SHRI MUKESH YADAV, JAIPUR V. INCOME TAX OFFICER, WARD-4-4, JAIPUR

ITA 509/JPR/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5996 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 12-04-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Wrong claim
• Section: 271(1)(c); 143(3); 251; 131

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PA L RAO, JM VK;DJ VIHY LA- @ ITA NO. 509/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 SHRI MUKESH YADAV 77/49, ARAVALI MARG, SHIPRA PATH, MANSAROVAR, JAIPUR. CUKE VS. THE ITO, WARD-4(4) JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AARPY 4343 F VIHYKFKHZ@ APPELLAN T IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI RAJEEV SOGANI (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : MISS ANURADHA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 21/08/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23/09/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25.02.2019 OF THE LD. CIT(A), AJMER ARISING FROM P ENALTY ORDER PASSED U/S 271((1)(C) OF THE I.T. ACT FOR THE ASSESSMENT Y EAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY AMOUNTIN G TO RS. 11,38,321/- IMPOSED BY LD. AO U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. THE ACTION OF LD. CIT(A) IS ILLEGAL, UNJ USTIFIED, ARBITRARY ITA NO. 509/JP/2019 SHRI MUKESH YADAV VS. ITO 2 AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEAS E BE GANTED BY DELETING THE SAID PENALTY OF RS. 11,38,321/- 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY U/S 271( 1)(C) IMPOSED BY LD. AO WITHOUT SPECIFICALLY POINTING OUT WHETHER THE PENALTY WAS PROPOSED ON CONCEALMENT OF PARTICULARS OF INCOM E OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE AC TION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAIN ST THE FACTS OF THE CASE RELIEF MAY PLEASE BE GRANTED BY QUASHING THE P ENALTY IMPOSED U/S 271(1)(C). 3. THE ASSESSE CRAVES HIGH RIGHT TO ADD, AMEND OR A LTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 2. AT THE TIME HEARING, THE LD. AR OF THE ASSESSEE HAS STATED AT BAR THAT THE ASSESSEE DOES NOT PRESS GROUND NO. 2 OF TH E GROUNDS OF APPEAL AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE L D. DR HAS RAISED NO OBJECTION IF GROUND NO. 2 OF THE ASSESSEES APPE AL IS DISMISSED AS NOT PRESSED. ACCORDINGLY THE GROUND NO. 2 OF THE ASSESS EES APPEAL IS DISMISSED BEING NOT PRESSED. 3. GROUND NO. 1 IS REGARDING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT WHICH WAS CONFIRMED BY THE LD. CIT(A). THE ASSE SSEE IS PROPRIETOR OF M/S OM SALES CORPORATION AND M/S S.S. ENTERPRISE S. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION ON 30.09.2012 DECLARING TOTAL INCOME OF RS. 6,79,080/- . THE AO COMPLETED SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT ON 30.03. 2015 WHEREBY ITA NO. 509/JP/2019 SHRI MUKESH YADAV VS. ITO 3 TRADING ADDITION AS WELL AS THE ADDITION ON ACCOUNT OF DISALLOWANCE OF SALARIES WERE MADE AND CONSEQUENTLY TOTAL INCOME WA S ASSESSED AT RS. 66,66,740/-. IN THE QUANTUM PROCEEDINGS THE TRIBUNA L FINALLY SUSTAINED THE ADDITION MADE BY THE AO TO THE EXTENT OF DISALL OWANCE OF SALARY OF RS. 36,83,887/-. THE AO INITIATED THE PENALTY PROCE EDINGS U/S 271(1)(C) OF THE ACT AND LEVIED THE PENALTY EQUIVALENT TO 100 % OF TAX SOUGHT TO BE EVADED IN RESPECT OF THE ADDITION MADE ON ACCOUN T OF DISALLOWANCE OF SALARY AMOUNTING TO RS. 11,38,330/-. THE ASSESSE E CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) BUT COULD NO T SUCCEED. 4. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT IN THE QUANTUM APPEAL THE TRIBUNAL HAS SUSTAINED THE ADDIT ION ON THE BASIS OF THE ESTIMATION OF THE INCOME OF THE ASSESSEE AND TH EREFORE, THE PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE LEVIED ON THE AD DITION BASED ON ESTIMATION OF INCOME OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTIONS, HE HAS RELIED UPON THE DECISION OF HONBLE JURISDICTIO NAL HIGH COURT IN CASE OF CIT VS. MAHENDRA SINGH KHEDLA (2012) 252 CTR 453 AS WELL AS THE DECISION IN CASE OF SHIV LAL TAK VS. CIT (2001) 251 ITR 373. THE LD. AR OF THE ASSESSEE HAS ALSO RELIED UPON THE VARIOUS DE CISIONS OF THE COORDINATE BENCHES OF THIS TRIBUNAL ON THIS POINT T HAT THE ADDITION MADE ON THE BASIS OF THE ESTIMATION OF THE INCOME WOULD NOT ATTRACT LEVY OF ITA NO. 509/JP/2019 SHRI MUKESH YADAV VS. ITO 4 PENALTY U/S 271(1)(C) OF THE ACT. THUS, THE LD. AR HAS PLEADED THAT THE PENALTY LEVIED BY THE AO MAY BE DELETED. 5. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT IT IS NOT A CASE OF ADDITION MADE BY THE AO ON THE BASIS OF ESTIMATI ON BUT THE AO MADE TWO ADDITIONS ONE ON ACCOUNT OF ESTIMATION OF INCOM E BEING TRADING ADDITION OF RS. 23,03,773 AND ANOTHER ON ACCOUNT OF DISALLOWANCE OF SALARY OF RS. 36,83,887/-. THE ADDITION MADE BY THE AO ON ACCOUNT OF TRADING ESTIMATION WAS NOT CONSIDERED BY THE AO WHI LE IMPOSING THE PENALTY U/S 271(1)(C) OF THE ACT BUT THE PENALTY HA S BEEN LEVIED ONLY IN RESPECT OF THE DISALLOWANCE OF BOGUS CLAIM OF SALAR Y OF RS. 36,83,887/-. HE HAS REFERRED TO THE ASSESSMENT ORDER AND SUBMITT ED THAT THE ASSESSEE HIMSELF HAS ADMITTED BOGUS CLAIM OF SALARY IN RESPECT OF 24 EMPLOYEES WHEREAS ONLY TWO PERSONS WERE EMPLOYED DU RING THE YEAR UNDER CONSIDERATION. THEREFORE, THE ASSESSING OFFIC ER HAS MADE DISALLOWANCE WHEN THE CLAIM OF THE ASSESSEE IN RESP ECT OF 22 EMPLOYEE WAS FOUND TO BE BOGUS AND FALSE. HE HAS RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER WHILE COM PLETING THE ITA NO. 509/JP/2019 SHRI MUKESH YADAV VS. ITO 5 ASSESSMENT U/S 143(3) OF THE ACT HAS MADE TWO ADDIT IONS TO THE RETURN OF INCOME OF THE ASSESSEE AS UNDER:- RETURN TOTAL INCOME RS. 6,79,080/- ADD: TRADING ADDITION AS DISCUSSED ABOVE. RS. 23,0 3,773/- ADD: DISALLOWANCE OF SALARY AS DISCUSSED ABOVE. RS. 23,03,773/- TOTAL TAXABLE INCOME RS.66,66,740/- THE SAID ADDITIONS MADE BY THE AO HAS BEEN CONFIRME D BY THE LD. CIT(A) AS WELL AS BY THIS TRIBUNAL IN THE QUANTUM P ROCEEDINGS. IT IS APPARENT FROM THE ASSESSMENT ORDER THAT THE AO HAS MADE TWO SEPARATE ADDITIONS ONE ON ACCOUNT OF TRADING ADDITI ON AND ANOTHER ON ACCOUNT OF SALARY CLAIMED BY THE ASSESSEE WHICH WAS FOUND TO BE BOGUS AND FALSE . SINCE THE PENALTY WAS LEVIED BY THE AO ONLY IN RESPECT OF THE DISALLOWANCE OF SALARY THEREFORE, THE ISSUE BEFORE US IS ONLY WHETHER THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF SALARY CL AIM ATTRACTS THE PENALTY U/S 271(1)(C) OR THIS ADDITION IS ONLY ON T HE BASIS OF ESTIMATION OF INCOME. IT IS PERTINENT TO NOTE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO RECORDED THE STATEMENT OF THE AS SESSEE WHEREAS THE ASSESSEE HAS CLEARLY ADMITTED THAT DURING THE Y EAR UNDER CONSIDERATION ONLY TWO PERSONS WERE EMPLOYED WHERE HE HAS CLAIMED ITA NO. 509/JP/2019 SHRI MUKESH YADAV VS. ITO 6 SALARY EXPENDITURE IN RESPECT OF 24 PERSONS. THE SA ID STATEMENT HAS NOT BEEN DISPUTED BY THE ASSESSEE HOWEVER, THE LD. AR O F THE ASSESSEE HAS SUBMITTED THAT DUE TO SOME CONFUSION THE ASSESSEE H AS MADE THIS STATEMENT. THE RELEVANT FINDINGS OF THE AO ON THIS ISSUE IN THE REASSESSMENT PROCEEDING IS REPRODUCE AS UNDER:- SALARY PAYMENT OF RS.40,63,887/- AS APPEARING IN I NDIRECT EXPENSES WAS CONSIDERED TO BE EXCESSIVELY HIGH WHEN ONLY 2 PERSONS WERE EMPLOYED. THE ASSESSEE WAS REQUIRED TO PROVIDE DETAILS OF EMPLOYEES TO WHOM SALARY PAYMENT WAS MADE. THE A/R OF THE ASSESSEE SUBMITTED A LIST OF E MPLOYEES OF BOTH THE CONCERNS M/S OM SALES CORPORATION AND M /S S.S. ENTERPRISES. IN M/S OM SALES CORPORATION, HE HAS PR OVIDED A LIST OF 9 PERSONS INCLUDING TWO SALES MAN, ONE ACCO UNTANT, TWO CASHIERS AND FOUR HELPERS TO WHOM SALARY PAYMEN T OF RS.15,41,017/- IS CLAIMED TO HAVE MADE. SAME WAY, A LIST OF 15 EMPLOYEES OF M/S S.S. ENTERPRISES WERE PROVIDED WHICH INCLUDES THREE TESTERS, ONE ACCOUNTANT, THREE SALES MAN, TWO CASHIERS, FIVE HELPERS AND A DELIVERY MAN. TOTAL PA YMENT WAS CLAIMED TO HAVE MADE AT RS.25,22,870/-. FORM EXAMINATION OF DETAILS OF EMPLOYEES AS DISCUSSED AB OVE, IT WAS FOUND TO BE TOTALLY CONTRARY TO THE DETAILS OF EMPLOYEES GIVEN BY THE ASSESSEE IN HIS STATEMENT RECORDED UND ER OATH U/S 131 ON 18.02.2015 WHEREON TOTAL NUMBER OF EMPLO YEES WERE ADMITTED TO BE ONLY TWO. IN VIEW OF THESE FACT S, THE ASSESSEE WAS REQUIRED TO PRODUCE SOME OF THE EMPLOY EES FOR THEIR VERIFICATION THAT THEY WERE EMPLOYED BY THE A SSESSEE DURING THE PERIOD UNDER CONSIDERATION. IT WAS SUBMI TTED ON BEHALF OF THE ASSESSEE THAT SINCE HE CLOSED HIS BUS INESS W.E.F. 01.04.2013, HE IS NOT IN TOUCH WITH THE EMPL OYEES AS APPEARING IN THE LIST HENCE UNABLE TO PRODUCE THEM FOR ITA NO. 509/JP/2019 SHRI MUKESH YADAV VS. ITO 7 VERIFICATION. HE COMPLETELY FAILED TO EXPLAIN AS TO HOW NUMBER OF EMPLOYEES ARE DECLARED AT 24 AS AGAINST 2 ADMITT ED IN HIS STATEMENT RECORDED U/S 131 AS MENTIONED ABOVE. IT I S AFTER THOUGHT OF THE ASSESSEE AND HE HAS JUST SUBMITTED A LONG LIST OF EMPLOYEES WITHOUT THEIR ADDRESSES AND PAN, UNABLE T O EXPLAIN WHETHER PAYMENTS WERE MADE IN CASH OR BY CHEQUE. HE ALSO FAILED TO PRODUCE THEIR PAN, RETURN OF INCOME OR BA NK STATEMENT SO AS TO VERIFY THAT THEY WERE EMPLOYED BY THE ASSE SSEE DURING THE RELEVANT PERIOD. FACTS GIVEN BY THE ASSESSEE IN HIS STATEMENT, RECORDED ON OATH U/S 131 ON 18.02.2015, ARE CONSIDE RED TO BE TRUE AND HENCE IT IS HELD THAT ASSESSEE WAS HAVING ONLY TWO EMPLOYEES IN HIS BUSINESS DURING THE YEAR UNDER CON SIDERATION. MAXIMUM SALARY DECLARED IN THE LIST OF M/S OM SALES CORPORATION IS APPEARING AT RS.1,90,000/- TO A SALESMAN AND A A CCOUNTANT. THIS SAME AMOUNT IS CONSIDERED TO HAVE BEEN PAID TO TWO EMPLOYEES, AS SUCH, SALARY PAYMENT WORKS OUT AT RS. 3,80,000/- (RS.1,90,000/- X 2) AS AGAINST SALARY PAYMENT CLAIM ED AT RS.40,63,887/-. AS PER ABOVE DISCUSSION AND CALCULA TION, EXCESS SALARY OF RS.36,83,887/- (RS.40,63,887/- LESS RS.3, 80,000/-) CLAIMED BY THE ASSESSEE IS HEREBY DISALLOWED AND AD DED TO THE RETURNED INCOME. FOR CONCEALMENT OF PARTICULARS OF INCOME, PENALTY PROCEEDINGS U/S 271(1)(C) ARE SEPARATELY IN ITIATED. THE SAID ADDITION MADE BY THE AO HAS BEEN CONCURREN TLY CONFIRMED BY THE LD. CIT(A) AS WELL AS BY THIS TRIB UNAL VIDE ORDER DATED 03.05.2019 IN ITA NO. 479/JP/2018. THE CONTEN TION OF LD. AR THAT THE ADDITION HAS BEEN SUSTAINED BY THE TRIB UNAL ON ESTIMATE BASIS REFERS TO THE OBSERVATION OF THE TRI BUNAL IN PARA 10 AS UNDER:- ITA NO. 509/JP/2019 SHRI MUKESH YADAV VS. ITO 8 10. IN THE INSTANT CASE, IF WE LOOK AT THE NET INC OME SO DETERMINED BY THE AO AFTER MAKING TRADING ADDITION AND DISALLOWANCE OF SALARY EXPENSE, IT COMES TO RS 66,3 1,966 WHICH GIVES A NET PROFIT RATE OF 0.12% WHICH IS COMPARABL E TO ANOTHER CASE OF THE ENTRY PROVIDER, MAHESH KHANDELWAL WHERE IN THE CO- ORDINATE BENCH HAS UPHELD ESTIMATE OF NET PROFIT @ 0.10%. BESIDES, THERE IS OTHER INCOME OF RS 127,776 WHICH HAS TO BE BROUGHT TO TAX SEPARATELY. THUS, THE TRIBUNAL HAS CONFIRMED THE ADDITIONS MADE BY THE AO AND ALSO OBSERVED THAT EVEN AFTER THE ADDITION MADE BY THE AO THE NET PROFIT RATE COMES TO 0.12% WHICH IS COMPARABLE TO T HE ANOTHER CASE WHICH HAS BEEN CONSIDERED BY THE COORDINATE BENCHES OF THIS TRIBUNAL. HENCE, THE SAID FINDING OF THE TRIBUNAL CANNOT BE S AID TO BE AN ADDITION BASED ON ESTIMATION BUT WHILE UPHOLDING AND CONFIRM ING THE ADDITIONS MADE BY THE AO, THE TRIBUNAL HAS JUST VERIFIED THE REASONABLENESS OF THE INCOME ASSESSED AND NOT GRANTED ANY RELIEF TO THE ASSESSEE ON THE CLAIM OF SALARY EXPENSES FOUND TO BE BOGUS AND FALSE. ACCORDINGLY, WHEN THE ASSESSEE HAS CLAIMED A BOGUS SALARY EXPEND ITURE AND THE ADDITION WAS MADE SPECIFICALLY AND INDEPENDENTLY BY THE AO ON ACCOUNT OF DISALLOWANCE OF SALARY THEN THE PENALTY LEVIED B Y THE AO U/S 271(1)(C) IN RESPECT OF THE SAID ADDITION IS JUSTIF IED AND VALID. THE DECISIONS RELIED UPON BY THE ASSESSEE WILL NOT HELP THE CASE OF THE ASSESSEE WHEN THE ADDITION WAS BASED ON FALSE CLAIM MADE BY THE ITA NO. 509/JP/2019 SHRI MUKESH YADAV VS. ITO 9 ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) CONFIRMING THE LEV Y OF PENALTY U/S271(1)(C) OF THE ACT. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/09/2019. SD/- SD- JESK LH0 KEKZ FOT; IKY JKO (RAMESH. C. SHARMA) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/09/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI MUKESH YADAV, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-4(4), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 509/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR