M/s Madhav Udyog (P) Ltd., Mandi Gobindgarh V. JCIT (OSD), Central Circle, Patiala

ITA 1078/CHANDI/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9759 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 27-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: ASHOK GOYALCA
• Keywords: Search and seizure
• Section: 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B, CHANDIGARH , !'#$ % & ' ( , )*' BEFORE: SMT. DIVA SINGH, JM & SMT. ANNAPURNA GUPTA, AM ./ ITA NO: 1078/CHANDI/2017 / ASSESSMENT YEAR : 2010-11 M/S MADHAV UDYOG (P)LTD. TALWARA ROAD, SIRHIND SIDE, MANDI GOBINDGARH. JCIT (OSD), CENTRAL CIRCLE, PATIALA. ./ PAN NO:AACCM76988 / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI ASHOK GOYAL,CA ! / REVENUE BY : SHRI MANJIT SINGH ,SR. DR ' # $ / DATE OF HEARING: 05.09.2018 %&'($ / DATE OF PRONOUNCEMENT : 25.09.2018 )+ / ORDER PER ANNAPURNA GUPTA, AM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINS T THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APP EALS)- 5, [IN SHORT REFERRED TO AS CIT(A)] LUDHIANA DATE D 26/05/17 RELATING TO A.Y. 2010-11 2. THE SOLE ISSUE IN THE PRESENT APPEAL RELATES TO ADDITION MADE OF RS.11,88,000 TO THE INCOME OF THE ASSESSEE, U/S 69(C) OF THE INCOME TAX ACT,1961(IN SHORT REFERRED TO AS THE ACT), ON ACCOUNT OF EXPENSES INCURRED ON WAGES PAI D OUTSIDE THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 3. BRIEFLY STATED, SEARCH AND SEIZURE OPERATIONS WE RE CONDUCTED ON THE MADHAV GROUP OF CASES, TO WHICH TH E ITA NO.1078/CHD/2017 A.Y.2010-11 2 ASSESSEE RELATES, UNDER SECTION 132 OF THE ACT, ON 10 TH FEBRUARY 2010 AND CERTAIN DOCUMENTS WERE IMPOUNDED. IN THE ASSESSMENT PROCEEDING THEREAFTER, THE ASSESSEE WAS ASKED TO VERIFY DOCUMENTS A-13, A-14 & A-16, IMPOUN DED FROM ITS BUSINESS PREMISES, WITH THE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE. THE ASSESSEE EXPLAINED THAT WHILE DOCUMENT A-13 AND A-16 WERE GATE REGISTERS, A -14 WAS THE FACTORY ATTENDANCE REGISTER REGARDING SALAR Y PAYMENT. THE A.O. THEREAFTER FOUND THAT WHILE THE G ATE REGISTER REFLECTED ATTENDANCE OF 81 PERSONS, THE FA CTORY ATTENDANCE REGISTER SHOWED ATTENDANCE OF 52 PERSON S ONLY AND TO WHOM SALARY/WAGES WERE PAID. THE SAME WAS CONFRONTED TO THE ASSESSEE WHO EXPLAINED THAT THE D IFFERENCE WAS FOR THE REASON THAT THE GATE REGISTER INCLUDED ATTENDANCE OF TROLLEY LABOR, SECURITY GUARDS AND CONSTRUCTION WORKERS CARRYING OUT WORK IN THE ASSESSEES PREMISES ON CONT RACT. THE A.O. ACCEPTED THE EXPLANATION OF DIFFERENCE VIS--V IS 7 TROLLEY LABORS ON FINDING THE SAID FACT MENTIONED IN THE GA TE REGISTER, BUT REJECTED THE EXPLANATION VIS--VIS TH E BALANCE 22 WORKERS. THEREAFTER TREATING THE SAID 22 WORKERS AS EMPLOYEES OF THE ASSESSEE WHO HAD BEEN PAID WAGES O UTSIDE THE BOOK OF ASSESSEE, HE MADE ADDITION OF THE SAME BY CALCULATING THE WAGES PAID TO THEM DURING THE YEAR BY ADOPTING THE AVERAGE MONTHLY SALARY PER WORKER OF R S.4500/- THUS, THE WAGES PAID TO THEM WAS CALCULATED AT RS.11,88,000/- FOR THE ENTIRE YEAR AND TREATING IT AS EXPENDITURE INCURRED OUTSIDE THE BOOKS ,ADDITION OF THE SAME WAS MADE TO THE INCOME OF THE ASSESSEE. ITA NO.1078/CHD/2017 A.Y.2010-11 3 4. BEFORE THE LD.CIT(A), THE ASSESSEE FILED SUBMIS SIONS IN WRITING AGAINST THE ADDITION SO MADE WHICH ARE REPR ODUCED AT PARA 3 OF THE ORDER OF CIT(A). BRIEFLY PUT THE A SSESSEE REITERATED THE CONTENTION MADE BEFORE THE A.O THAT THE DIFFERENCE IN NUMBER OF WORKERS WAS ATTRIBUTED TO S ECURITY GUARD AND CONSTRUCTION WORKER DOING WORK ON CONTRAC T BASIS IN THE ASSESSEE PREMISES. IT WAS FURTHER POINTED OU T EVEN THE GATE REGISTER SHOWED 5 PERSONS AS ABSENT AND THAT T HE REGISTER PERTAINED TO THE MONTH OF FEBRUARY ONLY PR IOR TO THE DATE OF SEARCH I.E. 10.2.2010 AND COULD NOT BE TR EATED AS REFLECTING THE POSITION FOR THE ENTIRE YEAR. FURTH ER, BILLS OF SECURITY GUARDS AND CONTRACT OF BUILDING CONSTRUCTI ON WAS FILED. IT WAS ALSO CONTENDED THAT NO EXPENSE COULD HAVE BEEN INCURRED OUTSIDE THE BOOKS SINCE THERE IS CHECK OF LABOR INSPECTOR ALSO. IT WAS ALSO POINTED OUT THAT THERE IS NO CORROBORATIVE MATERIAL TO SHOW THAT SUCH PAYMENT WA S MADE. THE ASSESSEE ALSO POINTED OUT THAT NO DIFFERENCE IN PURCHASE, SALES, STOCK IN HAND AND CASH IN HAND WAS OBSERVED DURING SURVEY OPERATIONS AND THAT NO AMOUN T WAS SURRENDERED BY THE ASSESSEE AND FURTHER THE ASSESSE E COMPANY WAS SUBJECTED TO EXCISE AND VAT . THE LD. CIT(A) UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER, STATING THAT THE GATE REGISTER REPRESENTED THE TRUE NUMBER OF PERSONS EMPLOYED BY THE ASSESSEE AND THE ASSESSEE H AVING PAID WAGES TO LESS WORKERS IN ITS BOOKS, THE A.O. H AD CORRECTLY HELD THAT PAYMENT OF WAGES HAD BEEN MADE OUTSIDE THE BOOKS OF THE ASSESSEE. ITA NO.1078/CHD/2017 A.Y.2010-11 4 5. AGGRIEVED BY THE SAME THE ASSESSEE HAS COME UP I N APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS: 1. THAT LEARNED C1T (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.11,88,000/- BEING CONSIDERED AS SALARY PAID FOR FULL YEAR WITHOUT ANY CORROBORATING DOCUMENT. 2. THAT LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.11,88,000/- BEINGCONSIDERED AS SALARY PAID WHEN THE ATTENDANCE SHEET IS ONLY FOR ONE MONTH AND PRESUMING THE SAME FOR FULL YEAR WITHOUT ANY CORROBORATING DOCUMENT. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD DELETE OR MODIFY ANY GROUND OF APPEAL BEFORE THE SAME IS HEARD OR DISPOSED OFF. 6. BEFORE US LD. COUNSEL FOR THE ASSESSEE REITERAT ED THE CONTENTION MADE BEFORE THE LOWER AUTHORITIES THAT T HE DIFFERENCE IN THE NUMBER OF PERSONS RECORDED IN THE GATE REGISTER AND THE ATTENDANCE REGISTER MAINTAINED BY THE ASSESSEE FOR THE PURPOSE OF PAYING SALARY/WAGES WAS ATTRIBUTABLE TO THE SECURITY GUARDS AND CONSTRUCTIO N WORKESR IN THE PREMISES OF THE ASSESSEE WORKING ON CONTRACT BASIS, EVIDENCE OF WHICH BY WAY OF BILLS HAD BEEN FILED A ND FURTHER THAT NO DISCREPANCY WAS FOUND IN THE BOOKS OF THE A SSESSEE DURING SURVEY AND THAT IN ANY CASE THE REGISTER REL ATED TO ONLY THE MONTH OF FEBRUARY OF THE IMPUGNED FINANCIA L YEAR, I.E. THE PERIOD BEFORE THE DATE OF SEARCH AND THE D ATA THEREIN COULD NOT BE USED FOR MAKING ADDITION FOR THE ENTIR E YEAR. IT WAS ALSO POINTED THAT AS PER THE GATE REGISTER, 5 P ERSONS WERE ABSENT DURING THAT PERIOD AND THEREFORE NO WAG ES COULD BE ATTRIBUTABLE AS PAID TO THEM. IT WAS POINTED OUT THAT THE LD.CIT(A) HAD UPHELD THE ADDITION MADE BY THE A.O W ITHOUT ITA NO.1078/CHD/2017 A.Y.2010-11 5 EVEN THE CONSIDERING THE CONTENTIONS OF THE ASSESSE E DULY SUBSTANTIATED WITH EVIDENCES. 7. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF THE CIT(A). 8. WE HAVE HEARD THE CONTENTION OF BOTH THE PARTIES AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. T HE ISSUE IN THE PRESENT APPEAL PERTAINS TO ADDITION MADE BY HOLDING THAT WAGES/SALARY WERE PAID OUTSIDE THE BOOKS OF THE ASSESSEE ON ACCOUNT OF DIFFERENCE IN THE NUMBER OF PERSONS NOTED IN THE GATE REGISTER AND IN THE FACTORY ATTEN DANCE REGISTER OF THE ASSESSEE. WE ARE IN AGREEMENT WITH THE LD.COUNSEL FOR THE ASSESSEE THAT THE CIT(A) HAS UPH ELD THE ADDITION WITHOUT CONSIDERING THE CONTENTIONS MADE AND EVIDENCES FILED BY THE ASSESSEE AGAINST THE ADDITIO N MADE. THE ASSEESSEE HAD ALL ALONG EXPLAINED THE DIFFERENC E AS BEING ATTRIBUTABLE TO THE CONSTRUCTION LABOR & SECURITY G UARD AT ITS PREMISES WORKING ON CONTRACT BASIS AND HAD ALSO PRO DUCED THE BILLS OF THE SAME AS EVIDENCE. THE ASSESSEE HAD ALSO POINTED OUT THAT 5 PERSONS WERE MARKED ABSENT IN TH E GATE REGISTER ITSELF AND THEREFORE NO SALARY AND WAGES C OULD BE PAID AS ATTRIBUTABLE TO THEM. THE ASSESSEE HAD ALSO CONTENDED THAT THE REGISTER PERTAINED ONLY TO THE P ERIOD OF MONTH OF FEBRUARY OF THE IMPUGNED FINANCIAL YEAR U PTO THE DATE OF SEARCH, THAT IS FROM 1 ST FEBRUARY TO 10 TH FEBRUARY AND REFLECTED THE ATTENDANCE OF THAT PERIOD ONLY AN D NOT THE ENTIRE YEAR. BUT DESPITE ALL THE ABOVE CONTENTIONS THE LD.CIT(A), WE FIND UPHELD THE ADDITION REITERATING THE ITA NO.1078/CHD/2017 A.Y.2010-11 6 FINDINGS OF THE A.O. THAT THE ADDITION WAS WARRANT ED ON ACCOUNT OF DIFFERENCE NOTED IN THE TWO REGISTERS AN D WITHOUT EVEN DEALING WITH A SINGLE CONTENTION RAISED BY TH E ASSESSEE. THE SAME IS EVIDENT FROM PARA 4.2 OF THE ORDER OF CIT(A) WHERE HIS FINDINGS ARE RECORDED AS UNDER : THE FACTS OF THE CASE, THE BASIS OF ADDITION MADE BY THE A.O. AND THE SUBMISSIONS/ARGUMENTS OF THE AR DURING THE APPELLATE PROCEEDINGS HAVE BEEN CONSIDERED. THE ADDITION HAS BEEN MADE BY THE AO ON THE BASIS OF THE DOCUMENT IMPOUNDED DURING THE SURVEY, THE AR ON THE OTHER HAND REPEATED THE SAME ARGUMENTS AS WERE PUT FOURTH DURING THE ASSESSMENT PROCEEDINGS. A COPY OF IMPOUNDED A-16 HAS ALSO BEEN FILED. PERUSAL OF THE SAME SHOWS THAT IT IS A STATUARY REGISTER DULY PRESCRIBED UNDER THE RELEVANT RULE 110. THE INWARD AND OUTWARD TIMES HAVE BEEN RECORDED IN RESPECT OF EACH PERSON ON DIFFERENT DATES. THIS REGISTER WAS BEING MAINTAINED AT THE GATE BY THE SECURITY STAFF AND THUS REPRESENTS THE TRUE NUMBER OF THE PERSONS EMPLOYED BY THE ASSESSEE. THE ASSESSEE HAS DEBITED THE SALARY OF ONLY 52 EMPLOYEES IN ITS BOOKS OF ACCOUNT AND THUS THE PAYMENTS OF THE BALANCE WORKERS HAVE NOT BEEN RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. THEREFORE, THE AO WAS RIGHT IN OBSERVING THAT THE PAYMENTS TO THESE MUST HAVE BEEN MADE OUT OF UNDISCLOSED INCOME. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION MADE BY THE AO, BASED UPON THE DOCUMENT IMPOUNDED SHOWING EXTRA WORKERS EMPLOYED BY THE ASSESSEE, IS FOUND SUSTAINABLE AND HENCE CONFIRMED. 9. BEING AN ADJUDICATING AUTHORITY, IN ALL FAIRNESS , THE CIT(A), WHILE DECIDING THE ISSUE, SHOULD HAVE VERIF IED AND THEREAFTER DEALT WITH THE CONTENTIONS OF THE ASSESS EE, GIVING REASONS FOR REJECTING THE SAME. HAVING NOT DONE SO THE ORDER IS NOT A REASONED ORDER. WE THEREFORE CONSIDER IT F IT TO RESTORE BACK THE ISSUE TO THE FILE OF THE LD.CIT(A) DIRECTING HIM TO VERIFY THE CONTENTIONS OF THE ASSESSEE ,CONS IDER THE SAME AND THEREAFTER PASS A WELL REASONED AND SPEAK ING ORDER IN ACCORDANCE WITH LAW. WE MAY ADD THAT DUE ITA NO.1078/CHD/2017 A.Y.2010-11 7 OPPORTUNITY OF HEARING BE GIVEN TO THE ASSESSEE. IN VIEW OF THE ABOVE, GROUNDS RAISED BY THE ASSESSEE ARE ALLOW ED FOR STATISTICAL PURPOSES. 10. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- $ % & ' ( (DIVA SINGH) (ANNAPURNA GUPTA) !' / JUDICIAL MEMBER )* ' / ACCOUNTANT MEMBER $ / DATED: 25 TH SEPTEMBER, 2018 * */PK &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. - # / CIT 4. - # ( )/ THE CIT(A) 5. +./ 0 , $0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35' / GUARD FILE &) # / BY ORDER, 6 ! / ASSISTANT REGISTRAR