ITO, Ward-7(2),, Hyderabad v. M/s Sri Lakshmi Agencies,, Hyderabad

ITA 240/HYD/2013 | 2008-2009
Pronouncement Date: 14-11-2014 | Result: Allowed

Appeal Details

RSA Number 24022514 RSA 2013
Assessee PAN AAGFS7415K
Bench Hyderabad
Appeal Number ITA 240/HYD/2013
Duration Of Justice 1 year(s) 8 month(s) 16 day(s)
Appellant ITO, Ward-7(2),, Hyderabad
Respondent M/s Sri Lakshmi Agencies,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2014
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 14-11-2014
Assessment Year 2008-2009
Appeal Filed On 27-02-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI P.M.JAGTAP ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBER ITA NO.240/HYD/13 : ASSESSMENT YEAR 2008 - 09 INCOME TAX OFFICER WARD 7(2) HYDERABAD V/S. M/S. SRI LAKSHMI AGENCIES HYDERABAD (PAN AAGFS 7415 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI I B.RAMAKRISHNA DR RESPONDENT BY : SHRI A.V.RAGHURAM DATE OF HEARING 12 . 11 .2014 DATE OF PRONOUNCEMENT 14.11.2014 O R D E R PER P.M.JAGTAP ACCOUNTANT MEMBER : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) VI HYDERABAD DATED 29.11.2012. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF DISTRIBUTION OF BSNL PREPAID CARDS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE ON 15.10.2008 DECLARING TOTAL INCOME OF RS.3 59 100. DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICES UN D ER S.143(2) AND S.142(1) WERE ISSUED BY THE ASSESSING OFFICER FIXING THE C A S E OF TH E ASSESSEE FOR H E ARING FROM TIME TO TIME. THE SAID NOTICES HO W EVER REMAINED UN - C OM PLIED WITH BY THE ASSESSEE AND THE ASSESSIN G OFFICER TH E REFORE WAS LEFT WITH NO OPT I ON BUT TO COMPL E TE THE ASSESSMENT OF THE ASSESSEE E X - PARTE UNDER S.144 TO THE B E ST OF HIS JU D G M ENT ON THE B A SIS O F M A TERIAL AVAILABLE ON RECORD. I N THE ASSESSMENT SO COMPLETED VIDE O R DER DATED 31.12.2010 H E ESTIMATED THE INCOME O F TH E ASSESSEE I TA NO. 240/H YD/20 13 M/S. SRI LAKSHMI AGENCIES HYDERABAD 2 AT R S .74 57 529 BEING THE GROSS RECEIPTS OF THE BU S IN E SS O F THE ASSESSEE AS REFLECTED IN THE TDS CERTIFICATE S . 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER UNDER S.144 AN APPEAL WAS PREFERRE D BY THE ASSESS EE BEFORE TH E LEARNED CIT(A). I T WAS SUBMI T TED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(A) THAT NON - CO M PLIANCE TO THE NO T I C ES ISSUED BY THE ASSESSING OFFICER WAS DUE TO NON - RECEIPT OF NO T I C ES AS TH E ADDRESS OF THE ASSESSEE WAS CHANGED DUE TO ILL - HE A LTH OF ITS MAN A GING PARTNER AND CLOSURE OF BUSINESS. IT W A S ALSO SUBMITTED BEFORE THE LEARNED CIT(A) TH A T THE TOTAL TURNOVER OF SIM CARDS AND RC DURING THE YEAR UNDER CONSIDERATION WAS RS. 12.20 C R ORES ON WHICH THE ASSESSEE R E CEIVED COMMISSION OF RS .74 57 430. IT WAS CLAIMED T HAT THE ASSESSEE WAS UNDER AN O B LI G ATION TO DI S TR I BUTE SUCH COMMISSION TO THE SUB - AGEN T S ALSO APART F R OM INCURRING WIDE RANGE OF E XP ENSES FOR EA R NING COMMISSION INCOME. IT WAS SU B MI T TED THAT AFTER CLAIMING ALL SUCH EXPENSES AND TAKING INTO ACCOUNT INCOME S OF RS .1 32 750 TOWARDS AUTO RENTS AND RS.76 616 AS INTEREST NET PROFIT WAS SHOWN AT RS.10 61 980 AND AFTER CLAIMING DEDUCTION ON ACCOUNT OF INTEREST OF R S .3 90 883 AND REMUNERATION OF R S .3 12 000 PAID TO PARTNERS NET IN COME OF R S .3 59 096 WAS DECL A RED IN TH E RETURN FIL E D FOR THE Y E AR UNDER CONSIDERATION . THE ASSESSEE HO WE VER EXPRESSED ITS INABILITY TO FURNISH THE RELE V ANT DETAILS AND DOCUM E N T S IN SUPPORT O F THE EXPENSE CLAIMED DUE TO THE CLOSURE OF BUSINESS AND DEATH OF MAN A GING P ARTNER AND URGED THE LEARNED CIT(A) TO DETERMINE ITS INCOME BY ESTIMATING THE P R OFIT ON THE B A SIS OF INFORMATION ALREADY PL A CED ON RECORD. 4. AFTER CONSIDERING THE SUBMI S SION S MADE ON BEHALF OF THE ASSESSEE AS WELL AS THE M A TERIAL AVAILABLE ON RECORD THE LEARNED CIT(A) HELD THAT IN THE ABSENCE OF RELIABILITY OF BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE THE P R O F IT OF THE BU S IN E SS WAS REQUIRED TO BE DETERMIN E D ON ESTIM A TE BASIS. IN THI S REGARD HE FOUND THAT ALTHOUGH THE NET PROFIT I TA NO. 240/H YD/20 13 M/S. SRI LAKSHMI AGENCIES HYDERABAD 3 OF 11.43% DECLARED BY THE ASSESSEE FOR THE Y E AR UNDER CONSIDERATION BEFORE PAYM E N T O F P A RTNERS REMUNERATION AND IN TE REST WAS HI G H E R THAN THE NET PROFIT OF 10% ESTIMATED FOR THE IMMEDI A TELY PR E CEDING YE A R I.E. 2007 - 08 AND THERE WAS NO G R OUND FO R TREATING THE ENTIRE C OMMISSION R ECEIVED BY THE ASSESSEE AS ITS INCOME AS DONE BY THE ASSESSING OFFICER. HE HELD T H A T IN THE FACTS AND CIRCUMSTANCES OF TH E C ASE INCLUDING ESPECIALLY THE FAILURE O F TH E ASSESSEE TO FURNISH THE RELEVANT DETAILS AND DOCUM E N T S THE P R O F IT OF TH E BU S IN E SS OF THE ASSESSEE COULD REASONABLY BE ESTIMATED BY APPLYING N E T P R O F IT RATE OF 15% TO TH E GROSS RECEIPTS OF R S .74 57 430. HE ACCO R D I NGLY DIRECTED THE ASSESSING OFFICER TO COMP U TE THE BUSINESS INCOME O F THE ASSESSEE AT 15% ON THE GROSS COMMISSION AMOUNT AND ALLOW FURTHER DEDUCTION ON AC C OUN T OF REMUN ER ATION AND IN TE R E ST PAID TO THE PARTNERS. 5. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL TAKING F OLLOWING GROUNDS - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) VI HYDERABAD IS ERRONEOUS IN LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT AFTER ESTIMAT ING THE INCOME @ 15% DEDUCTIONS FOR REMUNERATION AND INTEREST PAID TO THE PARTNERS SHOULD BE SEPARATELY ALLOWED WHICH IS AGAINST THE PROVISIONS OF SEC.184(5) OF THE INCOME TAX ACT WHEREIN IT IS CLEARLY STATED THAT IF THE ASSESSMENT IS COMPLETED U/S. 14 4 OF THE I.T. ACT REMUNERATION AND INTEREST PAID TO PARTNERS SHOULD BE DISALLOWED. 3. THE LEARNED CIT(A) OUGHT NOT TO HAVE REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE INCOME BECAUSE AS THE ASSESSEE IS UNABLE TO PRODUCE BILLS/VOUCHERS IN SUPPORT OF VARIOUS EXPENSES CLAIMED IT IS A CASE WHERE EXPENSES SHOULD HAVE BEEN DISALLOWED INSTEAD OF ESTIMATING THE INCOME. I TA NO. 240/H YD/20 13 M/S. SRI LAKSHMI AGENCIES HYDERABAD 4 4. THE LEARNED CIT(A) HAS ERRED IN APPLYING ESTIMATION @ 15% BECAUSE BY FOLLOWING CIT(A)S ESTIMATION THE NET INCOME WORKS OUT TO RS.4 15 732/ - ONLY WHICH IS ONLY 5.5% OF THE COMMISSION RECEIVED AS AGAINST 10 TO 15% DISCUSSED BY THE CIT(A) IN PARA 6.4 OF THE ORDER. 5. THE APPELLANT CRAVE LEAVE TO ADD TO /ALTER/SUBSTITUTE THE ABOVE GROUNDS. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. GROUND NO.1 RAISED BY THE REVENUE IS GENERAL IN NATURE REQUIRING NO SPECIFIC ADJU DI CAT I ON. IN GROUND NO.2 THE RE VENUE HAS CHALL E N G ED THE A CT ION OF THE LEARNED CIT(A) IN DI R ECTING THE ASSESSING OFFIC ER TO ALLOW DEDUC T ION ON ACCOUNT OF REMUN E RATION AND IN T EREST PAID BY THE ASSESSEE FIRM TO ITS PARTNERS FROM THE P R O F IT ESTIM A TED AT 15% OF THE GROSS COMMISSION AMOUNT. I N SUPPORT OF TH E REVENUES CASE ON THIS ISSUE RELIANCE IS P L ACED ON THE P R OVISION S OF S.184( 5) OF TH E A C T WHICH READ AS FOLLO W S - ASSESSMENT AS A FIRM S.184 (1) TO (4) .. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER 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 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 PARTNER 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. AS PROVIDED IN SUB - S EC T ION ( 5 ) OF S.184 THE P R OVISI O NS OF WHICH ARE OF OVERRIDING IN NATURE WH E RE THERE I S ANY SUCH FAILURE ON THE PART OF A FIRM AS M E N T ION E D IN S.144 IN RESPECT OF ANY ASSESSMENT YEAR IN THE I TA NO. 240/H YD/20 13 M/S. SRI LAKSHMI AGENCIES HYDERABAD 5 ASSESSMENT OF THE FIRM NO DEDUCTION BY WAY OF ANY P A YM E NT OF IN T EREST SALARY BONUS COMMISSION OR REMUN ER ATION BY WH A TEVER NAME IS C A L LE D PAID BY SUCH FIRM TO ITS PARTNERS SHALL BE ALLO WE D I N COMPUTING THE INCOME CHARGEABLE UNDER THE H E AD P ROFITS AND GAINS OF BU S IN E SS . IT I S FURTHER PROVIDED IN SUB - SEC T ION ( 5 ) OF S. 184 THAT ANY SUCH INTER E ST SALARY . BONUS COMMISSION SHALL NOT B E CHARGEABLE TO INCOME TAX UNDER CLAUSE (V) OF S.28. 7. AT THE TIM E OF H E ARING BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS CON T ENDED T H A T THERE WAS NO FAILU R E ON THE P A RT OF THE ASSESSEE FIRM AS MENTIONED IN S.144 AND THEREFORE THE P R OVI SI ONS OF S.184( 5 ) ARE NO T APPLICABLE IN THE C A S E OF TH E ASSESSEE. A PERUSAL OF THE P R OV I SION S OF S.144 HOWEVER SHOWS THAT THE CASE OF THE ASSESSEE IS SQU A RELY COVERED BY CL A USE (V) OF SUB - SECTION (1) OF S.144 INASMUCH AS THE ASSESSEE HAVING MADE A RETURN HAS FAIL E D TO COMPLY WITH THE NO T ICES ISSUED BY THE ASSESSING OFFICER UNDER S.143( 2 ) AND THIS PO SI TION CLEARLY EVIDENT FROM THE RECORD IS NO T DISPU T ED EVEN BY THE LEARNED COUN S EL FOR THE ASSESSEE. WE T HEREFORE AGREE WITH THE STAND O F THE REVENUE ON THIS ISSUE THAT THE P R O V IS I ON S OF S.184( 5 ) ARE CLEARLY APPLICABLE IN THE CA S E OF THE ASSESSEE FOR THE Y E AR UNDER CONSIDERATION AND THE LEARNED CIT(A) IS NO T JU S TIFIED IN DIR E CTING THE ASSESSING OFFICER TO ALLO W DEDUCTION ON ACCOUNT OF INTEREST AND REMUNERATION PAID TO THE PARTNERS F R OM TH E PROFIT ESTIMATED AT 15% OF THE GROSS COMMISSION AMOUNT BY INVOKING THE P R OV I SIONS OF S .144. WE AC C O R D I NGLY REVERSE THE IMPU G N E D ORD E R OF THE LEARNED CIT(A) GRANTING RELIEF TO THE ASSESSEE ON THIS ISSUE AND ALLOW GROUND NO.2 OF THE REVENUES APPEAL. AS ALREADY NOTED ABOVE WHEN TH E PROVIS I ONS OF S.184( 5 ) ARE APPLIED TO DISALLOW INTER E ST AND REMUNERATION PAID BY TH E ASSESSEE FIRM TO I T S PARTNERS SUCH IN T ER E ST OR REMUN ER ATION S HALL NO T BE CHARGEABLE TO INCOME TAX UNDER S.28(V)OF THE AC T IN THE HANDS O F TH E PARTNERS. I TA NO. 240/H YD/20 13 M/S. SRI LAKSHMI AGENCIES HYDERABAD 6 8 . AS REGARDS THE ISSUE RAIS E D IN GROUN D NO.3 OF THE RE VENUES APPEAL WE FIND NO INFIRMITY IN THE O R DER OF THE LEARNED CIT(A) HOL D IN G THAT IN TH E AB S EN CE OF BOOKS O F AC C OUNT AND OTHER SUPPORTING EVIDENCE TH E ENTIRE GROSS COMMISSION AMOUNT COULD NOT B E TAKEN AS THE IN C OM E OF THE ASSESSEE BY DISALLO W IN G THE ENTIRE EXPENDITURE . IN OUR OPINION THE P ROPER COURSE AVAILABLE IN SUCH A SITUATION IS TO REJECT THE BOOK S O F ACCOUN T AND ESTIM A TE THE INCOME O F THE ASSESSEE ON THE BASIS O F MATERIAL AVAILABLE ON RECORD AND THE LEARNED CIT(A) HAS TAKEN A VERY FAIR AND REASONABLE VIEW ON THE B A SIS OF MATERIAL AVAILABLE ON RECO R D IN C LU D IN G THE PAST HISTORY OF ASSESSEE S CASE TO ESTIM A TE THE INCOME OF TH E ASSESSEE F R OM BUSIN E SS AT THE RATE O F 15% OF TH E GROSS COM M ISSION AMOUNT . WE THEREFORE FIND NO JUSTIFIABLE R EASON TO INTERFERE WITH THE THE IMPUGNED ORDER O F THE LEARNED CIT(A) ON THI S I S SUE AND UPHOLDING THE SAME W E DISMISS GROUND NO.3 OF THE REVENUES APPEAL. 9 . AS REGARDS G R OUND NO . 4 OF THE REVENUES APPEAL IT I S OBSERVED THAT THE ISSUE RAISED THEREIN HAS BECOM E INFRUCTUOUS AS A RESULT OF OUR DECISION RENDERED ON GROUND NO.2 ACCEPTING THE STAND OF THE RE VEN U E THAT ONCE THE INCOME WAS ESTIMATED AT 15% OF THE GROSS COMMISSION AMOUNT BY INVOKING THE P R O V I SI ON S OF S.144 NO FURTHER DEDUCTION ON ACCOUNT OF INTEREST AND REMUN ER ATION PAID TO TH E PARTNERS CAN B E ALLOWED AS PER THE SPECIFIC PROVISIONS OF S.184( 5 ) OF THE ACT. THIS GROUND IS ACCORDINGLY TREATED AS DISMISSED HAVING BECOME INFRUCTUOUS . 10 . IN THE RESULT APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 14 T H NOVEMBER 2014 SD/ - SD/ - ( ASHA VIJAYARAGHAVAN ) ( P.M.JAGTAP ) JUDICIAL M EMBER ACCOUNTANT MEMBER DT/ - 14 TH NOVEMBER 2014 I TA NO. 240/H YD/20 13 M/S. SRI LAKSHMI AGENCIES HYDERABAD 7 COPY FORWARDED TO: 1. M/S. SRI LAKSHMI AGENCIES 13 - 6 - 439/A/11/A SRI KRISHNA BALAJI COMPLEX GUDIMALKAPUR HYDERABAD 2 . INCOME TAX OFFICER WARD 7 ( 2 ) HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) VI HYDERABAD COMMISSIONER OF INCOME - TAX - V HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD. B.V.S