The ACIT, Circle-4, Surat V. M/s. Shree Jagdamba Dyeing and Printing Mills Pvt. Ltd., Surat

ITA 2052/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2130 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 10-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J K CHANDNANI
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained expenditure; Income from undisclosed sources; Competent authority
• Section: 69; 69C; 133A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL,SURAT BENCH,SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.2052/AHD/2015/SRT [ [ / ASSESSMENT YEAR: 2010-11 DY. COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(2), SURAT. VS. M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD., 1-18, SHREE KRISHNA INDUSTRIAL ESTATE, BARDOLI, TANTHAITHIYA, PALSANA, SURAT. [PAN: AAHCS 0427R] ( / APPELLANT) ( /RESPONDENT) / ASSESSEE BY : SHRI RASESH SHAH, C.A /REVENUE BY : SHRI J.K.CHANDNANI, SR. D.R /DATE OF HEARING : 22-06-2018 / DATE OF PRONOUNCEMENT : 30-07-2018 / ORDER PERC.M.GARG, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, SURAT (CIT(A) FOR SHORT) DATED 16.04.2013 FOR THE ASSESSMENT YEAR (A.Y) 2010-11. 2. THE GROUNDS RAISED BY THE REVENUEREAD AS FOLLOWS: 2 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.36,92,341/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S. 69C OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS RIOT JUSTIFIED IN ALLOWING 3-5 TIMES INCREASE IN SALARY & WAGES FOR REDUCED TURNOVER IN POST SURVEY PERIOD. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE 3-5 TIMES INCREASE IN SALARY & WAGES FOR REDUCED TURNOVER IN POST SURVEY PERIOD EVEN WHEN ASSESSEE WAS NOT ABLE TO PRODUCE ORIGINAL SALARY REGISTER, ORIGINAL WAGES REGISTER, ATTENDANCE REGISTER (NEITHER PHOTOCOPY NOR ORIGINAL), METHOD OF RECRUITMENT OF EMPLOYEES, DETAILS OF ADVERTISEMENT MADE FOR SUCH RECRUITMENT, COPY OF APPLICATION RECEIVED, COPY OF APPOINTMENT LETTER, ANY REASON WHY THERE WAS HUGE INCREASE IN SALARY & WAGES, WHERE THEY WERE EMPLOYED, ETC. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A), SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.CIT(A)-I SURAT MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER'S ORDER MAY BE RESTORED. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBUNAL , INTER ALIA , PAPER BOOK FILED BY THE ASSESSEE SPREAD OVER 80 PAGES, ASSESSMENT ORDER AND FIRST APPELLATE ORDER. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE FIRST APPELLATE AUTHORITY HAS GROSSLY ERRED IN DELETING THE ADDITION OF RS. 36,92,345/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S. 69C OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AS THE LD. CIT(A) WAS NOT JUSTIFIED AND CORRECT IN ALLOWING 3-5 TIMES INCREASE IN SALARY AND WAGES FOR REDUCED TURNOVER IN POST SURVEY PERIOD. THE LD. DR VEHEMENTLY POINTED OUT THAT THE FIRST APPELLATE AUTHORITY ALLOWED HUGE INCREASE IN SALARY AND WAGES EXPENSES DESPITE THE FACT THAT THE TURNOVER WAS SUBSTANTIALLY REDUCED IN POST SURVEY PERIOD AND THE ASSESSEE WAS NOT ABLE TO PRODUCE 3 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. ORIGINAL SALARY REGISTER, ORIGINAL WAGES REGISTER, ATTENDANCE REGISTER, METHOD OF RECRUITMENT OF EMPLOYEES, DETAILS OF ADVERTISEMENT MADE FOR WHICH RECRUITMENT, COPY OF APPLICATION RECEIPT, COPY OF APPOINTMENT LETTER, AND NOT JUSTIFIED REASON WHY THERE WAS HUGE INCREASE IN SALARY AND WAGES AND WHERE THEY WERE EMPLOYED. THE LD. DR FURTHER SUBMITTED THAT THE LD. CIT(A) HAS GRANTED RELIED TO THE ASSESSEE WITHOUT ANY JUSTIFIED REASON AND BASIS THEREFORE, IMPUGNED ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE ASSESSING OFFICE (AO). 4. REPLYING TO THE ABOVE, THE LD. ASSESSEES REPRESENTATIVE (AR) SUPPORTED THE FIRST APPELLATE ORDER AND DREW OUR ATTENTION TOWARDS RELEVANT PARAS 6.1.1 TO .1.3 OF THE FIRST APPELLATE ORDER AND SUBMITTED THAT THE GP MARGIN HAVE INCREASED TO 13.50% AS AGAINST 12.35% IN THE IMMEDIATE PREVIOUS YEAR IN THE POST SURVEY AS AGAINST THE PRE SURVEY PERIOD. THE LD. AR ALSO SUBMITTED THAT DURING THE SURVEY U/S. 133A OF THE ACT A DISCLOSURE OF RS. 1.25 CRORE WAS MADE AS UNACCOUNTED INCOME WHICH COVERS ALL THE DISCREPANCIES FOUND DURING THE SURVEY THEREFORE, NO FURTHER ADDITION ON THIS ACCOUNT WAS TO BE MADE THEREFORE, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION. 5. THE LD. AR STRENUOUSLY CONTENDED THAT THE AO MADE ADDITION ON THE GROUND THAT THE NUMBER OF EMPLOYEES HAD INCREASED FROM OCTOBER ONWARD WHICH LED TO THE INCREASE IN THE EXPENSES ON WAGES AND SALARY 4 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. AND NO EVIDENCE WAS PROVIDED REGARDING THE RECRUITMENT OF EMPLOYEES IN DIFFERENT CADRE AND THE RECRUITMENT DID NOT LEAD TO INCREASE IN THE PRODUCTION. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAD SUBMITTED COPY OF THE WAGES AND SALARY REGISTER, WHERE THE DETAILS OF THE NAME AND ATTENDANCE, AMOUNT OF WAGES AND SALARY, AMOUNT OF PF AND ESI AND SIGNATURE OF EMPLOYEES ON REVENUE STAMP ETC., IN THE RELEVANT RECORD CLEARLY SHOWS THE GENUINENESS OF WAGES AND SALARY EXPENSES WHICH CANNOT BE DOUBTED IN ANY MANNER. THE LD. AR SUBMITTED THAT THE WAGES AND SALARY SUBJECTED TO PAYMENT ON PF AND ESI WHICH HAS BEEN REGULARLY DEPOSITED AND CHALLANS OF THE DEPOSITS WERE ALSO PRODUCED BEFORE THE AO. 6. THE LD. AR ALSO CONTENDED THAT THE TURNOVER OF THE ASSESSEE COMPANY HAS ALSO INCREASED IN THE SUBSEQUENT YEARS FROM RS. 7.9 CRORE IN AY 2010-11 TO RS. 14.80 CRORE IN AY 2011-12 AND RS. 26.03 CRORE IN AY 2012-13 WHICH WAS THE RESULT ACCRUED TO THE ASSESSEE DURING SUBSEQUENT TWO YEARS OUT OF EFFORTS AND SUPPORT OF ADDITIONAL RECRUITMENT OF THE STAFF WHICH CONSEQUENTLY RESULTED INTO INCREASE IN THE WAGES AND SALARY. THE LD. AR VEHEMENTLY POINTED OUT THAT IT IS SETTLED PRINCIPLE THAT A BUSINESSMAN IS FREE TO CONDUCT HIS BUSINESS IN THE MANNER HE THINKS APPROPRIATE AND BENEFICIAL AND THE AO CANNOT STEP INTO THE SHOES OF THE ASSESSEE AND CANNOT SIT ON THE CHAIR OF THE ASSESSEE TO GUIDE HIM HOW TO 5 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. DO BUSINESS. THE LD. AR SUBMITTED THAT THE REASONABLENESS OF THE INCREASED EXPENDITURE ON THE SALARY AND WAGES CANNOT BE QUESTIONED BY THE AO, ESPECIALLY WHEN THE ASSESSEE HAS GOT POSITIVE RESULTS IN ITS BUSINESS AFTER INCREASED STAFF AND LABOUR DURING SUBSEQUENT TWO YEARS IN THE FORM OF INCREASED TURNOVER. THE LD. AR SUBMITTED THAT THE FIRST APPELLATE AUTHORITY HAS APPRECIATED THE FACTS AND CIRCUMSTANCES OF THE CASE IN RIGHT PROSPECTIVE THEREFORE, THE IMPUGNED ORDER MAY KINDLY BE UPHELD BY DISMISSING APPEAL OF THE REVENUE. 7. THE LD. AR ALSO SUBMITTED THAT THE PROVISION OF S. 69 OF THE ACT CANNOT BE ATTRACT TO THE ALLEGED INFLICTED EXPENDITURE ON WAGES AND SALARY. HE FURTHER SUBMITTED THAT FROM THE CHART OF GROSS PROFIT COMPARISON OF PRE- SURVEY AND POST SURVEY PERIOD WHICH WAS SUBMITTED TO THE AO DURING ASSESSMENT PROCEEDINGS (ASSESSEES PAPER BOOK PG. 66) IT IS CLEAR THAT THE PRE SURVEY GP WAS 8.97% WHEREAS THE POST SURVEY PERIOD GP RATE WAS 13.15% WHICH CLEARLY SHOWS THAT DURING PRE-SURVEY PERIOD THE ENTIRE ACTUAL SALARY AND WAGES EXPENDITURE WAS NOT RECORDED BY THE ASSESSEE THUS, DURING POST SURVEY PERIOD IT WAS RECORDED AND CONSEQUENTIALLY THIS PRACTICE INCREASED THE AMOUNT OF SALARY AND WAGES DURING THE POST SURVEY PERIOD. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS SURRENDERED RS. 1.25 CRORES DURING THE SURVEY PROCEEDINGS WHICH COVERS THE ENTIRE AMOUNT OF PRE SURVEY PERIOD OF SALARY AND WAGES WHICH WAS NOT RECEIVED IN THE 6 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. BOOTS. THEREFORE, THE ALLEGATIONS CANNOT BE ALLEGED AGAINST THE ASSESSEE TO DOUBT THE INCREASED WAGES AND SALARY EXPENDITURE. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS DISCHARGED ONUS BY SUBMITTING SALARY REGISTER, PROVIDENT FUND (PF) & ESI PAYMENT CHALLANS WHICH CANNOT BE DOUBTED AS THE SAME CANNOT BE CREATED OR FABRICATED BY THE ASSESSEE AND THESE ARE THE PAYMENTS TO A GOVERNMENT BODY. THE LD. AR ALSO DREW OUR ATTENTION TOWARDS WRITTEN SUBMISSIONS FIELD BY THE LD. CIT(A) DATED 23.05.2014 AVAILABLE AT PGS. 2-12 OF THE ASSESSEE PAPER BOOK. 8. PLACING REJOINDER TO THE ABOVE, THE LD. DR SUBMITTED THAT THE COMPARISON NOTED BY THE LD. CIT(A) IN PARA 6.1.2 REGARDING EXPENSES ON WAGES AND SALARY IS NOT CORRECT AS THE PROCESS OF EACH UNIT IS DIFFERENT FROM ANOTHER UNIT AND THE SAME CANNOT BE APPLIED BLINDLY TO THE UNIT OF PRESENT APPELLANT. 9. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSIONS, AT THE VERY OUTSET WE FIND IT NECESSARY AND APPROPRIATE TO REPRODUCE THE RELEVANT OPERATIVE PART OF THE FIRST APPELLATE ORDER, WHEREIN THE LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE, WHICH READS AS FOLLOWS: 6.1.1 I HAVE CONSIDERED THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT. THE GROUNDS OF APPEAL GROUND NO.1 & 2 PERTAINS TO ADDITION OF RS. 36,92,341/- BY ALLEGING THAT THE APPELLANT HAS PAID EXCESS WAGES AND SALARY AND TREATING THE SAME AS UNACCOUNTED EXPENDITURE U/S 69C OF THE ACT, WHICH IS ERRONEOUS AND NEEDS TO BE DELETED AND ADDITION OF RS. 36,92,341/- OUT OF WAGES AND SALARY EXPENSES, AS MADE BY THE LEARNED AO BY TREATING THE SAME AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT, IS ILLEGAL AND BAD IN LAW. IN THIS CASE A SURVEY WAS CONDUCTED ON 09.01.2009 IN WHICH THE APPELLANT HAD DISCLOSED 7 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. AN AMOUNT OF RS. 1,25,00,000/- AS UNACCOUNTED STOCK. THE APPELLANT HAD SHOWN INCOME OF RS. 85,06,270/- IN HIS RETURN OF INCOME FOR AY 2010-11. THE AO FOUND THAT THE GROSS PROFIT HAS DECREASED BY 1.56% IN COMPARISON TO LAST YEAR EXCLUDING THE DISCLOSED INCOME IN THIS YEAR. IT WAS ALSO NOTICED THAT IN COMPARISON TO THE PREVIOUS YEAR THE EXPENSES ON WAGES AND SALARY HAS INCREASED AND THE RATIO OF THE WAGES TO THE TURNOVER HAS INCREASED TO 3.41% IN COMPARISON TO 0.99% IN PREVIOUS YEAR AND RATIO OF THE SALARY HAS INCREASED TO 5.26% IN COMPARISON TO 3.5% IN PREVIOUS YEAR. THE AO FOUND THAT THE APPELLANT HAD ALSO PAID INCENTIVE OF RS. 9,16,521/- DURING THE YEAR THOUGH NO SUCH PAYMENT WAS MADE IN THE LAST YEAR. THE SALARY REGISTER WAS EXAMINED AND IT WAS NOTICED THAT FROM PERIOD 01.04.2009 TO 30.09,2009 ONLY 11-12 WORKERS HAVE BEEN ENGAGED IN THE JOB WORK WHEREAS IN THE SECOND HALF THE APPELLANT HAS ENGAGED MORE THAN 45 WORKERS THOUGH NO INCREASE IN PRODUCTION HAS BEEN FOUND, IT WAS ALSO FOUND THAT THE INCREASE IN WAGE EXPENSES IS BY 37.60% AND SALARY BY 21.73% BUT THE JOB CHARGES INCOME HAS DECREASED BY 0.12% AS COMPARED TO PRE-SURVEY PERIOD. THE APPELLANT DID NOT PRODUCE THE ORIGINAL SALARY AND WAGES REGISTER AND THE ATTENDANCE REGISTER WAS NOT PRODUCED. THE AO HELD THAT 30 TO 34 PERSONS WERE RECRUITED AT THE LEVEL OF THE MANAGERIAL AND TECHNICAL/ PRODUCTION SUPERVISOR IN THE MONTH OF OCTOBER WITHOUT ANY RECRUITMENT ADVERTISEMENT, INTERVIEW ETC. THE AO HELD THAT THE INCREASE IN THE WAGES AND SALARY EXPENSES IS WITHOUT ANY SUPPORTING DOCUMENTS AND REASON AND THEREFORE THE ADDITION OF RS, 36,92,341/- WAS MADE U/S 69C OF THE ACT AS UNACCOUNTED EXPENDITURE. 6.1.2 THE APPELLANT SUBMITTED THAT THE GP MARGIN HAVE INCREASED TO 13.50% AS AGAINST 12.35% IN THE EARLIER YEAR IN THE POST SURVEY AS AGAINST PRE- SURVEY PERIOD. IT WAS SUBMITTED THAT DURING THE SURVEY U/S 133A OF THE ACT VARIOUS DISCREPANCIES SUCH AS EXCESS STOCK FALL IN GP MARGIN, EXCESS CASH, LESSER EMPLOYEES ON THE PAYROLL WAS FOUND AND ACCORDINGLY A DISCLOSURE OF RS, 1.25 CRORES WAS MADE WAS UNACCOUNTED INCOME WHICH COVERED ALL THE DISCREPANCIES FOUND DURING THE SURVEY, THE WAGES AND SALARIES HAVE ALSO BEEN SUBJECT TO PF, ESI, AND EPF WHICH HAVE BEEN DULY DEPOSITED BY THE APPELLANT COMPANY. THE COMPANY HAD CHANGE THE MANAGEMENT SYSTEM AND RECRUITED NEW EMPLOYEES FOR HANDLING VARIOUS TASK IN DIFFERENT DEPARTMENT TO ACHIEVE BETTER GROWTH IN THE COMPANY. THE CHANGE IN THE MANAGEMENT APPROACH LET TO THE SUBSTANTIATE INCREASE IN THE TURNOVER IN THE SUBSEQUENT YEARS I.E. AY 2011-12 THE TURNOVER INCREASE TO 148051834 AND AY . 2012-13 IT WAS INCREASED TO 260316157, THE AO HAS NOT DOUBTED THE GENUINENESS OF THE SALARY PAYMENT BUT HAS DISALLOWED MAINLY ON THE GROUND THAT THE SAME EXCESSIVE AS COMPARED TO THAT IN THE EARLIER YEAR. THE BASIS OF AO'S ADOPTING THE RATE OF WAGES AND SALARY @ OF 2% OF THE TURNOVER IS WITHOUT ANY BASIS. THE APPELLANT ALSO SUBMITTED THAT THE RATIO OF THE APPELLANT @ OF 8.67% IS MUCH LOWER AS COMPARED TO THE OTHER CONCERNS IN THE SIMILAR LINE OF BUSINESS WHICH ARE AS FOLLOWING :- SR. NO. NAME OF THE ASSESSEE PAN TURNOVER (RS.) TOTAL WAGES AND SALARY (RS.) % OF . WAGES AND SALARY 1 SUDHA DYEING AND PRINTING MILLS PVT. LTD. AADCS3856J 12,42,18,289 1,38,06,243 11.11% 2 RAINBOW DYEING AND PRINTING MILLS PVT. LTD. AA8CR3765R 14,89,76,705 1,97,17,601 13.24% 3 SUPRABHAT PRINTS AAECS8782Q 12,92,62,352 1,74,66,792 13.51% 8 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. PVT. LTD, 6,1.3 ON THE PERUSAL OF THE DETAILS, IT IS OBSERVED THAT THE AO HAD MADE THE ADDITION ON THE GROUND THAT THE NUMBER OF EMPLOYEES HAD INCREASED MANY FOLD FROM OCTOBER ONWARDS WHICH LED TO THE INCREASE IN THE EXPENSES ON WAGES AND SALARY AND NO EVIDENCE WAS PROVIDED REGARDING THE RECRUITMENT OF THE EMPLOYEES IN DIFFERENT CADRE AND THE RECRUITMENT DID NOT LEAD TO INCREASE IN THE PRODUCTION, THE AO ALSO HELD THAT THE APPELLANT DID NOT PRODUCE THE ORIGINAL SALARY AND WAGES REGISTER AND ONLY PRODUCE THE XEROX COPY OF THE REGISTER. THE APPELLANT HAD SUBMITTED THE COPY OF THE WAGES AND SALARY REGISTER WHEREIN THE DETAILS OF THE NAME, ATTENDANCE, AMOUNT OF WAGES AND SALARY, AMOUNT OF PF & ESI, SIGNATURE OF THE EMPLOYEE ON REVENUE STAMP, ETC. ARE AMPLY EVIDENT. THE WAGES AND SALARY HAVE BEEN SUBJECT TO PF AND ESI WHICH HAVE BEEN REGULARLY DEPOSITED AND THE CHALLANS OF THE DEPOSITS WERE PRODUCED BEFORE THE AO. THE TURNOVER OF THE COMPANY HAS ALSO INCREASED IN THE SUBSEQUENT YEARS FROM RS. 7,90,41,314/- IN 2010-11, RS. 14,80,51,834/- IN 2011- 12 AND RS. 26,03,16,157/- IN 2012-13. THE AO HAS NOT BROUGHT ANY FACTS ON RECORD THAT THE BUSINESSMAN IS FREE TO CONDUCT HIS BUSINESS IN THE MANNER HE THINKS IS BENEFICIAL. THE AO HAS ONLY QUESTIONED THE PROPRIETARY OF INCREASING THE WORK FORCE FROM OCTOBER OMARDS THOUGH IT HAS NOT LED TO ANY INCREASE IN THE TURNOVER. IF THE ISSUE OF INCREASE IN THE WAGES AND SALARY WAS DOUBTFUL THAN THE AO SHOULD HAVE CONDUCTED INQUIRIES FROM THE PF AND ES\C OFFICE TO VERWY THE EXISTENCE OF THE NUMBER OF EMPLOYEES OR COULD HAVE EXAMINED THE EMPLOYEES. BUT NO SUCH EFFORT HAS BEEN MADE BY THE AO. THE APPELLANT HAS DISCHARGED THE ONUS BY PRODUCING THE DETAILS OF THE WAGES AND SALARY PAID, WAGES AND SALARY REGISTER, DETAILS OF PF&ESL PAYMENTS ETC. THE REASONABLENESS OF THE EXPENDITURE ON SALARY AND WAGES VIS-A-VIS BUSINESS IS NOT IN THE DOMAIN OF THE AO. THE AO CAN ALWAYS VERIFY THE GENUINENESS OF THE EXPENSES WHICH HAS NOT BEEN DONE IN CASE. IN VIEW OF THE ABOVE FACTS, IT IS EVIDENT THAT THE AO HAS FAILED TO BRING ON RECORD ANY SUCH FINDING OR EVIDENCE TO SHOW THAT THE EXPENSES CLAIMED UNDER THE HEAD SALARY AND WAGES ARE NOT GENUINE AND INFLATED. THE ADDITION MADE BY THE AO OF RS. ZQ'MV- IS DELETED AND THE GROUNDS OF APPEAL IS ALLOWED. 10. FIRST OF ALL, WE MAY POINT OF OUT THAT ADMITTEDLY, THE ASSESSEE DECLARED RS. 1.25 CRORES DURING SURVEY PROCEEDINGS U/S. 133A OF THE ACT WHICH WAS CONDUCTED ON 09.10.2009. IT IS ALSO NOT IN DISPUTE THAT THE GP RATE OF PRE SURVEY PERIOD WAS 8.97% AND POST SURVEY PERIOD WAS 13.15%. SO FAR AS CONTENTION OF THE LD. DR IS CONCERNED THAT ON THE ISSUE OF INCREASED PAYMENT OF SALARY AND WAGES THE COMPARISON OF ASSESSEES CLAIM WITH OTHER UNITS OR CASES IS NOT CORRECT AS THE PROCESS IS DIFFERENT IN 9 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. EVERY UNIT IS CONCERNED WE DECLINE TO ACCEPT THIS CONTENTION. AS IT IS A WELL SETTLED PRINCIPLE OF TAX JURISPRUDENCE, THAT WHERE THERE IS ISSUE OF ESTIMATION OF APPROPRIATENESS OF EXPENDITURE ON WAGES AND SALARY COMES BEFORE THE REVENUE AUTHORITIES THEN THEY HAVE TWO OPTIONS VIZ. FIRST THE GRANTEE OF EXPENDITURE SHOWN BY THE ASSESSEE AND DURING EARLIER AND SUBSEQUENT YEARS IS RELEVANT AND IN CASE IN SUCH FIGURES ARE NOT AVAILABLE OR NOT FOUND TO BE CORRECT OR COMPARABLE THEN, OTHER COMPARABLE CASES WHO ARE IN THE SAME LINE OF BUSINESS MAY ALSO BE CONSIDERED FOR CORRECT AND REASONABLE ESTIMATION OF APPROPRIATE PERCENTAGE OF SALARY AND WAGES IN THE RATIO OF TURNOVER. 11. IN THE PRESENT CASE, IN THE LAST PART OF PARA 5 OF FIRST APPELLATE ORDER, THE LD. CIT(A) HAS CONSIDERED SUBMISSIONS OF THE ASSESSEE WHEREIN THREE COMPARABLE CASES HAS BEEN SHOWN TO JUSTIFY THE PERCENTAGE OF WAGES AND SALARY IN COMPARISON TO THE TURNOVER AND THE PERCENTAGE OF WAGES AND SALARY IS RANGING TO 11.11% TO 13.51% OF TURNOVER. IT IS THE FACTUAL CONTENTION OF THE ASSESSEE BEFORE THE LD. CIT(A) THAT THE WAGES AND SALARY CLAIMED BY THE ASSESSEE ARE 3.41% AND 5.26% OF THE TURNOVER TOTALING OF 8.67% OF THE TURNOVER WHICH WAS ALLEGED BY THE AO AS EXCESSIVE WITHOUT ANY BASIS THEREFORE, ALLEGATION OF INFLATED CLAIM OF WAGES AND SALARY CANNOT BE HELD AS SUSTAINABLE AGAINST THE ASSESSEE THUS, ACCEPT SAID CONTENTIONS OF THE LD. AR. 10 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. 12. SO FAR AS, PRE SURVEY AND POST SURVEY PERIOD GP RATE IS CONCERNED UNDISPUTEDLY PRE SURVEY PERIOD GP RATE WAS 8.97% WHICH WAS INCREASED TO 13.15% FOR POST SURVEY PERIOD. ON CAREFUL CONSIDERATION OF ABOVE RIVAL CONTENTION ON THIS ISSUE, WE ARE OF VIEW THAT THE GP MARGIN OF THE ASSESSEE HAVE INCREASED TO 13.50% AS AGAINST 12.35% IN THE EARLIER YEAR IN THE POST SURVEY PERIOD. WE CANNOT IGNORE THIS FACT THAT THE ASSESSEE HAS DECLARED RS. 1.25 CRORES AS UNACCOUNTED INCOME DURING THE SURVEY PERIOD WHICH COVERS ALL THE POSSIBLE LEAKAGE OF REVENUE DUE TO THE DISCREPANCIES AND DEFICIENCIES FOUND DURING THE SURVEY SUCH AS DEFLATED CLAIM OF SALARY AND WAGES AND UNACCOUNTED PURCHASE AND SALES. 13. THE LD. CIT(A) NOTED THAT THE WAGES AND SALARY EXPENSES HAS BEEN INCREASED BUT THE JOB CHARGES INCOME HAS BEEN DECREASED AS COMPARE TO PRE SURVEY PERIOD. THE WAGES AND SALARY HAVE ALSO BEEN SUBJECT TO PAYMENT OF PF, ESI & EPF WHICH HAVE BEEN DULY DEPOSITED BY THE APPELLANT COMPANY WITH THE RELEVANT COMPETENT AUTHORITY. WE ALSO OBSERVE THAT WHILE THE ASSESSEE COMPANY HAD CHANGED THE MANAGEMENT SYSTEM AND RECRUITED NEW EMPLOYEES FOR HANDLING VARIOUS TASKS IN THE DEPARTMENT OF THE UNIT TO ACHIEVE BETTER GROWTH IN THE COMPANY, WHICH RESULTED INTO SUBSTANTIAL INCREASE IN THE TURNOVER DURING SUBSEQUENT ASSESSMENT YEARS 2011-12 & 2012-13 IN COMPARISON TO THE PRESENT AY 2010-11 THEN, WE SAFELY PRESUME THAT IT WAS THE CONSEQUENT EFFECT OF THE 11 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. NEWLY RECRUITED STAFF. THE RESULTS OF CHANGE IN THE MANAGEMENT SYSTEM AND NEWLY RECRUITED EMPLOYEES OBVIOUSLY CANNOT BE EVALUATED IN SOME DAYS OR MONTHS, BUT THE RESULTS OF CHANGE IN THE MANAGEMENT SYSTEM MAY BE ASSESSED AND EVALUATED BY COMPARING THE TURNOVER OF PRESENT ASSESSMENT YEAR TO THE INCREASED TURNOVER OF SUBSEQUENT ASSESSMENT YEARS. IN THE PRESENT CASE, SUCH RESULTS CAN BE NOTICED FROM THE COMPARISON OF TURNOVER OF PRESENT AY 2010-11 WITH TURNOVER OF SUBSEQUENT TWO YEARS. 14. WE ARE ALSO IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE LD. CIT(A) IN PARA 6.1.3 THAT IF THERE WAS IN THE DOUBT IN THE MIND OF AO REGARDING INCREASE IN THE WAGES AND SALARY THEN, HE SHOULD HAVE CONDUCTED INQUIRIES FROM THE PF & ESIC TO VERIFY EXISTENCE OF NUMBER OF EMPLOYEES OR COULD HAVE EXAMINED THE EMPLOYEES WORKING THE ASSESSEE TO PRODUCE THEM. NO SUCH EXERCISE OR EFFORTS HAVE BEEN MADE BY THE AO AND WHEN THE ASSESSEE DISCHARGED THE ONUS BY PRODUCING THE DETAILS OF WAGES AND SALARYREGISTER, DETAILS OF PF& ESIC PAYMENT ETC., THEN, THEREASONABLENESS OF THE EXPENDITURE ON SALARY AND WAGES CANNOT BE DOUBTED.THE AO CANNOT STEP INTO THE SHOES OF THE ASSESSEE AND HE IS NOT ELIGIBLE TO SIT ON THE CHAIR OF THE ASSESSEE TO DECIDE MANAGEMENT AND NECESSITY OF NEW EMPLOYEES FOR HANDLING VARIOUS NEW TASKS IN THE DIFFERENT DEPARTMENT TO ACHIEVE BETTER GROWTH IN THE COMPANY. THEREFORE, 12 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. ALLEGATIONS MADE BY THE AO IN SUPPORT OF THE ADDITION ARE NOT SUSTAINABLE AND HENCE, WE DISMISS THE SAME. 15. IN VIEW OF THE FOREGOING DISCUSSION, WE DECLINE TO ACCEPT ALLEGATIONS OF THE AO SUPPORTING THE IMPUGNED ADDITION AS THE AO HAS FAILED TO BRING ON RECORD ANY SUSTAINABLE AND COGENT FINDINGS TO SHOW THAT THE EXPENSES ON A SALARY AND WAGES CLAIMED BY THE ASSESSEE ARE EITHER BOGUS OR NOT GENUINE OR HAS BEEN CLAIMED AS INFLATED WITH AN INTENTION TO REDUCE THE GP RATE. ACCORDINGLY, WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE FINDINGS ARRIVED BY THE LD. CIT(A) AND HENCE, WE UPHOLD THE SAME. ACCORDINGLY, GROUNDS OF REVENUE BEING DEVOID OF MERITS ARE DISMISSED. 16. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF30 TH JULY, 2018. / SURAT ; DATED : 30 TH JULY, 2018 / EDN / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. ( ) / THE CIT(A)-II, SURAT; 4. PRL. CIT-II, SURAT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // SD/ - SD/ - ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ) ) (C.M.GARG) /JUDICIAL MEMBER 13 ITA NO.2052/AHD/2015/SRT (A.Y: 2010-11) M/S. SHREE JAGDAMBA DYEING AND PRINTING MILLS PVT. LTD. / ASSISTANT REGISTRAR , / ITAT, SURAT