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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 ..... rt) and Metachem Industries (1999 (9) TMI 21 - MADHYA PRADESH High Court)the current capital introduced by partner in firm is established and thus the addition cannot be made in the hands of the firm. Following the above judgment the addition of Rs.11,83,637/- is deleted and balance addition of Rs.4,32,200/- (16,15,837-11,83,637/-) sustained by the CIT(A) is also deleted. Adhoc disallowance out of expenses - Held that:- Considering the nature of business of the assessee and fact that the assessee failed to produce complete bills, vouchers, the addition has been sustained by the CIT(A). The CIT(A) has rightly sustained the addition of Rs.2,50,000/-. Since this is a matter of estimation and the assessee and Revenue both have failed to point out any contrary material based on which a different estimation can be made at this stage, in the light of the fact, order of the CIT(A) is confirmed. Appeal of the assessee is partly allowed - ITA No. 80/Ag./ 2010, ITA No. 93/Agra/ 2010 - - - Dated:- 21-6-2013 - Shri Bhavnesh Saini And Shri A. L. Gehlot,JJ. For the Petitioner : Shri Rajendra Sharma, Adv. For the Respondent : Shri Waseem Arshad, Sr. D. R. ORDER Per A. L. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous Govt. departments. In response to statutory notices the assessee furnished required information and produced books of account. The A.O. made assessment under Section 144 of the Act on the ground that the hearing was adjourned to 22.12.2008 but the assessee did not appear nor any application for adjournment was filed. The A.O. noticed that this being a time barring case, therefore, there is no alternative but to complete the assessment on the basis of material available on record. The assessee has failed to comply with the requirements of notice under Section 142(1) of the Act, therefore, the assessment order was framed under Section 144 of the Act. Since the A.O. made assessment under Section 144 of the Act, therefore, he invoked provisions of Sub section (5) of Section 184 of the Act and disallowed Rs.8,56,315/- as interest paid to the partners and Rs.2,40,000/-as salary paid to partners. 4. The CIT(A) confirmed the action of the A.O. 5. The ld. Authorized Representative submitted that the A.O. did not provide any opportunity of hearing before making assessment under Section 144 of the Act. The ld. Authorized Representative submitted that notice issued under Section 142(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nish a certified copy of the revised instrument of partnership along with the return of income for the assessment year relevant to such previous year and all the provisions of this section shall apply accordingly. [(5) Notwithstanding anything contained in any other provision of this Act, where, in respect of any assessment year, there is on the part of a firm any such failure as is mentioned in section 144, the firm shall be so assessed that no deduction by way of any payment of interest, salary, bonus, commission or remuneration, by whatever name called, made by such firm to any partner of such firm shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession" and such interest, salary, bonus, commission or remuneration shall not be chargeable to income-tax under clause (v) of section 28." "Assessment when section 184 not complied with. 185. Notwithstanding anything contained in any other provision of this Act, where a firm does not comply with the provisions of section 184 for any assessment year, the firm shall be so assessed that no deduction by way of any payment of interest, salary, bonus, commission or remuneration, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply with a direction issued under sub-section (2A) of that section], or (c) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143,the[Assessing] Officer, after taking into account all relevant material which the[Assessing] Officer has gathered, [shall, after giving the assessee an opportunity of being heard, make the assessment] of the total income or loss to the best of his judgment and determine the sum payable by the assessee [* * *] on the basis of such assessment : [Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment : Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section.] [(2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not sufficient reason for making assessment under Section 144 particularly in case partnership firm where the A.O. want to invoke Section 184(5) and Section 185 of the Act, disallowing the interest and remuneration to partners firm, the assessment made by A.O. under Section 144 is not in accordance with the conditions laid down in Section 144 of the Act. We, therefore, find that the A.O. has wrongly made assessment under Section 144 though in clause 5 of the assessment order he has taken the status as a "firm" not as "AOP". We, therefore, set aside the orders of Revenue Authorities and allow the claim of the assessee in respect of interest paid to partners of Rs.8,56,315/-, and salary to partners Rs.2,40,000/-. Thus, addition of Rs.8,56,315/- and Rs.2,40,000/- made by the A.O. are deleted. 13. The Second ground of assessee's appeal is in respect of addition of Rs.11,83,637/- confirmed by the CIT(A) on account of unsecured loan given by the partner. During the assessment proceeding, the A.O. noticed that the assessee has taken fresh loans aggregating to Rs.16,83,637/- including loans of Rs.15,000/- each in the name of Brij Raj Singh Rajawat and Somendra Singh which have been sq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent capital introduced by partner in firm is established and thus the addition cannot be made in the hands of the firm. Following the above judgment the addition of Rs.11,83,637/- is deleted and balance addition of Rs.4,32,200/- (16,15,837-11,83,637/-) sustained by the ld. CIT(A) is also deleted. 17. Ground No.3 is in respect of addition of Rs.1,00,000/- out of depreciation allowance. This ground has not been pressed by ld. Authorized Representative, therefore, the same is dismissed. 18. Ground No.4 is in respect of adhoc disallowance out of expenses. The A.O. made addition of Rs.15,00,000/- which has been reduced by the ld. CIT(A) to Rs.2,50,000/- which is reproduced as under:- (Page No.10 CIT(A) "10.2 Appellant's submissions alongwith the assessment order have been considered carefully. There is no denying the fact that for preceding asstt. Yea, the appellant has surrendered an amount of Rs.15 lakhs which have been made the basis by the A.O. for making the addition this year also. However, the A.O. has not pointed out the items of expenditure which have been found to be unverifiable or not incurred. Thus, the A.O. was not justified in making adhoc addition of Rs.15 lakhs d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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