M/s Roving Eyes Management Group, Patiala V. JCIT, Patiala

ITA 1280/CHANDI/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90086 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Unexplained expenditure
• Section: 131; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 1280/CHD/2012 (ASSESSMENT YEAR : 2008-09) ROVING EYES MANAGEMENT GROUP VS. THE J.C.I.T., C/O AMARJIT ASSOCIATES, 7-S, PATIALA RANGE, SANT NAGAR, PATIALA. PATIALA. PAN: AAIFR9046F (APPELLANT) (RESPONDENT) APPELLANT BY : COL.G.S.MANN(RETD.) PARTNER OF ASSESSEES FIRM RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 07.04.2015 DATE OF PRONOUNCEMENT : 08.04.2015 O R D E R PER BHAVNESH SAINI, J.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), PATIALA DATED 5.10.2012 FOR ASSESSMEN T YEAR 2008-09, CHALLENGING THE ADDITION OF RS.16,49,069/- ON ACCOUNT OF SALARY PAID TO WORKERS AND DISALLOWANCE ON ACCOUNT OF WITHDRAWAL FOR HOUSEHOLD PURPOSES AMOUNTING TO RS.3,90,348/-. 2. EARLIER THE APPEAL OF THE ASSESSEE WAS DISMISSE D IN DEFAULT VIDE ORDER DATED 20.5.2014. THE ASSESSE E MOVED 2 MISCELLANEOUS APPLICATION FOR RECALLING OF THE EX-P ARTE ORDER, WHICH WAS ALLOWED VIDE ORDER DATED 21.11.201 4 AND THE APPEAL OF THE ASSESSEE WAS RESTORED AND WAS, TH EREFORE, FIXED FOR HEARING ON MERITS. 3. WE HAVE HEARD SHRI G.S.MANN, PARTNER OF THE ASS ESSEE FIRM, THE LEARNED D.R FOR THE REVENUE AND GONE THRO UGH THE MATERIAL AVAILABLE ON RECORD. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DEBITED A SUM OF RS.1,55,49,656/- UNDER THE HEAD SA LARY TO WORKERS. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO GIVE P RESENT ADDRESSES OF THE WORKERS. THE ASSESSING OFFICER FU RTHER ISSUED SUMMONS UNDER SECTION 131 TO SOME WORKERS AN D STATEMENT OF 9 WORKERS WERE RECORDED. IT WAS FOUN D THAT THERE WAS NO DISCREPANCY IN THE SALARY CLAIMED IN R ESPECT OF STAFF WORKING IN THE ASSESSEE'S OFFICE. HOWEVER I N THE SALARY PAID TO THE REMAINING WORKERS, CERTAIN DISCR EPANCIES WERE FOUND. IN SUCH CASES, ON THE BASIS OF STATEM ENTS OF 6 EMPLOYEES, IT WAS NOTICED THAT THE SALARY HAS BEEN RECORDED IN EXCESS BY RS.1710/- AND ON THIS BASIS THE ASSESS ING OFFICER CONCLUDED THAT THE SALARY HAS BEEN CLAIMED IN EXCESS BY 10.96% IN CASE OF SUCH STAFF. THE ASSESSING OF FICER, THEREFORE, ASKED THE ASSESSEE TO SHOW CAUSE AS TO W HY DISALLOWANCE IN RESPECT OF SALARY EXPENDITURE CLAIM ED TO THE TUNE OF RS.1,50,46,256/- (SALARY PAID TO WORKERS OT HER THAN STAFF) MAY NOT BE MADE BY APPLYING THE RATIO OF 10. 96%. THE ASSESSING OFFICER ALSO ALLOWED THE ASSESSEE TO CROS S EXAMINE 3 THE WORKERS. HOWEVER THE ASSESSEE DID NOT COME FO RWARD TO AVAIL OF THIS OPPORTUNITY. THE ASSESSEE SIMPLY ST ATED THAT THE STATEMENTS ARE RECORDED AFTER A PERIOD OF MORE THAN 3 YEARS AND, THEREFORE, THE STATEMENTS ARE BASELESS. HOWEVER THE ASSESSING OFFICER DISALLOWED THE SALARY TO THE EXTENT OF RS. 16,49,069/- BY APPLYING THE RATIO OF 10.96% AS THE WORKERS HAVE GIVEN THEIR STATEMENTS ON OATH AND THE ASSESSEE WAS GIVEN DUE OPPORTUNITY TO CROSS EXAMINE THE WORKERS. THE ASSESSING OFFICER ALSO OBSERVED THAT THE PARTNERS HAVE NOT MADE ANY WITHDRAWAL FOR HOUSE HOL D EXPENSES WHICH THE ASSESSING OFFICER WORKED OUT AT RS. 3,90,348/- FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER CONSIDERED THIS AS UNEXPLAINED EXPENDITURE UNDER SECTION 69 OF THE INCOME TAX ACT. HOWEVER NO SEPAR ATE ADDITION ON THIS ACCOUNT WAS MADE AS THE SAME IS TELESCOPICALLY COVERED IN THE ADDITION MADE ON ACCO UNT OF INFLATED EXPENDITURE ON SALARY PAID TO WORKERS. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. THE LEARNED CIT (APPEALS), HOW EVER, DISMISSED THE APPEAL OF THE ASSESSEE. THE FINDING S OF THE LEARNED CIT (APPEALS) IN PARAS 4.2 AND 5 ARE REPROD UCED AS UNDER : 4.2 I HAVE CONSIDERED THE SUBMISSIONS MADE. IT IS SEEN THAT THE STATEMENT OF WORKERS WERE RECORDED ON OATH AND THE APPELLANT WAS GIVEN DUE OPPORTUNITY TO CROSS EXAMINE THE WORKERS WHICH THE APPELLANT FAILED TO AVAIL. THE DECISION I N THE CASE CITED BY THE APPELLANT IS NOT APPLICABLE AS IN THE PRESENT 4 CASE, APPELLANT WAS GIVEN DUE OPPORTUNITY BEFORE MAK ING THE DISALLOWANCE. FURTHER THE APPELLANT DID NOT BRING O N RECORD ANY MATERIAL WHICH COULD HAVE BUTTRESSED HIS ARGUMENT E.G. ANY EVIDENCE IN RESPECT OF SALARY PAID TO OTHER WORKERS (OTHER THA N THE 6 WORKERS) SPECIALLY WHEN THE A.O HAS ISSUED SHOW CAUSE FOR ADD ITION BE MADE AT A CERTAIN PERCENTAGE. UNDER THE FACTS AND CIRCUMS TANCES OF THE CASE, I HOLD THAT THE A.O. HAS RIGHTLY MADE THE ADDITIO N. AS REGARDS DISALLOWANCE ON ACCOUNT OF WITHDRAWALS FOR HOUSE HOLD IS CONCERNED, IT IS SEEN THAT THE APPELLANT HAS NOT SPECIFICALLY RA ISED THIS ISSUE IN THE GROUNDS OF APPEAL. FURTHER HE HAS NOT RAISED THIS I SSUE EVEN IN THE SUBMISSION MADE DURING THE APPELLATE PROCEEDINGS. UND ER THE FACTS & CIRCUMSTANCES OF THE CASE AND AS NO ADDITION HAS BEE N MADE UNDER THIS HEAD, NO COMMENTS ARE MADE. 05 . IN THE RESULT, THE APPEAL IS DISMISSED. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE ADDITION OF RS.16,49,069/- ON GRO UND NO.1 IS EXCESSIVE IN NATURE. THE ASSESSING OFFICER NOT ED CERTAIN DISCREPANCIES IN RESPECT OF SALARY PAID TO REMAININ G WORKERS. ON THE BASIS OF STATEMENTS RECORDED OF SI X EMPLOYEES, IT WAS NOTICED THAT THE SALARY HAS BEEN PAID IN EXCESS BY RS.1710/-. THE ASSESSING OFFICER, THERE FORE, ON THIS BASIS FOUND THAT EXCESS SALARY HAS BEEN PAID BY 10.96%. THE PARTNER OF THE ASSESSEE FIRM ARGUED T HAT ONLY ON THE BASIS OF STATEMENTS OF SIX PERSONS THE ADDIT ION SHOULD NOT BE MADE. THIS SUBMISSION HAS NO FORCE BECAUSE THE ASSESSEE CLAIMED EXCESS EXPENDITURE AND THE BON AFIDE OF ASSESSEE IS NOT PROVED TO THE SATISFACTION OF THE A UTHORITIES BELOW THAT THE DEDUCTION IS CLAIMED IN ACCORDANCE W ITH LAW AND EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUS IVELY FOR THE PURPOSES OF BUSINESS. THE STATEMENTS OF T HE 5 EMPLOYEES RECORDED BY THE ASSESSING OFFICER CLEARLY REVEAL THAT EXCESS SALARY HAS BEEN RECORDED BY THE ASSESSE E. IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER WAS JUSTI FIED IN ESTIMATING THE DISALLOWANCE. HOWEVER, THE ASSESSI NG OFFICER HAS NOT BROUGHT SUFFICIENT MATERIAL ON RECO RD TO CONCLUDE AS TO WHAT WAS HIS BASIS FOR MAKING DISALL OWANCE OUT OF THE SALARY BY 10.96% PAID TO THE REMAINING W ORKERS. IN THE ABSENCE OF COMPLETE DETAILS AND CONSIDERING THE MARGINAL DIFFERENCE IN EXCESS SALARY OF RS.1710/-, IT IS DIFFICULT TO BELIEVE THAT THE ASSESSEE WOULD HAVE R ECORDED EXCESS SALARY BY 10.96% OF THE TOTAL SALARY. THER EFORE, THE ESTIMATE MADE BY THE AUTHORITIES BELOW SHALL HAVE T O BE REDUCED ACCORDINGLY. FURTHER THE PARTNER OF THE ASSESSEE FIRM ARGUED THAT NO OPPORTUNITY HAVE BEEN GIVEN TO CROSS EXAMINE THE EMPLOYEES WHO HAVE MADE STATEMENTS AGAI NST THE ASSESSEE. THE RECORD, HOWEVER, REVEALED THAT THE ASSESSING OFFICER HAS ALLOWED ASSESSEE FIRM TO CROS S EXAMINE SUCH WORKERS. HOWEVER, THE ASSESSEE DID NO T AVAIL THIS OPPORTUNITY AND MERELY STATED THAT STATEMENTS ARE RECORDED AFTER A PERIOD OF MORE THAN THREE YEARS. THE STATEMENT OF THE ASSESSEE CLEARLY REVEAL THAT THE A SSESSING OFFICER HAS GIVEN OPPORTUNITIES TO CROSS EXAMINE SI X EMPLOYEES AND, THEREFORE, THE ARGUMENTS ARE REJECTE D. 7. CONSIDERING THE ABOVE DISCUSSION IT WOULD BE REASONABLE AND PROPER TO ESTIMATE THE DISALLOWANCE OF EXCESS SALARY BY RS.7 LACS AS AGAINST ADDITION OF RS.16,49,069/-. THE ORDERS OF THE AUTHORITIES BEL OW TO THAT 6 EXTENT ARE MODIFIED AND ADDITION IS RESTRICTED TO R S.7 LACS ONLY. 8. IN THE RESULT, GROUND NO.1 OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8.1 SO FAR AS THE AMOUNT OF RS.3,90,348/- IN GROUN D NO.2 OF APPEAL IS CONCERNED, THE ASSESSING OFFICER HAS MADE NO SEPARATE ADDITION ON ACCOUNT OF HOUSEHOLD EXPENS ES BECAUSE OF THE DISALLOWANCE MADE OUT OF THE EXCESS SALARY. SINCE NO ADDITION OF RS.3,90,348 IS MADE, THEREFORE , THERE IS NO QUESTION OF DELETION OF SUCH ADDITION. THE GRO UND NO.2 OF APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF APRIL, 2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 8 TH APRIL, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7