Income Tax Appellate Tribunal - Rajkot
Sardar Soap Products,, Rajkot-Gujarat vs Assistant Commr. Income Tax,Cpc,, ... on 16 February, 2017
आयकर अपील य अ
धकरण, राजकोट यायपीठ, राजकोट ।
IN THE INCOME TAX APPELLATE TRIBUNAL
RAJKOT BENCH, RAJKOT
[ Conducted through E-Court at Ahmedabad ]
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER And
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No.111/RJT/2016
( नधा रण वष / Assessment Year : 2012-13)
M/s. Sardar Soap Products बनाम/ The ACIT, CPC
Nr. Amarsinhji Road Vs. Bangalore
Cirty Station Road
Opp Mahavir Gin
Wankaner
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. AAQFS 3596 P
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ ओर से /Appellant by : Written submission
यथ क! ओर से/Respondent by : Shri C.P. Bhatia, Sr.DR
ु वाई क! तार ख /
सन Date of Hearing 10/02/2017
घोषणा क! तार ख /Date of Pronounce ment 16/02/2017
आदे श / O R D E R
PER PRADIP KUMAR KEDIA, AM :
The captioned appeal by the Assessee is directed against the order of the Commissioner of Income Tax (Appeals)-3 [CIT(A) in short] dated 29/02/2016 for Assessment Year (AY) 2012-13.
ITA No. 111/Rjt/2016M/s. Sardar Soap Products vs. ACIT (CPC) Asst.Year - 2012-13 -2-
2. The grounds of appeal raised by the assessee read as under:-
1. The Ld. CIT(A) has erred in law and facts in confirming income at Rs.
1,05,140/-. The determination needs deletion / reduction to nil.
2. The Ld. CIT(A) has erred in law and facts in confirming income at Rs. 1,05,140/-based on position which is described wrongly. The addition needs deletion.
3. The Ld. CIT(A) has erred in law and facts in confirming income of Rs. 1,05,140/- erroneously without applying provisions of section 40(b). The addition needs deletion.
4. The Ld. CIT(A) has erred in law and facts in confirming income of Rs. 1,05,140/- based on presumption and surmises and against the settled position. The addition needs deletion.
5. Taking into consideration the legal, statutory, factual and administrative aspects, no determination of income of Rs. 1,05,140/- ought to have been confirmed. The additions need deletion.
6. The Ld. CIT(A) has erred in law and facts in confirming income of Rs. 1,05,140/- without considering that the remuneration paid by the firm to the partner was already shown by the partner in the return income and therefore there was double taxation in making addition in the hands of firm. The addition needs deletion.
7. The Ld. CIT(A) has erred in law and facts in not considering that the guidelines issued by the Hon. Supreme Court providing strict observation and following principals of natural justice. The order passed by the Ld. A.O. needs annulment.
8. The Ld. CIT(A) has further erred in not giving deduction to the amount of remuneration paid to the partners out of income determined at Rs. 1,05,140/-. The same needs deduction.
9. Without prejudice, the intimation made is bad in law and deserves annulment.
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10. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing intimation U/s. 143(1). The intimation needs annulment.
11. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing appeal order. The intimation needs annulment.
12. Without prejudice, the determination is framed beyond statutory time limit. The intimation needs annulment.
3. As can be seen, the assessee has raised several grounds. However, the solitary grievance is towards accepting the income of Rs.1,05,140/- in return filed under S.139 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") while processing intimation under s.143(1) of the Act by the ACIT - CPC Bangalore.
4. Briefly stated, the assessee is partnership-firm. For the AY 2011- 12, the assessee filed return of income at Rs.1,05,135/-. The return as filed by the assessee was accepted as such without any alteration and an intimation thereof under s.143(1) was processed. Consequently, tax demand of Rs.40,490/- was raised on the assessee on the returned income. It is the case of the assessee that aforesaid Income of Rs.1,05,135/- in the name of partnership-firm was divided among the partners' towards their remuneration as can be vouched from the accounts of the assessee as well as in the computation of total income in respect of returned income. However, it is contended by assessee that ITA No. 111/Rjt/2016 M/s. Sardar Soap Products vs. ACIT (CPC) Asst.Year - 2012-13 -4- there being no column in the return of income for impugned allocation, the remuneration to partners could not be claimed as deduction in the return and thus to this effect, the return filed by the assessee is not correct. It is being claimed by the assessee that in "computation of income" the income was correctly declared at Rs.NIL after giving effect to the payment towards partners. It is the case of the assessee that the AO without considering the statutory position as well as the past records of the assessee, treated the aforesaid amount of Rs.1,05,135/- as total income of the assessee as returned and demanded tax amount of Rs.40,490/- which is contrary to the authority of law. It is claimed that the AO ought to have considered the records of the assessee and an opportunity or notice to the assessee ought to have been given in this regard. Thus, in short, it is the case of the assessee that instead of determining the income at NIL, the AO erred in determining the income at Rs.1,05,135/- which in fact is remuneration to the partners and shown by the partners in their respective account.
5. In consequence of the intimation under s.143(1) dated 10/05/2013 wherein the income was accepted at Rs.1,05,140/- as per return and consequent demand of tax thereon, the assessee moved an appeal before the CIT(A). The CIT(A) however, did not accept the plea of the assessee and declined to grant relief. The process of reasoning for his conclusion is reproduced hereunder:-
ITA No. 111/Rjt/2016M/s. Sardar Soap Products vs. ACIT (CPC) Asst.Year - 2012-13 -5- "5.0 Decision:-
5.1. I have carefully considered the submission of the appellant and perused facts of the case in A.O's order. The order being agitated against is order u/s.14391). The intimation suggest that the income returned by the appellant u/s.139 of Rs.105135/- was accepted as such (Sr.No.2 of Intimation u/s.143(1). So intimation clearly shows that no alteration was made in the return filed by the appellant. Now it is being claimed that there being no column, the remuneration to the partners (of Rs.1056135/- divided equally between two partners) could not be claimed and thus to this effect return was not correct. It is being claimed that in "Computation of Income" income was shown as NIL after giving consideration to the Remuneration paid to the partners.
5.2. In my opinion, 143(1) gives only limited power to the AO basically to process return after making the following adjustments (only):
1) Any arithmetical error in the return; or
2) An incorrect claim, if such incorrect claim is apparent from any information in the return It is apparent that no mistake had been committed by the AO in the processing u/s.143(1) which had accepted the Returned Income as such.
5.3. Moreover, granting deduction u/s.40(b)(v) is subject to the authorization by the partnership deep. Now for giving debit of this amount on his own, AO would have been required to call for the copy of Partnership Deed and Act doesn't grant such power to the AO. Considering the above facts, I hold that AO has not erred in processing the return as prescribed u/s.143(1).
6.0 In the result, the appeal is dismissed."
ITA No. 111/Rjt/2016M/s. Sardar Soap Products vs. ACIT (CPC) Asst.Year - 2012-13 -6-
6. Aggrieved by the order of the CIT(A), the assessee preferred appeal before the ITAT.
7. None appeared for the assessee in person. However, a written submission dated NIL was placed before us for its consideration. The written submission filed by the assessee is reproduced hereunder:-
"1.1. At the out set it is humbly submitted that the issue involve in the matter is fully covered by the decisions of the Hon. IT AT, E-Bench, Rajkot in the case of ACIT v/s. Roopam Impex 157 ITD 360 where the Hon. Bench has been pleased to hold as under :
Tax cannot be levied on assessee at a higher amount or at a higher rate merely because assessee under a mistake belief or due to an error, offered income e for taxation at that amount or that rate.
1.2. More ever also the matter is also covered by the following :
1. CBDT Circular No. 14 dated 11-4-1955 Where it is clarified that the A.O. should not take advantage of an assessee's ignorance to collect more tax out of him than is legitimately due from him.
2. S.R. Koshti v/s. CIT (Guj.) - 276 ITR 165.
Regardless of whether a revised return is filed or not and whether the over assessment is a result of assessee's own mistake or otherwise, once an assessee is in a position to show that he has been over assessed [that he is entitled to exemption under s. 10(10C)], CIT is duty-bound under s. 264(1) to give relief to the assessee in accordance with the provisions of the Act.
2. The details of the case is as under :
ITA No. 111/Rjt/2016M/s. Sardar Soap Products vs. ACIT (CPC) Asst.Year - 2012-13 -7-
1. The assessee derived profit of Rs. 1,05,135/-. The same is allocated amongst the two partners as remuneration as under:
1. Shri Surendra Karshandas at 50% - Rs. 52,568/-
2. Shri Vijaykumar Karshandas at 50% - Rs. 52.567/-
Total Rs. 1,05,135/-
2.2 The factual position is as under :
1. The assessee firm is doing business on small basis and every year the amount of profit earned is being divided as remuneration to the partners.
2. In A.Y. 2011-12 the book profit of Rs. 1,17,495/- was allocated as remuneration to the partners and hence a return of income showing nil income was filed by the assessee is accepted by the department. Even in earlier years the same position is there.
3. In A.Y. 2012-13 under appeal the assessee earned an amount of Rs. 1,05,135/-
which is divided among 2 partners as remuneration as per accounts of the assessee as well as computation of total income in respect of return income.
2.3 Thus, the profit is being distributed amongst partners every year. This has also been accepted by the department every year.
3. This year in the return of income the amount of Rs. 1,05,135/- was shown and as per computation of income attached herewith after deduction of remuneration to the partners, Nil income was there. The remuneration to the partners, there being no specific column to show remuneration to the partners, the same was shown in this computation of income. Thus amount of Rs. 1,05,135/- is in fact remuneration to the partners and not assessable as income. [page No.: 7 and 8 ] 4.1. The Ld. A.O. without considering the statutory position as well as past records of the assessee, treated an amount of Rs. 1,05,135/- which is distributed among 2 partners as total income of the assessee and demanded tax amount of Rs. 40,490/-. The Ld. A.O. neither considered the records of the assessee nor gave any opportunity or notice to the assessee and therefore violating principals of natural justice. Thus instead of determining income as nil the Ld. A.O. erroneously determined income at Rs. 1,05,135/- which is in fact remuneration to the partners and shown by the partners in their respective accounts.
4.2 Not only this in the return of income the assessee has shown the tax payable as NIL. When assessee is shown this if the Ld. A.O. wants to differ he ought to have given an opportunity to the assessee to explain the same. Without doing so he state ITA No. 111/Rjt/2016 M/s. Sardar Soap Products vs. ACIT (CPC) Asst.Year - 2012-13 -8- way determinate tax payable at Rs. 40,490/-. This is in violation in principals of natural justice and also judicial guide lines from the Hon. Supreme Court to provide reasonable opportunity to submit the case.
4.3 Even before the Ld. A.O. CPC the position of previous is always there. When he must have found that the firm has given remuneration to the partners and accessible income there after declared as nil. Without considering this aspect also he erred in not providing any opportunity state way determined income at Rs. 1,05,135/- and tax payable at Rs. 40,490/-. While doing so he has not considered the return income declared as nil and tax payable nil and erred in determining income at Rs. 1,05,135/- and tax payable at Rs. 40,490/- with providing any opportunity which ought to have been.
4.4 Thus there is an error in determining income at 1,05,135/- which is in fact to be assessed as Nil income as per all previous years. The Ld. A.O. has not considered this aspect. The same therefore needs deletion.
5.1 It may also be mentioned that the above amount of remuneration has also been shown by both the partners in their return of income as under
1. Shri Surendra Karshandas at 50% - Rs. 52,568/-
2. Shri Vijaykumar Karshandas at 50% - Rs. 52.567/-
Total Rs. 1,05,135/-
5.2 Copy of acknowledgement of income filed by both the above partners along with their computation of income showing this remuneration shown by them is also submitted herewith for kind perusal. [page No: 10 to 15] 5.3 Thus there is also double taxation of the same amount which is also not permissible.
6. Even subsequent to A.Y. 2012-13, after allocation of remuneration to the partners, the income of the assessee as being assessed and accepted at Nil income. Thus only in A.Y. 2012-13, the above error is there.
7. It may also be mentioned that the return of income for A.Y. 2012-13 does not contain any specific column to show remuneration to the partners. In A.Y. 2015-16, the same is inserted which is enclosed herewith for kind perusal.
8. It is therefore humbly prayed that the income determined at Rs. 1,05,135/- may kindly be directed to be deleted and may kindly be directed to be taken at Nil.
Alternatively, the matter may kindly be restored back to the Ld. A.O. to allow ITA No. 111/Rjt/2016 M/s. Sardar Soap Products vs. ACIT (CPC) Asst.Year - 2012-13 -9- deduction of remuneration paid to the partners for after verification by giving an opportunity to the assessee.
3. The assessee also humbly reply on the following :
Sushil Kumar Das v. ITO
1. 2011 Taxpub (DT) 1770 (Kol-Trib): (2011) 011 ITR (Trib) 0017 Held: The law imposed by the AO to assess the income according to law and determined the tax payable thereon. In doing so, the AO cannot assess the income of the assessee an amount which is not taxable as per law though shown by the assessee in the return. It is always open to the assessee to take a plea that the taxable income though shown as income is not taxable under law before the higher authorities therefore, the income offered as such was not liable to tax.
It is a well settled that the principle for determining the taxable income of the assessee under the IT Act should be within the purview of the law in force. If the taxable income determined by the AO is not in accordance with such principle it is open to the assessee to contend the same before the higher authorities to follow the correct application of law to determine the actual taxable income of the assessee. The lower authorities, are not expected, to say that merely because the assessee has returned income which is higher than the income determined in accordance with legal principles such returned income can be treated as lawfully assessed. An assessee is liable to pay tax only upon the taxable income. The law imposed by the AO to assess the income according to law and determined the tax payable thereon. In doing so, the AO cannot assess the income of the assessee an amount which is not taxable as per law though shown by the assessee in the return. It is always open to the assessee to take a plea that the taxable income though shown as income is not taxable under law before the higher authorities. The CIT(A) without going into the merits of the case held that the CIT(A) is not having any power to reduce the taxable income of the assessee at the appellate stage, which is not correct. The interest received as a result of the order of the hon'ble High Court was not a statutory interest and was in the form of damage/compensation and the same was not liable to tax. In view of the above, after considering the totality of the facts and circumstances of the case the interest received by the assessee as per the order of the hon'ble High Court was not taxable and the same is a capital receipt. The appellate authorities have powers to admit points of law and admit claim for exemption based on materials on record. [Para 9] In view of the above, the AO is directed to treat the aforesaid receipt as capital receipt which was received by him as per the order of the hon'ble high court. {Para 9}.
ITA No. 111/Rjt/2016M/s. Sardar Soap Products vs. ACIT (CPC) Asst.Year - 2012-13
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2. National Thermal Power Co. Ltd. v/s. CIT - 229 ITR 383 - Hon. S.C. Held : Under s. 254 the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under s. 254 only to decide the grounds which arise from the order of CIT(A). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. Tribunal should not be prevented from considering questions of law arising in assessment proceedings although not raised earlier.--Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC): TC 7R.343 applied; CIT vs. Anand Prasad (1981) 128 ITR 388 (Del) : TC 8R.1021, CIT vs. Karamchand Premchand (P) Ltd. (1969) 74 ITR 254 (Guj) : TC 8R.547 and CIT vs. Cellulose Products of India Ltd. (1985) 44 CTR (Guj) 278 (FB) : (1985) 151 ITR 499 (Guj)(FB) : TC 8R.965 overruled.
3. Rajrani Gulati v/s. CIT Central Tilak - 346 ITR 543 - (Hon. All. H.C.) Decision in favour of favour} Assessee Appeal--Statutory right of assessee u/s. 250-Assessee sold 16,000 equity shares for a consideration of Rs. 14,91,3207- which was purchased for Rs.88,168--Sales resulted in long term capital gain of Rs.l2,34,006/-'at rate of 20%--AO accepted long term capital gain and passed assessment order--CIT holding that long term capital gain will have to be computed at rate of Rs.10% directed AO to compute long term capital gain at the rate of 10% in accordance with the circular No. 14 (XL-35) dated 11.04.1955 read with amended proviso to S. 112 (1)--IT AT following judgment in case of Goetze (India) Ltd. Vs. CIT, held assessee cannot raise ground before first appellate authority, as he has shown the long term capital gain at the rate of 20% and has not filed any revised return--Issue as to whether on true and correct interpretation of provisions to S. 250 Tribunal was correct in holding that assessee's claim for being assessed as per second proviso to S. 112 (1) could not have been considered and allowed from the stage of the first Appellate Authority--Held, relying on Supreme( Court's decision in case of Jute Corporation of India Ltd. assessee is entitled to raise legal issue before first Appellate Authority, which possessed co- terminus powers similar to AO--CIT (A) has rightly adjudicated statutory right of assessee and directed to allow the long term capital gain at the rate of 10%.
ITA No. 111/Rjt/2016M/s. Sardar Soap Products vs. ACIT (CPC) Asst.Year - 2012-13
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4. CIT V/s. Mahalaxmi Sugar Mills Co. Ltd. - Hon. S.C. 160 ITR 920 (para- 10/page8) In the second place, there is a duty cast on the ITO to apply the relevant provisions of the Indian IT Act for the purpose of determining the true figure of the asseessee's taxable income and the consequential tax liability. Merely because the assessee fails to claim the benefit of a set off, it cannot relieve the ITO of his duty to apply s. 24 in an appropriate case.
Encl: As Above. Sd/-
D.R. Adhia - AR"
8. The Ld.DR, on the other hand, submitted that the Department has simply accepted the return filed by the assessee without making any adjustments therein. Therefore, there is no occasion to raise any grievance on the intimation. No fault can be found with the Department for accepting the income offered by the assessee. Also, the scope of section 143(1) does not permit the Department to get into the debate as proposed on behalf of the assessee.
9. We have carefully considered the facts and circumstances of the case as narrated in the aforesaid paras. The short grievance of the assessee is that the return filed by the assessee itself ought to have been processed differently or an opportunity before raising the demand ought to have been given. It is pleaded that the demand raised on the assessee is without granting the benefit of payment of remuneration to its partners which is already disclosed in their respective returns. We ex-facie find this line of arguments raised on behalf of the assessee as ITA No. 111/Rjt/2016 M/s. Sardar Soap Products vs. ACIT (CPC) Asst.Year - 2012-13
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incomprehensible and farfetched. As per the scheme of the Act, a return filed under the IT Act shall be processed in the manner to correct arithmetical error etc. and after making certain prima-facie adjustment as enumerated in section 143(1) of the Act. A bare reading of the section 143(1) suggests that the income returned by the assessee is the starting point and all the adjustments suggested to the returned income are broadly of detrimental nature. It is beyond scope of the AO under s.143(1) to engage in a long drawn process and make the adjustment proposed by the assessee while processing the return under the aforesaid provision. The AO is not expected to chase a will-o the wisp as demanded by the assessee. The purported error committed by the assessee cannot be visualized under s.143(1) by any stretch of imagination. Thus, the relief urged on behalf of the assessee is clearly beyond the scope and ambit of section 143(1) of the Act. Hence, the action of the AO cannot be modified as sought. At this juncture, we note that as a remedial measure, s.139(5) of the Income Tax Act provides for revision of the return filed within stipulated time where any person having furnished a return of income discovers any omission or any wrong statement therein. Therefore, scheme of Income Tax is not entirely without remedy for the purported mistake claimed to have been rectified by the assessee in the present appeal. The assessee has probably chosen a wrong path for seeking correction of the alleged error committed by the assessee itself. The AO (ACIT-CPC Bangalore) cannot be blamed ITA No. 111/Rjt/2016 M/s. Sardar Soap Products vs. ACIT (CPC) Asst.Year - 2012-13
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for merely accepting an erroneous return filed by an assessee. Therefore, we are not in a position to travel beyond the scope of section 143(1) to entertain the relief sought.
10. In the result, appeal of the assessee is dismissed.
Order pronounced in the Court on 16/02/2017 at Ahmedabad.
Sd/- Sd/-
( RAJPAL YADAV) ( PRADIP KUMAR KEDIA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad ; Dated 16/02/2017
ट .सी.नायर, व.,न.स./T.C. NAIR, Sr. PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं
धत आयकर आयु.त / Concerned CIT
4. आयकर आय.
ु त(अपील) / The CIT(A)-3, Rajkot
5. 2वभागीय ,त,न
ध, आयकर अपील य अ
धकरण,राजोकट/DR,ITAT, Rajkot
6. गाड@ फाईल / Guard file.
आदे शानुसार/ BY ORDER,
स या2पत ,त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar)
आयकर अपील%य अ&धकरण, राजोकट / ITAT, Rajkot
1. Date of dictation .. 13.2.17 (dictation-pad 12- pages attached at thehis File)
2. Date on which the typed draft is placed before the Dictating Member .. 13.2.17
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S....... 17.2.17
7. Date on which the file goes to the Bench Clerk..................... 17.2.17
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................