Eastern Engineering Venture

[2019] 107 taxmann.com 78 (Cuttack – Trib.)

Conclusions :  AO was right in denying interest & salary paid to partners as firm failed to comply with sec. 142(1) notice: ITAT

INCOME TAX: Where assessee firm failed to comply with notices issued under section 142(1), Assessing Officer was right in framing assessment order under section 144 denying allowance of interest and salary paid to partners by taking support of provisions of section 184(5)

Section 184, read with sections 144 and 148, of the Income-tax Act, 1961 – Firm – Assessed as such (Best judgment assessment)

 Assessment year 2009-10 – Whether disallowance under section 184(5) comes into play not as a result of assessment under section 144 but as a result of committing failure to response to notice under section 142(1) as mentioned in section 144

 Held, yes

 Assessee, a partnership firm, was deriving income from contract works – Initially, assessment was framed under section 144 – Thereafter, Assessing Officer issued notice under section 148 – No return of income was furnished in response to notice under section 148 – Subsequently, two notices under section 142(1) were issued on different dates

 On one date there was partial compliance and on other date, there was no compliance at all by assessee

Thereafter, Assessing Officer passed an order under section 147 read with section 144 isallowing claim for deduction in respect of payment by way of interest, salary, bonus, commission or remuneration by assessee firm to partners

 Whether since there was a partial non-compliance regarding one notice under section 142(1) and complete non-compliance regarding another notice under said section, Assessing Officer was right in framing assessment order under section 144 denying allowance of interest and salary paid to partners by taking support of provisions of section 184(5) – Held, yes