Shri Ashwinbhai G.Kukadia, Surat V. The ACIT.,Circle-3, Surat

ITA 2729/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6339 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 21-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 01-10-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAWANSHI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONB LE SHRI A.N.PAHUJA, A.M.) I.T.A. NO. 2729/AHD./2009 ASSESSMENT YEAR : 2006-2007 ASHWINBHAI GOVINDBHAI KUKADIA, SURAT VS- ACIT, CIRCLE-3, SURAT (PAN : ABOPK 8012R) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARDIK VORA, A.R. RESPONDENT BY : SHRI G.S.SOURYAWANSHI, SR.D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 13-07-2009 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II, SUR AT FOR THE ASSESSMENT YEAR 2006-07. 2. GROUND NO.1 IS AGAINST CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS.21,413/- BEING 50% OF ADMINISTRA TIVE EXPENSES. BRIEF FACTS RELATING TO THE CONTROVERSY INVOLVED IN THIS ISSUE ARE THAT IN THE ASSESSMENT ORDER, THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED RS.42,825/- AS ADMINISTRATIVE EXPENSES AS PER SCHEDULE-Q1 ANNEXED WITH AUDIT REPORT. THE AO OBSER VED THAT THE ASSESSEE HAS SHOWN ONLY CRANE HIRING INCOME. DESPITE REPEATED REMINDER S, BOOKS OF ACCOUNTS OR VOUCHERS/BILLS WERE NOT PRODUCED FOR VERIFICATION. THE AO ACCORDINGLY DISALLOWED 50% OF ADMINISTRATIVE EXPENSES AMOUNTING TO RS.42,8 25/-. 3. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.2729/AHD/2009 2 4. WE HAVE HEARD BOTH THE SIDES. ON VERIFICATION OF ADMINISTRATIVE EXPENSES, AS PER SCHEDULE-Q1 ANNEXED WITH AUDIT REPORT FILED WIT H THE RETURN OF INCOME, THE AO NOTICED THAT THE ASSESSEE DEBITED THE FOLLOWING EXP ENSES: (I) COMPUTER EXPENSES RS. 250/- (II) MEMBERSHIP EXPENSES RS. 4,000/- (III) POSTAGE & TELEPHONE RS. 38,575/- TOTAL RS. 42,825/- THE AO DISALLOWED RS.21,413/- BEING 50% OF AFORESAI D EXPENSES OF RS.42,825/-. THE ASSESSEE HAS NOT SUBMITTED BOOKS OF ACCOUNTS OR BIL LS/VOUCHERS FOR VERIFICATION. IN THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE SAID D ISALLOWANCE. AT THE TIME OF HEARING, THE COUNSEL OF THE ASSESSEE PLEADED THAT W HEN THE BOOKS OF ACCOUNTS ARE AUDITED, AD HOC DISALLOWANCE OF RS.21,413/- EITHER BE DELETED OR THE SAME BE REDUCED TO 10% I.E. RS.4,282/-. THE DETAILS OF EXPENDITURE HAVE NOT BEEN FURNISHED BEFORE US. BE THAT IT MAY BE, FOR DEFECT IN VOUCHER, AT THE MO ST, AD HOC DISALLOWANCE OF RS.5,000/- WILL MEET THE ENDS OF JUSTICE. WE ACCORDINGLY RESTR ICT THE DISALLOWANCE TO RS.5,000/- AND DELETE THE BALANCE DISALLOWANCE OF RS.16,413/-. RESULTANTLY, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 5. GROUND NO.2 IS AGAINST CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS.2,71,962/- ON ACCOUNT OF SALARY AND WAGES. TH E FACTS RELATING TO CONTROVERSY INVOLVED IN THIS GROUND ARE THAT IN THE ASSESSMENT ORDER, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN SALARY AND WAGES EXPENSES OF RS. 5,43,924/-. THE ONLY INCOME SHOWN IN THE ASSESSMENT YEAR UNDER APPEAL IS RS.5,5 2,933/- FROM THE BUSINESS OF CRANE HIRING. AS THE ASSESSEE CLAIMED AROUND 99% OF THE I NCOME AS SALARY ADN WAGES EXPENSES, THE AO ASKED THE ASSESSEE TO SUBMIT FULL NAME AND PRESENT POSTAL ADDRESS OF THE EMPLOYEE. IN REPLY, BEFORE THE AO, THE ASSESSEE HAS SUBMITTED XEROX COPIES OF THE SALARY REGISTER. SINCE THE ASSESSEE FAILED TO FURNI SH ADDRESSES OF THE EMPLOYEES AS ASKED FOR, THE AO DISALLOWED 50% OF THE ABOVE EXPEN SES WHICH WORKED OUT TO RS.2,71,962/-. FOR MAKING THIS DISALLOWANCE, THE AO , IN THE ASSESSMENT ORDER STATED THAT NO PRUDENT BUSINESSMAN WILL OUTLAY 99% OF THE INCOME AS SALARY AND WAGES EXPENSES. ITA NO.2729/AHD/2009 3 6. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE CO NTENDED THAT COMPLETE DETAILS OF SALARY AND WAGES WERE GIVEN TO THE AO. NO DEFECT WAS POINTED OUT BY THE AO EITHER IN THE DETAILS OR IN THE SALARY REGISTER SUBMITTED BY THE ASSESSEE. IT WAS FURTHER CONTENDED THAT GENUINENESS OF THE EXPENDITURE COULD NOT BE DOUBTED SIMPLY BECAUSE EXPENSES AMOUNTED TO 99% OF THE RECEIPTS. THE ASSES SEE HAD TO MAKE FIXED PAYMENT OF SALARY TO THE EMPLOYEES, EVEN WHEN, THERE WAS NO WO RK. ALTERNATIVELY, IT WAS PLEADED THAT THE DISALLOWANCE OF 50% OF TOTAL EXPENSES IS O N THE HIGHER SIDE. 6.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LD. CIT(A) OBSERVED THAT BY NO STRETCH OF IMAGINATION I T CAN BE ACCEPTED THAT WHERE THE ASSESSEE HAD ONLY HIRED-OUT CRANE ON RENT, HE WOULD HAVE PAID ALMOST ALL THE RECEIPTS TOWARDS THE EMPLOYEES IN FORM OF SALARY AND WAGES. HE ACCORDINGLY CONFIRMED THE DISALLOWANCE OF RS.2,71,962/-. AGGRIEVED WITH THE A BOVE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE, SHRI HARDIK VORA APPEARED AND PRODUCED THE SALARY REGISTER. FROM THE SALARY REGISTER, HE POINTED OUT THAT IN RESPECT OF ALMOST ALL THE EMPLOYEES, THE ASSESSE E HAS PAID THE PROFESSIONAL TAX WHEREVER APPLICABLE AND ALSO DEDUCTED THE INCOME-TA X. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT-VS- CITY AHMEDABAD SPG. & WVG. MFG. CO. REPORTED IN 207 ITR 427 (GUJ. ) FOR THE PROPOSITION THAT WHEN THERE WAS INCOME AFTER INCURRING THE EXPENSES WAS F OUND TO BE LITTLE OR NEGLIGIBLE, IT CANNOT BE SAID THAT THE EXPENDITURE BECAME AN IMPER MISSIBLE DEDUCTION. ON THE STRENGTH OF THIS JUDGMENT, THE COUNSEL OF THE ASSES SEE POINTED OUT THAT 50% OF SALARY AND WAGES EXPENSES DISALLOWED BE DELETED. ALTERNATI VELY, THE COUNSEL OF THE ASSESSEE PLEADED THAT DISALLOWANCE MADE BY THE AO IS ON THE HIGHER SIDE, IT MAY BE REDUCED TO 10%. 8. ON THE OTHER HAND, SHRI G.S.SOURYAWANSHI, SR.D.R ., APPEARING ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). HE POINTED OUT THAT DETAILS AS CALLED BY THE AO WERE NOT PRODUCED. THER EFORE, THE AO WAS HAVING NO OPTION BUT TO ALLOW REASONABLE SALARY AND WAGES EXP ENSES. THE DISALLOWANCE OF 50% ITA NO.2729/AHD/2009 4 OF SALARY AND WAGES MADE BY THE AO IS FAIR AND REAS ONABLE. THEREFORE, THE SAME BE UPHELD. 9. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT BEF ORE THE AO, THE ASSESSEE HAS FURNISHED MONTHLY SALARY SHEET. IN THE MONTH OF APRIL, 2005 T O NOVEMBER, 2005, IT APPEARS THAT THERE WERE ONLY 4 OR 5 EMPLOYEES. ONLY IN RESPECT O F ONE EMPLOYEE, PROFESSIONAL TAX AND INCOME-TAX WAS DEDUCTED AT SOURCE. IN THE MONTH OF DECEMBER, 2005, THERE WERE 10 EMPLOYEES AND IN RESPECT OF SIX EMPLOYEES, PROFE SSIONAL TAX WAS DEDUCTED AND IN RESPECT OF ONE EMPLOYEE, INCOME-TAX WAS DEDUCTED AT SOURCE. IN THE MONTH OF JANUARY AND FEBRUARY ALSO, THE POSITION OF NUMBER OF EMPLOY EE AND DEDUCTION OF INCOME-TAX AND PROFESSIONAL TAX IS THE SAME AS IN THE MONTH OF DECEMBER, 2005. DESPITE ALL THESE, IT IS PERTINENT TO NOTE THAT THE NAMES AND ADDRESSE S OF THE EMPLOYEES WERE NOT FURNISHED BEFORE THE AO. THE DISALLOWANCE OF 50% OF TOTAL SALARY AND WAGES EXPENSES, LOOKING TO THE FACTS, IN OUR CONSIDERED O PINION, IS ON THE HIGHER SIDE. WE ARE, THEREFORE, OF THE VIEW THAT IT WILL MEET THE ENDS O F JUSTICE, IF DISALLOWANCE IS RESTRICTED TO 10% OF TOTAL EXPENSES I.E. RS.54,392/-. WE, ACCO RDINGLY, CONFIRM THE ADDITION TO THE EXTENT OF RS.54,392/-; AND REMAINING DISALLOWANCE O F RS.2,17,570/- IS DELETED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE COURT ON 24.06.2011 SD/- SD/- (A.N.PAHUJA) (T.K. S HARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24/06/2011 COPY OF THE ORDER IS FORWARDED TO:- (1) THE ASSESSEE (2) THE DEPARTMENT. (3) CIT (A.) CONCERNED. (4) CIT CONCERNED. (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AH MEDABAD. TALUKDAR/ SR. P.S.