ACIT, UDAIPUR V. M/s. Sun Polytex Pvt. Ltd., UDAIPUR

ITA 505/JODH/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4807 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-11-2016
• Assessment Year: misc
• Appeal Filed On: 01-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K DAS
• Section: 143(3); 142(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR BEFORE SHRI B.P JAIN ACCOUNTANT MEMBER AND SHRI PARTHA SAR A THI CHAUDHURY JUDICIAL MEMBER ITA NO.505/JODH/2014 ASSESSMENT YEAR:2011 - 12 ACIT VS. M/S. SUN POLYTEX PVT. LTD. CIRCLE - 1 20 7 B, ROAD NO. 11 UDAIPUR MADRI UDAIPUR PAN NO. AAECS9347K (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. AMIT KOTHARI DEPARTMENT BY : SH. A.K. DAS DATE OF HEARING : 28/11/2016 DATE OF PRONOUNCEMENT : 29/11/2016 ORDER PER PARTH A SARATHI CHAUDHURY , JM THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) DT. 03/07/2014 ON THE FOLLOWING GROUNDS OF APPEAL: 1. DELETING THE DISALLOWANCE OF RS. 31,74,947/ - MADE U/S 40A(2)(B) OF THE I.T ACT IGNORING THE FACT THAT THE ASSESSEE HAS COMPLETELY FAILED TO JUSTIFY AS TO WHY EXCESS PAYMENT WAS MADE FOR SALARY AND WAGES TO EMPLOYEES OF SISTER CONCERN. 2. DELETING THE DISALLOWANCE RS. 2,40,000/ - MADE U/S 40A(2)(B) OF THE I.T. ACT ON IGNORING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE AS TO HOW AND FOR WHAT PURPOSE THE GODOWN WAS USED AND. 2 2.1 IGNORING THE FACT THAT IN CASE OF ANY EXPENDITURE, ONUS IS ON ASSESSEE TO ESTABLISH ITS CLAIM. 3. DELETING THE DISALLOWANCE OF RS. 24,00,000/ - MADE U/S 40A(2)(B) OF THE I.T. ACT ON ACCOUNT OF PROVISION FOR ANNUAL BONUS TO DIRECTORS, OVER AND ABOVE REMUNERATION OF RS. 48,00,000/ - WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE FAILED TO SUSTAINED THE ELIGIBILITY OF DIRECTORS FOR RECEIVING SUCH HUGE AMOUNTS OF BONUS . THOUGH THE REVENUE HAS TAKEN UP MULTIPLE GROUND S OF APPEAL THE ISSUE REVOLVES AROUND THE ADDITION MADE UNDER SECTION 40A(2)(B) OF THE ACT. 2. THE BRIEF FACTS APPEARING IN THIS CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF P P TAPE /FABRIC SACKS. ASSESSEE E - FILED ITS RETURN ON 28/09/2011 VIDE ACKNOWLEDGMENT NO.294744541280911 DECLARING THEREIN TOTAL INCOME OF RS. 1,88,27,480/ - . THE ASSESSEE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) DT. 21/09/2012 WAS ISSUE D AND SERVED ON THE ASSESSEE. THEREAFTER A NOTICE UNDER SECTION 142(1) OF THE ACT DT. 20/08/2013 WAS ISSUED DUE TO CHANGE OF INCUMBENT AND DULY SERVED ON THE ASSESSEE. IN RESPONSE TO THESE NOTICES LD. AR OF THE ASSESSEE ATTENDED AND FURNISHED WRITTEN REPLY DURING THE ASSESSMENT PROCEEDINGS ALONGWITH NECESSARY DETAILS AND CLARIFICATION. THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED AS PER SECTION 44AB OF THE ACT AND NECESSARY AUDITED REPORTS IN FORM NO. 3CB AND 3CD WERE OBTAINED BY THE ASSESSEE. 3. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) OF THE ACT WITH TOTAL ASSESSED INCOME BEING RS. 2,24,26,340/ - AS COMPARE D TO THE RETURNED INCOME OF RS. 1,88,27,480/ - . 3 4. THAT T HE FIRST GROUND OF APPEAL IS DELETING THE DISALLOWANCE OF RS . 31,74,947/ - MADE U NDER SECTION 40A(2)(B) WITH REGARD TO THE EXCESS PAYMENT MADE FOR SALARY AND WAGES OF EMPLOYEES OF SISTER CONCERN. THE LD CIT(A) HAD CONSIDERED THE FINDINGS OF THE AO ALONGWITH PAST RECORD OF THE ASSESSEE IN HIS DECISION. THAT IN HIS ORDER FOR THE A.Y. 201 1 - 12 THE LD. CIT(A) OBSERVED THAT THE SAME GROUND WAS ALSO CONSIDERED BY HIM FOR A.Y. 2009 - 10 AND IT WAS DELETED VIDE APPELLATE ORDER DATED 13/12/2011 IN APPEAL NO. 302/IT/UDR/2011 - 12. THIS DELETION EVEN CONFIRMED BY HONBLE ITAT VIDE THEIR ORDER IN ITA NO . 138 & 150/JODHPUR/2013 DT. 02/04/2014 AND ON THIS BASIS, SIMILAR DISALLOWANCE MADE IN THE A.Y. 2010 - 11 WAS ALSO DELETED BY LD. CIT(A) VIDE ORDER DT. 08/05/2014 IN APPEAL NO. 55/IT/UDR/2013 - 14. THE LD. CIT(A) FURTHE R IN HIS ORDER GOES ON TO STATE THAT THI S ISSUE HAS BEEN CONSIDERED IN THE APPELLATE ORDER NO. 302/IT/UDR/11 - 12 DT 13/12/2012 AND THEREIN THE LD. CIT(A) HAS HELD THAT THE DISALLOWANCE MADE ON ACCOUNT OF EXCESS WAGES AND SALARY IS NOT SUSTAINABLE FOR DETAILED REASON GIVEN THEREIN. 5 . THAT, ONE O F THE PERTINENT REASON WAS THE AO HAS NOT BROUGHT ANYTHING IN VIEW OF RECORD BY WAY OF ANY ENQUIRY FOR MAKING DISALLOWANCE OF SALARY / WAGES PAID TWICE FOR THE DEPUTED STAFF AND OTHER CONCERNS. WITHOUT ANY SUCH MATERIAL /EVIDENCE THE DISALLOWANCE MADE OUT OF WAGES / SALARY PAID TO THE DEPUTED EMPLOYEE IS LIABLE TO BE DELETED. 6 . THE LD. CIT(A) FOR THIS RELEVANT A.Y. IN HIS ORDER THEREFORE STATES THAT THERE IS NO REASON FOR DEVIATING FROM HIS EARLIER DECISION PARTICULARLY WHEN THERE IS 4 NOTHING BROUGHT / AVA ILABLE ON RECORD BY THE AO WHICH NEEDS SPECIFIC CONSIDERATION AND THEREFORE THE DISALLOWANCE MADE UNDER SECTION 40A(2)(B) ON ACCOUNT OF EXCESS WAGES / SALARY AMOUNTING TO RS. 31,74,947/ - WAS DELETED. 7 . WE HAVE HEARD RIVAL CONTENTION, PERUSED THE CASE REC ORDS AND FACTS AND CIRCUMSTANCES OF THE CASE AND ARRIVE AT OUR CONSIDERED VIEW THAT THE DISALLOWANCE MADE BY THE AO SUFFERS FROM WANT OF SPECIFIC REASONING AND THERE HAS BEEN NO COGENT FINDINGS RECORDED BY THE AO FOR SUCH DISALLOWANCE. 8 . THAT, EVEN IN TH E EARLIER A SSESSMENT YEARS AS WELL AS IT IS EVIDENT IN RECORD FROM THE LD. CIT(A) ORDER THAT THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND IT WAS EVEN DEALT WITH BY THE COORDINATE BENCH IN ITA NO. 150/JODHPUR/2013 WHEREBY THE APPEAL FILED BY THE DE PARTMENT HAS BEEN DISMISSED HOLDING AS UNDER: WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE WAS PAYING TWICE SALARY TO THE EMPLOYEE S OF THE CONCERNS FROM WHOM OLD LOOMS WERE PURCHASED AND THE ASSESSEE WAS ALSO CHARGING TWICE OF SALARY FROM THE ASSOCIATED CONCERNS TO WHOM ITS STAFF WAS DEPUTED. THEREFORE, CHARGING OF TWICE SALARY FOR THE DEPUTED STAFF WAS RECIPROCAL AND THIS PRACTICE W AS ACCEPTED BY THE DEPARTMENT IN ALL THE PRECEDING YEARS WHERE THE ASSESSMENT HAD BEEN COMPLETED UNDER SECTION 143(3) OF THE ACT. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT THE PAYMENTS OF THE SALARY/WAGES WERE NOT FOR THE BUSINESS PURPOSE. HE H AS ALSO NOT BROUGHT ANY MATERIAL ON RECORD TO SUBSTANTIATE THAT HOW AND IN WHAT MANNER THE SALARY PAID WAS EXCESSIVE TO HIT THE PROVISIONS OF SECTION 40A(2)(B)OF THE ACT. WE, THEREFORE CONSIDERING THE TOTALITY OF THE FACTS OF THE VIEW THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED PARTICULARLY IN AN IDENTICAL FACTS, THE SIMILAR PAYMENTS MADE IN EARLIER YEARS HAS BEEN ACCEPTED. WE THEREFORE, DO NOT SEE ANY MERIT IN THIS ISSUE OF THE DEPARTMENTAL APPEAL. 9 . THAT, ON BASIS OF THE AFORE SAID FINDINGS AND EVIDENCE ON RECORD WE UPHOLD THE DELETION ON THIS GROUND HENCE THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 5 1 0 . THAT, THE NEXT GROUND OF APPEAL RELATES TO DELETION OF DISALLOWANCE OF RS. 2,40,000/ - MADE UNDER SECTION 40A(2)(B) OF T HE ACT. 11 . THAT, THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE AS TO HOW AND FOR WHAT PURPOSE THE GODOWN WAS USED. IT WAS NOTICED BY THE AO THAT THE ASSESSEE CLAIMED EXPENDITURE OF RS. 2,40,000/ - ON ACCOUNT OF RENT PAID TO ITS ASSOCIATE CONCERN NAMELY M/S. MAPLE INDUSTRIES. THE RENT WAS GIVEN ON BASIS OF THE RENT DEED EXECUTED BETWEEN ASSESSEE COMPANY AND M/S MAPLE INDUSTRIES. THIS CLAIM OF THE ASSESSEE WAS NOT ALLOWED BY THE AO. SINCE ACCORDING TO THE AO ASSESSEE FAILED TO EXPLAIN WITH SUPPORTING DOCUMENTA RY EVIDENCE AS TO THE ACTIVITY FOR WHICH THE GODOWN WAS USED AND ACCORDINGLY AO DISALLOWED THE SUM OF RS. 2,40,000/ - UNDER SECTION 40A(2)(B) OF THE ACT. 1 2 . THE LD. CIT(A) ON THIS ISSUE HELD THAT IT IS COVERED BY THE DECISION OF APPEAL FOR A SSESSMENT YEAR S 2009 - 10 AND 2010 - 11 AS WELL AS DECISION OF JURISDICTIONAL TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2009 - 10 VIDE THEIR ORDER WHICH IS ON RECORD. THE LD. CIT(A) OBSERVED THAT SINCE THIS ISSUE INVOLVED I S EXACTLY THE SAME AS THAT OF EARLIER A SSESSMENT Y EAR S MENTIONED AFORESAID THEREFORE THERE IS NO REASON TO TAKE DIFFERENT VIEW AND ACCORDINGLY THE DISALLOWANCE OF RENT PAID TO M/S MAPLE INDUSTRIES AMOUNTING TO RS. 2,40,000/ - WAS DELETED. 1 3 . WE HAVE PERUSED THE CASE RECORDS AND HEARD RIVAL CONTENTIONS, FACT S AND CIRCUMSTANCES OF THIS CASE AND WE FIND THAT ON THIS GROUND OF APPEAL FOR THE A.Y. 2009 - 10 IN APPEAL NO. 302/IT/UDR/2011 - 12 ORDER DT. 13/12/2012 AND FOR A.Y. 2010 - 6 11 HELD IN APPEAL NO. 55/IT/UDR/2013 - 14 ORDER DT. 08/05/2014 , T HE LD. CIT(A) HAS ALLOWE D RELIEF TO THE ASSESSEE ON THIS GROUND. FURTHER THE COORDINATE BENCH OF ITAT HAS DISMISSED THE APPEAL FILED BY THE REVENUE VIDE ITA NO. 150/JODHPUR/2013 FOR A.Y. 2009 - 10 DT. 02/04/2014. 1 4 . THAT, THIS GROUND IS COVERED BY THE A SSESSEES OWN CASE IN EARLIE R ASSESSMENT YEARS AND WE DO NOT FIND ANY INFIRMITY TO DEVIATE FROM THE DECISION OF LD. CIT(A) WHICH IS THEREFORE UPHELD AND THE DELETION IS SUSTAINED HENCE THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 1 5 . NEXT GROUND OF APPEAL RELATES TO DELETION O F DISALLOWANCE OF RS. 24,00,000/ - MADE UNDER SECTION 40A(2)(B) OF THE ACT ON ACCOUNT OF PROVISION OF ANNUAL BONUS TO DIRECTORS, OVER AND ABOVE REMUNERATION. 1 6 . IT WAS NOTICED BY THE AO THAT THE ASSESSEE MADE A PROVISION OF RS. 24,00,000/ - ON ACCOUNT OF A NNUAL BONUS TO DIRECTORS. IT WAS SUBMITTED BEFORE THE AO THAT THE PROVISION WERE MADE ON THE BASIS OF RESOLUTION PASSED IN THE MEETING OF BOARD OF DIRECTORS. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE SINCE ACCORDING TO THE AO SAME WAS A DDED IN THE COMPUTATION OF TOTAL INCOME WITH THE INTENTION TO CLAIM AND EXPENSES OF THE SAME AMOUNT AFTER DEPOSITING TDS. THE AO ADDED RS. 24,00,000/ - MADE FOR ANNUAL BONUS FOR THE DIRECTORS UNDER SECTION 40A(2)(B) OF THE ACT TO THE TOTAL INCOME OF THE ASS ESSEE. 7 1 7 . THAT BEING AGGRIEVED THE ASSESSEE WENT ON APPEAL BEFORE FIRST APPELLATE AUTHORITY AND SUBMITTED THE DETAILED SUBMISSION DURING THE APPEAL WHICH IS ON RECORD. 1 8 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE AND THE ASSES SMENT ORDER OBSERVED IN DETAIL WITH REGARD TO THIS ISSUE THAT THE POINT UNDER CONSIDERATION WHETHER PROVISION MADE FOR PAYMENT OF ANNUAL BONUS TO DIRECTORS IS ATTRACTED BY THE PROVISION OF SECTION 40A(2)(B)OF THE ACT. 19 . THAT, AO MENTIONED THE PROVISION MADE OF RS. 24,00,000/ - FOR PAYMENT OF ANNUAL BONUS TO DIRECTORS ARE CLEARLY ATTRACTED BY THE PROVISION OF SECTION 40A(2)(B) OF THE ACT , SINCE THE ASSESSEE FAILED TO JUSTIFY SUCH PAYMENT. WHEREAS IT IS A FACT BORNE OUT ON RECORDS THAT THE TURNOVER OF THE ASSESSEE HAS INCREASED NOT ONLY IN THE YEAR UNDER CONSIDERATION BUT ALSO IN SUBSEQUENT YEAR S ALSO IN COMPARISON TO EARLIER YEAR S TAKING INTO ACCOUNT SUCH INCREASE AND ALSO TO KEEP SUCH TREND IN FUTURE , BOARD OF DIRECTORS OF THE ASSESSEE COMPANY UNANIMOUSLY DECIDED TO GIVE ANNUAL BONUS TO DIRECTORS BY PASSING NECESSARY RESOLUTION TO THIS EFFECT. 2 0 . LD. CIT(A) HELD THAT BONUS DECIDED TO BE PAID TO THE DIRECTORS IS ALSO IN ACCORDANCE WITH THEIR SALARY / REMUNERATION PAID TO THEM DURING THE PREVIOUS YEAR RELE VANT TO THE A SSESSMENT YEARS UNDER CONSIDERATION. THE BONUS RECEIVED BY THE DIRECTORS IS ASSESSABLE FROM THEIR HANDS THEREFORE THERE IS NO CASE TO TREAT THIS PROVISION FOR PAYMENT OF ANNUAL BONUS A S DISALLOWABLE UNDER SECTION 40A(2)(B) OF THE ACT AND ACCOR DINGLY THE LD. CIT(A) DELETED THE ADDITION. 8 2 1 . WE HAVE HEARD THE RIVAL CONTENTION, PERUSED THE RECORDS IN THIS CASE AND FACTS AND CIRCUMSTANCES OF THE CASE AND WE FIND THAT ON THIS ISSUE THE LD. CIT(A) HAS GIVEN AN ORDER JUSTIFYING HIS OPINION AS TO WHY THE PROVISION OF SECTION 40A(2)(B) OF THE ACT IS NOT ATTRACTED IN THE CASE OF THE ASSESSEE. THERE HAS BEEN INCREASE IN THE INCOME OF THE COMPANY WHICH IS A FACT BORNE OUT FROM THE RECORD S THAT THE TURNOVER HA S INCREASED NOT ONLY THIS YEAR BUT ALSO IN THE SUBSEQUENT A SSESSMENT YEARS AND IN ORDER TO BOOST UP THE MORAL OF THE BOARD OF DIRECTORS IT HAS BEEN UNANIMOUSLY DECIDED IN THE MEETING TO PROVIDE ANNUAL BONUS. 2 2 . THAT, WHILE PERUSING THE ORDER OF THE AO WE FIND THAT IT IS NOT AT ALL A SPEAKING ORDER AS TO WHY THIS ADDITION SHOULD BE SUSTAINED UNDER SECTION 40A(2)(B) OF THE ACT. THE AO HAS NO T BROUGHT OUT ANY EVIDENCE OR MATERIAL ON RECORD TO SUBSTANTIATE THE ADDITION O N THIS GROUND. THEREFORE BASED ON THE AFORESAID DISCUSSION WE UPHELD THE ORDER OF THE LD. CIT(A) IN THIS GROUND AND HENCE THE DELETION IS SUSTAINED WHILE THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED . 2 3 . IN THE RESULT , APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT . SD/ - SD/ - (B.P. JAIN ) ( PARTHA SAR A THI CHAUDHURY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29/11/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, THE CIT(A), THE DR