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Facts
The assessee, a limited liability partnership firm, filed its return for AY 2012-13. The Assessing Officer (AO) made an addition of INR 67,58,815/- in respect of partner remuneration through a rectification order under Section 154. The CIT(A) dismissed the assessee's appeal as time-barred.
Held
The Tribunal held that the CIT(A) erred in dismissing the appeal on the ground of limitation without properly considering the date of service of the order and the submissions of the assessee. Furthermore, on merits, the addition made by the AO was not sustained as the partner remuneration was found to be in accordance with the partnership deed and relevant provisions of the Act and Circular No. 739.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal on the ground of limitation, and whether the addition made by the AO on account of partner remuneration was sustainable on merits.
Sections Cited
154, 143(3), 40(b), 40(b)(v)
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Income Tax Appellate Tribunal, E BENCH, MUMBAI
Per contra, the Ld. Departmental Representative supported the order 7. passed by CIT(A) and submitted that the Appellant had not filed any application for condonation of delay before the CIT(A), therefore, the CIT(A) was justified in dismissing the appeal as being barred by limitation.
We have considered the rival submissions and perused the material 8. on record. It emerges that assessment was framed on the Appellant under Section 143(3) of the Act vide order, dated 18/03/2015. Subsequently, notice was issued under Section 154 of the Act as the Assessing Officer was of the view that the Appellant has been mistakenly allowed excess deduction of INR 67,58,818/- in respect of remuneration paid by the Appellant to its partners in excess of the amounts specified in the Admission Deed, dated 11/09/2009. In response, the Appellant filed reply dated 19/05/2016 and 24/04/2017 explaining that partners remuneration has been paid in accordance with the terms of the Admission Deed, dated 11/09/2009, read with the Resolution, dated 01/04/2011. It was explained therein that Clause 8(d) of the Admission Deed, dated 11/09/2009, contained provision for payment of additional remuneration to the working partners and in accordance with Clause 8(f) of the said Admission Deed a Resolution, dated 01/04/2011, was passed by the partners of the Appellant approving payment of additional remuneration to the partners and resolving that the remuneration payable in accordance with Clause 8 of the said Admission Deed shall be subject to the overall limits prescribed under Section 40(b) of the Act. Thus, the remuneration of INR 3,08,96,445/- debited to the Profit & Loss Account was not excessive and that the provisions contained in Section 40(b) of Act and Circular No.739, dated 25/03/1996, issued by the Central Board of Direct Taxes were complied with. While at the time of passing order under Section 154 of the Act, the then Assessing Officer rejected the aforesaid contentions of the Appellant, the incumbent Assessing Officer giving the remand report as sought by the CIT(A) during the course of appellate proceedings accepted the aforesaid submissions of the Appellant. After verifying the Admission Deed, dated 11/09/2009 and Resolution, dated 01/04/2011, the Assessing Officer giving the remand report returned a finding that remuneration debited to the Profit & Loss Account was in accordance with the terms of partnership deed and the provisions contained in Section 40(b)(v) of the Act as well as Circular No. 739, dated 25/03/1996, issued by CBDT were complied with. During the appellate proceedings before us, the Revenue was unable to controvert the findings returned by the Assessing Officer in the remand report. Therefore, on merits the addition of INR 67,58,815/- made by the Assessing Officer while passing rectification order dated 11/04/2016, cannot be sustained. As regards, the order of CIT(A) dismissing the appeal on the ground of limitation is concerned, we are of the view that the order has been passed by CIT(A) without application of mind to the material on record. In Form No. 35 filed by the Appellant before CIT(A) date of service of the order was stated as 20/02/2018. The appeal was filed within a period of 30 days from the aforesaid date. According to the Appellant, there was no delay in filing the appeal and therefore, no application seeking condonation of delay in filing the appeal was filed by the Appellant.
It is admitted position that the CIT(A) had called for a remand report on the submissions/documents filed by the Appellant on 18/09/2018. Thereafter, a number of notices were issued by the CIT(A) to the Appellant. On perusal of the same, we do not find any query raised by the CIT(A) in relation to delay in filing the appeal. The CIT(A) decided the appeal moving on the premise that Appellant had time till 03/02/2018 to file the appeal without taking into consideration the fact that the Appellant had stated 20/02/2018 as the date of service of order. In view of the aforesaid, the order passed by CIT(A) dismissing the appeal preferred by the Appellant as being barred by limitation cannot be sustained and is hereby set aside. All the material facts for adjudication of the issue raised in the present appeal on merits are on record. We have already concluded hereinabove that the addition of INR 67,58,815/- made by the Assessing Officer vide rectification order, dated 04/01/2018, cannot be sustained in the facts and circumstances of the present case. Accordingly, addition of INR 67,58,815/- made by the Assessing Officer is deleted. Accordingly, Ground No. 1, 2, 3, 6 and 7 are allowed while Ground No. 4 and 5 are dismissed as being infructuous.
In result, the present appeal preferred by the Assessee is allowed. 9.
Order pronounced on 18.03.2024.