Income Tax Appellate Tribunal - Pune
Mahaveer Abhushan Bhandar,, Kolhapur vs Income-Tax Officer,, on 17 March, 2017
ु े यायपीठ "ए" पण
आयकर अपील य अ धकरण पण ु े म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
ु मा चावला, या यक सद य एवं ी आर. के. पांडा, लेखा सद य एवं
सु ी सष
BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM
आयकर अपील सं. / ITA No.954/PUN/2014
नधा$रण वष$ / Assessment Year: 2010-11
Shri Mahaveer Abhushan Bhandar,
214, C Ward, Bhende Galli,
Kolhapur. .... अपीलाथ /Appellant
PAN: AAFFS0537B
Vs.
The Income Tax Officer,
Central, Kolhapur. .... यथ / Respondent
अपीलाथ क ओर से / Appellant by : Shri M.K.Kulkarni
यथ क ओर से / Respondent by : Shri Anil Chaware
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing : 15.03.2017 Date of Pronouncement: 17.03.2017
आदे श / ORDER
PER SUSHMA CHOWLA, JM:
The appeal filed by the assessee is against the order of Commissioner of Income Tax (Appeals), Kolhapur dated 29/01/2014 relating to assessment year 2010-11 against order passed u/s 143(3) r.w.s. 153C(2) of the Income Tax Act, 1961 (in short 'the Act').
2ITA No.954/PUN/2014 for A.Y 2010-11
Shri Mahaveer Abhushani Bhandar
2. The assessee has raised the following grounds of appeal:-
"1) On the facts and circumstances of the case and in law the requisition issued under S. 132A ab-initi void resulting into illegal assessment made by the A.O. and confirmed by the Ld. CIT(A) as the police under S.457 of CrPC were bound to produce the seized natural before the Court and seek instructions/orders from the court about transfer of the seized material. In the absence of this the Requisition u/s 132A itself was invalid. The assessment confirmed u/s 153C be struck down.
2) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in rejecting the claim of remuneration to partner under S. 40(b) of the Act holding that surrendered income in survey u/s 133-A was 'deemed income' and not business income. It is settled law that the income returned in the Return of Income which is credited to P & L A/c is business income entitled to deduction under s. 40(b) of the Act. The deduction be allowed.
3) On the facts and circumstances of the case and in law the underlying purpose of making assessment of total income u/s 153A/153C is to assess the income which was not disclosed or would not have been disclosed. The provisions of S. 153A/153C cannot be interpreted to be a further innings for the A.O. and/or assessee beyond provisions of S.139(return of income). The surrendered income was already disclosed in the return of income which cannot be treated as 'deemed income'. The claim of deduction under S. 40(b) was wrongly rejected. It be allowed.
4) On the facts and circumstances of the case and in law the income declared in the return after search and seizure action or in the books of account is not assessable as undisclosed income under S.69, 69A or S.69B of the Act. The assessee was therefore, entitled to deduction u/s 40(b) of the Act. It be allowed accordingly.
5) On the facts and circumstances of the case and in law the levy of interest u/s 234A, 234B and 234C is not justified."
3. The Ld. AR for the assessee pointed out that the grounds of appeal no.1 is not pressed. Hence, the same is dismissed as not pressed.
4. The Ld. AR for the assessee further pointed that the only issue raised in the balance grounds of appeal is against the claim of deduction u/s 40(b) of the Act.
5. Briefly, in the facts of the case, a passenger bus carrying cash and jewellery was intercepted by the Bhuinj Police Authorities. The cash, jewellery 3 ITA No.954/PUN/2014 for A.Y 2010-11 Shri Mahaveer Abhushani Bhandar and documents were seized from two persons who were engaged in courier business. Information was passed on to Investigation Wing and consequently seizure action u/s 132A of the Act was carried out on 29/10/2010 at Bhuinj Police Station, Satara. The Investigation wing requisitioned the goods and documents seized by the police as per the inventory of stock in annexure and vide Panchnama dated 29/10/2010. Certain goods and documents belonged to the assessee firm Shri Dileep Jivraj Oswal, partner of the assessee firm was summoned and his statement was recorded u/s 131 of the Act on 24/12/2010. Since the assets and documents which were requisitioned and seized belonged to the assessee i.e. other than the person with respect to whom search u/s 132A of the Act was initiated, the Assessing Officer issued notice u/s 153C of the Act. In response, thereto, the assessee filed return of income declaring income of Rs.14,98,450/-. The assessee was engaged in the business of manufacturing and trading in silver articles on wholesale basis as per the orders of the customers especially from Mumbai, etc,. During the course of assessment proceedings the assessee was asked to produce the books of accounts, bills and vouchers, which were so produced.
6. On verification of the case records, the Assessing Officer noted that Survey action u/s 133A of the Act was carried out at the business premises of the assessee on 03/10/2010 resulting in declaration of additional income by the assessee on account of 187.066 kgs excess stock in the form of fine silver, jewellery / articles and excess cash of Rs.3,05,884/- aggregating to Rs.30,02,440/-. The Assessing Officer noted that the returned income excluding disclosure made during survey action was less than the declared income of the preceding year i.e. Assessment Year 2009-10. The case of the assessee was selected for scrutiny which was objected by the assessee. The 4 ITA No.954/PUN/2014 for A.Y 2010-11 Shri Mahaveer Abhushani Bhandar said contentions of the assessee were rejected. The Assessing Officer further noted that the assessee had declared additional income as Income from Business and considered the same for calculating book profit u/s 40(b) of the Act and had debited remuneration to partners at Rs.24,72,783/-. The Assessing Officer after deliberation on the issue vide para 9.3 onwards observed that the assessee was found owner of stock of silver jewellery / articles and excess cash, which investment was not recorded in his books of accounts. Further, the assessee had offered no satisfactory explanation nor reconciled the declared value of asset / silver articles stock. The assessee had also failed to explain as to how and from what source he invested the money in silver articles with regard to its purchase. The Assessing Officer thus held that the additional income of Rs.30,02,440/- could not be added to the business income. The Assessing Officer held that the said additional income is to be added to the total income as deemed income u/s 69A and 69B of the Income Tax Act. The Assessing Officer reduced deduction claimed u/s 40(b) of the Act to Rs.17,33,202/- as against the claim of the assessee at Rs.24,72,783/-.
7. In appeal, the Commissioner of Income Tax (Appeals) noted the no objection of the assessee in taxing the value of excess cash and excess stock u/s 69A and 69B of the Act. The Commissioner of Income Tax (Appeals) also took note of the claim of the assessee that since it did not have any other source of income, the excess stock which was declared during survey was business income. The Commissioner of Income Tax (Appeals) held as under:
"10..... The fact that excess stock has been part of assessee's business is not denied. However, that does not led to conclusion that the excess stock stands explained. The fact is that this excess stock was acquired out of money, the source of which is not known, therefore, the investment in this excess stock is not disclosed. In view of this 5 ITA No.954/PUN/2014 for A.Y 2010-11 Shri Mahaveer Abhushani Bhandar discussion, all the grounds taken by the appellant on this issue are rejected and action of the Assessing Officer in assessing value of excess stock under section 69B is upheld. On the same reasoning the action of the assessing officer in assessing excess cash under section 69A is also upheld."
8. The assessee is in appeal against the order of the Commissioner of Income Tax (Appeals).
9. The Ld. AR for the assessee pointed out that there was no challenge to the addition made u/s 69A and 69B of the Act and only issue which was arising in the present appeal was against the rejection of claim of remuneration to partners u/s 40(b) of the Act. He pointed out that the Assessing Officer had made the addition after the declaration made by the assessee against which the assessee was not in appeal. However, since the source of the additional income was the business income, the assessee was entitled to claim the deduction u/s 40(b) of the Act. He stressed that the issue stands covered by the order the Tribunal in assessee's own case in ITA No.1606/PN/2004 and connected appeals relating to Assessment Years 2000-01 & 2001-02, vide order dated 28/06/2007.
10. The Ld. Departmental Representative for the Revenue on the other hand while placing reliance on the orders of the Assessing Officer and Commissioner of Income Tax (Appeals), also placed reliance on the order of the Chandigarh Bench of the Tribunal in M/s. Makson Distributors Vs. DCIT in ITA No.53/CHD/2011 relating to Assessment Year 2006-07, order dated 13/05/2011.
11. We have heard the rival contentions and perused the records. In the facts of the present case before us seizure action u/s 132A of the Act was 6 ITA No.954/PUN/2014 for A.Y 2010-11 Shri Mahaveer Abhushani Bhandar carried out on 29/10/2010 after the police authority intercepted a passenger bus in which two persons were carrying certain items and documents. On investigation and verification, the said goods and documents were found to belong to the assessee firm. Consequent thereto proceedings u/s 153C of the Act were initiated against the assessee. Survey u/s 133A of the Act was also carried out against the assessee at his business premises on 03/02/2010 wherein the assessee had declared additional income on account of excess stock and excess cash, totaling Rs.30,02,440/-. Both the Assessing Officer and Commissioner of Income Tax (Appeals) had held that the said income is to be added as deemed income u/s 69A and 69B of the Act. The Ld. AR for the assessee at the outset stated that there was no challenge to the aforesaid addition being made u/s 69A and 69B of the Act. The assessee had claimed the deduction u/s 40(b) of the Act at Rs.24,72,783/- by treating the additional income as business income. However, the same was reduced to Rs.17,33,202/-. The case of the assessee before us is that since it had no other source of income but the business income, then the total income was its business income, against which it had correctly claimed the deduction u/s 40(b) of the Act.
12. The Ld. AR for the assessee placed reliance on the ratio laid down in assessee's own case before the Tribunal in Assessment Year 2000-01. The additional income declared by the assessee was assessed as Income from Business in the said year and was considered for calculating the book profit u/s 40(b) of the Act. However, for the year under consideration, the additional income of Rs.30,02,440/- was added as Deemed Income u/s 69A and 69B of the Act. The business income on the other hand was calculated after excluding the said additional income and the book profit was re-determined in 7 ITA No.954/PUN/2014 for A.Y 2010-11 Shri Mahaveer Abhushani Bhandar the hands of the assessee and the remuneration to partners was restricted to 17,33,202/-.
13. We find that similar issue of restriction of the deduction u/s 40(b) of the Act where the additional income was assessed as deemed income u/s 69A and 69B of the Act arose before the Tribunal in M/s. Makson Distributors (supra). The Tribunal vide para 7 held as under :
"7. Under the provisions of Income Tax Act, the interest and salary paid to the partners is to be allowed as per the provisions of section 40(b) of the Act which is in connection with the determination of business income. Once income in the hands of the assessee has been assessed as deemed income by invoking the provisions of section 69A, 69B & 69C of the Act and is not assessed as income from business under Income Tax Act, the provisions of section 40(b) of the Act in connection with the allowance of salary paid to the partners cannot be invoked to allow the deduction on account of such salary being paid to the partners of the firm. The assessee has relied upon the ratio laid down by the Chandigarh Bench of the Tribunal in Bhanu Mal Inder Lal (supra) wherein vide order dated 22.10.2010, the Tribunal had directed the allowance of salary in respect of the business income assessed in the hands of the assessee. The said ratio was laid down by the Tribunal in the facts of the case where there was a survey and certain income was surrendered, part of which was assessed as business income in the hands of the assessee and part as additional income of the assessee u/s 69A, 69B & 69C in the hands of the assessee. The direction was given by the Tribunal to allow the said claim of salary paid to the partners against the business income earned by the assessee. In the facts of the case before us, the surrendered income was assessed as additional income u/s 69A, 69B & 69C of the Act and hence no claim of salary paid to the partners is to be allowed against the said income.
Further, in the present case, assessee has failed to contravene the observations of Assessing Officer and CIT(A) in respect of genuineness of the amendment deed, under which the salary is alleged to be aid to the partners. Upholding the order of the CIT (A), we find no merit in the claim of assessee and hence the same is rejected. The ground of appeal Nos. 2 & 3 raised by the assessee are thus dismissed.
8. In the result, appeal of the assessee is dismissed."
14. The issue arising before us is squarely covered by the decision of the Chandigarh Bench Tribunal in M/s. Makson Distributors (supra) where the income is assessed in the hands of the assessee as deemed income under the provisions of section 69A and 69B of the Act and is not assessed as business income, then the remuneration paid to the partners is to be curtailed 8 ITA No.954/PUN/2014 for A.Y 2010-11 Shri Mahaveer Abhushani Bhandar in relation to the business income assessed in the hands of the assessee. Accordingly, we uphold the order of the Commissioner of Income Tax (Appeals) and dismiss the grounds of appeal raised by the assessee.
15. The ground of appeal no.5 raised by the assessee is against charging of interest u/s 234A, 234B and 234C of the Act, is consequential, hence the same is dismissed.
16. In the result, the appeal of the assessee is dismissed.
Order pronounced on this 17th day of March, 2017.
Sd/- Sd/-
(R.K. PANDA) (SUSHMA CHOWLA)
लेखा सद य / ACCOUNTANT MEMBER या यक सद य / JUDICIAL MEMBER
पुणे / Pune; दनांक Dated : 17th March, 2017.
SGR
आदे श क& ' त)ल*प अ+े*षत/Copy of the Order is forwarded to :
1. अपीलाथ / The Appellant;
2. यथ / The Respondent;
3. आयकर आयु"त(अपील) / The CIT(A), Kolhapur;
4. आयकर आयु"त / The CIT - I, Kolhapur ;
5. %वभागीय (त(न)ध, आयकर अपील य अ)धकरण, पण ु े ए / DR " "
'A', ITAT, Pune;
6. गाड. फाईल / Guard file.
ु ार/ BY ORDER, आदे शानस स या%पत (त //TRUE COPY// सहायक पंजीकार / Assistant Registrar, आयकर अपील य अ)धकरण, पण ु े / ITAT, Pune