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TMI Blog2018 (2) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... ice dated 22nd August 2012 and called upon the petitioner to supply various details. Such details were supplied by the petitioner alongwith a covering letter dated 5th October 2012. The documents annexed with the said letter dated 5th October 2012 included a copy of Partnership Deed of the petitioner-partnership firm. The Assessing Officer passed a scrutiny assessment order on 12th March 2013 in which he made certain additions and disallowances to the income declared by the assessee. To reopen the assessment, the Assessing Officer issued impugned notices. In order to reopen the assessment, he recorded the following reasons :- "The assessee M/s. Deloittee Haskins & Sells, a partnership firm engaged in practicing as a firm of Chartered Accountant, filed its original return of income for A.Y. 2010-11 on 13.10.2010 declaring total income of Rs. 7,45,82,670/-. The case was selected for scrutiny and the assessment was finalized u/s. 143(3) on 12.03.2013 determining income of Rs. 9,04,96,640/-. Subsequently, on verification of Schedule-9 of profit & loss account regarding professional fees it revealed that the assessee has directly deducted an amount of Rs. 48,10,682/- from Gross P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer, this was not an allowable deduction since a partner is not an employee of the firm and is therefore, not entitled to pension after retirement. The payment to the retiring partner, therefore, was capital in nature. The assessee raised objections to the notice of reopening under communication dated 5th March 2017 in which the assessee took mainly two grounds - one was that there was no failure on the part of the assessee to disclose truly and fully, all material facts. It was highlighted that all facts necessary for assessment were already on record and the notice for reopening, which was issued beyond the period of four years was therefore not valid. The second ground elaborately raised by the petitioner was that even on merits, the objection was not sustainable. The partnership deed had a clause for paying pension to the retiring partners. The payment would depend on nature of work already done by the retiring partner for which payments may not have been received from the clients. It was pointed out that such practice is being followed in similar other firms; including one C.C Chokshi & Associates, which was one of the firms taken over by the petitionerpartnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if any, payable, as provided in the Clauses 10.k and 10.l above, a retired/retiring Partner of the Firm or the Legacy Firm in respect of which the liability thereof has been taken over by this Firm or the spouse or nominee of a deceased Partner, as the case may be, shall be entitled to receive further sums determined on the basis specified in Clause 10.n in respect of the following: i. amounts billed, but not received, work completed, but not billed, and work partly completed and not billed as at the date of death or retirement, as the case may be, having regard to the fact that the Partnership follows the cash system of accounting; ii. in consideration of the Retiring Partner or the spouse or nominee of the deceased partner, as the case may, permitting the continuing Partners the use of the Firm name of Deloittee Haskins & Sells, to carry on the profession, along with the clientele and the attendant rights of the Firm; iii. the contribution made by the surviving partner or the deceased Partner as the case may be, during his association with the Firm, in increasing the future income earning potential of the Firm, the benefits whereof are likely to be reflected in the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner who retires on attainment of the normal Retirement Age after completing at least five continuous years as a partner but without completing the Qualifying period of 20 years shall be entitled to the payments of Rs. 6,00,000/- per annum for a period of 10 years from the date of the retirement. The absolute amount referred to above will be indexed as per the Cost Inflation Index specified in Section 48 of the Income Tax Act, 1961, the base year for the indexation being 2007-08 or increased every year at the simple rate of 5% per annum, whichever is higher. ii. Notwithstanding anything contained above the amounts payable under Clause 10.n.i to a Retiring Partner in any financial year (on or after 1st April, 2007) shall not be less than Rs. 6,00,000/- per annum provided the said partner has completed the qualifying period of 20 years. The minimum amount of Rs. 6,00,000/- shall be adjusted by Cost Inflation Index specified in Section 48 of the Income Tax Act, 1961, the base year for the Indexation being 2007-2008 or increased every year at the simple rate of 5% per annum whichever is higher. iii. Notwithstanding anything contained in clause 10.n.i and Clause 10.n.ii the amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There was nothing outside of the record which could have thrown any light on the nature of payment and its deductibility in terms of provisions of the Income-tax Act. We are not called upon to judge the Assessing Officer's assertion that though such payments were recognized in partnership deed, as per the Income-tax law, the payments were not allowable deductions, being the nature of payments made to the outgoing partner and therefore were in the nature of capital expenditure. We are presently concerned with the limited issue of reopening of the assessment beyond period of four years from the end of relevant assessment year. In this respect, the Revenue has completely failed in satisfying us that there was any failure on the part of the assessee in disclosing truly and fully, all material facts. From the reasons recorded by the Assessing Officer as well as material produced before us, it is completely visible that all necessary facts were already on record, duly disclosing and that there was no failure on the part of the assessee in this regard. If the Assessing Officer had any dispute about deduction of the said sum from the profit of the firm, he could have and ought to have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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