Vijay Kumar Sharma, CHENNAI V. ACIT, CHENNAI

ITA 1285/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4615 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 13-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 10-05-2016
• Court: TRIBUNAL
• Department Lawyers: B NISCHAL JT
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Onus to prove
• Section: 69C; 143(3); 131

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B/SMC, CHENNAI , ! ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER ./ITA NO.1285 /MDS/2016 # $ %&$ / ASSESSMENT YEAR : 2008-09 VIJAY KUMAR SHARMA, NO.162, BROADWAY, CHENNAI 600108. [PAN: AAHPS 0704J] VS. ASST. COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-IX, CHENNAI. (PRESENTLY NON CORPORATE RANGE 12, CHENNAI) ( /APPELLANT ) ( / RESPONDENT ) '( ) * / APPELLANT BY : SHRI K.BALASUBRAMANIAN, ADVOCATE +,'( ) * / RESPONDENT BY : SHRI B.NISCHAL, JT. CIT - % ) . / DATE OF HEARING : 13.04.2017 /& ) . / DATE OF PRONOUNCEMENT : 09.05.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-13, CHENNAI ( CIT(A) FOR SHORT) DATED 08.03.2016, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING HIS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREI NAFTER) DATED 27.12.2009 FOR THE ASSESSMENT YEAR (AY) 2008-09. 2. THE APPEAL RAISES THREE ISSUES, WHICH SHALL BE T AKEN UP IN SERIATIM. THE FIRST ISSUE IS IN RESPECT OF DISALLOWANCE OF EXPENDITURE ON SALARY, EFFECTED IN THE SUM OF . 5.6 LACS, ALLOWED TO FOUR PERSONS, AT . 1.40 LACS EACH. THE ASSESSING 2 ITA NO.1285/MDS/2016 (AY 2008-09) VIJAY KUMAR S HARMA V. ASST. CIT OFFICER (AO) OBSERVED IN THE COURSE OF THE ASSESSME NT PROCEEDINGS THAT NO PAYMENTS WERE MADE TO EACH OF THESE PERSONS, WHOSE ACCOUNTS WERE CREDITED TWICE DURING THE YEAR, WITH THE CORRESPONDING DEBIT /S TO THE SALARY ACCOUNT, AND THE CREDIT BALANCE AS AT THE END OF THE YEAR TRANSF ERRED TO THE LOAN ACCOUNT. FURTHER, NO EVIDENCE QUA THE SAID CLAIM WAS ALSO PRODUCED. HE, ACCORDINGLY, INFERRED THE ENTRIES PASSED IN ACCOUNTS AS BEING ON LY ACCOMMODATIVE IN NATURE, AND DISALLOWED THE CLAIM FOR SALARY EXPENDITURE. IN APPEAL, THE ASSESSEE REPRESENTED THAT, THOUGH RELATED, NONE OF THE PERSO NS ARE COVERED U/S. 40A(2)(B) OF THE ACT, FOR THE PROVISION OF SEC. 40A(2)(A) TO APPLY AND, FURTHER, THE AMOUNT/S STANDS DULY RETURNED BY THE PAYEES, WHO AR E ASSESSEES AT CHENNAI. THE SALARY WAS WITHDRAWN BY THE SAID PERSONS ONLY WHEN THEY GO TO THEIR NATIVE PLACES. IN VIEW OF THE SUBMISSIONS MADE, OPPORTUNIT Y TO PRODUCE THESE FOUR PERSONS WAS GRANTED, AND SUMMONS U/S. 131 OF THE AC T ISSUED THERETO. OF THE FOUR, ONLY TWO, NAMELY SUBASH SHARMA AND RAJESH SHA RMA, APPEARED ON 23.01.2013, AND WERE ACCORDINGLY EXAMINED; THEIR ST ATEMENTS, IN THE RELEVANT PART, FINDING REPRODUCTION AT PGS. 5-6 OF THE APPEL LATE ORDER. ON THE BASIS OF THE EVIDENCE THUS GATHERED AND/OR PRODUCED, THE LD. CIT (A) FOUND THE ASSESSEES CLAIM/S AS NOT TENABLE. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. THE ASSESSEES CASE, INCLUDING BEFORE ME, IS THAT NO ADVERSE INFERENCE COULD BE DRAWN MERELY ON THE BASIS OF THE FACT THAT THE PARTIES ARE RELATED, EVEN AS THEY ARE NOT COVERED U/S. 40A(2)(A), OR HAD NOT WITHDRAWN THEIR SALARY, WHICH IS WELL WITHIN THEIR RIGHT NOT TO. THE REVENUES CA SE IS THAT THE ASSESSEES CASE ON MERITS, I.E., QUA THE PROVISION OF SERVICES AGAINST WHICH THE SALARI ES STAND ALLOWED, IS WHOLLY UN-SUBSTANTIATED. WHY, THE SO CA LLED EMPLOYEES, COULD NOT EVEN STATE IF THEY WERE ASSESSEES, OR IF THEIR RETU RNS OF INCOME WERE BEING FILED. I FIRSTLY OBSERVE THAT THERE IS NO REFERENCE TO S. 40A(2)(A) IN EITHER THE ASSESSMENT OR THE APPELLATE ORDER AND, ACCORDINGLY, THE SAID PROVISION HAS NOT 3 ITA NO.1285/MDS/2016 (AY 2008-09) VIJAY KUMAR S HARMA V. ASST. CIT BEEN INVOKED BY THE REVENUE. THE DISALLOWANCE IS O NLY U/S. 37(1). THE ONUS TO PROVE HIS RETURN AND CLAIMS REFERRED THEREBY, IS ON LY ON THE ASSESSEE ( CIT V. CALCUTTA AGENCY LTD . [1951] 19 ITR 191 (SC); CIT V. R. VENAKATASWAMY NAIDU [1956] 29 ITR 529 (SC)). SALARY IS ONLY IN RESPECT OF PROVISION OF SERVICES, OF WHICH THERE IS NO WHISPER, AT ANY STAGE, MUCH LESS PROVED. RENDERING OF SERVICES, AS ANY OTHER WORK, WOULD GENERATE A HOST OF EVIDENCE IN THE NORMAL COURSE, WHILE HERE I FIND THAT EVEN WHAT THEY ARE D OING, I.E., THE NATURE OF THEIR JOB, IS NOT STATED. THE QUESTION OF SUBSTANTIATING IT, ACCORDINGLY, DOES NOT ARISE. A PERSON, BY VIRTUE OF EXPERIENCE; THE TWO WHO APPE ARED IN RESPONSE TO THE SUMMONS AND WERE EXAMINED STATING TO BE IN SERVICE FOR SEVERAL YEARS, BESTOWS A KEEN UNDERSTANDING OF THAT ASPECT OF THE RELEVANT TRADE OR AT LEAST THE ASSESSEES BUSINESS, WHILE IN THE PRESENT CASE THEY DID NOT EV EN KNOW IF THEY WERE ASSESSEES UNDER THE ACT, OR HAD FILED THEIR (OWN) R ETURN/S OF INCOME. THE OTHER TWO PERSONS DID NOT COMPLY WITH THE SUMMONS U/S. 13 1, WHICH WERE ISSUED ONLY AT THE INSTANCE OF THE ASSESSEE, WITH A VIEW TO PRO VIDE IT AN OPPORTUNITY TO PRESENT HIS CASE. NOTHING HAS BEEN BROUGHT ON RECOR D TO SHOW THAT THEY WERE AT THE RELEVANT TIME, AS STATED, AT THEIR NATIVE PLACE /S AND, IN ANY CASE, COULD HAVE APPEARED OR MADE THEMSELVES AVAILABLE SUBSEQUENTLY. THE ASSESSEES CASE, WHICHEVER WAY ONE MAY LOOK AT IT, REMAINS COMPLETEL Y UNPROVED. THE FACT THAT SALARY IS NOT DISBURSED, AS WOULD NORMALLY BE THE C ASE, THOUGH NOT CONCLUSIVE BY ITSELF, YET BECOMES A RELEVANT FACT UNDER THE CIRCU MSTANCES, I.E., WHEN COUPLED WITH AND IN CONJUNCTION WITH THE SURROUNDINGS FACTS AND CIRCUMSTANCES, INCLUDING THE PERSONS BEING KNOWN PERSONS AND, FURT HER, CONSIDERING THAT THE ASSESSEE DOES NOT FURNISH ANY EXPLANATION FOR SUCH ABNORMAL BEHAVIOR. AS THE LD. DR WOULD ASSEVERATE DURING HEARING, THAT LET THE AS SESSEE SHOW THAT THE EMPLOYEES HAVE SUFFICIENT INCOME FROM OTHER SOURCES , I.E., TO MEET THEIR REGULAR, MAINTENANCE EXPENDITURE, SO THAT THEY IMPLYING AL L OF THEM, DID NOT REQUIRE THE FUNDS ON A REGULAR BASIS! WHY, TWO OF THEM ARE STAT ED TO HAVE GONE TO THEIR 4 ITA NO.1285/MDS/2016 (AY 2008-09) VIJAY KUMAR S HARMA V. ASST. CIT NATIVE PLACE/S WHEN THE SUMMONS WERE ISSUED TO THEM DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, SO THAT THE ASSESSEE COULD SUBSTANTIATE HIS CASE OF WITHDRAWALS BEING THEREAT, AS ALSO OF SIMILAR PRACT ICE IN THE PAST, CORRELATING THE WITHDRAWALS IN ACCOUNTS WITH THEIR VISIT TO THEIR N ATIVE PLACES. AGAIN, EVEN IF NOT IN REQUIREMENT OF FUNDS, A PERSON NOT DRAWING HIS S ALARY, WHICH HE IS CONTRACTUALLY ENTITLED TO, IS QUIXOTIC, AND WHICH B ECOMES ALL THE MORE INCREDULOUS CONSIDERING THAT THERE IS NOT ONE, BUT FOUR SUCH PERSONS IN THE ASSESSEES EMPLOYMENT! IN THE PRESENT CASE, THE AMO UNT/S IS, ON THE CONTRARY, TRANSFERRED TO THE LOAN ACCOUNT, IMPLYING IT BEING LENT TO THE ASSESSEE, SO THAT THE EMPLOYEE/S HAS FOREGONE HIS RIGHT TO WITHDRAW DURIN G THE PERIOD OF THE LOAN, WHICH CANNOT IN ANY CASE BE REGARDED AS A CURRENT A CCOUNT. FURTHER STILL, THE TWO PERSONS WHO APPEARED WERE EVEN NOT AWARE IF THEY AR E FILING THEIR OWN RETURNS OF INCOME, EVEN AS THE ASSESSEE SEEKS TO DRAW SUPPORT FROM THE FACT THAT TAX HAD BEEN DEDUCTED ON THEIR SALARY, INDICATING OF THEIR BEING ASSESSEES. THE ASSESSEES CASE IS WHOLLY WITHOUT MERIT. THE LD. CIT(A), IN TH E CONCLUDING PART OF HIS ORDER, STATES OF THE AO HAVING DISALLOWED ONLY 25 PER CENT OF THE SALARY. THE SAME, EVEN AS CONTENDED BY THE ASSESSEE PER HIS GROUND OF APPEAL, IS ONLY AN ERROR. THERE IS NO SUCH CONCESSION EVEN IN THE REMAND REPO RT (DATED 08/3/2013/COPY ON RECORD). ACCORDINGLY, FOR THE REASONS AFORE-MENTION ED, I CONFIRM THE IMPUGNED DISALLOWANCE. 4. THE SECOND ISSUE ARISING IN THE INSTANT CASE IS THE DISALLOWANCE OF COMMISSION EXPENDITURE, ALLOWED TO FIVE PERSONS IN THE SUM OF . 20.93 LACS, I.E., OUT OF THE ASSESSEES TOTAL CLAIM QUA SUCH EXPENDITURE AT . 22.83 LACS, DISALLOWED AND CONFIRMED FOR THE SAME, AT 25% THERE OF, I.E., AT . 5,23,343/-. 5. THE BASIS OF THE DISALLOWANCE BY THE AO IS, AGAI N, NON-FURNISHING OF ANY EVIDENCE SUBSTANTIATING HIS CLAIM BY THE ASSESSEE. NO IMPROVEMENT COULD BE MADE IN THE APPELLATE PROCEEDINGS, EVEN AS THE LD. CIT(A), ADMITTING ADDITIONAL 5 ITA NO.1285/MDS/2016 (AY 2008-09) VIJAY KUMAR S HARMA V. ASST. CIT EVIDENCE, AFFORDED AN OPPORTUNITY TO THE ASSESSEE T O PRESENT HIS CASE BY CAUSING PRODUCTION OF THE CONCERNED PERSONS BY ISSUING SUMM ONS U/S. 131 OF THE ACT. THE FINDINGS BY THE AO, ARRIVED AT ON THE BASIS OF HIS EXAMINATION IN THE REMAND PROCEEDINGS, WHICH WERE ATTENDED TO BY ONLY ONE PER SON (SHRI KAMLESH P. SHAH), APPEARING FOR HIMSELF AND HIS DECEASED FATHE R, SHRI PARSHUTHAM DAS SHAH, WERE NOT REBUTTED AND, ACCORDINGLY, THE DISAL LOWANCE WAS CONFIRMED BY THE LD. CIT(A). THERE IS NOTHING TO SHOW THE PROVIS ION OF SERVICES OR THEIR BEING SUBSTANTIATED AT ANY STAGE. IN FACT, A PERUSAL OF T HE ACCOUNTS, ADDUCED DURING HEARING BY THE LD. AR, SHOWS THAT THE COMMISSION WA S ALLOWED TO THE EXISTING CUSTOMERS, SALES TO WHOM DURING THE PRECEDING YEAR WERE NOT ON COMMISSION BASIS, I.E., WERE DIRECT SALES, WHICH ALSO EXPLAINS THIS EXPENDITURE TO BE AT . 64,170/- ONLY FOR THE PRECEDING YEAR, AND WHICH IN FACT PROMPTED THE AO TO, IN THE FIRST PLACE, EXAMINE THIS MATTER AND DOUBT THE VERACITY OF THE ASSESSEES CLAIM. THE ASSESSEES CASE IS, AGAIN, WHOLLY UNPRO VED, AND THE REVENUE HAS, EVEN AS STATED DURING THE HEARING, TAKEN A LENIENT VIEW IN THE MATTER IN RESTRICTING THE DISALLOWANCE TO 25 PER CENT. REFERE NCE IN THIS CONTEXT MAY BE MADE TO THE DECISIONS IN THE CASE OF LACHMINARAYAN MADAN LAL V. CIT [1972] 86 ITR 439 (SC) AND LAKSHMIRATAN COTTON MILLS LTD. V. CIT [1969] 73 ITR 634 (SC). AS IT APPEARS, IT IS ONLY A CASE OF THE ASSE SSEE BOOKING THE EXPENDITURE WITH A VIEW TO REDUCE INCOME. I, ACCORDINGLY, FIND NO REASON FOR INTERFERENCE, AND DISMISS THE ASSESSEES RELEVANT GROUNDS. 6. THE THIRD AND FINAL ISSUE RAISED IN APPEAL IS IN RESPECT OF ADDITION U/S. 69C TOWARD LOW HOUSEHOLD EXPENSES, CONSIDERING THE COST OF LIVING OF A FAMILY IN A METROPOLITAN CITY, OBSERVING DRAWINGS TO BE ONLY AT . 1.59 LACS. I FIND THAT THIS ISSUE, THOUGH RAISED BEFORE THE FIRST APPELLATE AUT HORITY, HAS NOT BEEN DECIDED BY HIM PER THE IMPUGNED ORDER; HIS DECISION, APPEARING AT PGS. 8-9 OF THE IMPUGNED ORDER, BEING CONFINED TO THE FIRST TWO ISSUES ONLY. THE MATTER, ACCORDINGLY, DOES NOT ARISE OUT OF THE IMPUGNED ORDER. THE ONLY RECOU RSE AVAILABLE TO THE ASSESSEE 6 ITA NO.1285/MDS/2016 (AY 2008-09) VIJAY KUMAR S HARMA V. ASST. CIT UNDER THE CIRCUMSTANCES IS TO MOVE THE FIRST APPELL ATE AUTHORITY FOR THE DISPOSAL OF THE SAID GROUND, AND ON THIS BEING DONE, THE LD. CIT(A) SHALL FORTHWITH DECIDE THE ASSESSEES GROUND 3 BEFORE HIM PER A SPEAKING O RDER. I DECIDE ACCORDINGLY. 7. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. ORDER PRONOUNCED ON MAY 9, 2017 AT CHENNAI . SD/- ( ) (SANJAY ARORA) ! /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED, MAY 9, 2017. EDN 1 ) +#.23 43&. /COPY TO: 1. '( /APPELLANT 2. +,'( /RESPONDENT 3. - 5. ( )/CIT(A) 4. - 5. /CIT 5. 3%67 +#.# /DR 6. 78$ 9 /GF