Sicohi Detectives & Securities Agency (P) Ltd, V. ITO Ward-8 (4),

ITA 593/DEL/2008

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3400 (ITAT-DELHI)
• Duration Of Justice: 9 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 26-04-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 18-02-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: V RAJ KUMAR
• Section: 133(6); 148; 263

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH G, NEW DELHI BEFORE : SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NOS. 593 & 594/DEL./2008 ASSESSMENT YEARS: 2002-03 & 2003-04 SIROHI DETECTIVES & SECURITIES AGENCY PVT. LTD., 713, VIKAS DEEP LAXMI NAGAR DISTT. CENTRE, NEW DELHI. (PAN-AAACS4006P) (APPELLANT) VS. INCOME - TAX OFFICER, WARD 8(4), NEW DELHI. (RESPONDENT) ASSESSEE BY SH. K. SAMPATH, ADVOCATE & SH. V. RAJKUMAR, ADVOCATE REVENUE BY SH. KAUSHLENDRA TIWARI, SR. DR ORDER PER L.P. SAHU, A.M.: THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE COMMON ORDER OF LD. CIT(A)-XI, NEW DELHI DATED 14.12.2007 FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04 RESPECTIVELY. IN BOTH THESE AP PEALS, COMMON ISSUE IS INVOLVED WITH RESPECT TO SUSTENANCE OF DISALLOWANCE OF RS.11,39,222/- AND RS.7,17,341/- AS AGAINST THE DISALLOWANCE OF RS.57, 32,547/- & RS.33,49,373/- MADE BY THE ASSESSING OFFICER OUT OF SALARY PAYABLE CLAIMED BY THE ASSESSEE. FOR THE SAKE OF CONVENIENCE AND BREVITY, WE, THEREF ORE, DECIDE BOTH THESE APPEALS BY THIS CONSOLIDATED ORDER AND TAKE UP THE APPEAL FOR THE ASSESSMENT DATE OF HEARING 28.11.2017 DATE OF PRONOUNCEMENT 15 .02.2018 ITA NOS. 593 & 594/DEL./2008 2 YEAR 2002-03 FIRST, THE DECISION ON WHICH SHALL EQU ALLY APPLY TO OTHER APPEAL FOR A.Y. 2003-04. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN PROVIDING SECURITY GUARDS TO VARIOUS CLIENTS WHICH INCLUDES B IG CORPORATE, PUBLIC SECTOR UNDERTAKING AND OTHERS. THE ASSESSMENT HAS BEEN MAD E BY THE ASSESSING OFFICER U/S. 143(3)/147 OF THE IT ACT. IN THE ASSES SMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SH OWN SALARY PAYABLE UNDER THE HEAD CREDITORS AMOUNTING TO RS.93,78,949/-. NOT ICES U/S. 133(6) WERE ISSUED TO 67 PERSONS/CREDITORS OUT OF 307 CREDITORS FOR VERIFICATION AS PER DETAILS FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. ALL THE NOTICES ISSUED WERE RECEIVED BACK AS UN-SERVED. THE ASSESSEE WAS CONFRONTED WITH THIS FACT. THE ASSESSEE PRODUCED 12 PERSONS OU T OF 67 PERSONS. STATEMENTS OF 12 PERSONS WERE RECORDED ON OATH BY T HE ASSESSING OFFICER. THE ASSESSEE WAS UNABLE TO ESTABLISH UNPAID SALARY TO 2 40 PERSONS OUT OF 307 PERSONS. THE ASSESSING OFFICER MADE ESTIMATED EXCES S LIABILITY OF RS.19,83,035/- VIDE ASSESSMENT ORDER DATED 16.03.20 04. SUBSEQUENTLY, NOTICE WAS ISSUED BY THE CIT-III, DELHI U/S. 263 ON 09.09. 2004 WHEREIN, IT WAS MENTIONED THAT THE ASSESSMENT ORDER PASSED BY THE A SSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. AFTER ISSUE OF NOTICE U/S. ITA NOS. 593 & 594/DEL./2008 3 263, THE APPELLANT FILED APPLICATION U/S. 245C(1) B EFORE THE SETTLEMENT COMMISSION ON 16.12.2004 FOR THE ASSESSMENT YEAR 20 01-02 AND 2003-04. THE HONBLE SETTLEMENT COMMISSION ACCEPTED THE PETI TION FOR THE ASSESSMENT YEAR 2001-02 AND REJECTED THE SAME FOR THE ASSESSME NT YEAR 2003-04 AS THERE WERE NO PROCEEDINGS PENDING FOR THAT YEAR. THE ASSE SSEE DISCLOSED RS.5 LACS INCOME BEFORE THE SETTLEMENT COMMISSION FOR EACH YE AR. THE ASSESSING OFFICER AFTER RECORDING THE REASONS, ISSUED NOTICE U/S. 148 ON 27.03.2006, I.E., AFTER THE ORDER U/S. 245D(1) OF THE SETTLEMENT COMMISSION WAS RECEIVED. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAS SHOWN TOTAL SALARY EXPENSES OF RS.2,27,84,832/- AND RS.1,43,46,816/- RESPECTIVELY FOR THE TWO YEARS AND UNPAID SALARY FO R THESE TWO YEARS WAS SHOWN AT RS.1,14,43,166/- AND RS.91,24,308/- RESPEC TIVELY. THE ASSESSING OFFICER PREPARED A COMPARATIVE CHART FOR THE ASSESS MENT YEARS 2001-02 AND 2002-03 WHICH IS AS UNDER : A.Y. TOTAL RECEIPTS AMT. DEBITED AS SALARY AMT PAID TO SECURITY STAFF AS SALARY AMOUNT SHOWN PAYABLE AS ON 31 ST MARCH REMARKS 1. 2. 3. 4. 2001-02 23033967 21640880 (93% OF 1) 20603979 (89% OF 2) 9378950 (45% OF 3) AMOUNT ALLOWABLE 15727162 AFTER DISALLOWANCE OF RS.4876817 AS ABOVE 2002-03 24191092 22784433 (94% OF 1) 22049709 (91% OF 2) 11443166 (51% OF 3) ITA NOS. 593 & 594/DEL./2008 4 3. THE ASSESSING OFFICER AFTER ANALYZING THE ABOVE TABLE, DISALLOWED THE CLAIM OF ASSESSEE FOR ASSESSMENT YEAR 2002-03 OF RS .57,32,547/-. IN APPEAL, THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND THE ORDER OF THE ASSESSING OFFICER AND THE MATERIAL AVAILABLE ON RECORD, RESTRICTED THE ADDITIONS UPTO 5% OF THE SALARY PAID. ACCORDINGLY, THE LD. CIT(A) WORKED OUT THE AMOUNT OF RS.11,39,222/- AND RS.7,17,341/- FOR BOTH THE ASSESSMENT YEARS RESPECTIVELY. AGGRIEVED BY THE ORDER OF THE ASSESSI NG OFFICER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 4. THE LEARNED AR SUBMITTED THAT THE BOOKS F ACCOUN T OF THE ASSESSEE HAS BEEN AUDITED BY QUALIFIED CHARTERED ACCOUNTANT U/S. 44AB AND NO ANY DEFECT HAS BEEN POINTED OUT BY THE AUDITOR. IT WAS SUBMITT ED THAT THE SERVICE OF SECURITY GUARDS WAS NOT PERMANENT AND SEVERAL SUCH GUARDS WHICH COULD NOT BE VERIFIED, HAD LEFT THEIR JOBS AND COULD NOT BE T RACED OUT AT THE GIVEN ADDRESS. A FIRE ACCIDENT WAS OCCURRED ON 27.10.2004. THEREFO RE, ALL THE RECORDS, VIZ., CASH BOOK, BANK BOOK, ATTENDANCE REGISTER, LEDGER, SERVICE BOOK RECORDS, ESI PF DOCUMENTS WERE DESTROYED IN FIRE. THEREFORE, THE BOOKS OF ACCOUNT COULD NOT BE PRODUCED DURING THE RE-ASSESSMENT PROCEEDING S. THE ASSESSEE HAS PROVIDED SECURITY SERVICES TO PUBLIC SECTOR, CORPOR ATE SECTOR AND OTHERS. THE PAYMENTS WERE NOT RECEIVED IN TIME. THEREFORE, THE ASSESSEE WAS UNABLE TO ITA NOS. 593 & 594/DEL./2008 5 PAY THEIR SALARY IN TIME. AS SOON AS THE ASSESSEE R ECEIVED PAYMENTS FROM THE DEBTORS, HE HAS PAID SALARY TO THE SECURITY GUARDS. HE ALSO REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. THE ASSESSEE HAS MADE PAYMENT AT THE MINIMUM WAGES RATE. BOTH THE AUTHORI TIES BELOW HAVE MADE DISALLOWANCE ONLY ON THE ESTIMATE BASIS WITHOUT ANY COGENT MATERIAL FOR DISALLOWANCE OF SALARY PAID/PAYABLE. IT WAS SUBMITT ED THAT NATURE OF ASSESSEES BUSINESS IS SUCH THAT HE AMOUNT OF SUNDR Y CREDITORS REMAIN OUTSTANDING AS AT THE END OF EVERY YEAR. THE DEPART MENT ITSELF HAS ACCEPTED SUCH OUTSTANDING SUNDRY CREDITORS IN ASSESSMENT YEA R 2005-06 VIDE ORDER DATED 28.12.2007. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ORDERS OF THE LOWER AUTHORIT IES ARE NOT ON ESTIMATION BUT ARE BASED ON LOGICAL BASIS. THE ASSESSEE HIMSEL F APPROACHED TO THE SETTLEMENT COMMISSION FOR THE ASSESSMENT YEARS 2000 -01, 2001-02, 2002-03 AND 2003-04 AND SURRENDERED RS.5 LACS EACH YEAR WHI CH SHOWS THE MODUS OPERANDI OF INFLATING THE SALARY EXPENSES. THE ASSE SSEE DID NOT PRODUCE ANY VOUCHERS, BILLS, DOCUMENTS, BOOKS OF ACCOUNT BEFORE THE AUTHORITIES BELOW. THEREFORE, THEY HAVE ARRIVED AT CORRECT DECISION AN D THE LD. CIT(A) HAS ITA NOS. 593 & 594/DEL./2008 6 RESTRICTED THE ADDITION UPTO 5% OF THE SALARY DEBIT ED INTO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. 6. AFTER HEARING BOTH THE SIDES AND PERUSING THE MA TERIALS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT T HE ASSESSEE DID NOT PRODUCE ANY EVIDENCE REGARDING OUTSTANDING PAYMENTS APPEARI NG IN THE BALANCE SHEET AT THE END OF BOTH THE FINANCIAL YEARS. THE ASSESSE E HAS SUBMITTED THAT NO ANY DEFECT HAS BEEN POINTED OUT BY THE AUTHORITIES BELO W IS NOT CORRECT BECAUSE HE DID NOT PRODUCE THE BOOKS OF ACCOUNT BEFORE THEM. T HE ASSESSEE HAS SHOWN HUGE AMOUNT OF SUNDRY CREDITORS PAYABLE TO SECURITY GUARDS WHICH IS 43.34% OF THE TOTAL SALARY DEBITED INTO PROFIT AND LOSS AC COUNT WHICH COMES EQUAL TO FIVE MONTHS SALARY. HOWEVER, ON PERUSAL OF THE BAL ANCE SHEET FOR BOTH THE YEARS UNDER CONSIDERATION, WE FIND THAT THE CLOSING BALANCE IN BANK IS RS.22,01,036/- AND RS.21,76,150/- AT THE END OF THE YEAR. WE ALSO FIND THAT THE SALARY TO STAFF PAYABLE IN BOTH THE YEARS WAS RS.1, 14,43,166/- AND RS.91,24,308/- WHICH COMES NEAR ABOUT 5 TIMES OF TH E MONTHLY SALARY TO BE PAID TO THE SECURITY GUARDS. IT IS NOT UNDERSTANDAB LE AS TO HOW A SECURITY GUARD GETTING SALARY OF RS.3000/- TO RS.3500/- PER MONTH WOULD SURVIVE WITHOUT GETTING SALARY EQUAL TO AVERAGE FIVE MONTHS SALARY . THE ASSESSEE HAS ALSO FAILED TO EXPLAIN AS TO WHY HE DID NOT MAKE PAYMENT OF SALARY AND SHOWED IT AS ITA NOS. 593 & 594/DEL./2008 7 OUTSTANDING WHEN THE ASSESSEE WAS MAINTAINING HUGE BALANCES IN ITS BANK ACCOUNTS. THEREFORE, THE LD. AUTHORITY BELOW HAS LO GICALLY RESTRICTED THE DISALLOWANCE TO 5% OF THE TOTAL SALARY, WHICH APPEA RS QUITE JUSTIFIED. WE, ACCORDINGLY, DO NOT FIND ANY INFIRMITY IN THE IMPUG NED ORDER, WHICH DESERVES TO BE SUSTAINED. ACCORDINGLY, BOTH THE APPEALS OF THE ASSESSEE ARE LIABLE TO BE DISMISSED. 7. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY, 2018 SD/- SD/- (H.S. SIDHU) (L.P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 TH FEBRUARY, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI