Manilal Jethalal Soni, Ahmedabad V. Income Tax Officer, Ward-5(2)(3), Ahmedabad

ITA 2470/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8600 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 30-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAVIN KUMAR
• Assessee Lawyers: A C SHAH

Judgement Text

ITA NO. 2470/AHD/2016 MANILAL JETHALAL SONI VS. ITO ASSESSMENT YEAR: 2013-14 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD [ BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT ] ITA NO. 2470/AHD/2016 ASSESSMENT YEAR : 2013-14 MANILAL JETHALAL SONI ............AP PELLANT 210, SUPER MALL, CG ROAD, NAVRANGPURA, AHMEDABAD-380009 [PAN ACIPS 7509 L] VS. INCOME-TAX OFFICER .......................RESPONDENT WARD 5(2)(5), AHMEDABAD APPEARANCES BY: AC SHAH FOR THE APPELLANT PRAVIN KUMAR FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 20.09.2018 DATE OF PRONOUNCING THE ORDER : 11.12.2018 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 6 TH SEPTEMBER 2016 ON THE FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING SALA RY OF RS.7,14,000 UNDER SECTION 40A(2)(B) TO EMPLOYEES ON THE GROUND THAT T HEY ARE RELATIVES IN AS MUCH AS THE EMPLOYEES HAVE ACTUALLY WORKED IN THE S HOW ROOM OF THE ASSESSEE AND THEREFORE THE SALARY SO PAID IS FOR TH E PURPOSE OF BUSINESS AND NOT EXCESSIVE. 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE INTEREST EXPENSES OF RS.1,83,925 TO RELATIVES UNDER SECTION 40A(2)(B) ON THE GROUND THAT IT IS EXCESSIVE IN AS MUCH AS THE INTEREST PAID IS AT THE PREVAILING MARKET RATE AND NOT EXCESSIVE. 2. SO FAR AS GROUND NO.2 IS CONCERNED, LEARNED REPR ESENTATIVES FAIRLY AGREE THAT THIS ISSUE IN APPEAL IS COVERED, IN FAVOUR OF THE A SSESSEE, BY MY ORDER DATED 14 TH FEBRUARY 2018, IN ASSESSEES OWN CASE FOR THE ASSES SMENT YEAR 2012-13 WHEREIN I HAVE OBSERVED AS FOLLOWS:- 9. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, I FUND THAT BORROWINGS @ 18% P.A. CANNOT BE SAID TO BE AT EXCESSIVE OR UNREASONABLE INTEREST. THE FACT THAT THE ASSESS EE HAS BEEN ABLE TO BORROW @ 12% FOR SOME SHORT PERIOD CANNOT BE PUT AGAINST H IM, BECAUSE UNLESS THE ITA NO. 2470/AHD/2016 MANILAL JETHALAL SONI VS. ITO ASSESSMENT YEAR: 2013-14 PAGE 2 OF 4 INTEREST @ 18% IS HELD TO BE EXCESSIVE OR UNREASONA BLE, EVEN IF ASSESSEE IS ABLE TO BORROW AT A LOWER INTEREST RATE FROM UNRELA TED PARTIES, DISALLOWANCE UNDER SECTION 40A(2)(B) CANNOT BE MADE. THAT, HOWE VER, IS PRECISELY THE CASE HERE. IN VIEW OF THESE DISCUSSIONS, I UPHOLD THE PLEA OF THE ASSESSEE AND DELETE THE IMPUGNED INTEREST DISALLOWANCE OF RS .1,44,862/-. 3. IN VIEW OF THE FACT THAT THE CIT(A) HAS CONFIRME D THE IMPUGNED INTEREST DISALLOWANCE SOLELY ON THE BASIS OF HIS ORDER FOR T HE ASSESSMENT YEAR 2012-13 WHICH STANDS VACATED BY THE TRIBUNAL, AS NOTED ABOVE, THI S DISALLOWANCE MUST STAND DELETED TOO. LEARNED REPRESENTATIVES HAVE ALSO FAIR LY ACCEPTED THIS POSITION. ACCORDINGLY, THE INTEREST DISALLOWANCE OF RS.1,83,9 25/- IS DELETED. 4. GROUND NO. 2 IS THUS ALLOWED. 5. AS REGARDS GROUND NO.1, THE SAME IS COVERED, PAR TLY IN FAVOUR OF THE ASSESSEE AND PARTLY AGAINST THE ASSESSEE, BY MY ORDER DATED 14 TH FEBRUARY 2018, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2012-13 , WHEREIN I HAVE OBSERVED AS FOLLOWS:- 3. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE BEFORE ME IS A VERY SENIOR CITIZEN, IN HIS LATE 70S, AND IS ENGAGE D IN THE BUSINESS OF GOLD, BULLION AND SILVER BARS AND JEWELLERY. THE ASSESSE E IS CARRYING OUT BUSINESS WITH THE HELP OF EMPLOYEES ENGAGED BY HIM, INCLUDIN G SOME RELATIVES. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DISALLOWED A LARGE PORTION OF SALARIES SO PAID TO T HE CLOSE RELATIVES. HE HAD NOTED THAT AS AGAINST SALARY PAYMENT OF RS.7,54,526 /- IN THE IMMEDIATELY PRECEDING YEAR, THE SALARY PAYMENT IN THE CURRENT Y EAR WAS RS.15,94,526/- EVEN THOUGH THE INCREASE IN TURNOVER WAS ONLY MARGI NAL RS.83,69,20,633/- IN THE CURRENT YEAR AS AGAINST RS.77,44,53,764/- IN THE IMMEDIATELY PRECEDING YEAR. THE HUGE INCREASE IN SALARIES, AS PER THE AS SESSING OFFICER, COULD NOT BE JUSTIFIED. HE ALSO NOTED THAT MOST OF THE SALAR IES IS PAID ONLY TOWARDS THE FAG END OF THE YEAR. HE DISALLOWED ENTIRE SALARY O F RS.2,40,000/- TO SMT. HARSHABEN G SONI ON THE GROUND THAT SHE DID NOT HAV E ANY QUALIFICATIONS OR EXPERIENCE TO DO ACCOUNTS WORK. HE FURTHER DISALLO WED RS.2,00,000/-, OUT OF RS.4,16,000/- PAID TO SHRI NILESHBHAI SONI, ON THE GROUND THAT SALARY OF RS.18,000/- P.M. IS REASONABLE. HE FURTHER DISALLO WED RS.84,000/-, OUT OF RS.1,68,000/- PAID TO SHRI GIRISH SONI, ON THE GROU ND THAT RS.7,000/- P.M. WAS SUFFICIENT SALARY AS HE WAS NEW TO BUSINESS. OUT O F SALARIES OF RS.2,40,000/-, RS.2,10,000/- AND RS.2,10,000/- PAID TO VINIT SONI, SIMIT SONI AND ROMIT SONI, HE ALLOWED ONLY RS.1,20,000/-, RS.99,000/- AND RS.9 9,000/-. THE BALANCE AMOUNT OF RS.3,42,000/- WAS DISALLOWED MAINLY ON TH E GROUND THAT THESE PERSONS WERE YOUNGSTERS AND THAT THEY DID NOT HAVE ANY QUALIFICATIONS OR EXPERIENCE TO JUSTIFY THE SALARIES PAID TO THEM. A CCORDINGLY, A SUM OF RS.8,66,000/- WAS DISALLOWED UNDER SECTION 40A(2)(B ). AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT (A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN F URTHER APPEAL BEFORE ME. 4. I HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. ITA NO. 2470/AHD/2016 MANILAL JETHALAL SONI VS. ITO ASSESSMENT YEAR: 2013-14 PAGE 3 OF 4 5. AS FAR AS SALARY OF RS.2,40,000/- PAID TO SMT. H ARSHABEN SONI IS CONCERNED, I FIND THAT SHE IS WIFE OF THE ASSESSEE, HERSELF AN AGED LADY AND DOES NOT POSSESS ANY QUALIFICATIONS SO AS TO JUSTIF Y THE SALARY PAYMENT FOR DOING ACCOUNTING WORK. I, THEREFORE, UPHOLD THE DI SALLOWANCE TO THAT EXTENT. HOWEVER, AS REGARDS THE REMAINING PERSONS, I HAVE N OTED THAT THE DISALLOWANCE IS ONLY A PARTIAL DISALLOWANCE AND NO REASONABLE JUSTIFICATION IS GIVEN FOR QUANTIFICATION OF THE DISALLOWANCE. HAVI NG PERUSED THE DETAILS FILED BY THE LEARNED COUNSEL AND BEARING IN MIND THE SUBM ISSIONS MADE BY HIM, I DO AGREE THAT THE BASIS FOR PARTIAL DISALLOWANCE IS MERELY SURMISES AND CONJECTURES SOMETHING WHICH CANNOT MEET A JUDICIA L SCRUTINY. ONCE IT IS ACCEPTED THAT THESE PERSONS HAVE RENDERED THE SERVI CES, AS IS IMPLICITLY ACCEPTED IN THIS CASE, DISALLOWANCE CANNOT BE MADE UNLESS IT IS CLEARLY ESTABLISHED THAT THE PAYMENT IS EXCESSIVE OR UNREAS ONABLE. IN MY CONSIDERED VIEW, THERE IS NO COGENT MATERIAL TO JUSTIFY SUCH A CONCLUSION. IN VIEW OF THESE DISCUSSIONS AND BEARING IN MIND ENTIRETY OF THE CAS E, I UPHOLD THE DISALLOWANCE ONLY TO THE EXTENT OF RS.2,40,000/- AN D THE BALANCE AMOUNT OF DISALLOWANCE OF RS.6,26,000/- IS THUS DELETED. 6. GROUND NO.1 IS THUS PARTLY ALLOWED. 6. I SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE M ATTER THAN THE VIEW SO TAKEN BY ME FOR THE ASSESSMENT YEAR 2012-13. ACCORDINGLY I CONFIRM THE DISALLOWANCE OF RS.84,000/- IN RESPECT OF PAYMENT MADE TO SMT. HARS HABEN G. SONI AND I DELETE THE DISALLOWANCES OF RS.2,40,000/-, RS.90,000/- AND RS. 1,80,000/- PAID TO NILESHBHAI SONI, GIRISHBHAI MANILAL SONI AND ROMIT NILESH SONI RESPECTIVELY. AS REGARDS THE SALARY PAYMENT OF RS.36,000/- TO KISHAN SONI AND RS .84,000/- TO RADHIKA SONI, I FIND NO CONTEMPORANEOUS EVIDENCE OF SERVICES RENDERED BY THESE PERSONS AND I HAVE ALSO NOTED THAT THE PAYMENTS WERE MADE ONLY IN THE FAG END OF THE YEAR. I AGREE WITH THE AUTHORITIES BELOW THAT THERE IS NO REASONABLE E VIDENCE TO SUGGEST RENDITION OF SERVICES BY THESE PERSONS. I, ACCORDINGLY, CONFIRM THE DISALLOWANCE IN RESPECT OF PAYMENTS MADE TO KISHAN SONI AND RADHIKA SONI. TO SUM UP, THE PLEA OF THE ASSESSEE IS UPHELD ONLY TO THE EXTENT OF GRIEVANCE AGAINST DISALLOWANCE OF SALARIES PAID TO NILESHBHAI SONI (RS.2,40,000), GIRISHBHAI M ANILAL SONI (RS.90,000/-) AND ROMIT NILESH SONI (RS.1,80,000). 7. GROUND NO. 1 IS THUS PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PR ONOUNCED IN THE OPEN COURT TODAY ON THE 11 TH DECEMBER, 2018. SD/- PRAMOD KUMAR (VICE PRES IDENT) AHMEDABAD, THE 11 TH DAY OF DECEMBER, 2018 **BT ITA NO. 2470/AHD/2016 MANILAL JETHALAL SONI VS. ITO ASSESSMENT YEAR: 2013-14 PAGE 4 OF 4 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: .....ORDER PREPARED AS PER 4 PAGES MANUSCRIPT OF HONBLE VP...11.12.2018....... .... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: . 11.12.2018........ 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: .. 11.12.2018........ . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 11.12.2018... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : .. 11.12.2018.......... 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER: