9911796707
TMI Blog2014 (10) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... uneration as per deed and as per law correspondingly came to be revised and claimed at enhanced figure of Rs. 20,00,000 as against Rs. 3,00,000 originally claimed before the A.O. 4. The ld A.O. however, though accepted the revised profit & loss account and revised income, in the hands of the appellant firm while making assessment, he did not accept the revised remuneration to partners and thus accepted only one side of the profit & loss account by ignoring and disallowing the balance remuneration of Rs. 17,00,000 which was claimed as a result of revised profit which was shown in the firm's income. The ld A.O. held that as no information about the partners showing such payment and tax payment was available, the remuneration could not be allowed to the firm. 5. The appellant therefore preferred rectification application under s. 154 on 11.01.2011 (within 7 days on receipt of assessment order) on the ground that partners filed revised returns offering additional remuneration as per revised calculation. 6. Though assessment order was served on 04.01.2011 as the appellant had filed rectification application and expected that its grievance of disallowance of partners remuneration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t.Year - 2008-09 AO. The assessee preferred an appeal before the ld.CIT(A). The grievance raised before the ld.CIT(A) was that the AO did not dispose of the application for rectification within six months as prescribed u/s.154(8) of the Act and prayed that deduction of Rs. 17 lacs u/s.40(b) of salary to partners be allowed from total income and the revised total income of Rs. 70,83,940/- be accepted. 3.1. The ld.CIT(A) in his order in para-9 after considering the submissions observed that the claim of the assessee was not allowable as the revised return of income filed in the case of appellant-firm on 26/11/2010 and in the case of partners on 28/11/2010 which were beyond the limitation period and, therefore, are non-est. The ld.CIT(A) also rejected the appeal on the basis being barred by time and the explanation given by the assessee was not accepted. 4. The ld.counsel for the assessee has placed on record the written submissions and submitted that the appeal be decided on the basis of the written submissions. 4.1. On the contrary, ld.Sr.DR Shri B.Kulshrestha vehemently argued that there is nothing illegality in the orders of the authorities below. He submitted that the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer in disallowing remuneration to partners of Rs. 17 lacs on merits and by not admitting the appeal by refusing the condonation in filing the appeal. The facts in regard to above grounds are described as under: 3. The assessee electronically filed the return of income for A.Y. 2008-09 showing total income of Rs. 37,83,940/- on 30.09.2008 vide E-filing Acknowledgement No. 45209170300908. The assessee derives income from building and construction activities. A survey action u/s. 133A of the Income Tax Act, 1961 was conducted at the construction site premises of the assessee on 19.02.2008. During the course of survey proceedings, a statement under oath of Sh. Dahyabhai Manibhai Patel, partner of the assesses concern was recorded and in reply to Question No. 17 of the statement recorded during the survey proceedings u/s. 133A of the I. T. Act, 1961, Sh. Dahyabhai Manibhai Patel voluntarily disclosed income of Rs. 82,00,000/- as unaccounted income of assessee concern for the relevant financial year under consideration. Although the disclosure of Rs. 82 lacs was made in the course of survey action, assessee in the original return of income filed with the original accounts disclosed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of such additional sums of Rs. 17 lacs as made to the partners and the tax payment by the partners thereon have been furnished till date of this order. Therefore, the deduction in respect of such additional claims of unestablished and unsupported partner's salary is disallowed and deduction in respect of the partner's salary was restricted to Rs. 3 lacs only. 7. However, in fact the evidence of payment of partner's remuneration is already on record in form partnership deed and entries in the books of account of the assessee firm for payment of the remuneration to partners. All the partners are assessed to tax by the same assessing officer and the partnership deed was on record and remuneration to partners was worked out on the basis of the clause in the partnership deed. 8. Assessee has therefore applied for the rectification application u/s. 154 on 11.01.2011 which was not disposed off by the assessing officer. 9. As assessee's rectification application was not disposed off, the assessee filed the appeal before CIT(A) belatedly on 05.03.2012. In meanwhile, assessee reminded the assessing officer on 16.08.2011 and I13.09.2011 about its pending application u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed was filed with the first return of income and it was also filed in the course of the survey proceedings. There is no dispute that the partnership deed was not on record. 11.3 The maximum remuneration as per the ceiling of clause (v) laid down in S. 40(b) comes to Rs. 36,84,674/- but as assessee paid the remuneration of Rs. 20 lacs, it is much below the limit. The working of the permissible deduction u/s. 40(b) is reflected in the revised computation of income. So assessing officer has erred in holding that no evidence was produced for allowance of remuneration paid to partners. The only relevant evidence is entries in the books of accounts for the payment of the remuneration and partnership deed. Assessee filed the revised profit and loss account showing the remuneration paid to the partners and as stated above the copy of partnership deed was in the possession of the assessing officer and the part of the Income Tax records. 11.4 There is no condition for payment of tax by the partners for allowance of the remuneration. So the non payment of additional tax on enhanced remuneration cannot be the ground for rejecting assessee's claim. 11.5 The Id. CIT(A) also raised the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Baba Memorial Shri Hari Parmarth Dham Trust v/s. CIT - 111 ITD 175(Del)(SB). In view of the above it is prayed to Honourable Tribunal that assessee's claim for further deduction of Rs. 17 lacs as additional remuneration to partners may please be allowed. Otherwise the matter may be set aside to the file of CIT(A) to admit the appeal by condoning the delay and decide the appeal afresh. Date: 09.09.2014 Place: Surat Sd/- (Rasesh Shah)" 5.1. The grievance of the assessee in the present appeal is in two folds; firstly, the ld.CIT(A) ought to have condoned the delay in filing the appeal and secondly the ld.CIT(A) ought to have admitted the claim of the assessee with regard to remuneration to partners. We find that the explanation of the assessee for delay in filing the appeal before the ld.CIT(A) was that a rectification application was pending before the AO and the same was not decided by the ld.CIT(A). A specific ground was also taken by the assessee that the AO has not disposed of the rectification application within the period of six months. This ground of the assessee was not decided by the ld.CIT(A) in his order. So far as the finding of the ld.CIT(A) that the pendency of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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