S.B. BILLIMORIA & CO., MUMBAI v. ASST CIT 11(3), MUMBAI

ITA 34/MUM/2012 | 2005-2006
Pronouncement Date: 10-07-2013 | Result: Allowed

Appeal Details

RSA Number 3419914 RSA 2012
Assessee PAN AAAFS7376P
Bench Mumbai
Appeal Number ITA 34/MUM/2012
Duration Of Justice 1 year(s) 6 month(s) 7 day(s)
Appellant S.B. BILLIMORIA & CO., MUMBAI
Respondent ASST CIT 11(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-07-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 10-07-2013
Date Of Final Hearing 10-07-2013
Next Hearing Date 10-07-2013
Assessment Year 2005-2006
Appeal Filed On 03-01-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . . !' # $ BEFORE SHRI I.P. BANSAL JM AND SHRI N.K. BILLA IYA AM . / ITA NO.34/MUM/2012 % % % % / ASSESSMENT YEAR 2005-06 S.B.BILLIMORIA & CO. MEHAR CHAMBERS 2 ND FLOOR R.KAMANI MARG BALLARD ESTATE MUMBAI 400 001. / VS. THE ACIT RANGE 11(3) 4 TH FLOOR AAYKAR BHAVAN M.K.ROAD MUMBAI 400 020 & # ./ '( ./ PAN/GIR NO. : AAAFS 7376P ( &) / APPELLANT ) .. ( *+&) / RESPONDENT ) &) / APPELLANT BY: MS. VASANTI B. PATEL *+&) - / RESPONDENT BY : SHRI RAJENDRA KUMAR - .# / DATE OF HEARING : 10/07/2013 /0% - .# / DATE OF PRONOUNCEMENT : 10/07/2013 1 / O R D E R PER I.P.BANSAL J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS D IRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-2 MUMBAI DATED 4/10/2011 FOR ASSESSMENT YEAR 2005-06. GROUNDS OF APPEAL READ AS UNDER: THE APPELLANT OBJECTS TO THE ORDER DATED 4 OCTOBER 2011 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) 2 MUMBAI ON T HE FOLLOWING AMONG OTHER GROUNDS: 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONF IRMING PENALTY UNDER SECTION 271(1)(C) OF RS.23 57 588. 2. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLD ING THAT APPELLANT HAS NOT MADE A BONAFIDE CLAIM IN THE RETURN OF INCOME IN RESPECT OF THE PAYMENTS MADE TO RETIRED PARTNERS. . / ITA NO.34/MUM/2012 % % % % / ASSESSMENT YEAR 2005-06. 2 3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLD ING THAT THERE WERE NO TWO VIEWS POSSIBLE IN RESPECT OF DEDUCTIBILITY OF PAYME NTS TO RETIRED PARTNERS. 4. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT PENALTY SHOULD NOT BE LEVIED WHEN FULL DISCLOSURE WITH RESP ECT TO THE CLAIM HAS BEEN MADE BY THE APPELLANT IN THE RETURN OF INCOME. 5. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHO UT PREJUDICE TO THE OTHER. 6. THE APPELLANT RESERVES THE RIGHT TO AMEND ALTE R OR ADD TO THE GROUNDS OF APPEAL. 2. CONCEALMENT PENALTY HAS BEEN LEVIED ON AN ADDI TION OF RS.65 71 673/- WHICH WAS CLAIMED TO BE PAID BY THE ASSESSEE FIRM T O ITS RETIRED PARTNERS. ACCORDING TO AO IN VIEW OF AMENDMENT W.E.F. 1/4/199 3 ONLY WORKING PARTNERS OF THE FIRM WERE ENTITLED TO RECEIVE REMUNERATION AND INTEREST FROM THE REGISTERED FIRM FOR SERVICES RENDERED BY THEM DURING THE RELE VANT PREVIOUS YEAR. THEREFORE AO DISALLOWED THESE PAYMENTS BEING PAYMENTS MADE TO PERSONS OTHER THAN WORKING PARTNERS. THE AO ALSO REFERRED TO CLAUSE - 22 IN THE PARTNERSHIP DEED WHICH ALLOW THE PARTNERSHIP FIRM TO MAKE PAYMENTS T O THE RETIRED PARTNERS WHICH HAS DEFEATED THE INTENTION OF LEGISLATURE FOR THE PURPOSE OF INCOME TAX AS THE SAID CLAUSE SUPERSEDE PROVISIONS OF I.T. ACT. IT IS ON SUCH ADDITION PENALTY UNDER SECTION 271(1)(C) OF THE ACT HAS BEEN IMPOSED. THE ADDITION HAS BEEN UPHELD BY THE TRIBUNAL VIDE ITS ORDER DATED 21/2/2009 IN ITA NO.6033/MUM/2008. THE LD. CIT(A) HAS UPHELD THE PENALTY. 3. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD . AR THAT THOUGH ADDITION HAS BEEN UPHELD BY THE TRIBUNAL IN THE PRESENT CASE BUT IN OTHER CASES THE TRIBUNAL IS ALLOWING SIMILAR PAYMENTS AS AN EXPEND ITURE. HOWEVER SHE SUBMITTED THAT HONBLE BOMBAY HIGH COURT HAS ADMITT ED THE QUESTION OF LAW ON THE ADDITION SUSTAINED BY ITAT. SHE REFERRED TO TH E ORDER PASSED BY THE HONBLE HIGH COURT DATED 6/7/2011 IN ITA NO.3486 OF 2010 W HEREIN THEIR LORDSHIPS HAVE ADMITTED FOLLOWING TWO QUESTIONS OF LAW: CORAM : J.P. DEVADHAR AND A.A. SAYED JJ DATE : 6 TH JULY 2011 . / ITA NO.34/MUM/2012 % % % % / ASSESSMENT YEAR 2005-06. 3 P.C. HEARD 2. ADMIT ON THE FOLLOWING TWO SUBSTANTIAL QUESTION S OF LAW. 1. WHETHER THE ITAT ERRED IN HOLDING THAT THE SUM OF RS.65 71 673/- PAID BY THE APPELLANT TO ITS RETIRED PARTNERS AS PER CLAUSE 22 OF THE DEED OF PARTNERSHIP DATED 28TH MARCH 2004 WAS NOT EXCLUDIBLE/DEDUCTIBLE IN C OMPUTING THE TAXABLE INCOME OF THE APPELLANT? 2. WHETHER THE ITAT OUGHT TO HAVE HELD THAT THE SUM OF RS. 65 71 673/- PAID BY THE APPELLANT TO ITS RETIRED PARTNERS WAS DIVERTED BY OVERRIDING TITLE FROM THE APPELLANT AND NEVER FORMED A PART OF THE APPELLANTS INCOME? 3. TO BE HEARD ALONG WITH INCOME TAX APPEAL NO. 940 OF 2009. 3.1 SHE SUBMITTED THAT AS PER WELL ESTABLISHED LAW WHEN A QUESTION OF LAW HAS BEEN ADMITTED BY HONBLE HIGH COURT PENALTY UNDER SECTION 271(1)(C) CANNOT BE IMPOSED. SHE IN THIS REGARD REFERRED TO THE DECIS ION OF HONBLE DELHI HIGH COURT DATED 5/10/2010 IN ITA NO. 240/09 IN THE CASE OF CI T VS. LIQUID INVESTMENT & TRADING COMPANY WHEREIN THEIR LORDSHIPS HAVE OBSER VED AS UNDER: BOTH THE CIT(A) AS WELL AS THE ITAT HAVE SET ASIDE THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE IN COME TAX ACT 1961 ON THE GROUND THAT THE ISSUE OF DEDUCTION UNDER SECTION 14A OF TH E ACT WAS A DEBATABLE ISSUE. WE MAY ALSO NOTE THAT AGAINST THE QUANTUM ASSESSMENT W HERE UNDER DEDUCTION UNDER SECTION 14A OF THE ACT WAS PRESCRIBED TO THE ASSESS EE THE ASSESSEE HAS PREFERRED AN APPEAL IN THIS COURT UNDER SECTION 260A OF THE A CT WHICH HAS ALSO BEEN ADMITTED AND SUBSTANTIAL QUESTION OF LAW FRAMED. THIS ITSELF SHOWS THAT THE ISSUE IS DEBATABLE. FOR THESE REASONS WE ARE OF THE OPINION THAT NO QUESTION OF LAW ARISES IN THE PRESENT CASE. 3.2 SHE ALSO SUBMITTED THAT SIMILAR PROPOSITION HAS BEEN FOLLOWED BY THE MUMBAI TRIBUNAL VIDE ITS ORDER DATED 18/3/2011 IN I TA NO.2379/MUM/2009 IN THE CASE OF M/S. NAYAN BUILDERS & DEVELOPERS PVT. L TD. VS. ITO COPY WAS PLACED ON RECORD. IN THE SAID CASE UPON FINDING THAT QUE STION OF LAW WAS ADMITTED BY HONBLE HIGH COURT CONCEALMENT PENALTY WAS DELETED BY THE TRIBUNAL WITH THE FOLLOWING OBSERVATIONS: 3. IT IS THEREFORE ABUNDANTLY CLEAR THAT THE ADDI TIONS IN RESPECT OF WHICH PENALTY WAS CONFIRMED HAVE BEEN ACCEPTED BY THE HONBLE BOM BAY HIGH COURT LEADING TO . / ITA NO.34/MUM/2012 % % % % / ASSESSMENT YEAR 2005-06. 4 SUBSTANTIAL QUESTION OF LAW. WHEN THE HIGH COURT AD MITS SUBSTANTIAL QUESTION OF LAW ON AN ADDITION IT BECOMES APPARENT THAT THE ADDITI ON IS CERTAINLY DEBATABLE. IN SUCH CIRCUMSTANCES PENALTY CANNOT BE LEVIED U/S 271(1)(C ) AS HAS BEEN HELD IN SEVERAL CASES INCLUDING RUPAM MERCANTILE VS. DCIT [(2004) 9 1 ITD 237 (AHD) (TM)] AND SMT.RAMILA RATILAL SHAH VS. ACIT [(1998) 60 TTJ (AH D) 171]. THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW BY THE HONBLE HIGH COU RT LENDS CREDENCE TO THE BONA FIDES OF THE ASSESSEE IN CLAIMING DEDUCTION. ONCE I T TURNS OUT THAT THE CLAIM OF THE ASSESSEE COULD HAVE BEEN CONSIDERED FOR DEDUCTION A S PER A PERSON PROPERLY INSTRUCTED IN LAW AND IS NOT COMPLETELY DEBARRED AT ALL THE MERE FACT OF CONFIRMATION OF DISALLOWANCE WOULD NOT PER SE LEAD TO THE IMPOSI TION OF PENALTY. SINCE THE ADDITIONS IN RESPECT OF WHICH PENALTY HAS BEEN UPH ELD IN THE PRESENT PROCEEDINGS HAVE BEEN HELD BY THE HONBLE HIGH COURT TO BE INVO LVING A SUBSTANTIAL QUESTION OF LAW IN OUR CONSIDERED OPINION THE PENALTY IS NOT EXIGIBLE UNDER THIS SECTION. WE THEREFORE ORDER FOR THE DELETION OF PENALTY. 4 IN THE RESULT THE APPEAL IS ALLOWED THUS IT WAS PLEADED BY HER THAT PENALTY MAY BE DELE TED. 4. ON THE OTHER HAND LD. DR RELIED UPON THE ORDERS OF A.O & LD. CIT(A). 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. AS HONBLE BOMBAY HIGH COURT HAS ADMITTED THE QUESTION OF LAW ON THE IMPUGNED ADDITION IN RESPECT OF WHICH CONCEALMENT PENALTY HAS BEEN IMPOSED RESPECTFULLY FOLLOWING TH E AFOREMENTIONED TWO DECISIONS RELIED UPON BY LD. AR WE DELETE THE PENAL TY AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 6. IN THE RESULT THE APPEAL OF THE ASESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/07/20 13 1 - /0% # 3 45 10/07/2013 0 - 6 7 SD/- SD/- ( !' / N.K.BILLAIYA ) ( . . / I.P. BANSAL ) # / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 4 DATED 10/07/2013 . / ITA NO.34/MUM/2012 % % % % / ASSESSMENT YEAR 2005-06. 5 1 1 1 1 - -- - *.89 *.89 *.89 *.89 :9%. :9%. :9%. :9%. / COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. 9<6 *. / DR ITAT MUMBAI 6. 6= > / GUARD FILE. 1 1 1 1 / BY ORDER +9. *. //TRUE COPY// ? ?? ? / @ @ @ @ ' ' ' ' (DY./ASSTT. REGISTRAR) / ITAT MUMBAI . . ./ VM SR. PS