TaxTMI 
TaxTMI 
2023 (9) TMI 1321
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....eveloping housing projects. The partnership firm commenced its business with effect from 15.06.2007. The petitioner, along with other partners of the said partnership firm, executed a partnership deed on 27.06.2007 which contained a discretionary clause as to "payment of interest on capital" but "no remuneration" was payable to the partners. 2.2 On 01.04.2009, the partnership deed was amended and it was mutually agreed upon that with effect from 01.04.2009, "no interest on capital" shall be payable to the partners of the firm. Thus, Financial Year 2009-10 onwards, neither any "interest on capital" nor any "remuneration" was payable to the partners. Accordingly, the "partnership firm" did not pay either any "interest on capital" or any "remuneration" to its partners, including the petitioner, during the year under consideration. The partnership firm filed return of income for the Assessment Year 2012-13 on 29.09.2012 declaring total income at Rs. Nil after claiming deduction of Rs. 15,78,260/- under section 80IB(10) of the Act. 2.3 The case of the "partnership firm" for the Assessment Year 2010-11 was selected for scrutiny assessment. The then Assessing Officer framed assessme....
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....corded for reopening the case of the petitioner vide letter dated 26.08.2019. Perusal of reasons for reopening the petitioner's case, reveals that the case of the case of the petitioner has been reopened broadly on the count that the petitioner has not offered "interest on capital" and "remuneration" alleged to have been received from the partnership firm (M/s. My Home Developers) as income. 2.7 The petitioner, vide letter dated 30.08.2019, raised objections against reopening wherein various factual and legal submissions were made. The respondent - revenue, vide order dated 27.09.2019, disposed off such objections holding reopening of the petitioner's case to be valid. SPECIAL CIVIL APPLICATION No. 20720 & 20722 of 2019. 3 Basic facts of these two petitions are also the same. The petitioners are partners in a partnership firm, namely, "My Home Developers", engaged in the business of developing housing projects. For the year under consideration, the "partnership firm' did not pay either "any interest or capital" or any "remuneration". Notice under sec. 148 of the Income Tax Act, was issued for the reasons akin to the petitioner of Special Civil Application No. 18957 of 2019....
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....ed partnership deed dated 01.04.2009 which was duly placed before the Assessing Officer of the partnership firm in reassessment proceedings as per which, neither any "interest on capital" nor "remuneration" was payable by the partnership firm. Thus, when the respondent recorded reasons for reopening, the partnership deed dated 01.04.2009 was there on record and as per the said deed, neither any "interest on capital" nor "remuneration" was payable by the partnership firm to its partners. The reference made to a partnership deed by the respondent in the order disposing off objections is also on factually incorrect premise and without appreciating correct facts as well as the settled legal position. 4. For Special Civil Application No. 20720 of 2019, since the notice under section 148 of the Act was also reopened on two other counts, namely, that the petitioner sold immoveable property for Rs. 32,28,800/-, but no capital gain was offered in the return of income and that the source of investment in two immoveable properties purchased along with other co-owners remained unexplained, Mr. Hemani, learned Senior Counsel, would submit that: (1) As regards "sale of immovable prop....
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....val, would make the following submissions: 6.1 For SCA No. 18597 of 2019, Mr. Sanghani, would submit as under: (a) Petitioner has submitted a copy of partnership deed on a stamp paper of Rs. 100 purchased on 29.07.2008 whereby Petitioner has claimed that clause 6 of the earlier partnership deed was changed with effect from 01.04.2009 and as per this amended partnership deed it was incorporated that no interest shall be payable to any partner with effect from 01.04.2009. In this connection, the Respondent has provided a copy of partnership deed of M/s. My Home Developers, which was documented on a stamp paper of Rs. 100 purchased on 20.03.2009 and is effective from 01.04.2009. In the said partnership deed which is also applicable from 01.04.2009 the clause 6 dealing with provision of interest on capital to partner is still in the force. This abundantly proves that the partnership deed documented on a stamp paper of Rs. 100 purchased on 29.07.2008 is invalid and misleading. (b) Also as per the above partnership deed with effect from 01.04.2009, the ratio of share in profit and loss of Smt. Artiben B. Ravani is 20%, whereas, as per the partnership deed purchased o....
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.... of the firm, on appreciation of the clauses in the partnership deed held as under: "11. We have heard the learned counsel appearing for the respective parties and perused the material placed on record. 12. It is settled law that, the Assessing Officer has power to reassess any income with escaped assessment for any assessment year subject to provision of the Act. However, the use of this power is conditional upon the fact that, the assessing officer has some reason to believe that, the income has escaped assessment. Where an assessment under Section 143 or 147 of the Act has been made for the relevant assessment year, no action shall be taken after expiry of 4 years unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to the notice issued under sub-section 1 of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment. 13. We take the notice of the fact that, the applicant firm My Home Developers is a partnership firm engaged in the construction business and the said firm cam....
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....ount standing to the credit of the capital account or current account of the partners." 16. At this stage, it is apt to refer to and rely upon the case of Alidhara TaxSpin (supra), wherein identical issue of law was decided. The two questions of law raised by the revenue and the final conclusion arrived at by this Court reads thus : "(A) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in not appreciating the fact that by not providing interest and remuneration to the partners, the firm has claimed higher profits leading to higher claim of deduction u/s 80IB of the Act and thus, devoiding the revenue from due amount of tax? (B) "Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in not appreciating that the Section 80IB(10) enables AO to re-compute the profit of undertaking claiming deduction u/s 80IB i.e. the partnership firm as in the present case and not the case of partner's admissibility towards interest/ remuneration as held in the case of Smt. Mala Tandon?" Conclusion:- "On interpretation of the partnership agreement and considering the wish of....
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.... the clause 6 and 7 of the deed, has escaped assessment on account of failure on the part of the assessee in filing of the return of income disclosing fully and truly all material facts are contrary to law and without jurisdiction." 8. On the remaining two counts, as far as Special Civil Application Nos. 20720 and 20722 of 2019 are concerned, what is apparent is that the property sold for Rs. 32,28,800/- was owned by "Lavjibhai Ambaliya HUF". The Balance-sheet of HUF of the preceding year submitted showed the property on the asset side. No description or situation of the property purchased was given. Sale consideration of Rs. 32,28.800/- was received by cheque. LTCG of Rs. 23,99,559/- duly reflected as is evident from the relevant Statement of Long Term Capital Gain. 9. The reassessment was also therefore based on suspicion. As pointed out by learned Senior Counsel Mr. Hemani, that factors that indicate that income has escaped assessment consists of facts which if established will have a cause and effect relationship, whereas factors which indicate a suspicion about income escaping assessment which would warrant a further inquiry. This is not what is contemplated under sectio....