Anand Motwani, Faizabad V. Dy. Commissioner of Income Tax, Faizabad

ITA 690/LKW/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4031 (ITAT-LUCKNOW)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 16-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAMRAT CHANDRA SHRI AMIT NIGAM
• Keywords: Salary income
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. P . K. BANSAL , ACCOUNTANT MEMBER AND SHRI ABY T VARKEY , JUDICIAL MEMBER ITA NO. 690/LKW/2015 ASSESSMENT YEAR: 2011 - 12 ANAND MOTWANI PROP. DREAMZ, LG CHAMBER JAMUNIYA BAGH FAIZABAD V. DY. CIT CIRCLE FAIZABAD T AN /PAN : AJUPM2337D (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI SAMRAT CHANDRA RESPONDENT BY: SHRI AMIT NIGAM, D.R. DATE OF HEARING: 08 08 2016 DATE OF PRONOUNCEMENT: 30 08 2016 PER ABY T VARKEY, J. M : O R D E R THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), FAIZABAD DATED 15.9.2015 FOR THE ASSESSMENT YEAR 2011 - 12. 2 . THE MAIN GRIEVANCE OF THE ASSESSEE IS AGAINST THE ORDER OF THE LD. CIT(A) , WHO HAS SUSTAINED THE DISALLOWANCE OF RS.8,11,520/ - WHICH WAS CLAIMED BY THE ASSESSEE AS SALARY EXPENSES. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED RETURN DECLARING INCOME AT RS.11,79,657/ - ON 30.9.2011. LATER ON THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSEE HAS A PROPRI ETORSHIP FIRM WHICH IS ENGAGED IN THE TRADING BUSINESS OF GARMENTS AND YARN. IN THE RELEVANT ASSESSMENT YEAR, A SURVEY UNDER SECTION 133A OF THE INCOME - [ ITA NO.690/LKW/2015, A.Y. 2011 - 12 ] 2 TAX ACT, 1961 WAS CONDUCTED ON 14.12.2010. DURING THE SURVEY STATEMENT ON OATH OF SHRI INDER KUMAR , WH O IS BROTHER OF THE ASSESSEE WAS RECORDED AND IN REPLY TO THE QUERY RAISED HE INFORMED THAT 20 TO 22 EMPLOYEES WERE WORKING IN THE SHOP AND THEY WERE GETTING SALARY RANGING FROM RS.1,500/ - PER MONTH TO RS.4,000/ - PER MONTH AND NO COMMISSION WAS PAID TO THE M. IT WAS ALSO INFORMED BY HIM THAT HE WAS GETTING SALARY OF RS.6,.000/ - PER MONTH FROM THIS SHOP. THE ASSESSING OFFICER ALSO RECORDED THE STATEMENT OF THE OTHER EMPLOYEES. BASED ON THAT THE ASSESSING OFFICER CALCULATED THE SALARY OF THE EMPLOYEES AS UN DER: - SHRI INDER MOTWANI : 1X6000X12 = RS.72,000/ - EMPLOYEES SALARY : 22X4000X12 = 4 . THE ASSESSING OFFICER NOTICED FROM THE PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE THAT THE ASSESSEE HAS CLAIMED EXPENDITURE O F RS. 28,39,920/ - ON ACCOUNT OF SALARY PAID TO HER EMPLOYEES. THE ASSESSING OFFICER NOTED THAT IN THE PRECEDING ASSESSMENT YEAR THE ASSESSEE HAS DEBITED AN EXPENDITURE OF RS.18,44,000/ - UNDER THE HEAD SALARY. TAKING NOTE OF 54% INCREASE IN SALARY EXPENDIT URE AND THE STATEMENT RECORDED ON OATH DURING SURVEY OF SHRI INDER KUMAR, BROTHER OF THE ASSESSEE, THE ASSESSING OFFICER ALLOWED ONLY SALARY EXPENSE OF RS.11,28,000/ - . THUS BALANCE EXPENDITURE OF RS.17,11,920 (RS.28,39,920 RS.11,28,000) WAS ADDED TO THE INCOME OF THE ASSESSEE . RS.10,56,000/ - RS.11,28,000/ - 5 . AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO TOOK NOTE OF THE SALARY INCOME WHICH WAS DECLARED BY THE [ ITA NO.690/LKW/2015, A.Y. 2011 - 12 ] 3 ASSESSEE IN THE PRECEDING ASSESSMENT YEAR I.E. RS.18.44 LAKHS AND HE NOTED THAT THE ASSESSMENT WAS COMP LETED UNDER SECTION 143(3) OF THE ACT AND SINCE THE SAME WAS ACCEPTED BY THE DEPARTMENT AND TAK ING INTO CONSIDERATION 10% INFL ATION OF RS.18.44 LAKHS, HE CALCULATED THE TOTAL EXPENDITURE AT RS.20,2 8,400/ - AND SUSTAINED THE ADDITION OF RS.8,11,520/ - . AGGR IEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS BEFORE US. 6 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE TAKE NOTE THAT THE ASSESSING OFFICER ON THE BASIS OF THE STATEMENT ON OATH OF SHRI INDER KUMAR , WHO IS THE BROTHER OF THE ASSESSEE , HAS COME TO THE CONCLUSION THAT AN AMOUNT OF RS.11.28 LAKHS MUST HAVE BEEN THE ACTUAL SALARY PAID TO THE EMPLOYEES . W HEREAS THE ASSESSEES CLAIM IS THAT THERE ARE OTHER STAFF MEMBERS WHO ARE WORKING IN THE SHOP, LIKE SECURITY STAFF AND CONTINGENCY STAFF AR E ALSO EMPLOYED DURING THE TIME OF FESTIVAL, ETC , WHICH THE ASSESSES BROTHER HAS NOT TAKEN INTO ACCOUNT WHILE ANSWERING QUESTIONS DURING SURVEY . THE LD. A.R. OF THE ASSESSEE POINTED OUT THAT IT WAS AN APPROXIMATE FIGURE THAT WAS TOLD AT THE TIME OF SURVE Y AND ALSO POINTED OUT THAT THE STATEMENT ON OATH CANNOT BE RELIED UP ON BY THE ASSESSING OFFICER FOR MAKING ADDITION AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. S. KHADER KHAN SON, 352 ITR 480 WHEREIN THE HON'BLE SUPREME COURT HAS HELD THAT DURING SURVEY THE STATEMENT ON OATH CANNOT BE RECORDED AND THE SAME CANNOT BE AN ADMISSIBLE EVIDENCE FOR MAKING THE ADDITION. W E FIND THAT THE IMPUGNED ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER MERELY ON THE BASIS OF THE STATEMENT ON OATH RECORDED DURING SURVEY OF SHRI INDER KUMAR , WHICH IS INADMISSIBLE IN EVIDENCE AS PER THE APEX COURT DECISION IN KHADER KHAN SON (SUPRA) IS BAD IN LAW. FURTHER W E TAKE NOTE THAT THERE HAS BEEN INCREASE IN THE GP RATE AS WELL AS NP RATE BEING CONSIDERED [ ITA NO.690/LKW/2015, A.Y. 2011 - 12 ] 4 WITH THAT OF PREVIOUS ASSESSMENT YEAR AND THE BOOKS OF ACCOUNT ARE STATUTORILY AUDITED. THE ASSESSING OFFICER COULD NOT POINT OUT ANY DEFECT IN THE BOOKS MAINTAINED BY THE ASSESSEE IN THE REGULAR COURSE OF BUSINESS. AND SINCE T HE SOLE BASIS FOR MAKING ADDITION SINCE NOT ADMISSIBLE AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. S. KHADER KHAN SON (SUPRA), WE ARE INCLINED TO DELETE THE ADDITION. 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.8.2016. SD/ - SD/ - [P. K. BANSAL ] [ ABY T VARKEY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH 1 . APPELLANT AUGUST , 2016 JJ: 1808 COPY FORWARDED TO: 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR