DCIT Cir -3, Pune V. Shri Brijmohan Bhutada, Pune

ITA 372/PUN/2012

• Counselvise Citation: 37224514 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 24-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Assessee Lawyers: V L JAIN
• Keywords: Business income; Fair market value; Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 372 / P N/ 20 1 2 ASSESSMENT YEAR : 2008 - 09 DY. COMMISSIONER OF INCOME TAX, CIRCLE - 3, PUNE VS. SHRI BRIJMOHAN BHUTADA, PROP. OF M/S. ALOK FABRICATION, 109, NATIONAL HOUSING SOCIETY, BANER ROAD, AUNDH, PUNE (APPELLANT) (RESPONDENT) PAN NO. AARPB9102B REVENUE BY: SHRI P.L. PATHADE ASSESSEE BY: SHRI V.L. JAIN DATE OF HEARING : 21 - 1 1 - 2013 DATE OF PRONOUNCEMENT : 30 - 12 - 2013 ORDER PER R.S . PADVEKAR , JM : - THIS APPEAL IS FILED BY THE R EVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - I I, PUNE DATED 30 - 11 - 2011 FOR THE A.Y. 2008 - 09. THE REVENUE HAS TAKEN THE MULTIPLE GRO UNDS BUT THE FOLLOWING ARE THE EFFECTIVE GROUNDS: 1. (3). THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN DELETING THE DISALLOWANCE OF RS.11,29,195/ - MADE U/S 40A(2) ON ACCOUNT OF EXCESS PAYMENT OF COMMISSION MADE BY THE ASSESSEE TO HIS SO N WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT FURNISHED ANY DETAILS REGARDING THE QUALIFICATION OF HIS SON, WORK CARRIED OUT BY HIM FOR WHICH COMMISSION WAS PAID DURING THE ASSESSMENT PROCEEDINGS ETC. 2. (6). THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN DELETING THE DISALLOWANCE OF RS.19,80,000/ - MADE U/S 40A(2) ON ACCOUNT OF EXCESS PAYMENT OF SALARY MADE BY THE ASSESSEE TO HIS SON AND DAUGHTER - IN - LAW WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT FURNISHED ANY DETA ILS REGARDING THEIR QUALIFICATIONS, WORK CARRIED OUT BY THEM FOR WHICH SALARY WAS PAID DURING THE ASSESSMENT PROCEEDINGS ETC. 2 ITA NO. 372/PN/2012, SHRI BRIJMOHAN BHUTADA, PUNE 2. THE BRIEFLY STATED FACTS ARE AS UNDER. THE ASSESSEE I S AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF INDUSTRIAL FABRICATION A ND IS RUNNING THE BUSINESS UNDER THE NAME AND STYLE OF M/S. ALOK FABRICATION. THE ASSESSEE IS SPECIALIZED IN THE FABRICATION WORK FOR CHEMICAL TANKS, PRESSURIZED TANKS, PETROLEUM TANKS AND OTHER ENGINEERING CAPITAL GOODS AND IS RUNNING HIS BUSINESS ACTIVI TY FORM W - 124, BHOSARI MIDC, BHOSARI, PUNE. THE ASSESSEE HAS FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,72,72,500/ - AND ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT. IT HAS OBSERVED BY THE ASSESSING OFFICER THAT DURING T HE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.13,61,705/ - UNDER THE HEAD COMMISSION TO THE PROFIT AND LOSS ACCOUNT AND THE SAME WAS FOUND BY THE ASSESSING OFFICER TO HAVE BEEN PAID TO THE ASSESSEES SON SHRI BIJOY BRIJMOHAN BHUTADA. I T IS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT AS NO DETAILS REGARDING THE QUALIFICATION AND NATURE OF THE WORK WERE SUBMITTED T HE ASSESSING OFFICER HELD THAT THE SAID PAYMENT IS ON A HIGHER SIDE AND, THEREFORE, RESTRICTED THE COMMISSION TO 1% OF THE TOTAL TURNOVER OF RS.2,21,80,573, WHICH WORKED TO RS.2,21,805/ - AND THE DIFFERENCE OF RS.11,39,900/ - WAS DISALLOWED AND ADDED TO THE TOTAL INCOME U/S 40A(2)(B) OF THE INCOME - TAX ACT, 1961. THE OTHER DISALLOWANCE IS IN RESPECT OF SALARY PAYMENT TO THE ASSE SSEES SON BIJOY BRIJMOHAN BHUTADA AND THE DAUGHTER - IN - LAW VANDANA B. BHUTADA OF RS. 19,80,000/ - U/S 40A(2)(A) . AS NOTED BY THE ASSESSING OFFICER THE ASSESSEE HAD NOT SUBMITTED ANY DETAILS OF QUALIFICATION AND NATURE OF WORK AND DETAILS OF THE SAID PERSONS DURING THE ASSESSMENT PROCEEDINGS. 3. THE ASSESSEE CHALLENGED THE SAID ADDITION BEFORE THE LD. CIT(A) IN RESPECT OF THE ADDITION ON ACCOUNT OF ALLEGED EXCESS PAYMENT OF COMMISSION OF RS.11,29,195/ - . THE LD. CIT(A) HAS OBSERVED THAT DURING 3 ITA NO. 372/PN/2012, SHRI BRIJMOHAN BHUTADA, PUNE THE ASSESSME NT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT AN AMOUNT OF RS.13,61,705/ - UNDER THE HEAD COMMISSION WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT. IT IS ALSO OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD PAID AN AMOUNT OF RS.13,51,000/ - OUT OF TH E TOTAL COMMISSION DEBITED TO THE PROFIT AND LOSS ACCOUNT TO HIS SON SHRI BIJOY BRIJMOHAN BHUTADA. THE ASSESSING OFFICER HELD THAT THE PAYMENT OF COMMISSION WAS ON A HIGHER SIDE AS GENERALLY COMMISSION IS PAID @ 0.5% TO 1% OF THE TOTAL SALES EFFECTED BY A PERSON. THE ASSESSEE HAD ALSO NOT FURNISHED ANY DETAILS REGARDING THE QUALIFICATION OF THE ASSESSEES SON AND THE NATURE OF WORK FOR WHICH THE SAID COMMISSION WAS PAID. THE ASSESSING OFFICER, THEREFORE, RESTRICTED THE COMMISSION TO 1% OF THE TOTAL TURNO VER WHICH WAS TAKEN AT RS.2,21,80,573/ - , WHICH WORKED OUT TO RS.2,21,805/ - AS AGAINST RS.13,61,705/ - AND THUS THE DIFFERENCE OF RS.11,39,900/ - WAS DISALLOWED AND ADDED TO THE TOTAL INCOME. 4. THE ASSESSEE CARRIED SAID ISSUE BEFORE THE CIT(A). THE LD. C IT(A) HAS DISMISSED THIS ISSUE AS UNDER. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA 3(A) OF THE ASSESSMENT ORDER. IN THIS REGARD THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS TAKEN THE TOTAL TURNOVER OF RS.2,21,80,573/ - WHEREAS TH E ACTUAL TOTAL NET TURNOVER WAS RS.8,56,41,521/ - . IT IS CONTENDED BY THE ASSESSEE WITH RESPECT TO THE TURNOVER ON VERIFICATION IS FOUND TO BE CORRECT AND, THEREFORE, AGAINST THE FIGURE OF COMMISSION ALLOWED OF RS.2,21,805/ - , THE ASSESSING OFFICER SHOULD H AVE TAKEN RS.8,56,415/ - , AND THIS FIGURE SHOULD HAVE BEEN REDUCED FROM THE TOTAL COMMISSION PAID OF RS.13,61,705/ - . THUS THE DISALLOWANCE WOULD BE WORKED OUT TO (RS.13,61,705 RS.8,56,415) RS.5,05,290/ - AS AGAINST RS.11,39,900/ - ON THE BASIS OF THE WORKI NG DONE BY THE ASSESSING OFFICER TAKING THE COMMISSION @ 1%. 5. AFTER CONSIDERING THE ASSESSEES SUBMISSION THE LD. CIT(A) DELETED THE ADDITION. THE REASONS AND FINDINGS OF THE LD. CIT(A) ARE AS UNDER: 4 ITA NO. 372/PN/2012, SHRI BRIJMOHAN BHUTADA, PUNE 3.5. I HAVE CONSIDERED THE SUBMISSION AND ALSO TH E MATERIAL FACTS BROUGHT ON RECORD. THE A.O. HAS NOT DOUBTED THE GENUINENESS OF PAYMENT MADE BY THE APPELLANT AS COMMISSION TO HIS SON BIJOY BHUTADA. THE A.O. HAS DISALLOWED THE COMMISSION AMOUNTING TO RS.11,39,900/ - INVOKING THE PROVISIONS OF SECTION 40 A(2) OF THE I.T. ACT. SECTION 40A(2)(A) PROVIDES AS FOLLOWS: SEC. 40A (2) (A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB - SECTION, AND THE OFFICER IS O F OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERI VED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. THE SCOPE OF THE SECTION HAS BEEN SET OUT IN THE CIRCULAR OF CBDT NO. 6P DATED 06.07.68. THEREFO RE, UNDER THE PROVISIONS OF SECTION 40A(2), THE A.O. CAN DISALLOW ONLY THAT PORTION OF THE TOTAL EXPENDITURE WHICH IN HIS OPINION IS EXCESSIVE OR UNREASONABLE. IN THE CASE OF VOLTAMP TRANSFORMERS P. LTD. VS CIT (1981) 129 ITR 105 (GUJ) IT WAS HELD THAT REA SONABLENESS IS TO BE DECIDED ON THE BASIS OF THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES. THE REASONABLENESS OF ANY EXPENDITURE IS TO BE SEEN FROM THE VIEW POINT OF THE BUSINESSMAN AND NOT FROM THE VIEW POINT OF THE REVENUE AUTHORITIES. IN C ONSIDERING THE SCOPE OF REASONABLENESS THEIR LORDSHIP IN CIT VS GANGADHAR BANNERJEE & CO. P. LTD. (1965) 57 ITR 176 (SC) OBSERVED: 'THOUGH THE OBJECT OF THE SECTION IS TO PREVENT EVASION OF TAX, THE PROVISION MUST BE WORKED NOT FROM THE STANDPOINT OF THE T AX COLLECTOR BUT FROM, THAT OF A BUSINESS MAN. THE INCOME - TAX OFFICER MUST TAKE AN OVERALL PICTURE OF THE FINANCIAL POSITION OF THE BUSINESS. HE SHOULD PUT HIMSELF IN THE POSITION OF THE PRUDENT BUSINESSMAN OR THE DIRECTOR OF THE COMPANY AND DEAL WITH THE PROBLEM WITH A SYMPATHETIC AND OBJECTIVE APPROACH. THE FACT IN THE PRESENT CASE POINTS TO THE TREMENDOUS JUMP OF NEARLY 4 TIMES THE SALES OF LAST YEAR IN SALES OF THE PROPRIETARY CONCERN SINCE THE TIME THE APPELLANT'S SON TOOK OVER THE MANAGEMENT OF THE BUSINESS. THIS IS ALSO NOT A CASE WHERE THE APPELLANT'S SON HAS CLAIMED ANY EXTRA EXPENDITURE TO REDUCE THE TAX LIABILITY AS IT IS SEEN THAT THE COMMISSION RECEIVED WAS DULY OFFERED FOR TAXATION IN THE INDIVIDUAL HAND AND HAS BEEN SUBJECTED TO BOTH INCOME - TAX AND SERVICE - TAX. THE A.O. HAS ALSO NOT GIVEN ANY FINDING IN VIEW OF THE PROVISIONS OF THE ACT AS TO WHAT IS EXCESSIVE OF THE REASONABLENESS OF THE EXPENDITURE HAS TO BE JUDGED HAVING REGARD TO THE FAIR MARKET VALUE OF GOODS, SERVICES OR FACILITIES FOR WHICH PAYMENT IS MADE, THE LEGITIMATE 5 ITA NO. 372/PN/2012, SHRI BRIJMOHAN BHUTADA, PUNE NEEDS OF THE BUSINESS AND THE BENEFIT DERIVED BY OR ACCRUING TO THE TAXPAYER FROM THE EXPENDITURE. THE A.O. HAS NOT BROUGHT ON RECORD ANY SUCH FINDING REGARDING THE LEGITIMATE NEED OF THE BUSINESS. THE CASE LAW OF BANG ALORE ITAT CITED BY THE APPELLANT IN THE CASE OF S.K. ENGINEERING VS JCIT (SUPRA), IT HAS BEEN HELD AS UNDER: 'IT WOULD BE CLEAR FROM THE ABOVE CIRCULAR THAT THE REASONABLENESS OF THE EXPENDITURE HAS TO BE JUDGED HAVING REGARD TO (A) THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE, (B) THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION, (C) THE BENEFIT DERIVED BY OR ACCRUING TO THE TAXPAYER FROM THE EXPENDITURE. THESE THREE ARE ALTERNATIVE TESTS AND THE SAME DO NOT N ECESSARILY PROHIBIT CONSIDERATION OF OTHER CIRCUMSTANCES. . . . THE ASSESSING OFFICER MUST ESTABLISH THAT THE PAYMENT IS EXCESSIVE OR UNREASONABLE. THE INCOME - TAX OFFICER CANNOT PROCEED MERELY ON THE BASIS OF SURMISES AND CONJECTURE S. THE REVENUE HAS TO PLACE ON RECORD EVIDENCE AS REGARDS EXCESSIVENESS OR UNREASONABLENESS. IN OUR OPINION, THIS APPROACH IS NOT CORRECT. THERE IS NO PRESUMPTION THAT WHATEVER WAS PAID IN EARLIER YEARLY BECOMES REASONABLE AND ANYTHING IN EXCESS BECOMES UN REASONABLE. THERE MAY BE SEVERAL REASONS THAT THE ASSES - SEE MAY PAY LOWER COMMISSION IN THE INITIAL YEARS. HOWEVER, THE FINDING, WHICH IS REQUIRED, IS WHAT IS THE REASONABLENESS OR EXCESSIVENESS FOR THE YEAR UNDER APPEAL. LOOKING TO THE BACKGROUND OF SHRI SHARMA AND THE NATURE OF SERVICES RENDERED BY HIM, WE FIND THAT PAYMENT OF COMMISSION AT 21/2 PER CENT CANNOT BE CONSIDERED AS EXCESSIVE OR UNREASONABLE. 3.6. IN VIEW OF THE ABOVE FACTS AND THE RATION OF THE JUDICIAL DECISION THE DISALLOWANCE MADE BY THE A.O. IS LIABLE TO BE DELETED AND GROUND NO. 1 RAISED BY THE APPELLANT IS ALLOWED. NOW THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. IN THIS CASE THE ISSUE IN CONTROVERSY IS IN RESPECT OF AMOUNT OF THE COMMISSION OF RS. 13,61,705/ - WHICH WAS PAID BY THE ASSESSEE TO HIS SON SHRI BIJOY B. BHUTADA . I N THE OPINION OF THE ASSESSING OFFICER 6 ITA NO. 372/PN/2012, SHRI BRIJMOHAN BHUTADA, PUNE THE SAID COMMISSION WAS AT VERY HIGHER SIDE CONSIDERING FAIR MARKET VALUE OF HIS SERVICES WITHIN THE MEANI NG OF SEC.40A(2)(B) OF THE INCOME - TAX ACT. TH E ASSESSING OFFICER ESTIMATED THE COMMISSION @ 1% OF THE TOTAL TURNOVER AS R EASONABLE COMMISSION WHICH IS WORKED OUT AT RS.2,21,805/ - AND AFTER ALLOWING THE SAID AMOUNT MADE THE DISALLOWANCE OF RS.11,39,900/ - T REATING THE SAME AS BEYOND THE FAIR MARKET VALUE OF THE SERVICES RENDERED. WHEN THE MATTER REACHED BEFORE THE LD. CIT(A) THE REFERENCE TO THE DECISION OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF VOLTAMP TRANSFORMERS P. LTD. VS CIT 129 ITR 105 (GUJ ) WAS MADE FOR THE PURPOSE OF THE INTERPRETATION OF THE EXPRESSION REASONABLENESS OF ANY PAYMENT AFTER CONSIDERING THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES. WE FIND THAT THE ASSESSEES SON I S FULL TIME INVOLVED IN THE BUSINESS AND IT I S NOT DISPUTED BY THE ASSESSING OFFICER. IT IS THE EXPLANATION OF THE ASSESSEE IS THAT THE TURNOVER OF THE ASSESSEE COMPANY DURING THE LAST 20 YEARS WAS WITHIN THE RANGE OF RS. 50 THOUSAND TO RS. 3 LACS BUT DURING THE F INANCIAL Y EAR RELEVANT TO THE ASSESSME NT YEAR 2008 - 09 , THE ASSESSEES SON PUT HIS EFFORTS FOR ACHIEVING MAJOR ORDERS FROM THE VERY RENOWNED AND REPUTED COMPAN IES LIKE CIPLA LIMITED, GEICO PAINT SHOP INDIA PVT. LTD., RELIANCE RETAIL LIMITED AND SHREE RENUKA SUGAR INDUSTRIES LIMITED. IT IS ALSO EXPLAINED BY THE ASSESSEE THAT CONSIDERING THE EFFORTS TAKEN BY THE ASSESSEES SON HE WAS COMPENSATION BY PAYING COMMISSIONS AT THE RATE OF 1.5 8 % OF NET SALES OF RS.8.56 CRORES (AFTER REDUCING VAT AND TAXES) AND ASSESSEES SON HAS OFFERED THE SA ID COMMISS ION AS HIS INCOME IN HIS RETURNS. THE LAW IS WELL SETTLED ON WHAT IS REASONABLENESS VIS - - VIS FAIR MARKET VALUE THE BURDEN IS ON ASSESSING OFFICER TO DEMONSTRATE BY GIVING THE FACTS AND FIGURES HOW THE COMMISSION PAID BY THE ASSESSEE IS NOT REASONABLE. M OREOVER THE ASSESSEE HAS PUT THE FIGURES AND THE FACTS SUPPORTING THE PAYMENT OF THE COMMISSION TO HIS SON . W E FIND THAT THE ASSESSING OFFICER HAS RESTRICTED PAYMENT OF COMMISSION WITHOUT ANY SUPPORTING 7 ITA NO. 372/PN/2012, SHRI BRIJMOHAN BHUTADA, PUNE MATERIAL THE COMMISSION @ 1% , WHICH IN OUR OPINION H E IS NOT AS PER THE SPIRIT AND OBJECT OF SEC. 40A(2)(B) OF THE ACT. IN OUR OPINION , THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. WE, ACCORDINGLY, CONFIRM THE SAME. IN THE RESULT, GROUND NO. 3 IS DISMISSED. 7. NOW WE TAKE UP THE SECOND ISSUE THAT IS THE ALLEGED EXCESS PAYMENT OF SALARY OF RS.19,80,000/ - TO THE ASSESSEES SON AND DAUGHTER - IN - LAW WHICH WAS DISALLOWED U/S 40A(2). DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAD P AID AN AMOUNT OF RS.26,40,000/ - AND RS.6,00,000/ - TO SHOW SHRI BIJOY B. BHUTADA, SON AND THE DAUGHTER - IN - LAW SMT. VANDANA B. BHUTADA. THE ASSESSING OFFICER HELD THAT AS ASSESSEE HAS NOT SUBMITTED ANY DETAILS REGARDING THE QUALIFICATION OF THE RELATIVES, N ATURE OF DUTIES AND WORK DONE, THE EXPENDITURE CLAIMED AS SALARY WAS NOT EXCESSIVE AND UNREASONABLE. THEREFORE, THE ASSESSING OFFICER HELD THAT A MONTHLY SALARY OF RS.75,000/ - P.M. TO THE SON OF THE ASSESSEE AND RS.30,000/ - P.M. TO THE DAUGHTER - IN - LAW WAS FAIR AND REASONABLE AND THE SAME WORKED OUT TO RS.12,60,000/ - AND OUT OF THE TOTAL EXPENDITURE OF RS.32,40,000/ - THE REMAINING AMOUNT OF RS.19,80,000/ - WAS DISALLOWED AND ADDED TO THE TOTAL INCOME U/S 40A(2) OF THE ACT. THE ASSESSEE CARRIED THE ISSUE BEF ORE THE LD. CIT(A) AND LD. CIT(A) DELETED THE SAID ADDITION. THE REASONS AND FINDINGS OF THE LD. CIT(A) ARE AS UNDER: 4.2. I HAVE CONSIDERED THE SUBMISSION AND PERUSED MATERIAL ON RECORD. MERELY BECAUSE A PAYMENT IS MADE TO A RELATED PERSON, IT CANNOT BE UNDERSTOOD AS BEING NON - GENUINE OR THAT IT IS EXCESSIVE OR UNREASONABLE. SECTION 40A(2) AUTHORIZED DISALLOWANCE OF WHAT IS EXCESSIVE OR UNREASONABLE IN RESPECT OF PAYMENT TO RELATED PERSONS. BUT A PAYMENT CANNOT BE ASSUMED TO BE EXCESSIVE MERELY BECAUSE T HE NET PROFIT FOR THE YEAR IS LESS THAN THE PREVIOUS YEARS OR FOR THAT MATTER ANY OTHER REASON EXCESSIVENESS OR UNREASONABLENESS HAS TO BE JUDGED W.R.T. THE WORK DONE BY THE EMPLOYEE IN RESPECT OF SALARY AND NOT W.R.T. THE PROFITS OF THE BUSINESS. THE VERY FACT THAT THERE HAS BEEN A VISIBLE QUANTUM JUMP IN THE TURNOVER OF THE APPELLANT'S BUSINESS BEARS TESTIMONY TO THE EFFORTS PUT IN BY SHRI BIJOY BHUTADA, 8 ITA NO. 372/PN/2012, SHRI BRIJMOHAN BHUTADA, PUNE THE SON OF THE APPELLANT WHO IS STATED TO BE NOW MANAGING THE ENTIRE SHOW OF THE PROPRIETARY CONCERN M /S ALOK FABRICATION. THE DISALLOWANCE MADE BY THE A.O. IS WITHOUT ANY BASIS AND NO MATERIAL FACT IS ON RECORD TO SUGGEST THAT AMOUNT IN RESPECT OF WHICH THE DISALLOWANCE HAS BEEN MADE WAS EXCESS OR UNREASONABLE. THE NATURE AND DUTIES OF WORK OF SHRI BIJO Y BHUTADA IS QUITE DIVERSE AND ONEROUS AND THE VERY FACT THAT IN SUCH COMPETITIVE MARKET CONDITIONS HE HAS BEEN ABLE TO BOOST THE SALES BY INCREASING IT NEARLY 3 TIMES, COMPARED TO THE EARLIER YEARS. SO FAR AS THE SALARY PAYMENT TO SMT. VANDANA B. BHUTADA, IN VIEW OF THE QUALIFICATION AND SERVICES RENDERED THE PAYMENT OF SALARY APPEARS TO BE REASONABLE AND JUSTIFIED, IN ANY CASE THE A.O. HAS NOT BEEN ABLE TO BRING ANYTHING ON RECORD TO PROVE THAT THE SAME IS CONTRARY. BOTH THE PERSONS ARE REGULAR TAXPAYER A ND ALSO HAVE PAID SUBSTANTIAL INCOME TAX AND ALSO SERVICE TAX DURING THE YEAR IN THEIR INDIVIDUAL RETURNS OF INCOME. IN THE CASE LAW CITED BY THE APPELLANT OF ACIT VS. DOON VALLEY MOTORS CITED (SUPRA). 1. AS PER OUR CONSIDERED VIEW, IT IS A TRITE LAW THAT SO FAR AS THE QUESTION OF COMMERCIAL EXPEDIENCY AND BUSINESS NEEDS OF AN ORGANIZATION IS CONCERNED, IT IS NOT THE VIEW OF THE REVENUE OFFICER WHICH WOULD COUNT, BUT IT WOULD BE THE VIEW POINT OF ORDINARY BUSINESSMAN DEALING WITH A SITUATION LIKE ONE FACED BY THE ASSESSEE - FIRM IN QUESTION, IS TO BE CONSIDERED. THE REASONABLENESS OF THE EXPENDITURE FOR THE PURPOSE OF BUSINESS HAS TO BE ADJUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT OF THE REVENUE. 2. UNDISPUTEDLY, THE PAYMENTS RECEIVED BY RESPECTI VE FAMILY MEMBERS WERE DULY OFFERED FOR TAXATION IN THEIR INDIVIDUAL HANDS AND IN CASE OF SHRI AMIT AND AMBUJ OBEROL THE RATES OF TAX WERE IN THE HIGHEST BRACKET. FROM THE RECORD, WE ALSO FOUND THAT SALES OF THE ASSESSEE - FIRM HAS INCREASED MORE THAN 60% OF THE SALES IN THE IMMEDIATELY PRECEDING YEAR. 4.3. IN VIEW OF THE ABOVE AND THE FACT THAT THE A.O. HAS NOT BEEN ABLE TO BRING ON RECORD ANYTHING CONTRARY IN SUPPORT OF THE CONTENTION THAT PAYMENT OF SALARY FALLING U/S 40A(2)(B) OF THE ACT, WAS EXCESSIVE A ND UNREASONABLE, THEREFORE, THE DISALLOWANCE MADE BY THE A.O. IS LIABLE TO BE DELETED AND GROUND NO. 2 IS ALLOWED. NOW THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. HERE AGAIN THE ASSESSING OFFICER HAS QUESTION ED THE REASONABLENESS OF THE SALAR IES PAID BY THE ASSESSEE TO HIS SON AND DAUGHTER - IN - LAW. IT APPEARS THAT THE ASSESSING OFFICER ASKED FOR THE QUALIFICATION OF HIS SON AND DAUGHTER - IN - LAW AS IN HIS OPINION THE PROVISIONS OF SEC. 40A(2))B) ARE APPLICABLE. THE 9 ITA NO. 372/PN/2012, SHRI BRIJMOHAN BHUTADA, PUNE ASSESSING OFFICER HAS ALSO OBSERVED THAT THE EXPENDITURE ON THE SALARY APPEARS TO BE ABNORMAL AS THE ASSESSEE HAS PAID THE SALARY OF RS.2.20 LACKS P.M. TO HIS SON AND RS.50,000/ - P.M. TO DAUGHTER - IN - LAW. THE ASSESSING OFFICER ESTIMATED THE REASONABLE SALARY TO BE PAID TO ASSESSEES SON AND THE DAUGHTER - IN - LAW AT RS.75,000/ - P.M. AND RS.30,000/ - P.M. RESPECTIVELY AND HE MADE THE DISALLOWANCE TO THE EXTENT OF RS.19,80,000/ - . THE LD. COUNSEL SUBMITTED THAT THE ASSESSEES SON SHRI BIJOY B. BHUTADA MANAGE S THE ENTIRE BUSINESS OF THE FIRM M/S. ALOK FABRICATION WHICH IS ONE OF THE PROPRIETARY CONCERNS OF THE ASSESSEE . HE SUBMITS THAT THE ASSESSEE HAS NO TIME TO LOOK INTO THE SAID BUSINESS AND HE REFERRED TO THE NATURE OF WORK UNDERTAKEN BY SHRI BIJOY B. BHU TADA. AS PER THE SUBMISSI O N S MADE BEFORE THE LD. CIT(A) WHICH COPY IS PLACED AT PAGE NOS. 7 TO 52 OF THE PAPER BOOK. THE LD. COUNSEL ALSO SUBMITS THAT SMT. VANDANA B. BHUTADA, DAUGHTER - IN - LAW OF THE ASSESSEE IS A B. COM. SHE INTERNALLY LOOK S AFTER THE FI NANCE DEPARTMENT OF THE ASSESSEE S BUSINESS CONCERN AND SHE IS RIGHTLY PAID THE SALARY. AS ARGUED BY THE LD. COUNSEL THE PAYMENT TO SMT. VANDANA B. BHUTADA IS MUCH MORE AT LOWER SIDE THEN THE FAIR MARKET VALUE AS S HE HAS SHOWN THE GOOD PERFORMANCE IN THE ASSESSEE BUSINESS . WE FIND THAT THE ASSESSING OFFICER HAS MERELY STATED THAT THE DETAILS ARE NOT FILED IN RESPECT OF THE QUALIFICATION. I N OUR OPINION ONLY THE EDUCATIONAL QUALIFICATIONS ARE NOT DECISI VE IN ALL THE CASES AS THE PRESENT CASE BEFORE US TO DETERMINE THE REASONABLENESS OF ANY SALARY . THERE ARE MANY FACTORS WHICH ARE ATTRIBUTABLE FOR DISCHARGING THE DUTIES AND RESPONSIBILITIES AND ALSO MANAGING A PARTICULAR BUSINESS. IN OUR OPINION , THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD TO DEMONSTR ATE HOW THE SALARY PAID BY THE ASSESSEE IS UNREASONABLE COMPARE TO FAIR MARKET VALUE OF THE SERVICES RENDERED BY THE ASSESSEES SON AND HIS DAUGHTER - IN - LAW. THE LD. CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. WE, ACCORDINGLY, CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS THE RELEVANT GROUND 10 ITA NO. 372/PN/2012, SHRI BRIJMOHAN BHUTADA, PUNE I.E. GROUND NO. 6. THE OTHER GROUNDS EITHER TH EY ARE GENERAL IN NATURE OR SUPPORTING THE ISSUES ARISING IN THIS APPEAL HENCE, NO SPECIFIC ADJUDICATION IS REQUIRED. 9. IN THE RESULT, THE RE VENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30 - 12 - 20 1 3 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , D ATED : 30 TH DECEMBER, 20 1 3 COPY TO 1 DE PARTMENT 2 ASSESSEE 3 THE CIT(A) - II, PUNE 4 THE CIT - II, PUNE 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE