Mahalaxmi Jewellers Vs ITO (ITAT Panaji)
Panaji ITAT: Same Partner Remuneration Cannot Be Taxed Twice – ₹2.98 Lakh Addition in Firm Deleted Where Amount Already Taxed in Partner’s Hands
The Panaji ITAT in M/s Mahalaxmi Jewellers v. ITO dealt with an important case of double taxation of partner remuneration for AY 2013-14.
The assessee partnership firm had not filed its return of income. During a survey at the premises of another concern, it was found that Mahalaxmi Jewellers was also operating from the same address. Its profit & loss account reflected net profit of ₹1.85 lakh after claiming ₹4.96 lakh as remuneration to partners. Since no return had been filed, the AO disallowed the entire partner remuneration and assessed income at ₹6.81 lakh, comprising ₹1.85 lakh of net profit and ₹4.96 lakh of disallowed remuneration.
Before the Tribunal, the assessee pointed out that out of the ₹4.96 lakh remuneration, ₹2,97,626 paid to partner Shri Dattaram Sitaram Anvekar had already been separately assessed and taxed in the partner’s own reassessment proceedings u/s 147. The partner had accepted that assessment and had not filed any appeal. The assessee produced the partner’s assessment order before the ITAT to establish this fact.
The ITAT held that sustaining the disallowance of the same ₹2,97,626 in the firm’s hands, when the identical remuneration had already been taxed in the partner’s hands for the same assessment year, would amount to double taxation. It therefore set aside the CIT(A)’s order to this extent and directed the AO to delete ₹2,97,626 from the firm’s assessment.
FULL TEXT OF THE ORDER OF ITAT PANAJI
This appeal filed by the assessee is directed against the order dated 28.10.2025 passed by Ld. CIT(A)-2, Panaji [‘Ld. CIT(A)’] for the assessment year 2013-14.
2. The appellant has raised the following grounds of appeal :-
“1. The learned Assessing Officer was not justified in making and the learned Commissioner of Income Tax (Appeals) erred in upholding, the addition of Rs.1,85,320/- as alleged undisclosed income.
2. The learned Assessing Officer and the learned Commissioner of Income Tax (Appeals) have erred in making and sustaining the addition of Rs.4,96,043/- to the total income of the appellant-firm towards disallowance of interest and remuneration paid to partners.
3. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon’ble Tribunal to decide on the appeal in accordance with the law.”
3. Facts of the case, in brief, are that the assessee is a partnership firm consisting of two partners namely, Shri Dattaram Sitaram Anvekar and Smt. Pooja Anvekar. The assessee partnership firm has not furnished its return of income for the year under consideration. A survey u/s 133A of the IT Act was conducted at the business premises of M/s Kouber Jewellers wherein it was discovered that the assessee partnership firm namely M/s. Mahalaxmi Jewellers is also functioning at the same address and since its business is not going well the firm is being closed and a new firm M/s Kouber Jewellers has been formed. The assessee firm in its profit & loss account has declared net profit of Rs.1,85,320/-after claiming deduction of Rs.4,96,043/- on account of remuneration to the partners of the firm. Since the assessee partnership firm has not filed the return of income for assessment year 2013-14, the claim of remuneration paid to partners amounting to Rs.4,96,043/- is disallowed. The Assessing Officer vide orderdated 27.12.2018 completed the assessment proceedings u/s. 147 r.w.s 144 of the IT Act by determining the income of the assessee firm at Rs.6,81,360/- as against no return filed by the assessee. The above assessed income includes addition on account of net profit of Rs.1,85,320/- not disclosed in the return of income and addition of Rs.4,96,043/- on account of disallowance of remuneration paid to both the partners.
4. Being aggrieved with the above assessment order, the assessee preferred an appeal before Ld. CIT(A). After considering the reply and submissions of the assessee, Ld. CIT(A) dismissed the appeal filed by the assessee.
5. It is the above order against which the assessee is in appeal before this Tribunal.
6. We have heard Ld. Counsels from both the sides and perused the material available on record. In this regard, we find that it is the alternate request of the counsel of the assessee that the addition to the extent of Rs.2,97,626/- may kindly be deleted from the hands of the assessee firm, since case of one of the partner namely Shri Dattaram Sitaram Anvekar was also reopened u/s 147 of the IT Act & addition on account of remuneration of Rs.2,97,626/- receivedfrom the assessee firm was already made in the hands of the above partner which was accepted by the partner & no appeal was filed against it. In sum & substance, it is the request of the counsel of the assessee that addition of Rs.2,97,626/- has already been made in the hands of one of the partners on account of remuneration from the assessee firm, therefore, to that extent addition made in the hands of the partnership firm on account of disallowance of remuneration paid to partner may kindly be deleted. In support of this contention, copy of assessment order dated 19-07-2019 for Asstt Year 2013-14 passed u/s 143(3) r.w.s. 147 of the IT Act in the case of partner Shri Dattaram Sitaram Anvekar is also produced before the bench wherein addition on account of remuneration of Rs.2,97,626/- from assessee partnership firm is evident.
7. Considering the totality of the facts of the case & in the interest of justice, we deem it appropriate to set-aside the order passed by Ld. CIT(A) & direct the Assessing Officer to delete the addition of Rs.2,97,626/- from the hands of the assessee partnership firm, which was made on account of disallowance of remuneration to partner since the same, amounts to double taxation in the light of the fact that the amount of Rs.2,97,626/- was also taxed in the hands of the partner, namely Shri Dattaram Sitaram Anvekar for the same assessment year & against which no appeal was filed by the partner. Thus, the grounds of appeal raised by the assessee are partly allowed.
8. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced on this 05th day of August, 2026.
