Rectified Partnership Deed cannot be Invalid when Stamp Paper was issued on Prior Date: ITAT directs AO Verification of Rectified Deed [Read Order]

The Allahabad Bench of Income Tax Appellate Tribunal (ITAT) has directed the Assessing Officer (AO) verification of rectified deed holding that the rectified partnership deed could not be invalid when stamp paper was issued on a prior date.

The assessee, Neeraj Gas Movers /firm was engaged in the business of plying of vehicles. The assessee firm e-filed its return of income on 22.12.2016 which was later selected for scrutiny. And the AO having taken note that the assessee had claimed expenditure on account of disbursal of salary as well as interest on capital (given to partners), directed assessee to furnish evidence as well as requisitioned from the HDFC Bank where the assessee had bank account.

Pursuant to the same, the bank (HDFC) forwarded to AO a copy of the partnership deed filed by the assessee firm which was dated 01.02.2013. The AO on perusal of the same, noted that there was no provision in the partnership deed dated 01.02.2013 for disbursal of salary as well as interest on capital. When confronted with this fact, the assessee filed a copy of another partnership dated 13.05.2013, which assessee claimed to be the correct/rectified partnership deed.

The AO did not accept the veracity of the said submission of the assessee on the ground that it was an afterthought and there was no mention of the earlier deed in the rectified deed; and rejected the partnership deed dated 13.05.2013. And thus disallowed the claim of salary as well as interest on capital and added the same to the total income of the assessee firm.

Tanmay Sadh, who appeared on behalf of the assessee submitted that this particular fact itself had corroborated the fact that assessee had come into existence on 13.05.2013 and thus AO erred in ignoring the deed dated 13.05.2013 and instead considered the partnership deed filed initially on 01.02.2013 in order to open the bank account.

A. K. Singh, on behalf of the revenue pointed out that the second deed dated 13.05.2013 was an afterthought and drew attention to both deeds. Drawing attention to the first partnership dated 01.02.2013 (invalid partnership deed) he pointed out that stamp-paper was dated 29.01.2013, whereas the second partnership deed dated 13.05.2013.

A Single Bench of Aby T. Varkey, (Judicial Member) noted that the first deed [executed on 01.02.2013] the stamp-paper was dated 29.02.2013 and on perusal of the reverse page of ibid stamp-paper revealed that the stamp-paper had been issued to the assessee-Firm on 31.01.2013 ; whereas perusal of second partnership deed executed on 13.05.2013 it revealed that the stamp-paper was dated 22.01.2013 and the reverse page of this deed showed that the stamp-vendor issued to partner of assessee-Firm the stamp-paper on 31.01.2013.

Thus, it was noted that assessee-Firm/partner had themselves got issued stamp-paper in the month of January 2013, and prepared first deed on 01 February 2013 and rectified deed was executed on 13 May 2013, which was the basis for registration of PAN wherein date endorsed was 13.05.2013.

However, since the AO had not verified the same, the Bench set aside the impugned order and sent it back to the file of the AO for the limited purpose of verification of deed dated 13.05.2013 with regard to claim of expenditure (salary and interest).

To Read the full text of the Order CLICK HERE

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