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2020 (2) TMI 648

..... has three partners - HELD THAT:- The contention of the assessee's AR seems to hold much water in as much as the provision of section 5 of the Act does not provide any room for bringing to tax any income by way of notional income. On the matter of debit balance of one of the partners, find that the impugned debit balance is not a new finding by the AO, rather it has been carried forward from the past several years and there were no additions made on this count by the AO in those years. No doubt the principle of Res Judicata does not apply to lncome Tax proceedings but however, the principle of Consistency has to be adopted when there is no change in the material facts and circumstances of the assessee's case. On analyzing the entire gamut of the issue with respect to the material facts on record along with the legal aspects involved and my findings as in the foregoing, ultimately, find that bringing to tax an amount which is of notional in nature and which was never earned by the assessee cannot stand the test of jurisprudence in the tax regime. No justification in the action of the AO making addition - Decided in favour of assessee. Disallowance of management charges and su .....

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..... t Year 2011-12, have been taken into consideration for deciding the above appeals en masse. 3. Ground No. 1 and 2 raised by the Revenue in ITA No.125/Kol/2015 for A.Y.2011-12 and Ground No. 1 and 2 raised by the Revenue in ITA No.380/Kol/2016, for A.Y.2012-13 are common and identical which relate to disallowance of notional interest of ₹ 3,54,24,205/- pertaining to one of the partners of M/s Carlton Hotel (P.) Ltd. 4. The facts of the case which can be stated quite shortly are as follows: Assessee is a partnership firm and has three partners. The particulars of partners are given below: (i) Carlton Hotel Private Limited- Share 5% (ii) Sahara India Commercial Corporation Limited-Share 90% (iii) I. Ahmed-Share 5% The first partner namely, Carlton Hotel Private Limited, shall bring in the share capital in the form of land admeasuring 2,40,000/- sq.fit, as per point No.1 of the said party and no other capital in the form of investment brought in by the First Party. As per agreement, the construction of the commercial project shall be carried out by the party in the second part and entire cost of construction shall be borne by the party second part only. The assessing officer has .....

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..... see along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Before us, Ld. DR for the Revenue has vehemently submitted that Assessing officer in para 3 of the assessment order has discussed the terms of the partnership deed entered into between the partners and has analyzed the same. After reciting the terms of the partnership deed at page 3 of the assessment order in the first para he has reached to the conclusions that the partners cannot go beyond shares mentioned in the agreement and withdraw any benefit from the existing assets and liabilities of the firm. The ld DR pointed out that assessing officer also referred to clause 14 and 16 of the partnership deed and has reached to his conclusion that the partners are not entitled to withdraw money more than their respective shares. The Ld DR further stated that interest on money s borrowed by the firm and advanced by it in turn to its partners should be inadmissible, therefore, interest earned @ 12% should be charged against the average debit balance of the partner and hence AO has rightly added back of ₹ .....

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..... partners can carry on any business jointly and can also act upon in the manner as they deem fit in the inter se relationship between them. We note that the debit balance in one of the partner's current account i.e, Carlton Hotel (P.) Ltd., is appearing for last several years and the case of the assessee has been under scrutiny and in none of the earlier years any such hypothetical income has been subjected to tax in the hands of the assessee and therefore, following the principle of consistency, there being no change in the facts and circumstances during the year under consideration, there is no justification of the AO in imputing interest income on the debit balance of the said partner and subjecting the same to tax in the hands of the assessee. We note that it is a well settled legal position that factual matters which permeate through more than one assessment year, if the Revenue has accepted a particular's view or proposition in the past, it is not open for the Revenue to take an entirely contrary or different stand in a later year on the same issue, involving identical facts unless and until a cogent case is made out by the Assessing Officer on the basis of change in f .....

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..... hat bringing to tax an amount which is of notional in nature and which was never earned by the assessee cannot stand the test of jurisprudence in the tax regime. Considering the entire facts and circumstances, I do not find any justification in the action of the AO on both facts and law and hence, the addition made on this count is directed to be deleted." We have gone through the order of ld CIT(A) and we note that the conclusions arrived at by the CIT(A) are, correct and admit no interference by us. We, approve and confirm the order of the CIT(A). 10. The assessee filed cross objection in CO.No.16/Kol/2015, for A.Y.2011-12 which supports to the order of ld CIT(A). Since we have confirmed the order of ld CIT(A), therefore, Cross objections filed by the assessee become infructuous. 11. Now we shall take Ground No. 3 of Revenue's appeal for Assessment Year 2012-13; in ITA No.380/Kol/2016. Ground No.3 raised by the Revenue relates to disallowance of management charges and supervision of ₹ 6,00,00,000/-. The ground No.3 raised by the Revenue is as follows: 3. "That in the facts and circumstances of the case Ld. CIT(A) has erred in deleting the disallowance of the m .....

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..... year under consideration the company has not received any charges in the whole year casts a doubt on the genuinity of expense of the assessee. No conclusive evidence and reasoning to support the claim could be produced in the course of assessment proceedings. So, this claim of the assessee was considered by AO to be superfluous and not related to his business. Hence the AO disallowed ₹ 6,00,00,000/-. 13. Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the CIT(A) who has deleted the addition made by AO. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us. 14. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Ld. DR submits before us that in para 4 of the assessment order the ld. Assessing Officer has drawn a chart showing the gross receipts of the assessee, mall management charges paid and supervision charges paid and thereafter he has observed that the assessee has .....

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..... as entered into with M/s. Sahara Prime City Ltd. for the purposes thereof. As per the said agreement a sum of ₹ 6,00,00,000/- was paid to M/s. Sahara Prime City Ltd. for overall supervision of the Mall and also to keep control over the various contractors who were engaged for providing day-to-day services in the Mall. Earlier the assessee firm was having its own employees as it was carrying on the business of construction and sale of space in the Mall but since in the previous year relevant to A.Y. 2009-10 the assessee firm had capitalised its stock-in-trade and has treated it as an investment-building/fixed asset and was deriving rental income there from, no employees were kept for looking after the Mall management because of which the agreement was entered into by the assessee firm as the assessee firm was deriving income from Mall cleaning, Mall management, Mall supervision, Mall safety and security, Holding of Carnival etc. which require presence of substantial amount of man-power on a regular basis. 15. We note that the supervision charges have been paid by assessee as per an agreement. The assessee has deducted tax at source while making payment. The payment was made th .....

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