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TMI Blog2017 (6) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is a partnership firm engaged in the trading of building materials. A survey u/s 133A of the Act was conducted in the business premises of the assessee on 23.8.2007 along with other two business premises owned by the partners of the assessee firm. During the survey operations and afterwards, the partners were examined on oath and they stated they do not maintain any books of accounts and disclosed Rs. 25 lacs as undisclosed investment made in the hotel namely 'Nature View Hotel'. The ld AO observed that even the bills and vouchers were not produced during the survey operation. The ld AO observed that assessee had made fresh investment during the FY 2007-08 in Nature View Hotel amounting to Rs. 51,75,000/- as per document received from ITO Ward 1(3), Hooghly, where the closing balance of investment made was reflected at Rs. 69,79,093/-. The ld AO observed that after much delay, the assessee firm produced its audited accounts on 22.12.2010 . The ld AO observed that in the balance sheet of the assessee firm it was noticed that the assessee had shown investment made in the said hotel amounting to Rs. 35,59,093/-. The ld AO based on the document received from the ITO of Nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued that admittedly the amounts were found credited only in the books of M/s Nature View Restaurant towards partners contribution. Hence in all fairness , any addition that is made towards discrepancy in figures , should have been made only in the hands of M/s Nature View Restaurant u/s 68 of the Act. It cannot by any means considered in the hands of the partner i/e the assessee firm as unexplained investment. Apart from this, the ld AR argued that statement given during survey has got no evidentiary value. There is absolutely no corroborating evidence that was found during the survey operation or any evidence that has been brought on record by the ld AO in the assessment proceedings except merely placing reliance on the document received from ITO of Nature View Restaurant. None appeared on behalf of the revenue. No letter of adjournment was filed by the ld DR before us. Hence we proceed to hear the ld AR and dispose of the appeal as all the facts are available on record. 3.4. We have heard the ld AR and perused the paper book of the ld AR containing the financial statements of the assessee as on 31.3.2008 (enclosed vide pages 2 to 3 of Paper Book) ; Noting of ld AO in survey and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that, you have suppressed income in ASA & Co., Dutta Trading Co. by inflating the expenses and then ploughed back this amount of money in purchase of land, construction of the building and working capital of M/s Nature View Hotel. A. Yes Sir. I admit that the amount with which the building of Nature View Hotel was constructed was from ASA & Co. & Dutta Trading's income. 3.4.2. We also find it pertinent to reproduce the relevant portions of the statement recorded from Sri Subhal Chandra Dutta, Partner of A.S.A.& Co on 28.12.2010 as under:- Q 6. Please specify yearwise investment made by ASA&Co in Nature View Hotel? A. I am unable to reply such question as it is not known to me. Q 7. In the deposition taken during the survey operation and afterward you and your another partner disclosed 25 lakhs as investment made in the Nature View Hotel out of undisclosed fund. What do you comment on it. A. I cannot recollect the same as it is a matter of long period. Moreover during the time of survey operation we were so tensed . We have forgotten what we stated at that time. Q 8. It is seen from the documents received from I.T.O. Ward -1(3) Hooghly that the firm ASA & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. 4.1. The brief facts of this issue is that the ld AO observed that the partnership deed of the assessee firm did not specify the quantum of remuneration that could be paid to partners and accordingly disallowed the same as not in accordance with section 40b(v) of the Act and disallowed Rs. 1,57,735/- in the assessment by placing reliance on the CBDT Circular No. 739 dated 25.3.1996. 4.2. It was stated before the ld CITA that the action of the ld AO in disallowing the partners remuneration on the ground that quantum is not specified in the partnership deed was not correct in view of the subsequent clarification by the Board stating that where the manner of quantifying such remuneration is given in the partnership deed, then such remuneration shall not be disallowed. It was stated that the manner of calculation of remuneration was duly prescribed in the partnership deed wherein it is specifically stated that the remuneration to working partners shall be calculated at percentage of income of each accounting periods allowable under the provisions of section 40b(v) of the Income Tax Act,1961. It was also submitted that no addition on this account was made in the earlier years even ..... X X X X Extracts X X X X X X X X Extracts X X X X
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