The DCITBharuch Circle,, Bharuch v. Reliable Surface Coatings, Ankleshwar

ITA 1976/AHD/2010 | 1999-2000
Pronouncement Date: 31-01-2011 | Result: Dismissed

Appeal Details

RSA Number 197620514 RSA 2010
Bench Ahmedabad
Appeal Number ITA 1976/AHD/2010
Duration Of Justice 7 month(s) 22 day(s)
Appellant The DCITBharuch Circle,, Bharuch
Respondent Reliable Surface Coatings, Ankleshwar
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 31-01-2011
Date Of Final Hearing 07-01-2011
Next Hearing Date 07-01-2011
Assessment Year 1999-2000
Appeal Filed On 08-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI D. C. AGRAWAL ACCOUNTANT MEMBER ITA NO.1976-1980/AHD/2010 ASSESSMENT YEARS:1999-00 TO 2003-04 DATE OF HEARING:7.1.11 DRAFTED:28.1.11 DY. COMMISSIONER OF INCOME-TAX BHARUCH ABOVE BANK OF BARODA STATION ROAD BHARUCH CIRCLE V/S . M/S. RELIABLE SURFACE COATINGSS 2 ND FLOOR RAVI KIRAN COMPLEX ANKLESHWAR DIST. PAN NO.AACFR9099Q (APPELLANT) .. (RESPONDENT) ITA NO.1465-1469/AHD/2010 & ITA NO.330/AHD/2009 ASSESSMENT YEARS: 1999-00 TO 2004-05 M/S. RELIABLE SURFACE COATINGSS 2 ND FLOOR RAVI KIRAN COMPLEX VALIA CHOKDI GIDC ANKLESHWAR DIST. PAN NO.AACFR9099Q V/S . DY. COMMISSIONER OF INCOME-TAX BHARUCH ABOVE BANK OF BARODA STATION ROAD BHARUCH CIRCLE (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI RASESH B SHAH AR REVENUE BY:- SMT. SUMIT KAAUR DR O R D E R ITA NO.1976-80/AHD/10 & 1465-69/AHD/10 & 330AHD/09 AYS 99-00 TO 0 4-05 DCIT BHARUCH V. M/S. RELIABLE SURFACE COATINGS ANKLESHW AR PAGE 2 PER BENCH:- THESE ELEVEN CROSS-APPEALS BY REVENUE AND ASSESSEE ARE ARISING OUT OF ORDERS OF COMMISSIONER OF INCOME-TAX (APPEALS)-V I BARODA IN APPEAL NO.CAB/VI-47 TO 49/09-10 DATED 12-03-2010. THE ASSE SSMENTS WERE FRAMED BY DCIT BHARUCH CIRCLE BHARUCH U/S143(3) R.W.S. 1 47 OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HI S ORDERS DATED 24-11-2006 FOR ASSESSMENT YEARS 1999-00 TO 2004-05 RESPECTIVELY. T HE PENALTIES UNDER DISPUTE WERE LEVIED BY DCIT BHARUCH CIRCLE U/S.27 1(1) OF THE ACT VIDE HIS ORDER DATED 23-03-2009. 2. THE ONLY COMMON ISSUE IN THESE CROSS-APPEALS OF REVENUE AS WELL AS ASSESSEE IS REGARDING THE PENALTY LEVIED BY ASSESSI NG OFFICER U/S.271(1) OF THE ACT AND RESTRICTED BY CIT(A) ON DISALLOWANCE OF NON-WORKING PARTNERS SALARY AND DELETING THE PENALTY ON ESTIMATED ADDITI ON OF INFLATED LABOUR CHARGES AND WAGES. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) FOR DELETION OF PENALTY ON ADDITION OF INFLATED LABOUR CHARGES & WAGES. ASSESSEE CAME IN APPEALS AGAINST CONFIRMATION OF PENALTIES O N DISALLOWANCES OF NON- WORKING PARTNERS SALARY AND COMMON GROUNDS RAISED BY REVENUE AND ASSESSEE ARE IDENTICAL WORDED EXCEPT AMOUNT. WE WIL L TAKE THE FACTS ISSUES AND GROUNDS FROM THE ASSESSMENT YEAR 1999-00 WHICH ARE BEING REPRODUCED AS UNDER:- ITA NO.1976/AHD/2010 BY REVENUE (FOR A.Y.1999-00) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY OF RS. 64 030/- OUT OF PENALTY OF RS.95 805/- LEVIED U/S.271(1)(C) OF THE ACT BY RESTRICTING THE PENALTY ONLY ON THE ADDITION ON ACCOUNT OF PAYMENT OF REMUNERATION TO NON-WORKING PARTNER. 2. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ADD ITION ON ACCOUNT OF DISALLOWANCE OF WAGS WAS BASED ON THE ACTUAL WAGES REGISTER FOUND DURING THE COURSE OF SURVEY U/S.133A OF THE ACT. DU RING THE COURSE OF ITA NO.1976-80/AHD/10 & 1465-69/AHD/10 & 330AHD/09 AYS 99-00 TO 0 4-05 DCIT BHARUCH V. M/S. RELIABLE SURFACE COATINGS ANKLESHW AR PAGE 3 SURVEY IT WAS NOTICED THAT THE ASSESSEE HAD INFLATE D LABOUR CHARGES AND WAGES. IT WAS ALSO FOUND THAT THE ASSESSEE HAS MADE PAYMENT TO LABOURERS WITHOUT GETTING THEIR SIGNATURE ON THE LA BOUR REGISTER AND THE ASSESSEE WAS NOT ABLE TO FURNISH ANY CONCRETE EVIDE NCE IN SUPPORT OF ITS CLAIM OF WAGES. FURTHER IN THE RECENT JUDGEMENT IN THE CASE OF UNION OF INDIA AND OTHERS VS. DHARMENDRA TEXTILES PROCESSORS AND OTHERS 306 ITR 277 (SC) THE HONBLE APEX COURT HAS HELD TH AT THE EXPLANATIONS APPENDED TO SECTION 271(1)(C) OF THE I NCOME-TAX ACT 1961 INDICATE THE ELEMENT OF STRICT LIABILITY ON T HE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WH ILE FILING THE RETURN. THE PENALTY U/S 271(1)(C) WAS THEREFORE RIGHTLY L EVIED BY THE ASSESSING OFFICER IN THE ASSESSEES CASE. THE GROUNDS RAISED BY ASSESSEE ARE ALSO IDENTICAL W ORDED EXCEPT AMOUNT THE SAME ARE BEING REPRODUCED:- ITA NO.1465/AHD/2010 BY ASSESSEE (FOR A.Y. 1999-00 ) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN PARTLY CONFIRMING THE ACTION OF ASSESSING OFFICER IN LEVYING PENALTY U/S.271(1) OF THE I.T. ACT ON ACCOUNT OF DISALLOWANCE MADE ON ACCOUNT OF ALLEGED NON-WORKING PARTNERS SALARY OF RS.91 142/-. 2. IT IS THEREFORE PRAYED THAT THE ABOVE PENALTY LE VIED BY ASSESSING OFFICER AND CONFIRMED BY COMMISSIONER OF INCOME-TAX (APPEALS) MAY PLEASE BE DELETED. 3. THE BRIEF FACTS LEADING TO THE ABOVE COMMON ISSU E ARE THAT A SURVEY U/S.133A OF THE ACT WAS CARRIED OUT ON THE BUSINESS PREMISES OF THE ASSESSEE ON 24-08-2005. THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF CIVIL CONSTRUCTION AND NATURE OF WORK IS INDUSTRIAL PAINTINGS. THE ASS ESSEE-FIRM IS DOING WORK ON COMPOSITE WORK-BASIS. THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER NOTED FROM THE SURVEY MATERIAL THAT FROM ASSESSMENT YEAR 1997-98 I.E. THE FIRST YEAR OF CONTRACT BUSINESS THE LABOUR EXPENSES HAVE BEEN INFLATED BY ASSESSEE AND FURTHER ASSESSING OFFICER HAS TAKEN THE BASIS OF AC TUAL WAGES ALLOWABLE AS PER FOUND FROM IMPOUNDED REGISTERS DURING THE COURS E OF SURVEY FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 AND ON VERIFIC ATION OF DETAILS THE RATIO OF DISALLOWABLE LABOUR CHARGES DIFFERS FROM RATIO S HOWS AS UNDER:- ITA NO.1976-80/AHD/10 & 1465-69/AHD/10 & 330AHD/09 AYS 99-00 TO 0 4-05 DCIT BHARUCH V. M/S. RELIABLE SURFACE COATINGS ANKLESHW AR PAGE 4 A.Y. % OF LABOUR CLAIMED IN P&L ACCOUNT W.R. TO RECEIPTS RATIO MAINTAINED IN THE REASONS RECORDED RATIO OF LABOUR CHARGES AS PER ASSESSING OFFICER. ALLOWABLE DISALLOWANCE ALLOWABLE DISALLOWANCE 2002-03 45.06% 21.48% 23.58% 20.51% 24.55% 2003-04 41.44% 23.48% 17.96% 26.66% 14.78% 2004-05 38.45% 22.29% 16.16% 21.00% 17.45% TOTAL 124.95% 67.25% 57.70% 68.17% 56.78% AVERAGE 41.65% 22.41% 19.23% 22.72% 18.92% THE ASSESSING OFFICER IN VIEW OF THE ABOVE NOTED T HAT HE HAS NO ALTERNATIVE BUT TO DISALLOW THE INFLATED LABOUR CHARGES AND WAG ES AS EXCESS ON THE BASIS OF AVERAGE RATIO FOR ASSESSMENT YEARS 2002-03 TO 20 04-05 @ 18.92%. ACCORDINGLY HE MADE DISALLOWANCE AND INITIATED PEN ALTY PROCEEDINGS AND THIS ADDITION HAS BEEN CONFIRMED ON ESTIMATE BASIS BY CI T(A) BUT AFTER ON A REDUCED RATE OF PERCENTAGE I.E. @12%. THE AO LEVIED THE PENALTY PROCEEDINGS AND LEVIED PENALTY VIDE PARA-4.5 OF HIS PENALTY ORDER AS UNDER:- 4.5 THE CONTENTION OF ASSESSEE IN APPEAL THAT THE CIT(A) HAD ESTIMATED THE INCOME AT 12% AND THUS NO PENALTY IS LEVIABLE IS NOT ACCEPTABLE AS IN THE ORDER THE CIT(A) HAD CLEARLY M ENTIONED THAT AS THE LABOUR CHARGES WERE MADE IN CASH THE DISALLOWANCE O UT OF LABOUR EXPENSES ARE CALLED FOR. HOWEVER SINCE NO LABOUR RE GISTERS WERE FOUND OR PRODUCED DURING SURVEY FOR THE YEAR UNDER CONSID ERATION THE CIT(A) ADOPTED NET PROFIT ADDITION. IT IS A FACT THAT THE CIT(A) HAD CONFIRMED THE ADDITION ON ACCOUNT OF INFLATED LABOUR EXPENSES IN A.Y. 2002-03 TO 2004-05 AS REGISTERS WERE FOUND IN THOSE YEARS. FUR THER THE PENALTY LEVIED U/S.271(1)(C) FOR A.Y. 2004-05 ON SIMILAR IS SUES HAS BEEN CONFIRMED BY FIRST APPELLATE AUTHORITIES. ASSESSEE COULD NOT GIVE ANY PLAUSIBLE EXPLANATION EITHER IN THE ASSESSMENT PROC EEDINGS OR IN THE PENALTY PROCEEDINGS TO PROVE THAT IT HAD NOT INFLAT ED THE LABOUR EXPENSES AND PENALTY IS NOT LEVIABLE. THE ASSESSING OFFICER HAD ESTABLISHED ON THE BASIS OF FINDING IN SURVEY THAT THE ASSESSEE HAD INFLATED THE LABOUR EXPENSES WHICH WAS SUBSEQUENTLY CONFIRMED BY CIT(A) ALSO. THE ONUS IS ON THE ASSESSEE TO SUBSTAN TIATE ITS CLAIM OF NOT FURNISHING ANY INACCURATE PARTICULARS OF INCOME WIT H CONVINCING EVIDENCE. IN VIEW OF THE DISCUSSIONS MADE ABOVE THE ASSESSEES CASE CLEARLY FALLS UNDER EXPLANTION1 TO SECTION 271(1)(C ). ITA NO.1976-80/AHD/10 & 1465-69/AHD/10 & 330AHD/09 AYS 99-00 TO 0 4-05 DCIT BHARUCH V. M/S. RELIABLE SURFACE COATINGS ANKLESHW AR PAGE 5 4. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT( A). THE CIT(A) DELETED THE LEVY OF PENALTY VIDE PARA-3.2 OF HIS APPELLATE ORDER:- 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A R AND FACTS OF THE CASE. THERE WAS A FINDING BY THE AO HAT SMT. SASHIS MISHRA WAS NOT A WORKING PARTNER TO WHOM REMUNERATION WAS NOT PAYAB LE EVEN WHEN THERE WAS SUCH A CLAUSE FOR PAYMENT OF REMUNERATION IN PARTNERSHIP DEED IN TERMS OF PROVISIONS OF SECTION 40(B) AND AS SUCH THE SAME IS THE INCOME OF THE FIRM BY VIRTUE OF SECTION 28(V). IT I S A FACT THAT THE TRIBUNAL IN ITS ORDER REFERRED ABOVE HAS SUSTAINED THE ADDIT ION MADE BY THE AO REGARDING THE ADDITION MADE IN RESPECT OF THE SALAR Y PAID TO THE LADY PARTNER. WHILE LEVYING PENALTY THE AO HAS INVOKED T HE PROVISIONS OF EXPLANATION1 TO SECTION 271(1)(C) AS THE BONAFIDES OF SALARY PAYMENTS TO LADY PARTNER HAVE NOT BEEN PROVED. REGARDING OTH ER ADDITIONS THE EXPLANATION OF THE AUTHORIZED REPRESENTATIVE IS ACC EPTABLE AS THERE WAS ESTIMATION ADHOC ADDITIONS ETC. AND IN MY OPI NION THE AO IS NOT JUSTIFIED IN LEVYING CONCEALMENT PENALTY ON THESE A DDITIONS. SINCE THE MATERIAL ON RECORD ATTRACTS THE MISCHIEF OF EXPLANA TION 1 TO SECTION 271(1)(C) THE AO IS DIRECTED TO RECALCULATE THE QU ANTUM OF PENALTY ONLY IN RESPECT OF SALARY PAID TO THE NON-WORKING IN THI S REGARD FOR LEVY FOR FURNISHING INACCURATE PARTICULARS IN THIS REGARD IS SUSTAINED. NOW AGGRIEVED BOTH CAME IN APPEALS BEFORE THE TRIB UNAL. 5. BEFORE US LD. DR SMT. SUMIT KAUR ARGUED THAT TH E ASSESSEE COULD NOT PROVE THE BONA FIDE AND HENCE PENALTY LEVIED BY ASS ESSING OFFICER SHOULD BE RESTORED. ON THE OTHER HAND LD. COUNSEL FOR THE AS SESSEE SHRI RASESH B SHAH RELIED ON THE ORDERS OF LOWER AUTHORITIES. 6. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSE E-FIRM IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND NATURE OF WORK I S INDUSTRIAL PAINTINGS. IT IS ALSO A FACT THAT THE ASSESSEE IS DOING CONTRACT ON A COMPOSITE CONTRACT BASIS AND IN THIS TYPE OF CONTRACT THE EXPENDITURE IS 40- 45% ON COST MATERIAL 30- 35% LABOUR COST 15-20% OVER-HEAD ADMINISTRATIVE EX PENSES AND THUS 5-10% IS THE PROFIT. THE ASSESSEE DURING THE COURSE OF AS SESSMENT PROCEEDINGS AND EVEN NOW BEFORE US STATED THAT AS LABOURS ARE TEMPO RARY AND WORKING ON DIFFERENT SITES AND CHANGING THEIR RESIDENCE ACCORD ING TO THEIR WORK OF SITE ITA NO.1976-80/AHD/10 & 1465-69/AHD/10 & 330AHD/09 AYS 99-00 TO 0 4-05 DCIT BHARUCH V. M/S. RELIABLE SURFACE COATINGS ANKLESHW AR PAGE 6 ADDRESS IS NOT RELEVANT BUT HE HAS PRODUCED WORKERS WHO HAVE RENDERED SERVICES BEFORE ASSESSING OFFICER. FURTHER THE LAB OUR WAGE PAYMENT IS SUPPORTED BY WAGE/LABOUR REGISTERS MAINTAINED UNDER RESPECTIVE ACTS AND NOT BY VOUCHERS. ALL RECORDS PERTAINS TO THESE EXPENSES WERE PRODUCED BEFORE AC AND EVEN THOUGH HE DID NOT SPEAK A SINGLE WORD REGA RDING THESE EVIDENCES IN HIS ASSESSMENT ORDER IN FACT ENTIRE PAYMENT IS SUP PORTED BY ITS RELEVANT PROOF OF PAYMENT AND PROPERLY DEBITED IN THE BOOKS OF ACC OUNT AND BOOKS WERE FOUND COMPLETED PRIOR TO THE DATE OF SURVEY. THE AS SESSING OFFICERS GROUND OF SIGNATURE AND ACCEPTANCE OF WAGE/LABOUR BY SAME PER SON ON BEHALF OF OTHER ARE PURELY TECHNICAL IN NATURE WHEN THE MODUS OPER ANDI OF ASSESSEES BUSINESS IS ACCEPTED AND PROFITS EARNED IS BEING TA XED IN EARLIER AS WELL AS IN SUBSEQUENT YEARS. AND MOREOVER THE ASSESSEE-FIRM HA S MADE DETAIL SUBMISSION TO JUSTIFY ITS PAYMENT OF LABOUR AND WAG ES AND COPY ENCLOSED. FURTHER WAGES PAYMENT IS SUBJECT TO DEDUCTION OF P F AND ESI. BOTH THESE EXPENSES I.E. PF AND ESI ARE FULLY ALLOWED AS IT IS AS PER PROFIT AND LOSS ACCOUNT. AND ACCORDINGLY THERE IS NO JUSTIFICATION IN DISALLOWANCE OF ANY PART OF WAGES EXPENSES. EVIDENCES FOR LABOR PAYMENT WERE ALSO PRODUCED BUT THEY HAD SUMMARILY REJECTED WITHOUT GIVING ANY REASON BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER. MOREOVER IT HAS ALSO BEEN ES TABLISHED BY THE ASSESSEE THAT EVERY TIME BY MAKING WITHDRAWAL FROM BANK CC A CCOUNT PAYMENT OF LABOUR CHARGES WAS MADE AND ENTIRE RECORDS WERE PRO DUCED DURING THE ASSESSMENT PROCEEDINGS. IN THIS CONNECTION FEW INS TANCES WERE QUOTED IN WRITTEN SUBMISSIONS AND THESE NOT DISPUTED BY THE A SSESSING OFFICER. MOREOVER CASH BALANCE AT THE BEGINNING OF THE YEAR AS WELL AS AT END OF THE YEAR AS REFLECTED IN THE BALANCE SHEET IS ALSO ACCE PTED. WE FIND THAT CIT(A) HAS JUST MADE AN ESTIMATE OF NET PROFIT AT 12% ON P URELY ESTIMATED BASIS. WE FIND FROM THE ASSESSMENT ORDER AS WELL AS ORDER OF CIT(A) IN THE QUANTUM PROCEEDINGS THAT THE AUTHORITIES BELOW HAVE NOT GON E INTO THE MATERIAL FACTS WHILE LEVYING PENALTY FOR CONCEALMENT. EVEN IT IS N OT THE CASE OF REVENUE THAT DETAILS AND MATERIALS ARE NOT AVAILABLE ON RECORD. WE FURTHER FIND THAT ONCE THE FACTS ARE CLEARLY AVAILABLE ON RECORDS THE ASSESSE E HAS NOT TRIED TO CONCEAL ITA NO.1976-80/AHD/10 & 1465-69/AHD/10 & 330AHD/09 AYS 99-00 TO 0 4-05 DCIT BHARUCH V. M/S. RELIABLE SURFACE COATINGS ANKLESHW AR PAGE 7 THE PARTICULARS OF INCOME AND MOREOVER IN CASE OF E STIMATED NET PROFIT THE PENALTY CANNOT BE LEVIED FOR CONCEALMENT OF INCOME AND THIS VIEW OF OURS IS FORTIFIED BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 174 (SC) WHEREIN THE HONBLE APEX COURT HAS HELD :- WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA. HOWEVER WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE AS A M ATTER OF FACT THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS. IN WEBSTERS DICTIONARY THE WORD INACCURATE HAS BEEN DEFINED AS: NOT ACCURATE NOT EXACT OR CORRECT ; NOT ACCORDING TO TRUTH ERRONEOUS AS AN INACCURATE STATEMENT COPY OR TRANSCRIPT. WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTI CULARS IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN WHICH ARE NOT ACCUR ATE NOT EXACT OR CORRECT NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY TH E ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH N OT BEING THE CASE THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABL E IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOU NT TO THE INACCURATE PARTICULARS. IN VIEW OF THE ABOVE FACTS WE ARE OF THE VIEW THAT CIT(A) HAS RIGHTLY DELETED THE PENALTY LEVIED BY ASSESSING OFFICER AND WE CONF IRM THE SAME. THIS ISSUE OF REVENUES APPEALS IS DISMISSED. IN THE ASSESSEES APPEAL REGARDING DISALLOWANCE OF NON-WORKING PARTNERS SALARY 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THIS ADDITI ON WAS BASED ONLY ON THE STATEMENTS RECORDED DURING THE COURSE OF SURVEY AND POST SURVEY PROCEEDINGS. THE ASSESSEE HAS MADE SUBMISSION IN TH IS REGARD DURING ASSESSMENT PROCEEDINGS AND ALSO SUBMITTED EVIDENCES BUT ASSESSING OFFICER HAS NOT ACCEPTED THE FACT THAT MRS. SHASHI MISHRA I S A WORKING PARTNER LOOKING ITA NO.1976-80/AHD/10 & 1465-69/AHD/10 & 330AHD/09 AYS 99-00 TO 0 4-05 DCIT BHARUCH V. M/S. RELIABLE SURFACE COATINGS ANKLESHW AR PAGE 8 AFTER MISC. ADMINISTRATIVE MATTES BANKING MATTER E TC. OF THE ASSESSEE-FIRM IN THE ABSENCE OF SHRI AWADHESH MISHRA. WE FIND THAT M RS. SHASHL MISHRA WHEN HER HUSBAND GOES FOR SUPERVISION AT THE DIFFERENT S ITES IT IS ACCEPTED THAT MRS. SHASHI MISHRA ATTENDS TO ADMINISTRATIVE MATTES BAN KING MATTER ETC. OF THE ASSESSEE-FIRM AND ACCORDINGLY SHE IS ONE OF THE WOR KING PARTNERS AND HER SALARY CANNOT BE DISALLOWED. FURTHER ASSESSING OFF ICER HAS GIVEN ONE OF THE REASONS FOR NOT ALLOWING HER SALARY IS THAT SHE WAS NOT PRESENT AT THE BUSINESS PLACE AT THE TIME OF SURVEY AND HENCE SALARY WAS NO T ALLOWABLE TO THE FIRM IS NEITHER LEGAL NOR FACTUAL. IN FACT MRS. SHASHI MISH RA IS A WORKING PARTNER IN THE ASSESSEE-FIRM AND HAS BEEN PAYING INTEREST AND SALA RY IN ACCORDANCE WITH THE TERMS OF THE PARTNERSHIP DEED AND SUCH DEDUCTION WA S ALLOWED TO THE ASSESSEE-FIRM SINCE BEGINNING AND ALSO TAXED BY THE SAME AO IN HER PERSONAL CAPACITY AND THIS ADDITION AMOUNTING TO DOUBLE TAXA TIONS. MRS. SHASHI MISHRA IS RENDERING VARIOUS SERVICES TO THE FIRM AND DETAI LS OF WHICH WERE GIVEN TO THE AO VIDE ASSESSEES SUBMISSION DATED 21-01-2006 AND ASSESSEE HAS EVEN NOW ENCLOSED EVIDENCE WHICH PROVES THAT MRS. SHASHI MISHRA IS ALSO A WORKING PARTNER OF THE FIRM. MRS. SHASHIS MISHRA IS A HOUSEHOLD LADY BUT ALSO ATTENDING OFFICE OF THE ASSESSEE-FIRM M/S. RELIABLE SURFACE COATING. MOREOVER PARTNERS INTEREST AND SALARY ARE THE APPROPRIATION OR ALLOCATION OF ASSESSEE- FIRMS PROFIT AND NOT THE EXPENSES OF THE FIRM AND IN THE CASE OF CIT V. R.M. CHIDAMBARAM PILLAI (1977) 106 ITR 292 (SC) THE HONBLE APEX COURT ALS O HELD THAT THE SALARY STIPULATED TO BE PAID TO A PARTNER FROM THE FIRM IS IN REALLY A MODE OF DIVISION OF THE ASSESSEE-FIRM IS IN REALLY A MODE OF DIVISION OF THE FIRMS PROFITS. IN VIEW OF THE ABOVE LEGAL POSITION WE ARE OF THE VIEW THAT REMUNERATION AND INTEREST PAID TO A PARTNER FROM A FIRM DOES NOT CONSTITUTE EXPENDITURE. ITS ADMISSIBILITY IS ALSO GOVERNED BY S. 40(B) OF THE ACT AND NOT S.37 OF THE ACT. 8. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT THE ASSESSEE EXPLANATION IS A BONA FIDE EXPLANATION AND THIS DISALLOWANCE DOES NOT ATTRACT THE PENALTY PROCEEDINGS U/S.271(1) OF THE ACT AND ITA NO.1976-80/AHD/10 & 1465-69/AHD/10 & 330AHD/09 AYS 99-00 TO 0 4-05 DCIT BHARUCH V. M/S. RELIABLE SURFACE COATINGS ANKLESHW AR PAGE 9 ACCORDINGLY PENALTY CONFIRMED BY CIT(A) IS DELETED. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. ALL THE APPEALS OF ASSESSEE AND REVENUE ARE COVERED BY THE ABOVE APPEAL AND THIS INTER-CONNECTED COMMON ISSUES AS RAISED AR E DECIDED BY TAKING A CONSISTING VIEW IN OTHER APPEALS ALSO THE FACTS BE ING EXACTLY IDENTICAL WE ALLOW THE APPEALS OF ASSESSEE AND DISMISS REVENUES APPEALS. 9. IN THE RESULT ASSESSEES APPEALS ARE ALLOWED AND T HAT OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31/01/2011 SD/- SD/- (D.C.AGRAWAL) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 31/01/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-VI BARODA 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD