SUBHASH CHANDANMAL JAIN, MUMBAI V. DCIT 22(2), NAVI MUMBAI

ITA 4819/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8285 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 23-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Business income; Bogus loan
• Section: 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI , BEFORE : SHRI I.P.BANSAL, JM & SHRI R.C.SHARMA , A M ITA NO. 4819 / MUM/20 1 2 ( ASSESSMENT YEAR : 200 9 - 20 10 ) SHRI SUBHASH CHANDANMAL JAIN, 2 ND FLOOR, ASHOK VIHAR, 3 RD ROAD, CHEMBUR (EAST), MUMBAI - 71 VS. DCIT - 22(2), VASHI, MUMBAI PAN/GIR NO. : A ABPJ 3821 D ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 5171 / MUM/20 12 ( ASSESSMENT YEAR : 2009 - 2010 ) DCIT - 22(2), VASHI, MUMBAI VS. SHRI SUBHASH CHANDANMAL JAIN, 2 ND FLOOR, ASHOK VIHAR, 3 RD ROAD, CHEMBUR (EAST), MUMBAI - 7 1 PAN/GIR NO. : A ABPJ 3821 D ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI KIRIT SHETH /REVENUE BY : SHRI LOVE KUMAR DATE OF HEARING : 22 ND OCT . 201 4 DATE OF PRONOUNCEMENT : 10/12/2014 O R D E R PER R.C.SHARMA ( A .M.) : TH ESE ARE THE CROSS APPEALS FILED BY THE REVENUE AND ASSESSEE AGAINST THE ORDER OF CIT(A) , DATED 23 - 5 - 2012 FOR ASSESSMEN T YEAR 200 9 - 10 , IN THE MATTER OF ORDER PASSED U/S.143(3) THE I.T. ACT . 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE WAS CARRYING ON BUSINESS OF ACTING AS A ITA NO. 4819&5171 /12 2 COMMISSION AGENT FOR VARIOUS RELIANCE GROUP COMPAN IES. FOR THIS PURPOSE, ASSESSEE WAS GETTING COMMISSION INCOME AND FOR THE EARNING OF THIS COMMISSION INCOME, ASSESSEE HAS PAID SALARY OF RS. 17,70,000/ - , WHICH WAS DISALLOWED BY THE AO. THE AO HAS ALSO MADE ADDITION OF RS. 5,50,000/ - UNDER SECTION 68 OF THE ACT. BY THE IMPUGNED ORDER, THE CIT(A) ALLOWED THE SALARY TO THE EXTENT OF RS. 10,62, 000/ - AND ALSO ALLOWED TELESCOPING OF ADDITION MADE U/S.68 OUT OF DISALLOWANCE OF SALARY OF RS. 7,08,000/ - AFTER HAVING THE FOLLOWING OBSERVATIONS : - 6. I HAVE CONSIDERED T HIS SUBMISSION VIZ - A - VIZ FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER AS REPRODUCED ABOVE. I AM IN AGREEMENT WITH THE APPELLANT ON THE BASIC ISSUE THAT NO BUSINESS CAN 'BE DONE WITHOUT THE HELP OF MAN POWER. THE APPELLANT IS PRO PRIETOR OF M/ '. SURBHI.COM AND HAS SHOWN BUSINESS RECEIPTS OF RS. 25,06,382/ - . THIS KIND OF RECEIPT CANNOT OCCUR IN THE BUSINESS WITHOUT INCURRING EXPENSES WHICH CAN BE IN THE NATURE OF SALARY, OFFICE EXPENSES, RENT, ELECTRICITY AND SO ON. THE APPELLANT S UBMISSION IS THAT HIS BUSINESS BEING THAT OF COMMISSION AGENT FOR VARIOUS RELIANCE GROUP COMPANIES WHEREIN THIS ROLE IS TO IDENTIFY PROSPECTIVE CUSTOMERS WAS HEAVILY DEPENDENT UPON MAN POWER AND HENCE MAJORITY OF THE EXPENSES ARE BY WAY OF SALARY. IN VIEW OF THIS, THE APPELLANT WAS ASKED WHETHER FOR PAYMENT OF SALARY IN PROVIDENT FUND ACCOUNT I.E. EPF HAVE BEEN MAINTAINED OR PROFESSIONAL TAX HAVE BEEN DEDUCTED FROM THEIR SALARY PAID TO EMPLOYEES AS PER PREVAILING R ULES IN THE STATE OF MAHARASHTR A. THE APPEL LANT HAS CONFIRMED THAT NO SUCH DETAILS ARE AVAILABLE WITH HIM. THIS FACT THOUGH IS WELL TAKEN AT THE SAME TIME THE FACT REMAINS THAT THE 'VOLUM E ' OF SUCH SALARY PAYMENT HAS NOT BEEN FOUND TO BE AUTHENTIC IN ABSENCE OF ANY EPF DEDUCTION AS WELL AS ANY PRO FESSIONAL TAX DEDUCTION MADE FROM THE SALARY AND HENCE ON THIS I AM IN AGREEMENT WITH THE ASSESSING OFFICER. THE APPELLANT CANNOT DENY THAT EXPENSES HAVE BEEN INFLATED WHEN HE HAS FAILED TO FURNISH ANY DOCUMENTARY PROOF IN THE NATURE OF THIRD PARTY EVIDENC E I.E. EPF / PR O FESSIONAL TAX WHICH IS A MUST. 7. COMING TO THE CONFIRMATION GIVEN BY ALL 15 EMPLOYEES, I HAVE GONE THROUGH THE SAME AND IT IS NOTED THAT THEY ARE ALSO NOT SUPPORTED BY ANY DETAILS LIKE PAN NO. AND IDENTITY CARD AND THE LANGUAGE OF LETTER S IS ALSO MORE OR LESS SAME. AS THERE IS NO IDENTITY PROOF OF THESE EMPLOYEES, IT IS ALSO NOT E S TABLISHED BY APPELLANT THAT ACTUALLY THESE LETTERS WRITTEN IN ORDER TO CONFIRM THE SALARY RECEIPTS WERE FROM HIS EMPLOYEES ONLY IN ABSENCE OF ANY IDENTITY PROOF OF THOSE VERY PERSONS WHO, APPARENTLY DID THE JOB FOR THE APPELLANT AS HIS EMPLOYEES. IN VIEW OF THIS, THE CONFIRMATION LETTERS HARDLY HAVE ANY RELEVANCE WITH FIXED CONSIDERING ALL THESE FACTORS IN THE GIVEN CIRCUMSTANCES, I AM OF THE VIEW ON ONE HAND APP ELLANT CANNOT BE DENIED THE EXPENSES DEBITED A' SALARY IN TOTO ON THE OTHER HAND FOR ITA NO. 4819&5171 /12 3 WANT OF ANY RECORD, HE HAS NOT BEEN ABLE TO PROVE ADEQUATELY THAT HE HAS ACTUALLY INCURRED EXPENSES TO THE TUNE AS DEBITED IN THE PROFIT & LOSS ACCOUNT. HENCE,' I CONSIDER HIS THIS SUBMISSION REASO N ABLE THAT AT LEAST THOSE 9 EMPLOYEES WHO REACHED OFFICE IN THE AFTERNOON OF 15.09.2009 THOUGH CANNOT BE ATTENDED BY ASSESSING OFFICER A FACT APPEARING FROM THE RECORD ITSELF AND REPRODUCED IN THE ASSESSMENT ORDER IS TO BE ALLOWE D IN VIEW OF THE FACT THAT THE APPELLANT IS STATING THAT HIS BUSINESS IS CLOSED NOW AND IT WAS DIFFICULT FOR HIM TO CONTACT THESE PEOPLE AND BRING THEM BEFORE THE ASSESSING OFFICER FOR CONFIRMATION AS THEY WERE UNDER NO CONTRACTUAL OBLIGATIO N TO DO SO. THE SE 9 PERSONS ARE (I) NARAYAN KRISHNA JANGAM (II) RAHUL NAVINCHANDRA RAJA (III) RAJU VITTHAL GUGE (IV) PRAVIN BALASAHEB HASVE (V) KALIDAS PANDURANG BABAR (VI) VISHAL HARISCHANDRA JANGAM (VII) HEMAND CHABBU KHEIRNAR (VIII) VINOD RAMPRASAD SIN GH (IX ) AVINASH PANDURANG BABAR 9. SINCE THE SALARY PAID TO THEM AMOUNT TO RS. 10,62,000/ - , I AM OF THE OPINION THAT SAME SHOULD BE ALLOWED AND HENCE THIS SALARY, AN AMOUNT OF RS.10,62,000/ - IS ALLOWED. THE BALANCE AMOUNT OF RS.7,08,000/ - PAID TO 6 PERSONS WHO D ID NOT ATTEND THOUGH GAVE CONFIRMATION LETTER WHICH HAS ALREADY BEEN DISCUSSED ABOVE IS FOUND NOT AUTHENTIC FOR WANT OF ANY IDENTITY PROOF AND THUS HAS TO BE DISALLOWED. ACCORDINGLY, AGAINST THE SALARY EXPENSES OF RS.17,17,000/ - , DISALLOWED BY THE ASSESSIN G OFFICER AN AMOUNT OF RS.7,08,000/ - IS CONFIRMED, THE GROUND NO.1 IS PARTLY ALLOWED. 10. GROUND NO.2 DEALS WITH AN ADDITION OF RS.5,50,000/ - U/S.68 AS UNEXPLAINED IN THE ASSESSMENT ORDER REPRODUCED ABOVE WHEREIN THIS ISSUE HAS BEEN DISCUSSED BY THE ASSE SSING OFFICER IN PARA 3.2, 3.5 & 3.S. 11. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS SUBMITTED THAT EVEN IF IT IS CONSIDERED THAT THE SAID AMOUNT IS BOGUS AS HE HAS NOT BEEN ABLE TO PRODUCE THE PERSONS, 'IT IS NOTEWORTHY THAT THE SAID LOAN ACCOU NT SHOWN IN THE OPENING BALANCE OF RS.3,00,000/ - MEANING THEREBY AN AMOUNT OF RS.2,50,000/ - ONLY IS THE LOAN SHOWN DURING THE YEAR IN THE NAME OF SHRI PAWAN JAIN AND HENCE ADDITION CANNOT BEEN MADE FOR ENTIRE AMOUNT OF RS.5,50,000/ - . 12. BESIDES THIS THE APPELLANT HAS TAKEN AN INDEPENDENT AND ALTERNATIVE PLEA THAT EVEN IF IT IS CONSIDERED THAT THIS LOAN IS A BOGUS LOAN, EVEN IN THAT CASE IT IS NOTHING BUT THE UNTAXED INCOME OF THE APPELLANT WHICH HAS BEEN INTRODUCED IN THE NAME OF UNSEEN LOAN AND THE LOAN AMOUNT DURING THE YEAR BEING ONLY RS.2,50,000/ - IT IS FULLY COVERED BY THE AMOUNT DISALLOWED UPON I.E. RS.7,08,000/ - . 13. I HAVE CONSIDERED THIS SUBMISSION 'AND I AM IN AGREEMENT WITH THE APPELLANT THAT TECHNICALLY ADDITION FOR OPENING BALANCE IS NOT TE NABLE AND FOR THE SAME , THE ASSESSING OFFICER HAS TO RE - OPEN THE ITA NO. 4819&5171 /12 4 ASSESSMENT ORDER IN WHICH THIS AMOUNT OF RS.3 LAKHS WAS INTRODUCED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. AS REGARDS BALANCE AMOUNT OF RS.2,50,000 1 - WHICH IS LOAN AMOUNT INTRODUCED DUR ING THE YEAR SAME IS VERY MUCH INCLUDED IN THE AMOUNT DISALLOWED DURING THE YEAR UNDER THE HEAD SALARY I.E. AN AMOUNT OF RS.7,08,000/ - AS PER THE GROUND NO.1 DECIDED ABOVE. THE APPELLANT HAS TO BE GIVEN TELESCOPIC EFFECT FOR THIS AMOUNT AND HENCE THE ADDIT ION MADE OF RS.5,50,000/ - BEING INCLUDED IN THE AMOUNT OF RS.7, 08 , 000/ - IS DELETED . 3. AGAINST THE ABOVE ORDER OF CIT(A), BOTH ASSESSEE AND REVENUE ARE IN APPEALS BEFORE US. 4 . WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT AFTER RECORDING DETAILED FINDING AT PARA 6 TO 9, THE CIT(A) OBSERVED THAT IN RESPECT OF SALARY PAID TO 9 EMPLOYEES, THE SAME WERE APPEARED BEFORE THE AO BESIDES GIVING CONFIRMATION OF SALARY RECEIVED BY THEM AMOUNT ING TO RS.10,62,000/ - . FURTHER, IN RESPECT OF SIX EMPLOYEES, WHO DID NOT ATTEND THE OFFICE OF AO , T HE CIT(A) CONFIRMED THE DISALLOWANCE OF RS.7,08,000/ - K EEPING IN VIEW THE NATURE OF ASSESSEES BUSINESS, WHEREIN SALARIES ARE INEVITABLE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE OF SALARY IN RESPECT OF EMPLOYEES, WHO HAD ATTENDED BEFORE THE AO FOR GIVING STATEMENT AND ALSO FILED CONFIRMATION OF SALARY HAVING BEEN RECEIVED BY THEM. HOWEVER, IN RESPECT OF B ALANCE EMPLOYEES WHO DID NOT APPEARED BEFORE THE AO IN SPITE OF NOTICE ISSUED BY THE AO, ON THE BASIS OF THE REASONING GIVEN BY AO, THE CIT(A) HAS CONFIRMED THE DISALLOWANCE. FINDING RECORDED BY CIT(A) AT PARA 6 TO 9 HAD NOT CONTROVERTED EITHER BY LD. AR O R BY LEARNED DR. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE OF RS. 10,62,000/ - AND CONF I RM ING THE BALANCE DISALLOWANCE OF RS. 7,08,000/ - . ITA NO. 4819&5171 /12 5 4. IN RESPECT OF ADDITION OF RS. 5,50,000/ - ON ACCOUNT OF CASH CREDIT, WE F OUND THAT THE CIT(A) HAS ALLOWED TELESCOPING OUT OF ADDITION MADE ON ACCOUNT OF SALARY. WE FOUND THAT THE CIT(A) HAS ALSO FOUND THAT LOAN OF RS. 2,50,000/ - WAS RECEIVED IN THE EARLIER YEAR, SO THAT NO ADDITION WAS WARRANTED DURING THE YEAR UNDER CONSIDERATI ON , K EEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, SINCE THE ADDITION TO THE EXTENT OF RS. 7,08,000/ - WAS MADE ON ACCOUNT OF SALARY, THE SAME AMOUNT WAS AVAILABLE TO THE ASSESSEE, THEREFORE, THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING TELESCOPING OF SUCH INCOME OUT OF ADDITION MADE ON ACCOUNT OF LOAN U/S.68 AMOUNTING TO RS. 5,50,000/ - . 10 . IN THE RESULT, BOTH APPEALS OF THE ASSESSEE AS WELL AS REVENUE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 /12 / 201 4 . / 12 / 2014 SD / - SD/ - ( ) ( I.P.BANSAL ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 10 /12/ 2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//