DCIT, New Delhi V. Shri Pawan Gupta, New Delhi

ITA 2791/DEL/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0053 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 01-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: TARANJEET SINGH BHATIA
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND SHRI J.SUDHAKAR REDDY, AM ITA NO: 2791 /DEL/20 1 2 A.Y.: 200 8 - 09 DY.CIT, CIRCLE 26(1) VS. SH. PAWAN GUPTA D 9, VIKAS BHAWAN 4 B/5, TILAK NAGAR NEW DELHI NEW DELHI PAN: ADKPG 6797 K (APPELLANT) (RESPONDENT) A SSESSEE BY : SH. TARANJEET SINGH BHATIA, C.A. REVENUE BY : SH. VIKRAM SAHAY, SR.D.R. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) - X XIV, NEW DELHI DT. 27.3.2012 PERTAINING TO THE ASSESSMENT YEAR ( A.Y. ) 200 8 - 09 . 2. FACTS IN BRIEF: - THE FACTS OF THE CASE ARE BROUGHT OUT AT PARA 2 OF THE ORDER OF THE LD.CIT(A), WHICH IS EXTRACTED FOR READY REFERENCE. 2. RETURN OF INCOME WAS FILED ON 30.09.2008 DECL ARING INCOME AT RS.84,31,980 / - . A SURVEY WAS CONDUCTED U/S. 133A OF THE I T. ACT ON 07.03.2008 BY ADIT, INVESTIGATION UNIT - V I , NEW DELHI AT THE BUSINESS PREMISES OF THE ASSESSEE DURING WHICH VARIOUS DISCREPANCIES WERE NOTICED BY THE SURVEY TEAM. THE CASE W AS SELECTED FOR SCRUTINY AND STATUTORY NOTICE U/S.143(2) WERE ISSUED AND SERVED UPON THE APPELLANT. THE APPELLANT IS THE PROPRIETOR OF A DIAGNOSTIC CENTRE RUNNING IN THE NAME AND STYLE OR M / S. STAR IMAGING & PATH LAB AT TILAK NAGAR, NEW DELHI AND OTHER PLACES IN DELHI. AFTER CALLING FOR VARIOUS DETAILS AND EXAMINATION OF BOOKS OF ACCOUNTS, BILLS AND VOUCHERS OF ALL EXPENSES CLAIMED, THE AO MADE FOLLOWING ADDITIONS TO THE INCOME OF THE APPELLANT : ITA 2791 /DEL/201 2 AY: 200 8 - 09 PAWAN GUPTA 2 (A) R S.2,96,294/ - ON ACCOUNT OF DIFFERENCE IN CASH FOUND AND CASH AS PER BOOKS. (B) RS.11,64,078/ - BEING 10% OF EXPENSES CLAIMED UNDER THE HEAD 'SALARY PAID'. (C) RS.1,11,344/ - BEING 10% OF EXPENSES ON RENOVATION OF BUILDING. (D) RS.5,93,602/ - BEING 10% OF EXPENSES ON REPAIRS AND MAINTENANCE. (E) RS.3,30,925/ - BEING 1/6TH OF EXPENSES DEBITED TO P&L A/C. UNDER THE HEAD STAFF WELFARE, POSTAGE AND TELEPHONE, MISCELLANEOUS EXPENSES AND TRAVELLING EXPENSES FOR PERSONAL USAGE. 2 .1. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE FIRST APPELLATE AUTHORITY HAS GRANTED PART RELIEF. 2.2. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS. I) ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE, THE LD CIT(A) ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE ADDITION OF RS.2,96,294/ - MADE BY THE AO ON A / C OF UNEXPLAINED CASH BY IGNORING THE FACTS STATED IN THE ASSESSMENT ORDER. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD CIT(A) ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE ADDITION OF RS.11 ,64, 0 78/ - MADE BY THE AO ON A / C OF EXCESS PAYMENT OF SALARY AND BONUS BY IGNORING THE FACTS STATED IN THE ASSESSMENT ORDER. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE ADDITION OF RS.1, 11,344/ - MADE BY THE AO ON A / C OF RENOVATION EXPENSES IN SPITE OF T H E FACT THAT DURING THE COURSE OF SURVEY, IT WAS NOTICED THAT SOME EXPENSES WERE INCURRED IN CASH OUTSIDE THE BOOKS OF ACCOUNTS. (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE ADDITION OF RS.5,93,602/ - MADE BY THE AO ON A / C OF REPAIR AND MAINTENANCE EXPENSES BY IGNORING THE FACTS STATED BY THE AO REGARDING INCREASE IN THE TURNOVER AND LACK OF PROPORTIONATE INCREASE IN NET PROFIT OF THE ASSESSEE. (V) THE APPELLANT CRAVES THE RIGHT TO ADD ANY OTHER GROUND(S) OF APPEAL DURING THE COURSE OF HEARING OF THIS APPEAL. 3. WE HAVE HEARD SH. VIKRAM SAHAY, LD.SR.D.R. ON BEHALF OF THE REVENUE AND SHRI TARANJEET SINGH BHATIA, LD.COUNSEL FOR THE ASSESSEE. ITA 2791 /DEL/201 2 AY: 200 8 - 09 PAWAN GUPTA 3 4. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ORDERS OF AUTHORITIES BELOW, MATERIAL ON RECORD AND CASE LAWS CITED, WE HOLD AS FOLLOWS 5 . GROUND NO.1 IS GENERAL IN NATURE. 6 . GROUND NO.2 IS AGAINST THE DELETION OF AN ADDITION OF RS.2,96,294/ - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH. DURING THE COURSE OF SURVEY THE CASH ON HAND AS PER THE BOOKS WAS RS.23,36,547/ - AND WHERE AS THE ACTUAL CASH PHYSICALLY FOUND WAS RS.17,33,117/ - . THE DIFFERENCE WAS ADDED BY THE AO FOR THE REASON THAT SALARY PAID DURING THAT PERIOD AMOUNTED TO RS.8,99,671/ - AND THE ASSESSEE FAILED TO E XPLAIN THE DIFFERENCE OF RS.2,96,294/ - I.E. (RS.8,99,671 RS.6,03,377). THE ASSESSEE S CASE WAS THAT DISBURSEMENT OF SALARIES WERE BEING CARRIED OUT WHEN THE INVESTIGATING TEAM ARRIVED AND STOPPED THE SAME. IT WAS SUBMITTED BY THE TIME OF SUCH STOPPAGE , ONLY AN AMOUNT OF RS.6,03,377/ - WAS DISBURSED AND THE BALANCE OF RS.2,96,294/ - WAS DISBURSED ON THE NEXT DAY I.E. 8 TH MARCH I.E. AFTER THE SURVEY TEAM LEFT THE PREMISES. THE LD.CIT(A) DELETED THE ADDITION BY ACCEPTING THIS EXPLANATION. WE FIND NO INF IRMITY IN THE SAME. HENCE WE UPHOLD THE FINDING OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROUND OF REVENUE. 7. GROUND NO.2 IS AGAINST DELETION OF AN ADDITION OF RS.11,64,078/ - ON THE GROUND THAT THERE IS EXCESS PAYMENT OF SALARY AND BONUS. THE D ISALLOWANCE WAS MADE ON ADHOC BASIS. THE FIRST APPELLATE AUTHORITY HAS ITA 2791 /DEL/201 2 AY: 200 8 - 09 PAWAN GUPTA 4 DEALT WITH THIS ISSUE AT PARA 5 PAGE 4 AND 5 OF HIS ORDER . AT PARA 5 HE HELD AS FOLLOWS: 5. THE SECOND ADDITION PERTAINS TO A BLANKET DISALLOWANCE OF 10% OF ALL EXPENSES CLAIMED UNDER THE HEAD 'SALARI ES AND BONUS', SALARY BEING RS.1, 02,94,238 / - AND BONUS BEING RS.13,46,543/ - , TOTALING UPTO RS.L,16,40,781/ - . THE AO DISALLOWED 10% OF THE TOTAL AMOUNT, I.E. RS.L1 ,64,078/ - ON THE GROUNDS THAT THE APPELLANT HAD FALSELY BOOKED AND INFL ATED THE EXPENSES UNDER THE HEAD SALARY AND BONUS TO REDUCE THE TAX INCIDENCE ON THE DIAGNOSTIC CENTRE. THE AO HAS MENTIONED THAT DURING THE COURSE OF SURVEY OPERATION, IT WAS FOUND FROM THE SALARY PAID ACCOUNT THAT THE APPELLANT HAD CLAIMED SALARY IN THE NAME OF FOLLOWING FOUR PERSONS : (A) SMT. DIMPLE BHARDWAJ (RS.L,35,000 / - ); (B) MS. RUMI AGARWAL (RS.L,29,600 / - ); ( C) MS. SWETA GUPTA (RS.3,60,000/ - ) AND (D) MS. SANGEETA BAWA (RS.79,200 / - ). THE AO HAS NOTED THAT THE NAMES OF THESE PERSONS WERE NEITHER REF LECTED IN THE MANUAL ATTENDANCE REGISTER, NOR WERE THEY FOUND PRESENT IN THE PREMISES DURING THE SURVEY. ON BEING ASKED TO CLARIFY, THE APPELLANT SUBMITTED THAT THE NON - AVAILABILITY OF THE EMPLOYEES MIGHT JUST BE A CO - INCIDENCE. THE AO REFUTED THIS ARGUMEN T BY QUOTING FROM THE STATEMENT OF SH. ALOK BHARDWAJ, S/O. SH. GOPINATH SHARMA, WHOSE STATEMENT WAS RECORDED BY THE SURVEY TEAM AND WHO WAS WORKING THERE IN THE CAPACITY OF SENIOR MANAGER, BUSINESS DEVELOPMENT AND CUSTOMER OPERATION'S SINCE JUNE 2007 AT A SALARY OF RS.30,000 / - PER MONTH. THE SURVEY TEAM RECORDED THE STATEMENT OF MR. BHARDWAJ WHOSE WIFE SRNT . DIMPLE BHARDWAJ WAS TAKING HOME A SALARY OF RS.15,000 / - PER MONTH. WHEN CONFRONTED, SH. ALOK BHARDWAJ ACCEPTED THAT IT WAS BEING DONE AT HIS INSISTENCE AS A MEASURE OF TAX PLANNING, SINCE, HE WAS EMPLOYED BY THE DIAGNOSTIC CENTRE AT A SALARY OF RS.45,000 / - PER MONTH. ON THIS BASIS, THE AO DISALLOWED 10% OF SALARY AND BONUS EXPENSES ACROSS THE BOARD ON ESTIMATE BASIS AMOUNTING TO RS.11, 64,078 / - . ON THE O THER HAND, THE APPELLANT EXPLAINED THAT THREE OF THE EMPLOYEES NAMELY MS. RUMI AGARWAL, MS. SWETA GUPTA AND MS. SANGEETA BAWA WERE NOT AN EMPLOYEE OF STAR IMAG I NG AND PATH LAB, BUT WERE EMPLOYEES OF ITS SISTER CONCERN M/S. JANTA X - RAY CLINIC. MS.RU MI AGAR WAL WAS WORKING THERE AS AN OFFICE EXECUTIVE, MS. SWETA GUPTA AS SENIOR SUPERVISOR AND MS. SANGEETA BAWA AS RECEPTIONIST. THE SALARY PAID TO THEM WAS BEING BOOKED AND DULY REFLECTED IN THE ACCOUNTS OF M/S. JANTA X - RAY CLINIC. AS REGARDS, SMT. DIMPLE BHARDW AJ, THE STATEMENT OF SH. ALOK BHARDWAJ WAS SELF EXPLANATORY AND NO INFLATION OF EXPENSES UNDER THE HEAD SALARY AND BONUS WAS BEING CARRIED OUT BY THE APPELLANT. I HAVE ITA 2791 /DEL/201 2 AY: 200 8 - 09 PAWAN GUPTA 5 GIVEN CAREFUL CONSIDERATION TO THE ARGUMENTS OF BOTH THE A O AS WELL AS THE APPELLANT. TH E FACT THAT THREE OUT OF FOUR LADY EMPLOYEES MENTIONED IN THE SURVEY REPORT WERE NOT WORKING FOR THE APPELLANT, BUT FOR ITS SISTER CONCERN M / S. J ANTA X - RAY CLINIC, HAS NOT BEEN DISPUTED, COUNTERED OR REBUTTED BY THE A O . AS REGARDS THE SALARY PAID TO SMT. D IMPLE BHARDWAJ, IT APPEARS TO BE AN INTERNAL ARRANGEMENT WORKED OUT BY THE SENIOR MANAGER OF THE CENTRE SH. ALOK BHARDWAJ FOR HIS PERSONAL BENEFIT. NO CASE CAN BE MADE OUT FOR BOOKING OF BOGUS EXPENSES ON THIS COUNT AND ACTION IF ANY, SHOULD BE TAKEN BY TH E A O OF SH. ALOK BHARDWAJ. THE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS OF THE APPELLANT ARE AUDITED BY A CHARTERED ACCOUNTANT AND NO OTHER DISCREPANCY HAS BEEN POINTED OUT BY THE A O IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. THE A O HAS NOT RESORTED TO THE PR OVISIONS OF SECTION 145(3) OF THE ACT TO REJECT THE BOOKS OF ACCOUNTS OF THE APPELLANT. UNDER SUCH CIRCUMSTANCES. MAKING AN AD - HOC DISALLOWANCE OF 10% OUT OF ALL SALARIES AND BONUS EXPENSES DOES NOT APPEAR JUSTIFIED. THE ADDITION OF RS.11, 64,078/ - IS THERE FORE DELETED. 7.1. THE LD.SR.D.R. COULD NOT CONTROVERT THIS FACTUAL FINDINGS OF THE FIRST APPELLATE AUTHORITY. HENCE WE DO NOT FIND ANY INFIRMITY IN THE SAME. THUS WE DISMISS GROUND NO.2 OF THE REVENUE. 8. GROUND NO.3 IS ON THE ISSUE OF DISALLOWANCE OF RENOVATION EXPENSES ON AN ADHOC BASIS. THE LD.CIT(A) DIRECTED THE AO TO VERIFY WHETHER THE RENOVATION EXPENSES IN QUESTION WERE CAPITALISED BY THE ASSESSEE OR NOT. IF A PARTICULAR EXPENDITURE HAS BEEN CRYSTALLISED, THE QUESTION OF AN ADHOC DISALLOWANC E AND ADDITION TO THE TAXABLE INCOME DOES NOT ARISE. THUS WE DISMISS THIS GROUND OF REVENUE. 9. GROUND NO.4 IS AGAINST THE DELETION OF AN ADDITION OF RS.5,93,602/ - MADE BY THE AO ON ACCOUNT OF REPAIRS AND MAINTENANCE EXPENSES HERE ALSO AN ADHOC DISALLOWAN CE OF 10% HAS BEEN MADE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE FIRST APPELLATE AUTHORITY OBSERVED THAT NO ITA 2791 /DEL/201 2 AY: 200 8 - 09 PAWAN GUPTA 6 PARTICULAR DEFECTS ARE POINTED OUT IN THE BOOKS OF ACCOUNTS AND UNDER THOSE CIRCUMSTANCES THE BOARD DISALLOWANCE OF 10% FROM ALL REP AIRS AND MAINTENANCE EXPENSES DEBITED TO THE PROFIT AND LOSS A/C CANNOT BE UPHELD. WE FIND NO INFIRMITY IN THESE FINDINGS. IN THE RESULT GROUND NO.4 IS DISMISSED. 10. GROUND NO.5 IS GENERAL IN NATURE. 11. IN THE RESULT, THE REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MAY, 2015 . SD/ - SD/ - ( G.C.GUPTA ) (J.SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER DATED: THE 22 ND MAY, 2015 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR