Karnataka Hitech Agro Enterprises Vs PCIT (ITAT Bangalore)
The appeal was filed by Karnataka Hitech Agro Enterprises against the order of the Principal Commissioner of Income Tax, Hubballi, passed under Section 263 of the Income-tax Act, 1961, for AY 2015-16. The assessee is a partnership firm engaged in production and marketing of sowing seeds such as Maize, Bengal Grams and Green Gram. It filed its return declaring total income of Rs.82,63,305. The assessment under Section 143(3) resulted in certain disallowances of Rs.80,000.
A survey was conducted at the assessee’s premises on 20.03.2015. During the survey proceedings, the firm’s partner offered Rs.2,00,50,750 as undisclosed income, comprising Rs.1,83,76,500 towards advances against stock and Rs.16,74,250 towards advances to farmers.
The PCIT noticed that the assessee had claimed partner remuneration of Rs.1,26,19,839 against the declared income. According to the PCIT, Section 115BBE(2) did not permit deduction of expenditure against income covered by Section 115BBE. The PCIT therefore held that the entire Rs.2,00,50,750 should have been brought to tax and that the partner remuneration should have been disallowed. The assessment order was accordingly set aside under Section 263 for fresh assessment.
The assessee submitted that the income declared during the survey represented business income and was recorded in its books. It had therefore included the amount in book profits for computing allowable partner remuneration under Section 40(b).
