VALIANT GLASS WORKS P. LTD, MUMBAI V. DCIT CEN CIR 39, MUMBAI

ITA 6123/MUM/2010

• Counselvise Citation: 612319914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2005-2006
• Appeal Filed On: 09-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUBACHAN RAM
• Keywords: Business expenditure; Search and seizure; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NO.6123/MUM/2010 (ASSESSMENT YEAR: 2005-06) VALIANT GLASS WORKS PVT. LTD., C/O. SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BUILDING, 265 PRINCESS STREET, MUMBAI -400 002 ...... APPELLANT VS DCIT CENT. CIR. 39, MUMBAI ..... RESPONDENT PAN: AAACV 1224 E APPELLANT BY: NONE RESPONDENT BY: SHRI SUBACHAN RAM DATE OF HEARING: 08.12.2011 DATE OF PRONOUNCEMENT: 23.12.2011 O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT MUMBAI DATED 08.07.2010 FOR THE A.Y. 2005-06. WHEN THIS APPEAL WAS CALLED FOR THE HEARING, ONE PERSON, SHRI KAMALESH WHO IS PEON FROM THE OFFICE OF THE CHARTERED ACCOUN TANT REPRESENTING ASSESSEE, APPEARED BEFORE THE BENCH AND PRESENTED A N APPLICATION FOR ADJOURNMENT. IN OUR OPINION, SEEKING AN ADJOURNMENT IN COURT PROCEEDING IN ANY CASE, ITSELF IS A JUDICIAL PROCEE DING AND NO UNAUTHORISED PERSON CAN APPEAR IN THE COURT. MOREO VER, WE ARE SERIOUSLY CONCERNED ABOUT THE APPROACH OF THE CHART ERED ACCOUNTANT WHO PREFERRED TO SEND HIS PEON TO APPEAR IN THE COU RT PROCEEDINGS INSTEAD TO REMAIN PRESENT IN PERSON, WHEN HE WAS PR OFESSIONALLY BOUND TO DO SO AS HE HAS FILED POWER OF ATTORNEY TO REPRESENT ASSESSEE. UNDER THE CIRCUMSTANCES WE REJECT THE AP PLICATION FOR ITA 6123/MUM/2010 VALIANT GLASS WORKS PVT. LTD. 2 ADJOURNMENT PRESENTED BY THE PEON OF THE CHARTERED ACCOUNTANT AND PROCEED TO DISPOSE OFF PRESENT APPEAL ON MERIT AFTE R HEARING THE LD. D.R. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIV E GROUNDS IN THE APPEAL:- 1. THE LD. CIT (A) ERRED IN CONFIRMING DISALLOWANC E OF ` 3,81,075/- OUT OF SALARY EXPENSES AS CLAIMED BEING PAYMENT TO RELATIVES OF THE EMPLOYEES, TREATING SUC H EXPENSES AS NON-BUSINESS, WITHOUT PROPERTY APPRECIA TING THE FACT THAT PAYMENT HAS BEEN MADE FOR THE PURPOSE OF THE BUSINESS OF THE APPELLANT COMPANY. 2. THE LD. CIT (A) ERRED IN CONFIRMING DISALLOWANCE OF ` 6,07,283/- OUT OF THE PAYMENT MADE TO THE CONTRACTORS BEING RELATIVES OF THE EMPLOYEES, WITHOUT APPRECIAT ING THE FACT THAT SUCH RELATIVES HAVE BEEN PAID FOR THE LAB OUR SUPPLIED FOR THE MANUFACTURING OPERATIONS OF THE AP PELLANT AND HENCE SUCH PAYMENTS ARE ALLOWABLE DEDUCTIONS. 2. BRIEFLY STATED THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. A SEARCH AND SEIZURE OPERATION U/S.132 OF T HE ACT WAS CARRIED OUT ON 10.10.2007 AT THE BUSINESS AND RESIDENTIAL P REMISES OF JIMTEX GROUP AND DIRECTORS / PARTNERS OF THE COMPANIES AND FIRMS IN THE SAID GROUP. THE ASSESSEE IS ONE OF THE GROUP CONCERNS I N THE JIMTEX GROUP, WHICH WAS ALSO COVERED IN THE SEARCH. IN CO NSEQUENCE OF THE SEARCH AND SEIZURE OPERATION NOTICE U/S.153A WAS IS SUED DIRECTING THE ASSESSEE TO FILE THE RETURN OF INCOME. THE ASSESSE E FILED THE RETURN OF INCOME FOR THE A.Y. 2005-06 DECLARING AN UNDISCLOSE D INCOME OF ` 2,95,45,431/- WHICH WAS ADMITTED DURING THE COURSE OF THE SURVEY U/S.133A, BEING UN ACCOUNTED SALE OF WASTE MATERIAL AND PAYMENT TO THE LABOUR CONTRACTOR. IN THIS CASE APART FROM THE SEARCH AND SEIZURE OPERATION THERE WAS SURVEY ACTION U/S.133A ON 5.1.2 006 AND DURING THE COURSE OF THE SURVEY ACTION THE ASSESSEE HAS SU RRENDERED THE ADDITIONAL INCOME IN THE HANDS OF THE DIFFERENT CON CERNS. IT WAS ITA 6123/MUM/2010 VALIANT GLASS WORKS PVT. LTD. 3 REVEALED THAT THE ASSESSEE HAS SOLD FENTS AND CHIN DIES WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. FENTS AND C HINDIES ARE WASTE WHICH IS GENERATED DURING THE COURSE OF THE BUSINES S ACTIVITIES OF THE ASSESSEE. FENTS AND CHINDIES ARE SOLD IN CASH AN D THIS CASH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. AS PER THE STATEMENT GIVEN BY THE ASSESSEE, OUT OF THE SALE OF FENTS AND CHINDIES OF ` 2,95,45,431/- VARIOUS PAYMENTS OF LABOUR CONTRACTO RS AND OTHER EXPENSES HAD BEEN MADE. IT WAS ALSO FOUND THAT SAL ARY WAS PAID TO THE RELATIVES OF CERTAIN EMPLOYEES. THE ASSESSEE C LAIMED THE SAME EXPENDITURE AS A BUSINESS EXPENDITURE BY STATING TH AT PAYMENT ON ACCOUNT OF SALARY WAS MADE TO THE RELATIVES OF THE EMPLOYEES AS PART OF PAY PACKAGE OF EMPLOYEES. THE A.O. MADE DISALLOWAN CE TO THE EXTENT OF ` 3,81,075/-. THE ASSESSEE CHALLENGED THE DISALLOWA NCE BEFORE THE LD. CIT (A) WHO CONFIRMED THE ORDER OF THE A.O. BY GIVING THE FOLLOWING REASONS:- 1.4 I HAVE CAREFULLY CONSIDERED THE REPLY OF THE A PPELLANT AND PERUSED THE ASSESSMENT ORDER. THE ASSESSING OFFICE R HAS FOUND THAT THE EXPENSES HAS NOT BEEN INCURRED FOR T HE PURPOSE OF BUSINESS AS NO TAX HAS BEEN DEDUCTED FRO M THE SALARY PAID THE RELATIVES. MOREOVER THE EMPLOYEES HAVE ALSO NOT PAID TAX ON THE SAME. IT IS AN ADMITTED F ACT THAT THE RELATIVES OF THE EMPLOYEES HAVE NOT RENDERED AN Y SERVICES TO THE APPELLANT. THEREFORE PAYMENT MADE TO THE ASSESSEE IS NOT BUSINESS EXPENDITURE AND RATHER EXG RATIA PAYMENT TO THE RELATIVES OF THE EMPLOYEES WHICH IS NOT ALLOWABLE AS BUSINESS EXPENDITURE. IN VIEW THIS FA CT THE ASSESSING OFFICER IS JUSTIFIED IN MAKING DISALLOWAN CE OF THESE EXPENSES. THE DISALLOWANCE MADE BY THE ASSES SING OFFICER IS CONFIRMED. THE FIRST GROUND OF APPEAL I S NOT ALLOWED. ITA 6123/MUM/2010 VALIANT GLASS WORKS PVT. LTD. 4 3. WE HAVE HEARD THE LD. D.R. WHO SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. AS PER THE REASONS RECORDED BY THE A.O. WE FIND THAT THE RELATIVES OF THE EMPLOYEES HAVE NOT RENDER ED ANY SERVICES TO THE ASSESSEE. HENCE, THE EXPENDITURE CLAIMED BY TH E ASSESSEE CANNOT BE SAID TO HAVE BEEN INCURRED FOR THE PURPOSE OF TH E BUSINESS. IN OUR OPINION, THE LD. CIT (A) HAS RIGHTLY CONFIRMED THE ADDITION. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT ( A) ON THIS ISSUE. ACCORDINGLY, THE SAME IS CONFIRMED AND GROUND NO.1 IS DISMISSED. 4. SO FAR AS GROUND NO.2 IS CONCERNED, IT IS AGAINS T THE DISALLOWANCE MADE OF ` 6,07,283/- WHICH WAS PAYMENT MADE TO THE RELATIVES OF THE EMPLOYEES. 5. BRIEFLY STATED THE FACTS ARE AS UNDER. THE A.O. HAS NOTED THAT CLINCHING EVIDENCES WERE GATHERED SHOWING PAYMENTS MADE TO LABOUR CHARGES TO THE RELATIVES OF THE EMPLOYEES AMOUNTING TO ` 6,07,283/- AND THE ASSESSEE CONTENDED THAT THE PAYMENTS HAD BE EN MADE FOR SUPPLY OF LABOUR. AS THE ASSESSEE FAILED TO PROVE THE PAYMENT FOR THE PURPOSE OF THE BUSINESS THE A.O. MADE THE DISALLOWA NCE MADE OF ` 6,07,283/- WHICH WAS CONFIRMED BY THE LD. CIT (A). 6. WE HAVE HEARD THE LD. D.R. WHO ARGUES THAT UNLES S THE PAYMENT IS MADE FOR THE PURPOSE OF THE BUSINESS AND SUPPORTING EVIDENCE IS LED TO PROVE THE SAME THEN ONLY THE DED UCTION CAN BE ALLOWED. HE SUBMITS THAT THOUGH FEW BILLS WERE PRO DUCED BEFORE THE LD. CIT (A) BUT THOSE WERE NOT GENUINE AS EVEN THE BILL NUMBERS WERE MISSING ON SO CALLED BILLS. THE LD. D.R. PRAYED FO R CONFIRMING THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. WE FIND TH AT THE LD. CIT (A) HAS GIVEN THE DETAILED REASONING FOR REJECTING THE CLAI M OF THE ASSESSEE. THE ASSESSEE TRIED TO PROVE THE PAYMENT OF THE LABO UR CHARGES INCURRED FOR THE PURPOSE OF THE BUSINESS BY PRODUCI NG SOME BILLS BUT THERE WERE SERIOUS CONTRADICTIONS. THE LD. CIT (A) HAS IN DETAIL ITA 6123/MUM/2010 VALIANT GLASS WORKS PVT. LTD. 5 DISCUSSED HOW THE BILLS WERE NOT RELIABLE AND OPERA TIVE PART OF THE LD. CIT (A) IS AS UNDER:- 2.3 I HAVE CAREFULLY CONSIDERED THE REPLY GIVEN BY THE APPELLANT AND PERUSED THE ASSESSMENT ORDER. THE APPELLANT HA S PAID LABOUR CHARGES OF ` 6,07,263/- TO THE RELATIVES OF THE EMPLOYEES NAMELY SHRI N.P. LAHOTI AND PRIYA NAIR. THE APPELLANT HAS CLAIMED THAT THE PAYMENT HAS BEEN MAD E TO PROVE THAT THE EXPENDITURE HAS BEEN INCURRED FOR TH E PURPOSE OF BUSINESS. THE APPELLANT HAS FILED COPY OF BILL FROM SHRI NP LAHOTI LABOUR CONTRACTOR. FROM THE PR ODUCTION BILL DATED 10.04.2004, IT IS SEEN THAT NO BILL NUMB ER HAS BEEN GIVEN AND TOTAL BILL HAS BEEN RAISED FOR ` 27,055/-. THE DETAILS OF BILL IS REPRODUCED AS UNDER: DATED 10/4/04 BILL NO._______ M/S. VALIANT GLASS WORKS (P) LTD. MIDC TARAPUR DHALL STENOTER NO.2 MONTE MARG TOTAL PRODUCTION 18,41,432 X 0.15 = ` 27,621 LESS: TDS ` 566 ` 27,055 ===== ` TWENTY SEVEN THOUSAND FIFTY FIVE ONLY PERUSAL OF THIS BILL SHOWS THAT LABOUR CHARGES HAS BEEN CALCULATED @ 0.015 HAS NOT STATED THESE ARE RUPEES OR PAISA. FURTHER THE REMUNERATION FOR PRODUCTION LIK E METER FOR CLOTHES HAS NOT BEEN GIVEN. CONTRACTOR HAS DED UCED TDS ALTHOUGH THE SAME IS TO BE DEDUCTED BY THE APPE LLANT AS PAYER OF THE AMOUNT. THE APPELLANT WAS REQUIRED TO FILE AGREEMENT WITH THE CONTRACTOR FOR SUPPLY OF LABOUR, BUT HE HAS FAILED TO PRODUCED ANY AGREEMENT. ITA 6123/MUM/2010 VALIANT GLASS WORKS PVT. LTD. 6 THE APPELLANT HAS ALSO FILED LABOUR CHARGES BILL D ATED 08.03.2004 IN WHICH TOTAL PRODUCTION TAKEN AT 11398 0 @ 1.50% WHICH IS MORE THAN TEN TIMES OF THE RATE QUOT ED IN THE BILL DATED 10.04.2004. THE APPELLANT HAS NOT E XPLAINED THE DISCREPANCY IN THIS REGARD. THE APPELLANT HAS ALSO FILED BILL DATED 08.02.2005, EVEN BILL NUMBER IS MISSING AND TOTAL LABOUR CHARGES HAS BEEN SHOWN AT ` 24,669/-, AND BASIS OF LABOUR CHARGES HAS NO BEEN. THE CONTRACTO R HAS DEDUCTED TD OF ` 28,286/-. SIMILAR POSITION IS WITH REGARD TO BILL DATED 02.11.2004 WHERE NEITHER BILL NO. IS GIVEN NOR BASIS OF PAYMENT HAS BEEN GIVEN. IN BILL DATED 25. 05.2004 THE RATE OF PRODUCTION HAS BEEN TAKEN @ 0.02 NP WHI CH IS DIFFERENT FROM THE EARLIER BILLS. PERUSAL OF THESE BILLS SHOWS THAT NEITHER THERE IS ANY RATE UNIFORMITY NOR UNIFO RM LABOUR CHARGES HAS BEEN GIVEN. THE APPELLANT HAS NOT FILE D COPY OF ANY BILL RAISED BY PRIYA NAIR. THUS IT IS CLEAR THAT THE APPELLANT HAS FAILED TO EXPLAIN THAT THIS EXPENDITU RE OF ` 6,07,263/- HAS BEEN INCURRED FOR THE PURPOSE OF BUS INESS AS THE SAME IS NOT SUPPORTED BY PROPER BILLS. MORE OVER THE APPELLANT HAS SURRENDERED SUBSTANTIAL AMOUNT OF ` 2,95,25,451/- DURING THE SURVEY U/S.133A DUE TO PAY MENT OF LABOUR CONTRACT. IN VIEW OF THIS FACT THE ASSES SING OFFICER IS JUSTIFIED IN MAKING DISALLOWANCE OF ` 6,07,283/-. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFI RMED. SECOND GROUND OF APPEAL IS NOT ALLOWED. 7. IN OUR OPINION, AS RIGHTLY ARGUED BY THE LD. D.R . THE ASSESSEE FAILED TO PROVE THAT THE PAYMENT WAS MADE FOR THE P URPOSE OF THE BUSINESS OF THE ASSESSEE. WE FIND NO REASON TO INT ERFERE WITH THE ORDER OF THE LD. CIT (A) ACCORDINGLY, GROUND NO.2 I S DISMISSED. 8. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 3RD DECEMBER, 2011. ITA 6123/MUM/2010 VALIANT GLASS WORKS PVT. LTD. 7 SD/- SD/- ( RAJENDRA SINGH ) ACCOUTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE : 23RD DECEMBER, 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-41, MUMBAI. 4) THE CIT-CENTRAL III, MUMBAI. 5) THE D.R. F BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 6123/MUM/2010 VALIANT GLASS WORKS PVT. LTD. 8 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 07.12.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 13.12.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER