The DCIT, Trichur V. Sri.V.P. Nandakumar, Trichur

ITA 378/COCH/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7319 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2017
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 30-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 08-09-2016
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: RADHESH BHATT
• Keywords: Wrong claim; Assessment record; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER I.T.A. NO. 378/COCH/2016 ASSESSMENT YE AR : 2008 - 09 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), THRISSUR. VS. V.P. NANDAKUMAR, MANAPPURAM HOUSE, VALAPPAD, THRISSUR-680 567. [PAN:ABGPN 8092A] (REVENUE - APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY SHRI A. DHANARAJ, SR.D R ASSESSEE BY SHRI RADHESH BHATT, CA DATE OF HEARING 30 /1 2 / 201 6 DATE OF PRONOUNCEMENT 02 / 01 / 201 7 O R D E R PER GEORGE GEORGE K., JUDICIAL MEMBER THIS APPEAL, AT THE INSTANCE OF THE REVENUE, IS DIRECTED AGAINST THE ORDER OF THE CIT(A), THRISSUR DATED 31/03/2016. THE RELEVANT ASS ESSMENT YEAR IS 2008-09. 2. THE GROUNDS RAISED READ AS FOLLOWS: 1.THE LEARNED COMMISSIONER(APPEALS), THRISSUR HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME IN ASS ESSMENT ORDER, OF RS.58,12,889/- THE AMOUNT OF SALARY PAYMENT IN THE PROPRIETARY CONCERN OF THE ASSESSEE, MANAPPURAM AGRO I.T.A. NO. 378/COCH/2016 2 FARM, DURING THE FINANCIAL YEAR RELEVANT TO ASSESSM ENT YEAR 2008-09, WHICH IT HAS NOT CLAIMED DURING EARLIER YEARS. 2. THE LEARNED COMMISSIONER(APPEALS), THRISSUR HAS FAILED TO ACKNOWLEDGE THE FACT THAT ASSESSING OFFICER HAS BROUGHT INTO THE ASSESSMENT O RDER THE CLAIM OF THE ASSESSEE, VIDE HIS REPLY DATED 27/12/2010, OF AGGRESSIVE MARKETING OF DEPOSITS/LOANS IN RESPECT OF M/S. MANAPPURAM AGRO FARM, A PROPRIETARY CONCERN OF THE ASSESSEE, FOR WHICH EMPLOYEES WERE RECRUITED IN LARGE AND THAT PROPER MUSTER ROLL FOR ALL THE EMPLOYEES AND THEIR SALARY DETAILS ARE BEING MAINTAINED. 3. THE LEARNED COMMISSIONER(APPEALS), THRISSUR HAS FAILED TO ACKNOWLEDGE THE FACT THAT ASSESSING OFFICER HAS CLEARLY BROUGHT INTO THE ASSE SSMENT ORDER THAT VARIOUS PROPRIETARY CONCERNS OF THE ASSESSEE INCLUDING THE MANAPPURAM A GRO FARM, HAVING SAME HEAD OFFICE AT MANAPPURAM HOUSE, P.O. VALAPPAD, ARE MAIN LY UNDERTAKING FINANCE ACTIVITIES AND THE ACTIVITIES OF THE WHOLE MANAPPURAM GROUP IS BEING HANDLED BY A COMMON SET OF STAFF. 4. THE LEARNED COMMISSIONER(APPEALS), THRISSUR HAS ERRED IN IDENTIFYING THE BOGUS CLAIM OF THE ASSESSEE BY NOT DRAWING HIS ATTENTION TO THE FACT HIGHLIGHTED BY THE ASSESSING OFFICER THAT ON BEING ASKED TO THE DETAILS OF NEW S TAFF THAT HAVE BEEN RECRUITED WITH DATE OF SUCH RECRUITMENTS, THE ASSESSEE HAS DENIED NO NE W APPOINTMENT BUT CLAIMED RELOCATION OF STAFF FROM THE OTHER FIRMS IN THE GRO UP WITHOUT ATTRIBUTING ANY EVIDENCES TO PROVE THE NECESSITY OR COMMERCIAL EXPEDIENCY OF SUC H A REALLOCATION. 5. THE LEARNED COMMISSIONER(APPEALS), THRISSUR HAS ALSO FAILED TO APPRECIATE THE FACT THAT ANY INCREASE IN DEPOSITS AND ASSETS DOES NOT G IVE RIGHT TO ASSESSEE TO INCREASE THE CLAIM OF SALARY EXPENSES PROPORTIONATELY WITHOUT AN Y MATERIAL EVIDENCE TO PROVE THE SAME. 6. THE LEARNED COMMISSIONER(APPEALS), THRISSUR INS TEAD OF TAKING INTO ACCOUNT THE WHOLE OF FINANCIAL POSITION REFLECTED BY THE PROPRI ETARY CONCERN, MANAPPURAM AGRO FARM, VIZ. A VIZ. SALARY EXPENSES, HAS WRONGLY DELIBERATE D UPON THE ASSESSEES POLICY OF REALLOCATING THE STAFF TO SISTER CONCERNS WHERE THE RE IS A CLAIM OF SUBSTANTIAL INCREASE IN WORK. 7. FOR THESE AND OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSI NG OFFICER BE RESTORED. 8. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY G ROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 3. THE ASSESSEE IS AN INDIVIDUAL. HE IS RUNNING V ARIOUS PROPRIETARY CONCERNS, VIZ., MANAPPURAM FINANCE CO., MANNAPPURAM AGRO FARMS, MAN APPURAM CHIT FUNDS, I.T.A. NO. 378/COCH/2016 3 MANAPPURAM COMMODITIES, MANAPPURAM STOCK & SHARE AN D MANAPPURAM FINANCE. THE ABOVE PROPRIETARY CONCERNS ARE MAINLY ENGAGED I N FINANCING ACTIVITIES. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING A TOT AL INCOME OF RS.33,54,300/-. WHILE COMPLETING THE SCRUTINY ASSESSMENT U/S. 143(3 ) OF THE ACT, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.58,12,889/-, BEI NG SALARY EXPENSES CLAIMED IN ONE OF THE PROPRIETARY CONCERNS MANAPPURAM AGRO FA RMS. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASS ESSING OFFICER. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR, APART FROM RELYING ON THE GROUNDS RAISED, HAS SUBMITTED A BRIEF WRITTEN SUBMISSION. THE CONTENT OF THE WRITTEN SUBMISSION IS THAT THE INCRE ASE IN SALARY FOR THE PROPRIETARY CONCERN, VIZ. MANAPPURAM AGRO FARM IS NOT IN COMMEN SURATE TO THE INCREASE IN BUSINESS. IT WAS FURTHER POINTED OUT IN THE WRITTEN SUBMISSION THAT THE RATIO OF THE SALARY EXPENSES TO THE TOTAL EXPENSES IS HIGH AT TH E RATE OF 22%. 6. THE LD. AR, ON THE OTHER HAND, SUBMITTED THAT THE GROUNDS RAISED BY THE REVENUE RELATES ONLY TO THE CLAIM OF THE SALARY EXP ENSES AS BOGUS. IT WAS SUBMITTED THAT THE CIT(A), AFTER EXAMINING THE DOCU MENTS ON RECORD, HAS CATEGORICALLY FOUND THAT THE SALARY EXPENSES CLAIME D IS NOT BOGUS. AS REGARDS THE LD. DRS WRITTEN SUBMISSION, IT WAS SUBMITTED THAT THE REVENUE SHALL NOT SIT IN THE I.T.A. NO. 378/COCH/2016 4 ARMCHAIR OF A BUSINESS MAN TO STATE THAT INCREASE IN SALARY EXPENDITURE IS HIG H AND NOT COMMENSURATE TO THE INCREASE IN THE VOLUME OF T HE BUSINESS. IT WAS SUBMITTED THAT ALL THE SALARY PAID TO THE EMPLOYEES HAD BEEN DULY REFLECTED IN THE BOOKS OF ACCOUNT OF THE PROPRIETARY CONCERN. IT WAS SUBMITTE D THAT THAT THE DETAILS HAVE BEEN CAREFULLY EXAMINED BY THE CIT(A) AND ON SATISF YING WITH THE SAME, THE ADDITION MADE WAS DELETED. 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. THE CIT(A), AFTER EXAMINING THE ASSESSMENT RECORDS AND HEARING THE ASSESSEES COUNSEL, HAD DELETED THE DISALLOWANCE MADE BY THE A SSESSING OFFICER. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS: I HAVE EXAMINED THE ASSESSMENT ORDER, GROUNDS OF A PPEAL AND SUBMISSIONS MADE BY THE APPELLANT. IT IS SEEN THAT DURING THIS YEAR TH ERE IS A SUBSTANTIAL INCREASE IN THE BUSINESS DONE BY ONE OF THE PROPRIETARY CONCERN, I. E., MANAPPURAM AGRO FARM. TERM DEPOSITS OF THIS CONCERN WERE INCREASED FROM RS.29. 71 CRORES TO RS.46.71 CRORES AND TOTAL ASSETS WERE INCREASED FROM RS.17.30 CRORES TO RS.31.25 CRORES. IT IS STATED BY THE APPELLANT THAT SINCE THERE IS HUGE INCREASE IN THE BUSINESS IN THE FINANCIAL YEAR, EMPLOYEES WERE RE-LOCATED FROM OTHER CONCERNS. ALL THE EMPLOYEES WERE FULLY ENGAGED IN THE BUSINESS OF THIS CONCERN AND SALARY PAYMENTS MADE TO THEM WERE DEBITED INTO THE PROFIT & LOSS ACCOUNT OF THIS CONC ERN. THE SALARY PAYMENTS MADE TO THESE EMPLOYEES ARE NOT CLAIMED IN ANY OTHER CONCER NS. THEY HAVE FURNISHED THE FULL LIST OF EMPLOYEES SHOWING THE EMPLOYEE CODE, COMPUT ATION OF SALARY ETC. AND IT IS ALREADY SUBMITTED TO THE ASSESSING OFFICER ALSO. I EXAMINED THE ACCOUNTS OF THE CONCERN MANAPPURAM AGRO FARM AND IT IS SEEN THAT TH E DEPOSITS IN THE CONCERN WAS SUBSTANTIALLY INCREASED THIS YEAR FROM 29.71 CRORES TO 46.79 CRORES. NATURALLY MORE MANPOWER IS REQUIRED TO CANVAS THIS MUCH DEPOSITS F ROM INVESTORS AND MANAGE THESE DEPOSITS. IT IS STATED BY THE APPELLANT THAT THERE WERE NO FRESH APPOINTMENTS FOR THIS WORK BUT ONLY A RE-LOCATION OF STAFF FROM OTHER FIR MS OF THE GROUP. THE ASSESSING OFFICER HAS NOT PROVED THAT THE SAME ASSESSEE WAS G ETTING SALARY FROM TWO CONCERNS SIMULTANEOUSLY. 8. ON EXAMINATION OF THE FACTS AND CIRCUMSTANCES, IN MY OPINION, THERE IS NOTHING WRONG IN RE-ALLOCATING THE STAFF TO THE SISTER CONC ERNS WHERE WORK WAS SUBSTANTIALLY INCREASED. DEBITING SALARY OF THOSE EMPLOYEES WHO W ERE RE-LOCATED TO THE CONCERN FOR I.T.A. NO. 378/COCH/2016 5 WHICH THESE EMPLOYEES WERE ACTUALLY WORKING WAS NOT A WRONG POLICY. ALSO THERE IS NO EVIDENCE TO PROVE THAT EITHER THESE EMPLOYEES DI D NOT WORK FOR THE APPELLANT OR THE EXPENSES ARE BOGUS. 9. AS THERE IS NOTHING TO PROVE THAT THE SALARY D EBITED IN THE ACCOUNTS OF THE PROPRIETARY CONCERN OF THE ASSESSEE I.E., MANAPPURA M AGRO FARM IS A BOGUS EXPENDITURE, I HEREBY DELETE THE ADDITION MADE BY T HE ASSESSING OFFICER OF RS.58,12,889/- UNDER THE HEAD SALARY. THE ABOVE FACTUAL FINDING OF THE CIT(A) HAS NOT BEE N DISPELLED BY THE REVENUE BY PLACING ANY CONTRARY EVIDENCE. THE CIT(A) HAS CA TEGORICALLY SUBMITTED THAT THE SALARY EXPENSES ARE NOT BOGUS AFTER EXAMINING T HE MUSTER ROLL OF THE ASSESSEE. THE CIT(A) HAD ALSO FOUND THAT THERE HAS BEEN SUBSTANTIAL INCREASE IN THE BUSINESS OF THE ASSESSEE WARRANTING INCREASE IN SALARY EXPENDITURE. IT WAS FURTHER NOTICED BY THE CIT(A) THAT THERE WAS NO DUP LICATION OF SALARY EXPENDITURE. 8. IT IS SETTLED LAW, THAT THE REVENUE CANNOT SIT IN THE ARMCHAIR OF THE BUSINESS MAN AND DECIDE WHAT IS THE SALARY THAT HAS TO BE PA ID TO THE EMPLOYEES. THE REVENUE IS AT LIBERTY TO ESTABLISH THAT THE SALARY EXPENDITURE IS BOGUS OR WHETHER THERE HAS BEEN DUPLICATION OF SALARY CLAIM. THE ASS ESSING OFFICER HAVING FAILED TO ESTABLISH THE SAME, I AM OF THE VIEW THAT THE ORDER OF THE CIT(A) IS CORRECT AND IS IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLE D FOR. ACCORDINGLY, I UPHOLD THE CIT(A) ORDER. IT IS ORDERED ACCORDINGLY. I.T.A. NO. 378/COCH/2016 6 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN CO URT ON 2 ND -01-2017. SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER PLACE: KOCHI DATED: 2 ND JANUARY, 2017 GJ COPY TO: 1. V.P. NANDAKUMAR, MANAPPURAM HOUSE, VALAPPAD, THR ISSUR-680 567. 2.THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(1 ), THRISSUR. 3.THE COMMISSIONER OF INCOME-TAX(APPEALS), THRISSUR . 4.THE PRINCIPAL COMMISSIONER OF INCOME-TAX, THRISSU R. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN