M/s. Sri Parameswari Projects Pvt.. Ltd., Visakhapatnam V. The ITO, Srikakulam

ITA 453/VIZ/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6787 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 18-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C DAS
• Assessee Lawyers: Y ANIL KUMAR
• Section: 143(3); 12; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON'BLE JUDICIAL MEMBER ITA NO S . 452 & 453 / VIZ /201 6 (ASST. YEAR S : 20 11 - 1 2 & 2012 - 13 ) M/S. SRI PARAMESWARI PROJECTS PVT. LTD., REGIDI VILLAGE, AMADALAVALASA MANDAL, SRIKAKULAM DISTRICT VS. A CIT, RANGE - 4, VISAKHAPATNAM. PAN NO. AAICS 3336 E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI Y. ANIL KUMAR FC A. DEPARTMENT BY : SHRI K.C. DAS SR. DR DATE OF HEARING : 26 / 0 7 /201 7 . DATE OF PRONOUNCEMENT : 30 / 0 8 /201 7 . O R D E R THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE COMMON ORDER PASSED BY THE LD. CIT(A) - 2, VISAKHAPATNAM DATED 22/08/2016 FOR THE ASSESSMENT YEARS 2011 - 12 & 2012 - 13. ITA NO. 452/VIZ/2016 2. FACTS ARE IN BRIEF THAT THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF TRADING OF LUBRICANTS, DE A LER IN PIGGAO AUTOS, RUNNING THEATRE EXHIBITING CINEMATOGRAPHY FILMS AND RUNNING RETAIL OUTLET OF BHARAT PETROLEUM CORPORATION LTD. THE ASSESSEE HAD FILED ITS RETURN OF INCOME BY DECLARING TOTAL LOSS OF 23,104/ - . RETURN FIELD BY TH E ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 2 ITA NOS. 452 & 453/VIZ/2016 (M/S. SRI PARAMESWARI PROJECTS PVT. LTD.) 1961 (HEREINAFTER REFERRE D TO AS THE 'ACT'). AFTER FOLLOWING DUE PROCEDURE, ASSESSMENT IS COMPLETED UNDER SECTION 143(3) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTED THAT ON VERIFICATION OF THE LEDGER COPIE S SU BMITTED BY THE ASSESSEE - COMPANY , IT IS FOUND THAT THE ASSESSEE - COMPANY HAS SHOWN AN AMOUNT OF 8,40,000/ - IN THE LEDGER ACCOUNT AS PART TIME SALARIES ; 16,20,000/ - WORK SHOP SALARIES; SALARIES OF 14,10,716/ - ; AND EXECUTIVE SALARIES OF 7,28,400/ - ; TOTALLING TO 45,99,116/ - . THE ASSESSING OFFICER HAS ASKED THE ASSESSEE - COMPANY TO PRODUCE THE BILLS AND VOUCHERS IN RESPECT OF THE SAID EXPENDITURE. THE ASSESSEE HAS FILED THE DETAILS AS CALLED FOR AND ON VERIFICATION OF THE SAME, IT IS FOUND THAT THE ABOVE TOTAL SALARIES ARE PA ID IN CASH AND , MOST OF THE BILLS ARE SELF - MADE VOUCHERS. THEREFORE, THE ASSESSING OFFICER HAS DISALLOWED 15% OF THE EXPENDITURE, WHICH WORKS OUT TO 6,89,867/ - AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. ON APPEAL BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE MAIN OFFICE OF THE ASSESSEE - COMPANY IS AT SRIKAKULAM AND IT HAD 03 BRANCHES IN THREE DIFFERENT PLACES . IT WAS THE PRACTICE OF THE E XECUTIVE M ANAGER THAT HE USED TO DRAW SALARIES IN CASH FOR THE EMPLOYEES , WHO ARE WORKING IN THE BRANCH OFFICES AND DISBURSE THEM , AS THE BRANCHES WERE IN INTERIOR PLACES . THE LD. CIT(A) AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAD MADE CASH PAYMENTS TO 3 ITA NOS. 452 & 453/VIZ/2016 (M/S. SRI PARAMESWARI PROJECTS PVT. LTD.) THE EMPLOYEES AND HE HAS NOT GIVE ANY J USTIFI ABLE REASON, HENCE, HE CONFIRMED THE O R DER OF THE ASSESSING OFFICER. 4 . AFTER HEARING BOTH THE SIDES , I FIND THAT THE ASSESSEE IS CARRYING VARIOUS BUSINESSES AND ITS MAIN OFFICE IS SITUATED AT SRIKAKULAM. IT IS ALSO UNDISPUTED FACT THAT IT HAD THREE BRANCHES IN THREE DIFFERENT PLACES. THE ASSESSEE IS DRAWING SALARY AT ONE PLACE AND DISBURSING THE SAME IN DIFFERENT PLACES WHERE THE BRANCHES ARE SITUATED . I DO NOT SEE ANY REASON AS TO WHY THE ASSESSING OFFICER HAS DISALLOWED THIS AMOUNT , WHICH W AS CONFIRMED BY THE LD. CIT(A). WHEN FACTUAL POSITION IS NOT DISPUTED BY THE AUTHORITIES BELOW , DISALLOWANCE CANNOT BE MADE SIMPLY ON ASSUMPTION AND PRESUMPTION. IN VIEW OF THE ABOVE, I SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) AND THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. ITA NO. 453/VIZ/2016 5 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS OBSERVED THAT THIS OFFICE INSPECTOR HAS GATHERED INFORMATION FROM SAPTHAGIRI AUTOMOBILES. AS PER THE ATTENDANCE REGISTER , THERE ARE 28 PERSONS ARE EMPLOYED AT WORK SHOP AND 12 PERSONS ARE EMPLOYED AT FRONT OFFICE AND 23 WAGERS ON ROLLS. THE VOUCHERS PRODUCED , IN SUPPORT OF PAYMENTS MADE TO THE PART TIME SALARIES, EXECUTIVE STAFF SALARIES AND BRANCH S ALES WAGES , WERE EXAMINED. SO FAR AS EXECUTIVE SALARIES ARE CONCERNED, ONLY ONE RECIPIENT SIGNED THE VOUCHERS FOR ALL THE TWELVE MONTHS I.E. P. SRINIVASA RAO, WHICH IS SUPPORTED BY THE ENCLOSURE 4 ITA NOS. 452 & 453/VIZ/2016 (M/S. SRI PARAMESWARI PROJECTS PVT. LTD.) SIGNED BY 10 PERSONS INCLUDING P. SRINIVASA RAO . FURTHER, THE OTHER VOUCHERS ARE ALL SELF - MADE AND WITHOUT PROPER DESCRIPTION. IN VIEW OF THESE DISCREPANCIES POINTED OUT, THE CLAIM OF THE ASSESSEE CANNOT BE STATED TO BE GENUINE AND CORRECT . SINCE ALL THE PAYMENTS MADE TO PART TIME STAFF SALARIES OF 3,84,000/ - , EXECUTIVE STAFF SALARIES OF 10,86,000/ - AND BRANCH SALES WAGE PAYMENTS OF 21,57,300/ - , OUT OF WHICH 15% IS DISALLOWED TO COVER UP THE DISCRE PANCIES , WHICH WORKS OUT TO 5,61,684/ - , THE SAME IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 6 . ON APPEAL, LD. CIT(A) HAS CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY OBSERVING THAT THE ASSESSEE HAS NOT GIVEN PROPER EXPLANATION IN RESPECT OF DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER AND ALSO DISBURSEMENT OF CASH PAYMENTS. 7 . I HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW . 8 . I FIND THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS DISALLOWED 15% OF THE EXPENDITURE INCURRED ON ACCOUNT OF SELF - MADE VOUCHERS A S NO DESCRIPTION ABOUT THE PAYMENTS HAS BEEN MADE . ON APPEAL LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAS NOT EXPLAINED ABOUT THE DISCREPANCIES AS POINTED OUT BY THE ASSESSING OFFICER AND ALSO ON ACCOUNT OF CASH PAYMENTS. I FIND THAT THE ASSESSEE IS RUNNING AUTOMOBILE SHOP AND FOR THAT , VARIOUS TYPE S OF WORKERS ARE REQUIRED. 5 ITA NOS. 452 & 453/VIZ/2016 (M/S. SRI PARAMESWARI PROJECTS PVT. LTD.) THE CASE OF THE ASSESSING OFFICER IS THAT THE ASSESSEE HAS MADE CASH PAYMENTS AND ALSO SELF - MADE VOUCHERS. THE ASSESSI NG OFFICER HAS NOT DOUBTED ABOUT THE BUSINESS OF THE ASSESSEE. SIMPLY ON ACCOUNT OF SELF - MADE VOUCHERS AND CASH PAYMENTS, DISALLOWANCE CANNOT BE MADE. I FIND THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ON PRESUMPTIVE BASIS , WHICH IS CONFIRMED BY THE LD. CIT(A) . N O ADDITION CAN BE MADE ON THE BASIS OF PRESUMPTIONS EXCEPT THERE IS CLEAR EVIDENCE THAT THE ASSESSEE IS MAINTAINING BOGUS RECORDS. IT IS ALSO A FACT THAT THE ASSESSEE IS MAIN TAINING THE REGISTERS OF THE EMPLOYEES. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE , I AM OF THE OPINION THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) CANNOT BE SURVIVED. ACCORDINGLY, I SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) AND THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 9 . IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 3 0 T H DAY OF AUGUST , 201 7 . S D / - ( V. DURGA RAO ) JUDICIAL MEMBER DATED : AUGUST , 201 7 . VR/ - 6 ITA NOS. 452 & 453/VIZ/2016 (M/S. SRI PARAMESWARI PROJECTS PVT. LTD.) COPY TO: 1. THE ASSESSEE - M/S. SRI PARAMESWARI PROJECTS PVT. LTD., REGIDI VILLAGE, AMADALAVALASA MANDAL, SRIKAKULAM DISTRICT . 2. THE REVENUE ACIT, RANGE - 4, VISAKHAPATNAM. 3. THE CIT - 2, VISAKHAPATNAM. 4. THE CIT(A) - 2, VISAKHAPATNAM. 5. THE D.R. , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SENIOR PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.