SAPNA RAJKUMAR JETHRA, THANE V. INCOME TAX OFFICER WARD 1(1), THANE

ITA 7053/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5397 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2012-2013
• Appeal Filed On: 12-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Depreciation; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.7053/M/2017 ASSESSMENT YEAR: 2012-13 M/S. SAPNA RAJKUMAR JETHRA, OFFICE NO.19, SHRIKANT INDUSTRIAL ESTATE, ADIVASIPADA, ROAD NO21, MANDAL COMPOUND, WAGLE INDUSTRIAL ESTATE, THANE- 400 604 PAN: ADHPJ9443J VS. INCOME TAX OFFICER, WARD 1(1), ROOM NO.23, B-WING, ASHAR IT PARK, AMBIKA NAGAR, WAGLE INDUSTRIAL ESTATE, THANE 400 604 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI MAYUR KISNADWALA, A.R. REVENUE BY : SHRI CHAUDHARY ARUNKUMAR SINGH, D.R . DATE OF HEARING : 02.05.2019 DATE OF PRONOUNCEMENT :16.05.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 24.10.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED IN THE VARIOUS GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF SALARY EXPENSES TO THE TUNE OF RS.2,83,500/- BY THE ASSESSEE. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED T HE RETURN OF INCOME ON 30.09.2012 DECLARING THE INCOME AT NIL. THE CASE OF ITA NO.7053/M/2017 M/S. SAPNA RAJKUMAR JETHRA 2 THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE GRO SS RECEIPT OF THE ASSESSEE WAS RS.2.50 CRORE AND AFTER DEBITIN G ALL EXPENSES THERE WAS A NET LOSS OF RS.8,38,717/-. THE AO OBSE RVED FROM THE DETAILS FURNISHED BY THE ASSESSEE THAT ASSESSEE HAS CLAIMED RS.28,35,000/- ON ACCOUNT OF SALARY WHICH APPEARS T O BE VERY EXCESSIVE AND AMOUNT FOR 11% OF THE TOTAL TURNOVER AND ISSUED SHOW CAUSE NOTICE TO PRODUCE THE BILLS, VOUCHERS AN D OTHER SUPPORTING DOCUMENTS TO JUSTIFY THE SALARY CLAIM WH ICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 24.02.201 5. THE AO FOUND THAT MOST OF THE VOUCHERS AND BILLS WERE IN C ASH AND CAME TO THE CONCLUSION THAT THOSE WERE NOT SATISFACTORY. THE AO ALSO NOTED THAT THE ASSESSEE HAS NOT SUBMITTED BANK STAT EMENT NOR ANY CASH BOOK TO JUSTIFY THE CASH PAYMENTS AND FINA LLY DISALLOWED THE SALARY TO THE TUNE OF 10% OF THE TOT AL SALARY WHICH COMES TO RS.2,83,500/- AND ADDED THE SAME TO THE LO SS RETURNED BY THE ASSESSEE THEREBY ASSESSING THE NET LOSS AT R S.5,55,217/- VIDE ORDER DATED 03.03.2015. 4. IN THE APPELLATE PROCEEDINGS ALSO THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO IN THE ASSESSMENT ORDER AND ARGUMENTS OF THE LD. AR OF THE APPELLANT. DURING THE COURSE OF APPELLATE PROCEEDINGS THE LD. AR HAD FURNISHED S OME OF THE VOUCHERS REFLECTING THE PAYMENTS OR SALARY/WAGES IN CASH IN ROUND FIGUR ES, WITHOUT MUCH OF DETAILS. IT IS FURTHER NOTICED THAT ON THE VOUCHERS ONLY NAME OF T HE EMPLOYEES WAS MENTIONED, WITHOUT GIVING THE QUALIFICATION, NATURE OF JOB EXE CUTED AND THEIR ADDRESSES. IN VIEW OF THESE FACTS THE GENUINENESS AND REASONABLENESS O F THE SALARY/WAGES PAID TO THE EMPLOYEES/LABOURERS COULD NOT BE ASCERTAINED. CONSI DERING THE ABOVE FACTS THE DISALLOWANCE TO THE EXTENT OF 10%, I.E. 2,83,500/-, OUT OF TOTAL WAGES OF RS 28,35,000/-, APPEARS TO BE REASONABLE. IT IS PERTIN ENT TO MENTIONED HERE THAT EVEN AFTER DISALLOWANCE OF ABOVE AMOUNT THE RESULTANT LO SS HAS BEEN DETERMINED AT RS 5,55,217/-, AGAINST THE TOTAL TURNOVER OF RS 2.50 C RORES, HARVESTED FROM THE TRADING OF INDUSTRIAL GASES. IN COMPLIANCE THE LD. A.R. COU LD NOT OFFER ANY VALID REASON FOR INCURRING HUGE LOSSES. CONSIDERING THE FACTS IN ENT IRETY, IN MY VIEW, THE DISALLOWANCE ITA NO.7053/M/2017 M/S. SAPNA RAJKUMAR JETHRA 3 OF RS 2,83,500/-, OUT OF TOTAL SALARY OF RS. 28,35, 007-, IS QUITE REASONABLE THEREFORE, SUSTAINED AND ALL THE GROUNDS OF APPEAL, RAISED AS ABOVE, ARE DISMISSED. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD AND TAKING INTO ACCOUNT THE EVIDENCES AS PLA CED BEFORE THE BENCH DURING THE COURSE OF HEARING, WE OBSERVE THAT THE SALES OF THE ASSESSEE DURING THE YEAR HAVE GONE UP BY 42%. THE SALES DURING A.Y. 2011-12 WERE RS.1,76,14,092/- WHE REAS SALES DURING THE YEAR UNDER CONSIDERATION WERE RS.2,50,30 ,781/-. FURTHER, WE NOTICE FROM THE COPY OF PROFIT & LOSS A CCOUNT FOR BOTH THE YEARS, THAT THE DEPRECIATION ON FIXED ASSE TS WAS RS.34,96,138/- IN A.Y. 2011-12 WHEREAS IN THE CURRE NT YEAR THE DEPRECIATION WAS RS.56,57,148/-. AFTER PERUSING TH E FACTS ON RECORD, WE OBSERVE THAT THE DISALLOWANCE HAS BEEN M ERELY MADE BECAUSE DURING THE YEAR THE ASSESSEE HAS INCURRED L OSS AND WITHOUT ASSIGNING ANY REASON FURTHER ,DISALLOWANCE THE SALARY WAS MADE EQUAL TO 10% OF THE TOTAL CLAIM OF THE AS SESSEE ON JUST ADHOC BASIS. THE LD. CIT(A) SUSTAINED THE DISALLOW ANCE WITHOUT ANY REASON AND JUSTIFICATION BY JUST OBSERVING THAT ON A TURNOVER OF RS.2.50 CRORES, THE ASSESSEE HAS INCURRED A LOSS OF RS.5,55,217/- AFTER GIVING EFFECT TO THE ABOVE DISA LLOWANCE OF SALARY OF RS.2,83,500/- WITHOUT PINPOINTING ANY SPE CIFIC DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE MERE FACT THAT ASSESSEE HAS PAID SALARY BY CASH WOULD NOT AUTOMATI CALLY MEAN THAT THE SALARY PAID IS NOT GENUINE. MOREOVER, FRO M THE PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE IN THE CURRENT Y EAR VIS--VIS PRECEDING YEAR, WE OBSERVE THAT THERE HAS BEEN DRAS TIC INCREASE IN THE SALES BY WHOPPING PERCENTAGE OF 42% BUT TH E DEPRECIATION HAS ALSO INCREASED ENORMOUSLY. UNDER THESE CIRCUMSTANCES, WE ARE NOT IN AGREEMENT WITH THE CON CLUSION ITA NO.7053/M/2017 M/S. SAPNA RAJKUMAR JETHRA 4 DRAWN BY THE LD. CIT(A) THAT ASSESSEE HAS INCURRED LOSS DESPITE THE SALES OF THE ASSESSEE BEING RS. 2.50 CR AND ACC ORDINGLY ORDER OF LD. CIT(A) IS SET ASIDE AND ADDITION OF RS. 2,83 ,500/- IS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.05.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 16.05.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.