Balkrishna S. Gawate, Pune V. Income-tax Officer, Pune

ITA 1194/PUN/2011

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0019 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 23-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUKESH VERMA
• Keywords: Income from undisclosed sources; Search and seizure; Documents seized
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1192 TO 1197/PN/2011 (ASSESSMENT YEAR: 2002-03 TO 200 8-09) BALKRISHNA S. GAWATE FLAT NO. 2 C BUILDING SAINAGAR HOUSING SOCIETY KALYANINAGAR, PUNE-411 0067 PAN AAWPG 1829 M .. APPELLANT VS. I.T.O. CENTRAL II, PUNE .. RESPO NDENT APPELLANT BY: S/SHRI NIKHIL PATHAK & SUHAS P. BORA RESPONDENT BY : SHRI MUKESH VERMA, CIT ORDER PER G.S. PANNU, A.M .: THESE SEVEN APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST SIMILARLY WORDED SEPARATE ORDERS OF THE COMMISSIONER OF INCOM E-TAX (APPEALS)- CENTRAL, PUNE DATED 25-7-2011 WHICH, IN TURN, HAVE ARISEN FROM THE RESPECTIVE ASSESSMENT ORDERS PASSED BY ASSESSING OFFICER, UNDE R SECTION 143(3) R.W.S. 153A OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT ), PERTAINING TO THE ASSESSMENT YEAR 2002-03 TO 2008-09. 2. IN ALL THE APPEALS, A SOLITARY ISSUE IS WITH REG ARD TO DISALLOWANCE OF EXPENDITURE CLAIMED TO HAVE BEEN IN CURRED BY THE ASSESSEE ON PAYMENT OF SALARY TO HIS SON MR. HEMAN T GAWATE. 3. IN BRIEF, THE BACKGROUND OF THE DISPUTE IS THAT ASSESSEE IS AN INDIVIDUAL DERIVING INCOME BY WAY OF COMMISSION FRO M AUTO CONSULTANCY IN RESPECT OF TWO-THREE WHEELER VEHICLE S. A SEARCH ACTION U/S 132(1) OF THE ACT WAS CARRIED OUT AT THE RESIDENTIAL AS WELL AS BUSINESS PREMISES OF THE ASSESSEE ON 4-7-2007. AS A CONSEQUENCE, ASSESSEE FILED RETURNS OF INCOME FOR C APTIONED ASSESSMENT YEARS IN RESPONSE TO NOTICES ISSUED U/S 153A(A) OF THE ACT AND IN SUCH RETURNS OF INCOME, TOTAL INCOME WAS DECLARED HIGHER THAN THE INCOME ORIGINALLY DECLARED IN RETURNS OF I NCOME FILED IN ITA NO 1192 TO 1198/PN/11 B.S. GA WATE A.Y. 2002-03 TO 2008-09 NORMAL COURSE, EXCEPT IN RELATION TO THE ASSESSMENT YEARS 2007-08 AND 2008-09 FOR WHICH NO RETURNS U/S 139(1) OF THE ACT WERE FILED, AS THE TIME PRESCRIBED U/S 139(1) OF THE ACT HAD NOT L APSED AS ON THE DATE OF SEARCH. APART FROM DECLARING COMMISSION INC OME WHICH WAS NOT HITHERTO DECLARED IN THE ORIGINAL RETURNS OF IN COME, ASSESSEE ALSO COMPUTED HIS TOTAL INCOME ON THE BASIS OF DOCU MENTS/MATERIAL FOUND DURING THE SEARCH WHICH REFLECTED EXPENDITURE S WHICH WERE ALSO NOT HITHERTO CLAIMED IN THE RETURNS OF INCOME ORIGINALLY FILED. IN THE RETURNS OF INCOME SO FILED, THE ASSESSEE CLAIM ED EXPENDITURES INCLUDING EXPENDITURE ON SALARY PAYMENT TO HIS SON, WHICH WERE HITHERTO NOT CLAIMED IN THE ORIGINAL RETURNS OF INC OME FOR THE ASSESSMENT YEARS 2002-03 TO 2006-07. IN SO FAR AS T HE CLAIM OF SALARY PAYMENT TO HIS SON IS CONCERNED, THE YEAR-WI SE DETAIL FOR THE CAPTIONED ASSESSMENT YEARS IS AS UNDER:- ASSTT. YEAR AMOUNT OF SALARY (RS.) 2002-03 24000/- 2003-04 72,000/- 2004-05 72,000/- 2005-06 1,20,000/- 2006-07 1,20,000/- 2007-08 1,20,000/- 2008-09 1,20,000/- 4. THE AFORESAID CLAIMS HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER, WHICH IS THE SUBJECT MATTER OF DISPUTE BEF ORE US. THE REASONS WEIGHING WITH THE ASSESSING OFFICER WERE TO THE EFFECT THAT SUCH CLAIM WAS NOT MADE IN THE ORIGINAL RETURNS AND THAT THERE WAS NO EVIDENCE FOR SERVICES HAVING RENDERED BY THE ASS ESSEES SON IN ORDER TO JUSTIFY THE CLAIM OF SALARY. ACCORDINGLY , THE SALARY CLAIMED TO HAVE BEEN INCURRED ON SON WAS DISALLOWED. 5. THE CIT(A) HAS ALSO SUSTAINED THE DISALLOWANCE F OR ALL THE ASSESSMENT YEARS IN QUESTION BY MAKING FOLLOWING DI SCUSSION: 6. . IT IS AN UNDISPUTED FACT THAT THE DEDUCTIO N ON ACCOUNT OF SALARY WAS NOT CLAIMED BY THE APPELLANT IN THE ITA NO 1192 TO 1198/PN/11 B.S. GA WATE A.Y. 2002-03 TO 2008-09 ORIGINAL RETURN FILED BY HIM. THE STATEMENT OF THE APPELLANT THAT THE STATEMENTS OF ACCOUNT WERE PREPA RED CONSIDERING BOOKS OF ACCOUNTS SEIZED DURING THE COU RSE OF SEARCH AND FIGURE OF SALARY WAS CHANGED ACCORDINGLY , IN ACCORDANCE WITH THE ENTRIES IN THE SEIZED BOOKS, IS ALSO NOT CORRECT. THE SUBSTANTIVE DOCUMENTS SEIZED DURI NG THE COURSE OF SEARCH AND SEIZURE OPERATION INCLUDED CASHBOOK. THE ENTRIES RELATING TO THE SALARY PAID TO HIS SON ARE NOT THERE IN THESE DOCUMENTS. LATER ON, TH E APPELLANT CAME UP WITH THE THEORY THAT THE SALARY D UE TO HIS SON HAS BEEN CREDITED TO HIS ACCOUNT AND SHOWN AS A LIABILITY. THUS, THE BASIC DOCUMENTS WHICH WERE FO UND DURING THE SEARCH AND SEIZURE OPERATION DID NOT CON TAIN ANY ENTRY RELATING TO THE SALARY PAID TO HIS SON. UNDER THE CIRCUMSTANCES, THE CONTENTION OF THE APPELLANT IN R ESPECT OF ALLOWANCE OF DEDUCTION ON ACCOUNT OF SALARY PAID TO HIS SON CANNOT BE ACCEPTED. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 6. NOT BEING SATISFIED WITH THE ORDER OF THE CIT(A) , THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE DISALLOWANCE OF SALARY PAID TO THE SON SHR I HEMANT GAWATE IS UNJUSTIFIED, INASMUCH AS, THE ASSESSEE HAD DEPOS ED IN HIS STATEMENT U/S 132(4) OF THE ACT ITSELF THAT HIS SON WAS ASSISTING HIM IN HIS BUSINESS. IT WAS POINTED OUT THAT AFTER THE SEARCH, ASSESSEE RE-CASTED HIS BOOKS OF ACCOUNT ON THE BASIS OF NOTI NG IN THE SEIZED PAPERS AND COMPILED HIS INCOME STATEMENT FOR SUBMIT TING THE RETURNS OF INCOME U/S 153A OF THE ACT. IT WAS POINTED OUT THAT THE SALARY PAID TO EMPLOYEES, OTHER THAN THE ASSESSEES SON, H AS BEEN ALLOWED AND EXPENDITURE ON SALARY PAYMENT TO THE SON HAS BE EN UNJUSTLY DISALLOWED. THE LEARNED COUNSEL FOR THE ASSESSEE PO INTED OUT THAT IT IS ONLY THE NET INCOME (AFTER DEDUCTING EXPENDITURE ) WHICH IS LIABLE TO BE ASSESSED AND IN THIS CASE, ASSESSEE HAS CLAIMED THAT ONLY THE NET UNACCOUNTED INCOME, REFLECTED BY THE SEIZED DOC UMENTS IS LIABLE TO BE ASSESSED AND IN DOING SO, THE EXPENDITURE INC URRED HAS TO BE ALLOWED AS A DEDUCTION. 8. ON THE OTHER HAND, THE LEARNED CIT DR APPEARING FOR THE REVENUE HAS DEFENDED THE DISALLOWANCE BY REFERRING TO THE DISCUSSION MADE IN THE ORDER OF THE CIT(A), WHICH W E HAVE ALREADY ITA NO 1192 TO 1198/PN/11 B.S. GA WATE A.Y. 2002-03 TO 2008-09 EXTRACTED IN THE PRECEDING PARAGRAPHS AND IS NOT BE ING REPEATED FOR THE SAKE OF BREVITY. 9. HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE FIND THAT THE CIT(A) HAS RECORDED A FINDING TO THE EFFECT THAT TH E DOCUMENTS SEIZED DURING THE COURSE OF SEARCH DO NOT REFLECT E NTRIES RELATING TO PAYMENT OF SALARY TO SHRI HEMANT GAWATE I.E. ASSESS EES SON. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE DID NOT CLAIM DEDUCTION ON ACCOUNT OF SALARY TO HIS SON IN THE ORIGINAL RETURN OF INCOME FILED FOR A.Y. 2002-03 TO 2006-07. THEREFORE, IT IS QUITE CL EAR THAT THERE IS NO EVIDENCE FOUND IN THE COURSE OF SEARCH OF ASSESSEE HAVING INCURRED ANY EXPENDITURE BY WAY OF SALARY PAYMENT TO HIS SON SHRI HEMANT GAWATE. PERTINENTLY, BEFORE US THERE IS NO PLEA RAI SED BY THE ASSESSEE SO AS TO DEMONSTRATE THAT ANY EVIDENCE WA S FOUND DURING THE COURSE OF SEARCH EVIDENCING PAYMENT OF SALARY B Y THE ASSESSEE TO HIS SON. THE PLEA RAISED BY THE ASSESSEE BASED ON HIS DEPOSITION IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT AT THE TIME OF SEARCH, THAT HIS SON WAS ASSISTING HIM IN BUSINESS DOES NOT PROVE INCURRENCE OF SALARY PAYMENT TO SON, AND ACCORDINGLY WE FIND N O REASON TO INTERFERE WITH THE ORDERS OF THE CIT(A) ON THIS ASP ECT. 10. IN SO FAR AS THE ASSESSMENT YEAR 2007-08 IS CON CERNED, WE FIND THAT ON THE DATE OF SEARCH I.E. 4-7-2007, THE DUE DATE FOR FILING OF THE RETURN HAD NOT LAPSED, SO HOWEVER, THE RELEVAN T PREVIOUS YEAR HAS ENDED ON 31-3-2007 AND THERE IS NOTHING ON RECO RD TO SHOW INCURRENCE OF SALARY PAID TO HIS SON BY THE ASSESSE E AND THEREFORE, THE CLAIM HAS BEEN RIGHTLY DISALLOWED BY THE CIT(A) FOR THE A.Y. 2007-08 ALSO. SO HOWEVER, IN SO FAR AS A.Y. 2008-0 9 IS CONCERNED, THE SAME IN OUR VIEW STANDS ON A DIFFERENT FOOTING AS THE SEIZED MATERIAL IS ONLY UPTO THE DATE OF SEARCH I.E. 4-7-2 007 AND NOT FOR THE ENTIRE PREVIOUS RELEVANT TO THE ASSESSMENT Y3EAR 20 08-09. THE RETURN OF INCOME FOR THIS ASSESSMENT YEAR HAS BEEN FURNISHED AFTER THE DATE OF SEARCH AND THE PERIOD AFTER THE DATE OF THE SEARCH I.E. ITA NO 1192 TO 1198/PN/11 B.S. GA WATE A.Y. 2002-03 TO 2008-09 FROM 5-7-02007 AND ENDING UPTO 31-3-2008 IS NOT COV ERED BY THE SEIZED MATERIAL. THEREFORE, IN THIS LIGHT, THE CL AIM OF THE ASSESSEE CANNOT BE DENIED AS HAS BEEN DONE FOR THE A.YS. 200 2-03 TO 2007- 08. IN THE ASSESSMENT YEAR 2008-09,, THE ASSESSEE CLAIMED TO HAVE PAID SALARY TO HIS SON OF RS. 1,20,000/- AND THE RE CIPIENT OF SALARY SHRI HEMANT GAWATE HAS ALSO DISCLOSED SUCH INCOME I N HIS RETURN OF INCOME, THOUGH FILED AFTER THE DATE OF SEARCH. IN THE ABSENCE OF ANY MATERIAL TO NEGATE THE CLAIM OF THE ASSESSEE FOR TH E PAYMENT OF SALARY, AS WAS THE CASE IN THE EARLIER ASSESSMENT Y EARS COVERED BY THE SEIZED MATERIAL, WE THEREFORE, HOLD THAT FOR TH E PERIOD AFTER THE DATE OF SEARCH, THE CLAIM OF SALARY CANNOT BE DISAL LOWED IN THE MANNER SO DONE BY THE LOWER AUTHORITIES. IN THIS V IEW OF THE MATTER, WE THEREFORE, DEEM IT FIT AND PROPER TO DIRECT THE ASSESSING OFFICER TO RE-WORK THE DISALLOWANCE IN ASSESSMENT YEAR 2008-09 , SO AS TO RESTRICT THE SAME TO THE AMOUNT CLAIMED UPTO THE DA TE OF SEARCH AND DELETE THE BALANCE OF THE DISALLOWANCE. THUS, FOR ASSESSMENT YEAR 2008-09 ASSESSEE PARTLY SUCCEEDS. 11. IN THE RESULT, THE APPEALS FOR A.Y. 2002-03 TO 2007-08 ARE DISMISSED WHILE APPEAL FOR A.Y. 2008-09 IS PARTLY ALLOWED. THE ABOVE DECISION WAS PRONOUNCED IMMEDIATELY UPON CONCLUSION OF THE HEARING ON 26 TH SEPTEMBER 2012 IN PRESENCE OF BOTH THE PARTIES. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED:26 TH SEPTEMBER 2012 ANKAM COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT (A) CENTRAL PUNE 4) THE CIT CENTRAL 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T.A.T., PUNE. BY ORDER //TRUE COPY// SR. P.S. I.T.A.T., PUNE ITA NO 1192 TO 1198/PN/11 B.S. GA WATE A.Y. 2002-03 TO 2008-09