Sri Vigneswara Foundry, Erode V. ACIT, Coimbatore

ITA 1672/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81148 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 12-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C V PAVANA KUMAR
• Assessee Lawyers: S SRIDHAR
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , ' # , $ % BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.1672/MDS/2014 ( / ASSESSMENT YEAR: 2009-10) M/S. SRI VIGNESWARA FOUNDRY A-1095, NEAR LAKSHMI MILLS CO. AVINASHI ROAD, P.N.PALAYAM COIMBATORE-641 037. VS ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-III COIMBATORE. PAN: AALFS5096H ( /APPELLANT) (( /RESPONDENT)) / APPELLANT BY : MR. S.SRIDHAR, ADVOCATE /RESPONDENT BY : MR. C.V.PAVANA KUMAR, JCIT / DATE OF HEARING : 18 TH AUGUST, 2014 / DATE OF PRONOUNCEMENT : 26 TH SEPTEMBER, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, COI MBATORE DATED 06.05.2014 FOR THE ASSESSMENT YEAR 2009-10 A RISING OUT OF ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 254 OF THE ACT. ITA NO.1672/MDS/2014 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING ADDITION OF ` 52,19,040/- MADE BY THE ASSESSING OFFICER TOWARDS UNPROVED EX-GRATIA PAYMENTS MADE TO WORKERS . COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSING OFF ICER DISALLOWED EX-GRATIA PAYMENT TO WORKERS ON THE GRO UND THAT ASSESSEE HAS NOT PRODUCED ANY PROOF OF PAYMENT OF E X-GRATIA. COUNSEL SUBMITS THAT SOME OF THE WORKERS HAVE FILED AFFIDAVITS IN PROOF OF RECEIPT OF EX-GRATIA FROM THE ASSESSEE. COUNSEL ALSO SUBMITS THAT SOME OF THE WORKERS HAVE RECEIVED EX-GRATIA THROUGH LABOUR COURT . THEREFORE, HE SUBMITS THAT A SSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING EX-GRATIA P AYMENT IGNORING THE SUBMISSIONS AND EVIDENCES PRODUCED BY THE ASSESSEE. 3. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER O F LOWER AUTHORITIES IN DISALLOWING EX-GRATIA PAYMENTS AS THE ASSESSEE FAILED TO PRODUCE CONCLUSIVE PROOF FOR PAY MENT OF EX-GRATIA TO THE WORKERS. ITA NO.1672/MDS/2014 3 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THIS IS A SECOND ROUND OF APPEAL BEFORE THE TRIBUNA L BY THE ASSESSEE. IN THE ORIGINAL ASSESSMENT MADE, THE ASSE SSING OFFICER DISALLOWED WAGES, EX-GRATIA PAYMENT ETC. ` 52,19,040/- SALARY FOR MARKETING PEOPLE OF ` 8,87,900/- AND TRAVELLING ALLOWANCE FOR MARKETING PEOPLE AT ` 1,50,000/-, AS THE ASSESSEE COULD NOT PROVE THE PAYMENTS MADE TO WORKE RS AND INCURRING OF EXPENSES TOWARDS SALARIES AND TRAVELLI NG ALLOWANCES FOR MARKETING PEOPLE. THE COMMISSIONER O F INCOME TAX (APPEALS) ALSO CONFIRMED THE SAID DISALL OWANCE AGAINST WHICH ASSESSEE CAME UP IN APPEAL BEFORE THI S TRIBUNAL AND THIS TRIBUNAL BY ORDER IN ITA NO.2098/ MDS/2012 DATED 4.1.2013 REMITTED THE MATTER TO THE TILE OF T HE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE ISSUE AFRES H IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORT UNITY TO THE ASSESSEE, SINCE THE ASSESSEE SUBMITTED THAT IT HAD SOME DETAILS OF THE EMPLOYEES WHO RECEIVED EX-GRATIA PA YMENT, SALARY, WAGES, T.A. ETC. AND TO PROVE THE GENUINENE SS OF THE PAYMENT. PURSUANT TO THE ORDERS OF THIS TRIBUNAL, T HE ASSESSING OFFICER TOOK UP THE ASSESSMENT AND IN THE COURSE ITA NO.1672/MDS/2014 4 OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A COP Y OF DOCUMENT BEARING SERIAL NUMBER 14AA099972 OF TWENT Y RUPEES DENOMINATION OF NON-JUDICIAL STAMP PAPER, WH EREIN THE ASSESSEE ENTERED INTO AN AGREEMENT WITH THE WORKERS . THE AGREEMENT IS SAID TO HAVE BEEN EXECUTED ON 12.01.20 06 TO PAY THE WORKERS COMPENSATION IN INSTALLMENTS ON AC COUNT OF CLOSURE OF ASSESSEES FIRM. THE ASSESSING OFFICER IN ORDER TO VERIFY THE GENUINENESS OF THIS DOCUMENT REFERRED TH E DOCUMENT TO THE GENERAL MANAGER, SECURITY PRINTING PRESS AT HYDERABAD REQUESTING TO FURNISH THE DATE ON WHICH THE DOCUMENT GOT PRINTED AND TO WHOM THE DOCUMENT WAS SUPPLIED. THE ASSESSING OFFICER RECEIVED LETTER DAT ED 23.10.2013 FROM THE WORKS MANAGER OF SECURITY PRIN TING PRESS STATING THAT THE DOCUMENT WAS PRINTED ON 25.0 1.2007 AND WAS DESPATCHED TO THE TREASURY OFFICER, CHENNAI ON 27.03.2007. THEREFORE, THE ASSESSING OFFICER CONCLU DED THAT THE AGREEMENT MADE ON 12.01.2006 ON A DOCUMENT WHI CH WAS PRINTED ON 25.01.2007 IS NOT A VALID DOCUMENT A ND WAS MADE AS AN AFTERTHOUGHT. THE ASSESSING OFFICER ISS UED LETTERS TO 41 PEOPLE TO WHOM THE EX-GRATIA PAYMENTS SAID TO ITA NO.1672/MDS/2014 5 HAVE BEEN MADE TO VERIFY AND CONFIRM THE RECEIPT O F COMPENSATION FROM THEM. OUT OF 41, NINETEEN PEOPLE FILED AFFIDAVIT IN CONFIRMATION OF THE SAME AND IN SOME C ASES LETTERS WERE RETURNED UNSERVED. THE ASSESSING OFFICER ALSO ISSUED SUMMONS TO TEST CHECK TO SOME OF THE EMPLOYEES AND SWORN STATEMENTS WERE RECORDED FROM THEM. SOME OF THE EMP LOYEES HAVE CONFIRMED THAT THEY HAVE SIGNED THE AGREEMENT AND THEY DID NOT KNOW ABOUT THE CONTENTS OF THE AGREEMENT AN D ONE OF THE EMPLOYEES CONFIRMED THAT SHE HAS RECEIVED MONEY , HOWEVER NO PROOF WAS FURNISHING HAVING RECEIVED MON EY IN CASH AND SOME OF THE EMPLOYEES HAVE CONFIRMED THAT THEY NEVER HAD ANY COMMUNICATION WITH THE ASSESSEE AND T HEIR NAMES HAVE BEEN MISUSED IN THE AGREEMENT. THEREFORE , THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSES SEE HAS NOT PAID ANY COMPENSATION TOWARDS SALARY AND EX-GRA TIA AND THE ASSESSEE HAD NO EVIDENCE TO SUBSTANTIATE ITS CL AIM. THE ASSESSING OFFICER IGNORED THE AFFIDAVITS FURNISHED BY SOME OF THE EMPLOYEES AND DISALLOWED THE ENTIRE PAYMENT CLA IMED TOWARDS WAGES AND EX-GRATIA AMOUNTING TO ` 52,19,040/-. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONE R OF ITA NO.1672/MDS/2014 6 INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TA X (APPEALS) SUSTAINED THE DISALLOWANCE OBSERVING AS U NDER:- 3. T HE ISSUE IN THE GROUNDS OF APPEAL IS R E GA RDI NG THE DI S ALLOWA NCE O F CO M P ENSATION PAID TOWARDS S A L ARY AND E X - GRAT IA BY T HE APP E LL A NT . SHRI S . S RIDHAR , ADVOCATE AND AUTHORIZED R EPRESENTAT IVE O F TH E APP EL L AN T APPEAR ED AN D SUBMITTED DETAILS. THE L EARNED AUTHORIZE D REP R E S EN TA TIV E S UB MITTED T H AT THE A DDITIO N IS NOT SUSTAINAB LE F O R T HE R EAS O N THA T THE ID EN T IT Y O F THE P ER S ONS A N D T H E VERACIT Y OF THE AFF I DAVITS WER E NOT P R OV E D T O BE W RO N G BY T H E A S S ESSING OFFICER . 4. AS S EE N FR O M THE F AC TS O F T HE CASE , TH E O R IG I N AL APP EA L FOR THE ASST . Y EAR 20 0 9 -1 0 W AS D ISMI S SE D B Y C I T(A) I N APPEA L NO. 2 7 1 /11 - 1 2 D A T E D 0 3 . 1 0. 2012 . HON' BL E H AT REMITTED THE M A TTER TO THE ASSESS ING OFFICER W IT H A DIRECTION TO EXAMINE T H E I SSUE AFR E S H. THE A SSE S SIN G O F FI C ER MADE I NVESTIGATION REGARDING T HE DOCUMENT BEARI N G SI. NO. 1 4AA 099972 OF RS .2 0 1 - D ENOMINATI O N , W HEREIN THE ASSE S SEE F IRM HA S E NT ERED INTO A N AGR E E M ENT WITH THE WORKERS O F M/S. SRI VIGNESW A R A F O UNDRY ON 12.01 . 2 006 . A S PER T H I S AGREEME N T THE ASSE S SEE HAS A GR EED TO PA Y TH E W OR KER S COMPEN SATION IN INS T ALL M E NTS ON ACCOUNT OF CLOSURE O F THE A S SE SS E E 'S FI RM . T O VER IF Y T H E G E NUIN ENESS OF THE DOCUMENT, A LET T ER W AS SENT TO T H E G E N E R AL MA NAG ER, SECURIT Y PR INTING PRESS AT HYDE R A B A D AND T H E GE N ERA L MA NAG E R I N HIS LE T TER STA T ED T H A T THE DOCUMENT WAS P RI NTED ON 25 . 01 . 2007 A N D W A S DESPATC H ED T O T H E TREASU RY OFFICER , C HENNAI ON 27.03.2007. HENCE IT CAN BE C L EA RL Y SEEN THA T T H E ASS E SS E E HAD MAD E AGREEMENT ON 12 . 01 . 2 006 ON A DOCU M E N T W H ICH W A S PRINTED ON 2 5.03.2007. THIS CLEA RL Y P R OVE S T HAT TH E AG R EE M E NT W A S B A C K DATED TO CLA I M E X P E NDI T U RE A GA INST TH E RE AL ESTATE I N CO M E B E IN G E ARN ED B Y THE APPELLANT . 5 . AS SEEN F R OM THE FACTS, T H E A PP E L LANT COMPAN Y M/S. S RI V IGNES W AR A F OUNDRY W A S CL OS ED IN THE YEAR 1 9 9 5- 96 AND WAS NOT DOING ANY BU S INESS THEREAFTER. IN R E ALIT Y, THE A P P E L L ANT F I RM GAVE ITS PROPERTY FOR JOINT DEVE L O PM EN T ITA NO.1672/MDS/2014 7 A GRE E M E N T AND W A S D OING R EA L E STATE BUSINE S S . D U RING THE C OURSE OF APPEL L ATE P R OCEEDINGS, THE A U T H ORIZED REP RE SENTATIVE W AS AS K ED T O P R OV ID E CO P Y O F ANY AGREEMENT ENTE R ED EAR L IER I . E . IN TH E L ATE 9 0 S REGARDIN G W AGE DISPUTE. THE APPE L LANT COULD NOT FURNISH ANY EV IDENC E T O SHO W T H E NATU R E OF DI S P U T E A ND T H E AMOU N T RE ALL Y T O BE PAID TO BE W ORKERS AS W AGE / CO M PE NS A TI O N . THE AUTH O R I Z ED RE PRES E NT A TI VE WAS ALSO NOT ABLE TO EXP L AIN T H E DET AIL S O F TH E AMOUNT S SHOWN A S W A GE PAYMENT TO THE W ORKERS . THE E X - GRATIA PAY M E N T AM OUNTIN G TO RS.5 7 ,21 , 5401 - COULD NOT BE EXP L AI N ED IN RELAT I ON TO A R RIVI N G A T T HI S Q U ANTUM. T HE A PP ELLANT ALSO CANNOT CLAIM THIS AS B U SINESS EXPE NDITUR E BEC A USE T H E AP P ELL A N T CLOSED DOING THE FOUNDRY BUS IN ESS IN THE Y EA R 1996 AND WHEN HE H E D INCOM E IN THE RELEVANT A SS E SSMENT Y EA R IN APPEAL ON ACCOUNT OF REAL ESTATE TRANSACT I O N , T HE W AGES AN D E X -G RA T IA P AYMENTS CANNOT BE CLAIMED AS EXPENDITURE AGA I N ST R E AL E S TATE BUSINE S S. 6. F U R THER THE ASSESSING OFFICER ALSO MA D E N ECESSA RY ENQU IR IES W I TH REGARD TO WAGE PAYMENTS AND EX-GRATIA PAYMEN T . THE AP P E LLA NT CO ULD N OT F U R N I SH PROPER EVIDENCE TO PROVE THE GENUINENESS OF T H E CLAIM OF EXPENDITUR E. THE ASSESSING OFFICER HAS DISALLOWED THE UNE X PLAINE D EX P EN DI TU R E REG A R D I N G E X - GRATIA PAYMENT AND SALARY FOR MARKETING . CONS ID ER IN G T H E DISCUSSIONS MAD E ABOVE, THE D I SALLO W ANCES MADE B Y T HE AS SESSIN G OFFICER AR E CONFIRMED. THE GROUNDS OF APPEAL ARE DISMISSE D . 5. ON GOING THROUGH THE ORDERS OF THE ASSESSING OFF ICER AS WELL AS COMMISSIONER OF INCOME TAX (APPEALS), WE FI ND THAT THE ASSESSEE HAS NOT CONCLUSIVELY PROVED THAT THE E X-GRATIA AND SALARY PAYMENTS WERE IN FACT MADE TO WORKERS. T HE ONUS OF PROVING INCURRING OF EXPENDITURE TOWARDS EX-GRAT IA AND SALARY WAS NOT DISCHARGED BY THE ASSESSEE. SOME OF THE ITA NO.1672/MDS/2014 8 WORKERS DEPOSED AND CONFIRMED THAT THEY NEVER HAD A NY COMMUNICATION WITH THE ASSESSEE AND THEIR NAMES HAV E BEEN MISUSED IN THE AGREEMENT. EVEN THOUGH THE COUNSEL S UBMITS THAT SOME OF THE EMPLOYEES RECEIVED COMPENSATION FR OM LABOUR COURT, NO EVIDENCE/DETAILS WERE FURNISHED T O SAY THAT THOSE EMPLOYEES WHO RECEIVED COMPENSATION FROM COUR T ARE THE SAME EMPLOYEES OUT OF 41, THE EX-GRATIA IS SAID TO HAVE BEEN PAID. FURTHER, IN VIEW OF THE FACT THAT STAMP PAPER WHICH WAS USED FOR EXECUTION OF THE AGREEMENT WAS PRINTED ON 25.01.2007, THE ASSESSEE COULD NOT HAVE EXECUTED TH E AGREEMENT ON 12.01.2006 WITH THE WORKERS FOR PAYMEN T OF EX- GRATIA. THE AGREEMENT CANNOT BE GIVEN CREDENCE, THE REFORE IN THE ABSENCE OF ANY CONCLUSIVE PROOF THAT THE ASSESS EE MADE PAYMENT TO WORKERS UNDER THE VALID AGREEMENT WITH W ORKERS, THE CLAIM MADE BY THE ASSESSEE CANNOT BE ALLOWED. T HUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REJECT ED. ITA NO.1672/MDS/2014 9 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 26 TH DAY OF SEPTEMBER, 2014 AT CHENNAI. SD/- SD/- . ( & () ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGEN DRA PRASAD ) ACCOUNTANT MEMBER / + JUDICIAL MEMBER/ ( + ( /CHENNAI, , /DATED, 26 TH SEPTEMBER, 2014 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .