PARANJAPE & PARANJAPE, CHARTERED ACCOUTANTS,MUMBAI vs. INCOME TAX OFFICER, MUMBAI

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ITA 4685/MUM/2026Status: DisposedITAT Mumbai11 September 2026AY 2019-20205 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found merit in the assessee's submission that the disallowance was made without proper reasons or a show cause notice. The partnership deed clearly allowed for partner remuneration, and no such disallowance was made in other years.

What were the facts?

The assessee's return was processed under section 143(1) allowing partner remuneration. Subsequently, an order under section 154 disallowed this remuneration without issuing a show cause notice. The partnership deed also provided for such remuneration.

What were the issues?

Whether disallowance of partner remuneration under section 154 without a show cause notice and contrary to the partnership deed is valid.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI CHALLA NAGENDRA PRASAD & SHRI PRABHASH SHANKAR

Pronounced: 11/09/2026

PER SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER:

This appeal is filed by the assessee against the order of the learned Addl./JCIT (Appeals)-NFAC, Delhi, dated 25.02.2026, for the assessment year 2019-20.

2.

The assessee raised the following grounds of appeal:

“1. The impugned order is void as it violates the provisions of section 143. 2. The Ld. Assessing Officer has erred in disallowing remuneration to the partner while passing order under section 143(1). 3. The Ld. Commissioner Appeal has erred in dismissing the appeal. 4. The demands for interest are erroneous and need to be set aside.” Ld. Counsel for the assessee, at the outset, submitted 3. that while processing the return u/s. 143(1) of the Act, the CPC allowed the remuneration paid to the partners. However, subsequently, an order u/s. 154 of the Act was passed disallowing the remuneration paid to the partners and no reason was specified for such disallowance. Ld. Counsel further submitted that no show cause notice was issued to the assessee before passing the order u/s. 154 of the Act.

4.

Ld. Counsel further referring to page 36 of the paper book submitted that this is a copy of the screenshot wherein it was mentioned that the rectification order was under process and no show cause notice was issued. Ld. Counsel further referring to page 44 of the paper book, which is a copy of partnership deed submitted that the partnership deed specifically provides for remuneration to the partners and, 2 therefore, there is no reason to disallow the remuneration paid to the partners. Ld. Counsel also submitted that neither in the earlier years nor in the subsequent assessment years such disallowance was made and, therefore, there is no justification in making the disallowance for the assessment year under consideration. 5. Heard rival contentions and perused the orders of the authorities below. We find considerable merit in the submission of Ld. Counsel for the assessee. On perusal of the order passed by the CPC u/s. 154 of the Act, we could not find any reason for the disallowance. It is also the submission of Ld. Counsel for the assessee that no show cause notice was issued prior to passing of the order u/s. 154 of the Act. Further, the partnership deed clearly specified the clause providing for payment of remuneration to the partners. Hence, we see no reason for disallowance of the remuneration paid to the partners for the assessment year under consideration, especially when there was no such disallowance made either in the earlier years or in the subsequent assessment years. Thus, we direct the Assessing Officer to delete the disallowance. Grounds raised by the assessee are allowed.

6.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 11/09/2026.

Sd/- Sd/- PRABHASH SHANKAR CHALLA NAGENDRA PRASAD ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 11/09/2026 Prabhat Copy to: PARANJAPE & PARANJAPE, CHARTERED ACCOUNTANTS 4 JAYARAM NIWAS, TILAK MANDIR 1 VILE PARLE EAST, MUMBAI – 400057 MAHARASHTRA

INCOME TAX OFFICER, WARD – 16(3)(1) 2 AAYAKAR BHAVAN, M K ROAD, NEW MARINE LINE, MUMBAI-400020, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE TRUE COPY

ASSISTANT REGISTRAR / SR. PRIVATE SECRETARY I.T.A.T., MUMBAI Sr. No. Details Date 1 Draft dictated on 04.09.2026 2 Draft placed before author 08.09.2026 3 Draft proposed & placed before the Other Member 4 Draft discussed/approved by the Other Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement 7 File came to P.S. 8 Date of uploading the Tribunal Order on website 9 File sent to the Bench Clerk / Dealing Clerk 10 Date on which the file goes to Office Superintendent 11 Date on which file goes to Assistant Registrar 12 Date of Dispatch of order

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