-2011
Assessment Year 2005-2006
Appeal Filed On 12-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH S MC SMC SMC SMC LUCKNOW LUCKNOW LUCKNOW LUCKNOW BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT ITA NO.10/LUC/2011 ASSESSMENT YEAR:2005-06 M/S ALANKAR COMPLEX CINEMA ROAD GOLA GOKARANNATH DISTT. LAKHIMPUR KHERI V. ITO WARD II LAKHIMPUR KHERI PAN:AAMFA5308B (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI. T. RAM AND Z.A. USMANI ADVOC ATES RESPONDENT BY: SHRI. ANADI VERMA D.R. O OO O R RR R D DD D E EE E R RR R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD. CIT(A) BAREILLY DATED 14.9.2010 RELATING TO ASSESS MENT YEAR 2005-06. 2. IN THIS APPEAL THE ASSESSEE HAS TAKEN THE FOLLOWIN G GROUNDS:- 1. THAT THE LD. C.I.T. (APPEAL) HAS ERRED IN LAW & FAC TS IN SUSTAINING THE IMPUGNED ORDER PASSED U/S 144/147 IGNORING THE FACT S THAT PROCEEDINGS U/S. 147 WERE ILLEGALLY INITIATED BY THE ASSESSING OFFIC ER. 2. THAT THE LD. C.I.T. (APPEAL) HAS ERRED IN LAW AND F ACTS IN SUSTAINING THE IMPUGNED ASSESSMENT ORDER IN THE STATUS OF A.O.P. W ITHOUT APPRECIATING THE FACTS THAT THE A.O. WAS NOT JUSTIFIED IN TREATING T HE ASSESSEE AS AOP SINCE DULY CERTIFIED COPY OF PARTNERSHIP DEED WAS FURNISHED WI TH THE RETURN OF INCOME FOR THE A.Y. 2004-05. 3. THAT THE LD. C.I.T. (APPEAL) HAS ERRED IN LAW AND F ACTS IN SUSTAINING THE ESTIMATION OF INCOME MADE BY THE ASSESSING OFFICER WITHOUT FOLLOWING THE PROCEDURE LAID U/S. 147 OF I.T. ACT 1961. 4. THAT THE LD. C.I.T. (APPEAL) HAS ERRED IN LAW AND F ACTS IN FAILING TO APPRECIATE THAT THE DISALLOWANCE OF RS.1 44 000.00 RENT PAID T O PARTNERS WAS ILLEGAL BECAUSE THERE IS NO SUCH PROVISIONS EITHER IN SECTI ON 40(B) OR 40(3) I.T. ACT 1961. 5. THAT THE LD. C.I.T. (APPEAL) HAS ERRED IN LAW AND F ACTS BY UPHOLDING ITA NO. 10/LUC/11 A.Y. 2005-06 M/S ALANKAR COMPLEX V. ITO :-2-: DISALLOWANCES TOWARDS INTEREST PAID TO THE PARTNERS IN THE LIGHT PROVISIONS OF SECTION 40 (B) I.T. ACT 1961. 6. THAT THE LD. C.1.T. (APPEAL) HAS ERRED IN LA W AND FACTS BY UP HOLDING THE DISALLOWANCES OUT OF GENERATOR EXPENSES TELEPHONE EXPENSES WASHING EXPENSES AND MISC. EXPENSES. 7. THAT THE LD: C.I.T. (APPEAL) HAS ERRED IN LAW AND F ACTS BY UP HOLDING THE DISALLOWANCES MADE BY ASSESSING OFFICER OUT OF SALA RY PAID TO WORKERS. 3. A THE TIME OF HEARING SHRI.T. RAM LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR GROUNDS NO.1 TO 3 AND 5. ACCORDINGLY GROUNDS NO.1 TO 3 AND 5 OF THE APPEAL ARE DISMISSED AS NOT PRESSED. 4. GROUND NO.4 OF THE APPEAL RELATES TO DISALLOWANCE O F $1.44 LAKHS RENT PAID TO THE PARTNERS. 5. THE ASSESSEE FIRM IS RUNNING HOTEL BUSINESS IN THE RENTED PROPERTY. THE ANNUAL RENT IS BEING PAD AT $1.44 LAKHS AS PER AGREEMENT D ATED 1.4.2002. THE RENTED PREMISES ARE OWNED BY TWO PARTNERS NAMELY SUBHKARAN GIRI AND SMT. LATA PURI WHICH HAS BEEN CONSTRUCTED BEFORE THE COMMENCEMENT OF THE HOTEL BU SINESS BY THE FIRM. THE BUSINESS PREMISES ARE NOT THE PROPERTY OF THE FIRM. WHILE F RAMING THE ASSESSMENT THE ASSESSING OFFICER HAS DISALLOWED THE SAID RENT U/S. 40(3)/40( B) OF THE INCOME-TAX ACT 1961 (IN SHORT THE ACT). 6. ON APPEAL THE LD. CIT(A) CONFIRMED THE DISALLOWANC E AND HENCE THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PE RUSED THE MATERIALS AVAILABLE ON RECORD. IT IS SEEN THAT THE ASSESSING OFFICER H AS DISALLOWED RENT U/S. 40(3) OF THE ACT. IN MY OPINION THERE IS NO SUCH PROVISION IN THE IN COME-TAX ACT. FURTHER I FIND THAT THE RENT PAID TO THE PARTNERS IS ALSO NOT COVERED WITHI N THE PROVISIONS OF SECTION 40(B) OF THE ACT. THUS CONSIDERING THE ENTIRE FACTS AND CIRCUM STANCES OF THE PRESENT CASE AS WELL AS LEGAL POSITION I ALLOW THIS GROUND OF APPEAL 8. AS REGARDS GROUNDS NO.6 AND 7 OF THE APPEAL THE AS SESSEE CLAIMED GENERATOR EXPENSES AT $65 318 TELEPHONE EXPENSES AT $8 239 WASHING EXPENSES AT $27 532 MISCELLANEOUS EXPENSES AT $22 418 AND SALARY TO WOR KERS AT $88 550. IN THIS CASE THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S. 144 OF THE ACT AND DISALLOWED 25% OF THE ITA NO. 10/LUC/11 A.Y. 2005-06 M/S ALANKAR COMPLEX V. ITO :-3-: EXPENSES CLAIMED BY THE ASSESSEE UNDER THE ABOVE HE ADS BECAUSE THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT. 9. ON APPEAL THE LD. CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER AND HENCE THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 10. SHRI.T. RAM LD. COUNSEL FOR THE ASSESSEE VEHEMENTL Y ARGUED THAT THE RETURN OF INCOME WAS FILED IN THE STATUS OF FIRM DULY SIGNED BY SHRI SHBHKARAN IN THE CAPACITY OF PARTNER. HE FURTHER SUBMITTED THAT THE CONDITIONS OF SECTION 144 OF THE ACT HAVE BEEN FULFILLED. THE PARTNERSHIP IS EVIDENCED BY AN INST RUMENT DATED 1.4.2002 AND THE INDIVIDUAL SHARES OF THE PARTNERS ARE SPECIFIED THE REIN. HE ALSO SUBMITTED THAT THE FIRM WAS CONSTITUTED W.E.F. 1.4.2002 THE CERTIFIED COPY OF THE PARTNERSHIP HAS BEEN FILED WITH THE RETURN OF INCOME FOR ASSESSMENT YEAR 2004-05. HE FURTHER SUBMITTED THAT IN CASE THE ASSESSING OFFICER FOUND ANY DEFECT IN THE RETURN FI LED AN OPPORTUNITY SHOULD HAVE BEEN PROVIDED AS PER LAW TO RECTIFY SUCH DEFECTS BUT NO OPPORTUNITY HAS BEEN PROVIDED FOR DOING SO. IT WAS ALSO BROUGHT TO MY NOTICE BY SHRI .T. RAM LD. COUNSEL FOR THE ASSESSEE THAT THERE IS NO CHANGE IN THE CONSTITUTION OF THE FIRM AND IT SHOULD HAVE BEEN ASSESSED IN THE STATUS OF FIRM DURING THE YEAR UNDER CONSIDERAT ION. HE FURTHER POINTED OUT THAT THE NOTICES HAVE NOT BEEN PROPERLY SERVED AND INVOCATIO N OF PROVISIONS OF SECTION 144 OF THE ACT IS NOT JUSTIFIED. HE FURTHER SUBMITTED THAT AD HOC DISALLOWANCES @ 25% ON ABOVE EXPENSES ARE WHOLLY UNJUSTIFIED. ALTERNATIVELY SH RI.T. RAM LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCES @ 25% MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) ARE ON HIGHER SIDE. IT IS APPARE NT FROM THE RECORD THAT THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNT BEFORE THE ASSESSI NG OFFICER. IT IS ALSO OBSERVED FROM RECORD THAT NO COMPLIANCE WAS MADE TO THE STATUTORY NOTICES ISSUED BY THE ASSESSING OFFICER CALLING FOR MATERIAL TO SUBSTANTIATE HIS CO MPUTATION OF TOTAL INCOME IN THE ASSESSMENT PROCEEDINGS. IN THAT VIEW OF THE MATTER CERTAIN DISALLOWANCES ARE REQUIRED TO BE MADE OUT OF THE ABOVE EXPENSES. HOWEVER I A M OF THE VIEW THAT THE ADHOC DISALLOWANCES MADE BY THE ASSESSING OFFICER @ 25% O F THE ABOVE EXPENSES AND CONFIRMED BY THE LD. CIT(A) SEEMS TO BE ON HIGHER S IDE. KEEPING IN VIEW THE ENTIRE FACTS OF THE PRESENT CASE AND ALSO IN THE INTEREST OF JUS TICE IT WOULD BE FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCES TO 5% INSTEAD OF 25%. A CCORDINGLY I DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE INCOME OF THE ASSESSEE AS INDICATED ABOVE. 11. NO OTHER POINT WAS RAISED OR ARGUED BEFORE ME BY BO TH THE PARTIES. ITA NO. 10/LUC/11 A.Y. 2005-06 M/S ALANKAR COMPLEX V. ITO :-4-: 12. IN THE RESULT APPEAL IS ALLOWED PARTLY AS INDICATE D ABOVE. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 3.3.2011 . SD/- [H. L. KARWA] VICE PRESIDENT DATED:3.3.2011 JJ:0303 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR