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M/s. A.S.A & Co. Versus I.T.O. Ward – 1 (2) , Hooghly

2017 (6) TMI 447 - ITAT KOLKATA

Addition towards alleged difference in investment in partnership firm - Held that:- There is no evidence to the fact as to how much was generated from ASA & Co and from Dutta Trading Co. We find that the ld AO had made addition only on account of unexplained investment in Nature View Restaurant in the instant case. Hence we confine our opinion only on the point whether an addition could be made in the hands of the assessee towards undisclosed investment in Nature View Restaurant. - In our c .....

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losed income has been generated from two partnership businesses and the same has been ploughed back by them as investment in Nature View Restaurant. There is absolutely no case for making an addition in the case of the assessee firm in the instant case. Hence we have no hesitation in deleting the addition of ₹ 34,20,000/- made in the hands of the assessee. - Decided in favour of assessee. - Disallowance of partners’ remuneration - addition u/s 40(b) - Held that:- It was held that the C .....

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tion 40(b) then no disallowance of remuneration could be made. In the instant case, as stated supra, the partnership deed clearly mentions the manner of computation of remuneration. Hence respectfully following the ratio laid down in the said decision, we direct the ld AO to allow deduction towards partners remuneration in the sum of ₹ 1,57,735/-. - I.T.A. No. 655/Kol/2013 - Dated:- 7-6-2017 - Shri Aby. T. Varkey, Judicial Member And Shri M. Balaganesh, Accountant Member For the Appellant .....

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general in nature and does not require any specific adjudication. 3. The first issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the addition made in the sum of ₹ 34,20,000/- towards alleged difference in investment in partnership firm M/s Nature View Restaurant in the facts and circumstances of the case. 3.1. The brief facts of this issue is that the assessee is a partnership firm engaged in the trading of building materials. A survey u/s 133A of t .....

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ld AO observed that assessee had made fresh investment during the FY 2007-08 in Nature View Hotel amounting to ₹ 51,75,000/- as per document received from ITO Ward 1(3), Hooghly, where the closing balance of investment made was reflected at ₹ 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 .....

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in Nature View Hotel. 3.2. Before the ld CITA, it was pointed out that even in the assessment of partnership firm M/s Nature View Restaurant for the Asst Year 2008-09 completed u/s 143(3) of the Act, no such discrepancy was founded and no addition was made in this respect. The assessee submitted the audited balance sheet of assessee firm for the financial year 2007-08 relevant to Asst Year 2008-09. Similarly it filed the audited financial statements for the year ended 31.3.2008 of M/s Nature Vi .....

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d CITA observed that the document received from ITO of Nature View Restaurant is the balance sheet of Nature View Restaurant as on 31.3.2008 wherein partners contribution had been reflected at a higher figure by ₹ 34,20,000/-. He observed that the balance sheet of Nature View Restaurant and assessee firm has been signed by Mr Arun Kumar Dutta (common partner). Moreover, Arun Kumar Dutta and Subhal Chandra Dutta had declared a sum of ₹ 25,00,000/- each as undisclosed investment in Nat .....

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said findings. 3.3. The ld AR argued 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 giv .....

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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 survey report (enclosed vide pages 4 to 5 of Paper Book) ; Statement of Sri A Dutta in Survey (enclosed vide pages 6 to 7 of Paper Book) ; Statement of Sri S Dutta in Survey (enclosed vide pages 8 to 12 of Paper Book); Statement of Sri S Dutta in assessment proceedin .....

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reinbelow from statement of Sri A Dutta on 24.8.2007 taken during survey:- Q. You have already stated in the deposition under oath on 23.08.2007, that you have invested about ₹ 50 lakhs in Nature View Hotel. Do you accept this? A. Yes, I accept that I have disclosed ₹ 50 lakhs on 23.08.2007 and I on behalf of all the partners of M/s A.S.A. & Co & M/s Dutta Trading Co. are ready to pay the tax liability for this disclosure of ₹ 50 lakhs for the FY 2007-08. Q. Please deta .....

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4.1. We find it relevant to reproduce the relevant portions of the statement recorded u/s 131 of the Act from Sri Subhal Dutta , Partner of A.S.A. & Co (assessee firm) and M/s Dutta Trading Co. on 3.9.2007 :- 4. You are yet to file the modalities of payment of taxes against the disclosure? A. I also accept that my partner Sri Arun Dutta disclosed ₹ 50 lakhs on 23/08/07 with and after consultation with me and other partners of the firms. The first instalment may be adjusted with our due .....

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rom 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 investmen .....

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ature View Hotel was ₹ 35,59,093/- only whereas the closing balance as per statement filed before the I.T.O. Wd. 1(3) the same is ₹ 69,79,093/-. What is the reason behind it? A. I am unable to reconcile or can throw any light on it. 3.4.3. From the aforesaid statements, what transpires is only the partners in their individual capacity had made the disclosure at the time of survey and thereafter. They have never said that the assessee firm had made investment of ₹ 25 lacs in Nat .....

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on the point whether an addition could be made in the hands of the assessee towards undisclosed investment in Nature View Restaurant. In our considered opinion, the excess amount of ₹ 34,20,000/- , being the difference in capital account, as reflected in Nature View Restaurant vis a vis investment reflected in assessee firm s books, is found credited only in the books of Nature View Restaurant. Hence if at all any addition that could be made, the same could be made in the hands of Nature .....

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sessee. Accordingly, the Ground No. 2 raised by the assessee is allowed. 4. The next ground to be decided in this appeal is as to whether the ld CITA was justified in upholding the disallowance of partners remuneration in the sum of ₹ 1,578,735/- in the facts and circumstances of the case. 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 dis .....

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ven 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 eventhoug .....

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ade. 4.3. We have heard the ld AR. We find that the partnership deed contain the following clause on partners remuneration which is reproduced below for the sake of convenience:- Clause 9 . The working partners of the firm would be paid remuneration within the overall ceiling fixed u/s 40(b) of the Income Tax Act, 1961 including any statutory modification from time to time. The amount of remuneration to be paid to the working partners each year shall be Fixed with reference to the Book profits o .....

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