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Facts
The assessee's appeal is against the order of the CIT(A) confirming an adjustment made by CPC, Bengaluru, disallowing remuneration to a partner. The CPC disallowed the claim of salary paid to a partner, and the CIT(A) confirmed this based on a suspicious partnership deed.
Held
The Tribunal held that the adjustment made by CPC under section 143(1) without providing an opportunity to the assessee was not justified. The CIT(A) was also not justified in holding the partnership deed suspicious and confirming the adjustment.
Key Issues
Whether the CPC was justified in disallowing partner's remuneration under Section 143(1) without providing an opportunity to the assessee?
Sections Cited
143(1), 40B, 143(1)(a)
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI MAHAVIR SINGH & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid appeal filed by the assessee is against the order of Learned Commissioner of Income Tax, Appeal, National Faceless Appeal Centre (NFAC), Delhi [hereinafter “CIT(A)”] dated 03.06.2024 vide intimation issued by CPC, Bengaluru u/s.143(1) of the Income Tax Act, 1961 (hereinafter “the Act”) dated 05.01.2014.
The only effective ground of appeal in this appeal of assessee is against confirming the adjustment made by CPC, Bengaluru in order u/s. 143(1) of the Act disallowing the claim of remuneration to partner of Rs. 11,40,000/-.
1. 3. The CPC, Bengaluru in order u/s. 143(1) of the Act has disallowed the claim of salary paid to partner of Rs. 11,20,000/- u/s. 40B of the Act. On appeal, the Ld. CIT(A) has confirmed the addition as he found after calling the original partnership deed, he found that the deed of partnership is suspicious.
4. Before us, The Ld. Authorized Representative (A.R) of the assessee has contended that the assessee in the return of income has claimed salary paid to partner of Rs. 11,20,000/-, but the same has been disallowed by CPC, Bengaluru without providing any opportunity.
The Ld. AR has argued that the salary paid to partners do not fall under the permissible adjustment u/s 143(1)(a) of the Act, and therefore, the CPC was not justified to make the adjustment. The Ld. AR further submitted that the CPC has not provided opportunity before making such adjustment.
The Ld. Departmental Representative (DR), on the other hand, has relied on the orders of lower authorities.
We have heard the rival submissions, and perused the materials available on record. The CPC in intimation passed u/s. 143(1) of the Act has made the disallowance of remuneration to partners of Rs. 11,20,000/- claimed u/s. 40(b) of the Act. The Ld. CIT(A) has confirmed the disallowance by calling partnership deed and finding it suspicious. The Ld AR has submitted that the CPC has not provided opportunity before making such adjustment and Ld CIT(A) was not justified to hold the partnership deed suspicious and confirming adjustment made in processing u/s 143(1) on such suspicion . In view of the above, we are of the view that the assessee be provided with opportunity to substantiate his case before the A.O. Accordingly, we set aside the orders passed by the A.O and the Ld. CIT(A) and remit the matter back to the file of the A.O to adjudicate this appeal afresh in accordance with law. In view of the above, the appeal filed by the assessee is allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 23rd October, 2024.