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TMI Blog2013 (6) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... anced by the partner Shri Pratap Sharma who had acknowledged the aforesaid loan to the appellant firm by a filing an affidavit. Ground No.3:- on the facts & in circumstances of the case the learned Commissioner of Income Tax (Appeal) was not justified in confirming disallowance of Rs.100000/-out of the depreciation allowance. Ground No.4:- on the facts & in circumstances of the case the learned Commissioner of Income Tax (Appeal) was not justified in retaining an adhoc addition of Rs.2.50 Lac out of the addition of Rs.15,00,000/- made by the A.O. without any basis, reason or rhyme." ITA. No. 93/Agra/2010 by the Revenue :- "i) On the facts & in circumstances of the case the learned Commissioner of Income Tax (Appeal) has erred in deleting the addition of Rs.5,74,565/- made on account of refund of commercial tax." ii) on the facts & in circumstances of the case the CIT (Appeals) has erred in deleting the addition of Rs.36,551/- made on account of excess commercial Tax debited to P&L account." iii) on the facts & in circumstances of the case the CIT (Appeals) has erred in deleting the addition of Rs.97,800/- out of addition of Rs.17,13,367/- made on account of unexplained cash c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentatives of the parties and records perused. Before considering the facts of the case, under consideration, we would like to refer the scheme of assessment as firm and relevant Sections. Sections 184 & 185 of the Act reads as under :- "[Assessment as a firm. 184. (1) A firm shall be assessed as a firm for the purposes of this Act, if- (i) the partnership is evidenced by an instrument and (ii) the individual shares of the partners are specified in that instrument. (2) A certified copy of the instrument of partnership referred to in sub- section (1) shall accompany the return of income of the firm of the previous year relevant to the assessment year commencing on or after the 1st day of April, 1993 in respect of which assessment as a firm is first sought. Explanation.--For the purposes of this sub-section, the copy of the instrument of partnership shall be certified in writing by all the partners (not being minors) or, where the return is made after the dissolution of the firm, by all persons (not being minors) who were partners in the firm immediately before its dissolution and by the legal representative of any such partner who is deceased. (3) Where a firm is assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antages. The interest paid to any partner computed at a prescribed rate and remuneration paid to working partner would be allowable under Section 40(b) of the Act. If the assessment were to be made in the status of an AOP, such interest or remuneration given to any partner, will not be allowable deduction. Sub Section (5) starts with an non-obstante clause and is of overriding nature. Where the firm, despite complying with other procedural formalities, is guilty of contumacious conduct in courting a best judgment, the firm shall not be assessed as such for such assessment year. It would be assessed in the status of an AOP and all other provisions of the I.T. Act would apply accordingly, as if it was an AOP. The words used in the new section 184(5) are "shall" signifying the intention of the Legislature that it is used in the mandatory sense only. Thus, where there is a best judgment assessment under section 144 the status would be AOP only and it cannot be contended that inasmuch as the procedural formalities prescribed by section 184 have been complied with, it should be assessed in the status of firm only. 9. For further appreciating the scheme of assessment of firm, we would li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comply with all the terms of a notice issued under sub-section (1) of section 142[or fails to comply with a direction issued under sub-section (2A) of that section], or (3) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143, (4). The A.O. shall provide an opportunity of hearing to the assessee. 11. In the light of the above discussion, if we consider the facts of the case under consideration, the admitted facts of the case are that the assessee made compliance and furnished information required by the A.O. The books of the account was also produced by the assessee before the A.O. as noted by the A.O. in para 2 of his order. The ld. Authorized Representative also demonstrated that the notice issued under Section 142(1) of the Act with queries were complied by the assessee. The case of the A.O. is that the assessee has failed to comply the condition No.2, which is as under:- "(b) fails to comply with all the terms of a notice issued under sub-section (1) of section 142[or fails to comply with a direction issued under sub- section (2A) of that section], or" 12. But it is relevant to state that the Revenue has failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the assessee maintained two capital accounts, one is fixed for capital and another is current capital account. This amount of Rs.11,83,637/- is on account of current capital account. He further submitted that the title of the account "loan" was inadvertently used as per prevailing practice but in fact it is a current capital account of the partner in the books of the firm. The ld. Authorized Representative submitted that the assessee has furnished confirmation, identity and other records to establish that in fact the amount was given to the firm by the partner as a current capital. He submitted that under the circumstances, addition cannot be made in the hands of the firm. The ld. Authorized Representative in support of his contention relied upon the order of Hon'ble M.P. High Court in the case of Commissioner of Income Tax vs. Metachem Industries, 345 ITR 160 (MP), Hon'ble Allahabad High Court in the cases of India Rice Mills vs. Commissioner of Income Tax 218 ITR 508 (All.), Surendra Mahan Seth vs. Commissioner of Income Tax (1996) 221 ITR 239 (All) and ITAT Agra Bench, in ITA No. 654/Agr/2008 vide order dated 25.05.2010. 15. The ld. D.R., on the other hand, relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a different estimation can be made at this stage, in the light of the fact, order of the CIT(A) is confirmed. 20. Now we take up ITA No. 93/Agra/2010 appeal filed by the Revenue. The first ground is in respect of addition of Rs.5,74,656/- made by the A.O. invoking Section 43B on account of commercial taxes. Before the ld. CIT(A) the assessee has demonstrated that the A.O. has added the amount without appreciating the facts and accounting principle. The ld. CIT(A) reproduced the reconciliation and explanation of the assessee at page no.6 of his order. The CIT(A) after considering the assessee's submission held as under :- "7.2 Appellant's submission alongwith assessment order and assessment records have been considered carefully and the appellant's contention in this regard is found to be correct. No. violation of provisions of Section 43-B of the I.T. Act is made by the appellant on the basis of accounting entries made by it in its books of accounts. The said addition of Rs.5,74,656/- is hereby, deleted." 21. We have heard ld. Representatives of the parties and records perused. We noticed that the ld. CIT(A) has rightly appreciated the fact and reconciliation and detailed file ..... X X X X Extracts X X X X X X X X Extracts X X X X
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