TaxTMI 
TaxTMI 
2021 (1) TMI 78
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....er of the AO. Accordingly he issued a show cause notice to the assessee asking it to explain as to why proceedings u/s 263 of the I.T. Act should not be initiated. The relevant portion of the notice is reproduced as under :- "i) It is gathered from the record that the firm was having 3 partners during the year under consideration, namely Shri Dhan Pal Gupta, Shri Amit Gupta and Shri Ankit Gupta, having share of 20% , 40% and 40% respectively. Interest on capital of partners & remuneration to partners were claimed at Rs. 15,70,834/- and Rs. 13,20,000/- respectively and the claim of the assessee firm was accepted by the AO without taking cognizance of partnership deed. In fact he did not procure the same from the assessee. ii) Total turnover during the year under consideration amounts to Rs. 80,84,44,763/-. Rebate & discount are shown at Rs. 2,20,73,322/-. The G.P. and N.P. were shown at Rs. 2,36,72,351/- and Rs. 9,59,000/- respectively, after allowing salary and interest on capital to partners which reflects that N.P. in terms of percentage is only 0.12% which is very low. It is gathered that commission of Rs. 58,77,675/- is debited in the P & L A/c . T....
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.... 1,48,840/- on account of improvement expenses cannot be allowed in absence of documentary evidence. c) The AO has not conducted discrete enquiries to ascertain the genuineness of deposits and withdrawals in partners' capital account. 4.1 He accordingly set aside the order passed by the AO u/s 263 with a direction to pass a fresh order after giving due opportunity of being heard to the assessee. 5. Aggrieved with such order of PCIT the assesee is in appeal before the Tribunal by raising following grounds : 1. "That under the facts and circumstances, the asstt. order u/s. 143(3) Dtd.04.11.16 is neither erroneous nor prejudicial to the interest of revenue, hence the Ld. PCIT wrongly assumed the jurisdiction u/s.263 of the I.T. Act. 2. That Ld. Pr. CIT erred in law as well as on facts in setting aside various issues to the file of Ld. A.O. with the directions without making any enquiry at her end, in the absence of which, the issues could not had been set aside and no directions could had been issued to the A.O. for read-judicating those issues. 3. That the impugned asstt. u/s. 143(3) has been framed by the Ld. A.O. after calling for the expla....
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....er book he submitted that the AO has allowed interest as per the original deed dated 4th February, 2008 as has already been allowed in the past. There is no change in the interest position with respect to supplementary deed of partnership deed dated 30th March, 2012. Further the interest has always been allowed on that basis in the past as well as even in assessment year 2013-14 u/s 143(3).He submitted that the Ld. PCIT misunderstood that the interest clause has also been amended in supplementary deed which is not so. 7. The ld. Counsel for the assessee submitted that as per clause 11 of the original deed dated 4th February, 2008, remuneration to partners is to be calculated on book profit so computed in the manner laid down in section 40 (b) (v) of the I.T. Act. He submitted that the supplementary partnership deed dated 30th March, 2012 is effective from 1.4.2012 relevant to assessment year 2013-14. As per the supplementary deed, the salary payable to partners is Rs. 13,20,000/- the Ld. PCIT directed the AO to verify the authenticity and genuineness of the supplementary deed as a condition for allowing the above salary on the ground that the AO did not procure the amended su....
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....ed assessment year for Rs. 89,40,000/- and the assessee has computed long term capital gain after indexation. He submitted that the Ld. PCIT has directed the AO to examine the capital gain with respect to purchase and sale deed and also held that the benefit of improvement expenses cannot be allowed in the absence of documentary evidences. He submitted that since the three properties were purchased on 6th February 2001 for Rs. 12,83,300/- and the cost of improvement of Rs. 1,48,840/- was also incurred in the same period, thus total cost came to Rs. 14,32,140/- which was appearing in the balance sheet since assessment year 2001-02. The properties were sold during the impugned assessment year i.e after about 13 years and therefore there is no need to examine the evidence of improvement cost by the AO since the same stood accepted in the past in the orders passed u/s 143(3). Since the Ld. PCIT himself has examined the purchase and sale deeds and found no discrepancy, therefore, there was no requirement of law to send it back for fresh examination. He submitted that complete working of capital gain was furnished before the AO for his examination and the ledger account of the properties....
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.... Development Corporation 56 ITD 345 (BOM) 5. CIT vs. Krishna Capbox (P) Ltd. 372 ITR 310 (All.) 6. DIT vs. Jyoti Foundation 357 ITR 388 (Del) 7. Mrs. Khatiza S. Oomerbhoy 100 ITD 173 (MUM) 14. Ld. DR on the other hand heavily relied on the order of the Ld. PCIT. He submitted that the AO has never examined the issue under provisions of section 40(b)(v) or 40(b)(iv) and he has examined only the provision of section 40 (a)(ii)((b). Similarly the AO has never examined the cost of improvement. Thus it is a case of no enquiry. Relying on various decisions he submitted that the order passed by the Ld. PCIT u/s 263 is fully justified. 15. The ld. Counsel for the assessee in his rejoinder submitted that no section 263 proceedings were initiated for asstt. Year 2013-14 and even till date the assesee is still claiming the salary and interest to the partners and salary was not the issue in section 263 . He accordingly submitted that the order passed by the Ld. PCIT should be set aside and the grounds raised by the assessee be allowed. 16. We have considered the rival arguments made by both the sides, perused the orders of the AO and Ld. CIT(A) and the paper ....
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....ovement were consistently being shown in the balance sheet and the assessments in the past were completed u/s 143(3) in some of the years. Therefore, when the purchase deed and sale deed were before the AO and the long term capital gain was computed and no discrepancy was found there was no occasion on the part of the Ld. PCIT to invoke jurisdiction u/s 263(3). 18. Similarly the assessee has produced the books of accounts before the AO which contained the ledger account of the partners giving details of withdrawals and deposits. Deposits are very small and less than the amount of withdrawal and the partners are withdrawing only out of their credit balance. Therefore, the order of the AO cannot be held to be erroneous and prejudicial to the interest of the revenue on the third issue also. 19. We find force in the above arguments made by the Ld. Counsel for the assessee. From the various details furnished in the paper book we find there is no change in the rate of interest clause in the supplementary deed dated 30th March 2012 and such interest has been allowed in the past on that basis and also in the immediately preceding assessment year i.e 2013-14 where the order was passed....