M/s. Freewill Infrastructure Pvt. Ltd., Pune V. Joint Commissioner of Income-tax,

ITA 724/PUN/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7137 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 31-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 11-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Maximum Marginal Rate; Question of law; Fair market value
• Section: 143(3); 133(6)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , ! ' # $ , % & BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM !. / ITA NO.724/PUN/2014 ' ( ( / ASSESSMENT YEAR : 2010-11 M/S. FREEWILL INFRASTRUCTURE PVT. LTD. OFFICE NO.6, PHASE NO.II, PREMIER PLAZA, CITS NO.45, MUMBAI PUNE ROAD, CHINCHWAD. PAN NO.AAACF8863F. . / APPELLANT V/S JT.COMMISSIONER OF INCOME TAX, RANGE 9, PUNE. . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI SUHAS KULKARNI. ) / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) V, PUNE DT.11 .02.2014 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- / DATE OF HEARING : 31.01.2017 / DATE OF PRONOUNCEMENT: 01.03.2017 2 ITA NO.724/PUN/2014 AY.NO.2010-11 2.1 ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF TRADING IN SPORTS ACCESSORIES AND GOODS. ASSESSEE ELECT RONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2010-11 ON 28.09.2010 DECLA RING TOTAL INCOME AT RS.80,26,610/-. THE CASE WAS SELECTED FOR S CRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORD ER DT.08.01.2013 AND TOTAL INCOME WAS DETERMINED AT RS.1,08,18,242/-. AGGRIEVED BY THE ORDER OF AO ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO VIDE ORDER DT.11.02.2014( IN APPEAL NO.PN/CIT(A)-V/JT.CIT, RG-9/322/12-13) DISMISSED THE APP EAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSE SSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION OF RS.19 , 51,632/- MADE BY THE LEARNED A .O. IN RESPECT OF DISALLOWANCE OF PURCHASES MADE FROM FIVE PARTIES WI THOUT APPRECIATING THAT THE ADDITION WAS NOT WARRANTED ON FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASS ESSEE WAS NOT ABLE TO GIVE ' THE CORRECT ADDRESSES OF THE FIVE PARTIES AND THE NOTICES ISSUED BY THE A.O. U/S 133(6) TO THESE PARTIES ON THE ADDRESSES GIVEN BY THE APPELLANT WERE RECEIVED BACK UNSERVED AND HENCE , THE ASSESSEE WAS NOT ABLE TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM THE ABOVE PA RTIES AND THEREFORE , THE SAID PURCHASES WERE TO BE DISALLOWED IN THIS YEAR. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD DULY FURNISHED THE COPIES OF PURCHASE BILLS, CO NTACT NUMBERS AND PAN NOS. OF THE ABOVE FIVE PARTIES AND THEREFORE, THERE WAS NO REASON TO HOLD THAT PURCHAS ES MADE FROM THESE PARTIES WERE BOGUS MERELY BECAUSE THE SU MMONS ISSUED BY THE A.O ON THE ADDRESSES GIVEN BY THE ASS ESSEE WERE RETURNED UNSERVED AND HENCE, THE ADDITION IS N OT F JUSTIFIED. 4. THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT TH E PURCHASES MADE FROM THE ABOVE PARTIES WERE GENUINE AND ALL TH E PAYMENTS TO THESE PARTIES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND HENCE , THE ADDITION MADE BY THE LEARNED A.O. WAS NOT WARRANTED AT ALL . 5. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE ASSESSEE HAD STOPPED TRANSACTING WITH THE ABOVE PAR TIES AND 3 ITA NO.724/PUN/2014 AY.NO.2010-11 HENCE, THE ASSESSEE WAS NOT AWARE OF THE PRESENT AD DRESSES OF THESE PARTIES AND THEREFORE, THE ADDITION MADE BY THE LEARNED A.O. WITHOUT POINTING OUT ANY OTHER DEFECTS REGARDING THE PURCHASE, SALES AND CONSUMPTION SHOWN BY THE ASSESSEE WAS NOT JUSTIFIED ON FACTS OF THE CASE. 6. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ADDITI ON U /S 40A(2)(B) OF RS.8,40,000/- MADE IN RESPECT OF DISALLOWANCE OF 50% OF SALARY PAID TO MRS. DIVYA KHARBANDA, WIFE OF THE DIRECTOR WITHOUT APPRECIATING THAT THE SAID ADDITIO N WAS NOT WARRANTED ON FACTS OF THE CASE. 7. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE SAL ARY OF RS. 16,80,000/- PAID TO MRS. DIVYA KHARBANDA WAS IN EXCESS OF THE SALARY PAID TO OTHER EMPLOYEES DOING SIMILAR WO RK AND THEREFORE, THE DISALLOWANCE OF RS . 8 . 40 LACS MADE BY THE LEARNED A.O. U /S 40A(2)(B) WAS JUSTIFIED ON FACTS OF THE CASE. 8. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT MRS . KHARBANDA WAS IN CHARGE OF THE ENTIRE OPERATIONS OF THE ASSESSEE COMPANY IN THE NORTHERN INDIA REGION INCLU DING OVERALL ADMINISTRATION OF THE COMPANY AND VARIOUS O THER FUNCTIONS AND HENCE, THE SALARY OF RS.16.80 LACS PA ID TO HER WAS QUITE REASONABLE CONSIDERING THE SERVICES RENDE RED BY HER AND THEREFORE, THE ADDITION MADE WAS NOT JUSTIF IED ON FACTS OF THE CASE. 9. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE INCOME OF MRS. KHARBANDA WAS TAXABLE AT MAXIMUM MAR GINAL TAX RATE AND THEREFORE, THERE WAS NO LOSS OF REVENU E AND HENCE, THE ADDITION MADE BY THE LEARNED A.O. U/S 40 A(2)(B) IS NOT WARRANTED AT ALL . 10. WITHOUT PREJUDICE TO THE ABOVE GROUND, THE ASSESSEE SUBMITS THAT THE ADDITION OF RS.8 . 40 LACS MADE BY THE LEARNED A.O. IS VERY HIGH AND THE SAME MAY BE RESTRICTED TO A REASONABLE AMOUNT . 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT THOUGH ASSESSEE HAS RAISED VARIOUS GROUNDS BUT GROUND NOS.1 T O 5 ARE WITH RESPECT TO ADDITION OF RS.19,51,632/- ON ACCOUNT OF DISALLOWA NCE OF PURCHASES AND GROUND NOS.6 TO 10 ARE WITH RESPECT TO THE ADDITION MADE U/S 40A(2)(B) OF THE ACT. HE THEREFORE SUBMITTED THAT ONLY THESE TWO ISSUES NEEDS ADJUDICATION. 4. FIRST ISSUE IS WITH RESPECT TO ADDITION OF RS.19,51,632/- ON ACCOUNT OF DISALLOWANCE OF PURCHASES. 4 ITA NO.724/PUN/2014 AY.NO.2010-11 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOT ICED THAT ASSESSEE HAD MADE PURCHASES FROM VARIOUS PARTIES. WITH RESPECT TO THE 5 PARTIES LISTED AT PAGE 2 OF ASSESSMENT ORDER THE AGGREGATE PURCHASES MADE FROM THEM AMOUNTED TO RS.19,51,632/-. AO HAD ISSUED NOTICES U/S 133(6) AND CALLED FOR THE DETAILS ABOUT THE SALES MADE BY THEM TO ASSESSEE LIKE CONFIRMATIONS, INCOME TAX P ARTICULARS ETC. AO NOTICED THAT NOTICES WERE RETURNED UNSERVED A ND ASSESSEE HAD ONLY FILED CONFIRMATION ON ITS OWN LETTER HEAD. THE ASS ESSEE WAS ASKED TO PRODUCE THE PARTIES. SINCE THE ASSESSEE COULD NOT PRODUCE THE PARTIES, THE PURCHASES AGGREGATING TO RS.19,51,632/- MADE BY ASSESSEE FROM 5 PARTIES WERE HELD BY AO TO BE NON-GENUINE AND THU S DISALLOWED. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIE D THE MATTER BEFORE LD. CIT(A), WHO CONFIRMED THE ADDITIONS BY HOLDIN G AS UNDER : 9. I H A V E C A REFULLY CO N SI D ERED THE FACTS OF THE CASE A S W ELL AS REPLY OF THE APPELLANT. IN THIS CASE, THE APPELLANT HAS FAILED TO FILE I NDE P E ND E NT C O N FI R MATION S AS WEL L AS PRESENT ADDRESSE S O F THOSE PARTI E S TO EN A BLE TH E ASS E SSING OFFIC ER TO VER IF Y TH E PU R CH A SES M A DE FR O M THO S E PARTIES, DESPITE PROVIDING SUFFICIENT OPPORTUNITY BY THE ASS E SS I NG OFFICER. THOUGH THE APPELLANT CLAIMS THAT ONCE CONFIRMATIONS WERE FILED BY IT, THE ONUS WAS DISCHARGED AND IT WAS FOR THE ASSESS I NG OFFICER TO MAKE FURTHER VE RI FIC ATI O N. TH I S CONTEN TION OF T HE A P PEL L AN T I S NOT AC CEPT ABL E IN VIEW OF THE FACT THAT AFTER THE CONFIRMATION FILED BY THE APPELLANT ON ITS LETTER HEAD WHICH WAS DATED 24.08.2010, THE ASSESSING OFFICER MADE FURTHER ENQU IR I ES AND NOTICES U/S, 133(6) OF INCOME-TAX ACT ISSUED WE RE RECEIVED BACK UNSERVED IN RESPECT OF THE ABOVE PART IES, THIS BEING SO, THE ONUS AGAIN SHIFTED ON THE APPELLANT TO PRODUCE THE PARTIES AND FILE PRESENT ADDRESSES OF THOSE PARTIES SO THAT NECESSARY VERIFICATION COULD BE CARRIED OUT. THE AP PELLANT HAS NOT BEEN ABLE TO DISCHARGE THIS ONUS. THE APPELLANT HAS RELIED UPON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN T HE CASE OF CIT- 1, MUMBAI VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD., FOR THE PROPOSITION THAT ADDITION CANNOT BE MADE EVEN I F PURCHASES ARE FOUND TO BE BOGUS . I HAVE GONE THROUGH THE ORDER OF HON'BLE BOMBAY HIGH COURT AND IT IS SEEN T HAT THE APPEAL FI L ED BY THE REVENUE HAS BEEN DISMISSED ON THE 5 ITA NO.724/PUN/2014 AY.NO.2010-11 GROUND THAT NO QUESTION OF LAW ARISES AS TRIBUNAL'S ORDER WAS BASED ON PROPER REASON I NG TAKEN INTO ACCOUNT ALL THE FACTS BEFORE CONCLUDING THAT PURCHASES OF RS. 1 . 33 CRORES WAS NOT BOGUS. SINCE THE APPEAL FILED BY THE REVENUE WAS D ISMISSED ON THE GROUND THAT NO SUBSTANTIAL QUESTION OF LAW A RISES THE A P PEL L ANT CANNOT DERIVE ANY SUPPORT FROM THE ABOVE J UDGMENT OF H O N ' BL E BOMBAY HIGH COURT, AS THE ASSESSING OFFICER HAS HELD THAT TH E PUR CH A S ES ARE NOT GENUINE ON THE BASIS OF ENQUIRIES CONDUCTED. THE APPELLANT HAS NOT BEEN ABL E TO FURNISH THE DETAILS REGARDING ADDRESS OF THE PARTIE S AS WELL AS CONFIRMATION EVEN DURING THE COURSE OF APPELLATE PR OCEEDINGS . THIS BEING SO, I DO NOT FIND ANY MERIT IN THE SUBMI SSIONS OF THE APPELLANT. ACCORDINGLY, DISALLOWANCE OF RS.19 , 51,632/- IS UPHELD AND THE GROUND IS DISMISSED . 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD. CIT(A) AND SUBMITTED THAT THE PURCHASES CANNOT BE DISALLOWED AND THE ADDITION MADE BY AO AND CONFIRMED BY LD . CIT(A) BE SET ASIDE. LD. D.R. ON THE OTHER HAND SUPPORTE D THE ORDER OF LOWER AUTHORITIES AND SUBMITTED THAT ASSESSEE HAS NOT FURNISHED THE DETAILS ABOUT THE PURCHASES EITHER BEFORE THE LOWER AUTHORITIES NOR HAS SUBMITTED THOSE DETAILS BEFORE THE TRIBUNAL. IN S UCH CIRCUMSTANCES, THE ORDER OF LD. CIT(A) NEEDS TO BE UPHELD. HE THUS SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WIT H RESPECT TO THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAD MADE PURCHASES AGGR EGATELY TO RS.19,51,632/- FROM 5 PARTIES, (THE DETAILS OF WHICH ARE LISTED AT PAGE 2 OF THE ASSESSMENT ORDER), THE NOTICES SENT U/S 133(6) BY THE 6 ITA NO.724/PUN/2014 AY.NO.2010-11 AO TO THE AFORESAID 5 PARTIES CALLING FOR VARIOUS DETAILS W ERE RETURNED UNSERVED AND THE ASSESSEE WAS THEREFORE ASK ED TO PRODUCE THE PARTIES OR PROVIDE ALTERNATIVE ADDRESSES. AO HAS N OTED THAT DESPITE VARIOUS OPPORTUNITIES, THE ASSESSEE DID NOT PRODU CE THE PARTIES FOR VERIFICATION NOR HAS PRODUCED ANY DETAILS TO S UPPORT THE PURCHASES MADE. LD. CIT(A) HAS ALSO NOTED THAT ASSESSEE WAS NOT ABLE TO FURNISH DETAILS REGARDING THE ADDRESS OF THE PART IES AS WELL AS CONFIRMATIONS EVEN DURING THE APPELLATE PROCEEDINGS. BEFORE US ALSO ASSESSEE HAS NOT BEEN ABLE TO FURNISH ANY EVIDENCE WITH RESPECT TO PURCHASES. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASO N TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS, THE GROUND OF THE ASSESSEE IS DISMISSED. 8. SECOND GROUND IS WITH RESPECT TO DISALLOWANCE U/S 40 A(2)(B) OF THE ACT. 8.1 ON PERUSING THE DETAILS OF SALARY EXPENSES, AO NOTICED THAT ASSESSEE HAS PAID SALARY AMOUNTING TO RS.16,80,000/- TO M RS. DIVYA KHARBANDA W/O. RAJESH KHARBANDA, DIRECTOR OF THE ASSESS EE COMPANY. THE ASSESSEE WAS ASKED TO JUSTIFY THE SALAR Y PAYMENT TO WHICH THE ASSESSEE INTER-ALIA SUBMITTED THAT SHE IS A WHOLE-TIME EMPLOYEE OF THE COMPANY AND IN-CHARGE OF ENTIRE OPERATION S OF NORTH INDIA AND IS WHICH IS BASED IN JALANDHAR. IT WAS FURTHER S UBMITTED THAT SHE REPRESENTS THE MANAGEMENT OF THE COMPANY. THE SUBMISSION OF THE ASSESSEE WAS FOUND NOT ACCEPTABLE TO AO INVIEW OF THE FACT THAT THE OTHER EMPLOYEES OF THE ASSESSEE HA VING SIMILAR DESIGNATIONS WERE PAID SALARY OF RS.2,50,000/- TO RS.3,00,000 /- PER 7 ITA NO.724/PUN/2014 AY.NO.2010-11 ANNUM, AS AGAINST THE SALARY OF RS.16,80,000/- PAID TO MRS. DIVYA KHARBANDA, NO DOCUMENTS WERE FURNISHED BY ASSESSEE TO ESTABLISH THAT THE SALARY PAID TO MRS. DIVYA KARBANDA WAS COMME NSURATE WITH THE SERVICES RENDERED BY HER. AO THEREFORE CONCLUD ED THAT THE SALARY PAID WAS EXCESSIVE AND DISPROPORTIONATE AND ACCOR DINGLY DISALLOWED 50% OF SALARY AMOUNTING TO RS.8,40,000/-. AGGRIEVE D BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER : 13. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AS WELL AS REPLY OF THE APPELLANT . IN THIS CASE IT IS SEEN THAT THE APPELLANT COMPANY HAS WRONGLY MENTIONED THE DISALLO WANCE AMOUNT AT RS.15 LACS THOUGH IN ACTUAL DISALLOWANCE IS ONL Y RS. 8 , 40,000/-. AS FAR AS THE MERIT OF THE ISSU E IS CONCERNED , I T IS SEEN T HA T THE APPELL A NT HAS SIMPLY G I VEN ST A TEM E NT S BEFORE THE ASSESSING OFFICER THAT MRS. DIVYA KHARBANDA WAS HANDLING THE AFFAIRS OF ENTIRE NORTH INDIA BASED IN JALANDHAR. HOWEVER, NO DOCUMENTARY EVIDENC E IN THIS REGARD COULD BE FILED BY THE A PPELL A NT E ITHER DURING T H E COURSE OF ASSESSMENT PROCEEDINGS OR DURING THE COU R SE OF APPELLATE PROCEEDINGS . FURTHER, ON THE FACTS OF THE CASE, IT IS SEEN THAT THE ASSESSING OFFICER HAS BEEN QUITE LIBE RAL IN COMPUTING THE DISALLOWANCE AS HE HAS ALLOWED 8 , 40,000/ - COMPARED T O RS.2 . 5 TO 3 LACS P . A . RECEIVED BY OTHER EMPLOYEES DOING SIMILAR WORK. THE APPE L LANT'S GRIEVANCE REGARDING EXECUTIVES FUNCTIONING IN SIMILAR CAPACITY IN OTHER INSTITUTIONS GETS ADDRESSED BY THE FACT THAT ASSESSING OFFICER H AS ALLOWED RS. 8 , 40,000/- TO MRS. DIVYA KHARBANDA. CONSIDERING THE TOTALITY OF FACTS, IT IS HELD THAT THE ASSESSING OF FICER HAS BEEN QUITE REASONABLE IN COMPUTING THE DISALLOWANCE AND THEREFORE, I DO NOT FIND ANY NECESSITY IN INTERFERI NG THE ORDER OF THE ASSESSING OFFICER. ACCORDINGLY, THE DI SALLOWANCE OF RS.8 , 40,000/- IS UPHELD AND GROUND NO.3 IS DISMISSED . 9. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 10. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFOR E AO AND LD. CIT(A) AND FURTHER SUBMITTED THAT MRS. DIVYA KARBHA NDA 8 ITA NO.724/PUN/2014 AY.NO.2010-11 HAS BEEN DRAWING SIMILAR SALARY FOR PAST MORE THAN THREE YEARS AND THERE HAS BEEN NO SUDDEN INCREASE IN THE SALARY PAID AN D THE SAME SALARY WAS DRAWN BY HER SINCE F.Y. 2007-08. IT WAS FURTH ER SUBMITTED THAT MRS. DIVYA KHARBANDA IS A REGULAR TAX PAY ER AND THE AMOUNT OF SALARY HAS BEEN DISCLOSED BY HER IN HER RETURN OF INCOME AND THAT MRS.DIVYA AND THE ASSESSEE ARE COVERED UNDER MAXIMUM MARGINAL RATE OF TAX AND THEREFORE IT CANNOT BE SAID THAT IT WAS A CASE OF DIVERSION OF ASSESSEES PROFITS IN FAVOUR OF MRS. DIV YA. HE FURTHER SUBMITTED THAT IT IS NOT A CASE WHERE AO HAS HE LD THAT NO SERVICES HAVE BEEN RENDERED BY MRS. DIVYA KHARBANDA TO ASSESSEE AS HE HAS NOT DISALLOWED THE ENTIRE EXPENSES. HE SUBMIT TED THAT IT IS A SETTLED LAW THAT AO CANNOT DIRECT THE ASSESSEE TO CONDUCT HIS BUSINESS IN A PARTICULAR MANNER AND IT IS FOR THE ASSESSE E TO DECIDE HOW TO CONDUCT HIS BUSINESS. HE FURTHER PLACED RELIANCE O N THE DECISION IN THE CASE OF CIT VS. INDO SAUDI SERVICES REPORT ED IN (2009) 310 ITR 306 (BOM). LD. D.R. ON THE OTHER HAND SUPPO RTED THE ORDER OF AO AND LD. CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DISALLOWANCE OF SALARY EXPENSES U/S 40A(2)(B) OF THE ACT. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAS PAID SALARY OF RS.16,80,0 00/- TO MRS. DIVIYA KHARBANDA WHO IS A PERSON SPECIFIED U/S 40A(2)(B ) OF THE ACT. IN TERMS OF SEC.40A(2)(A) OF THE ACT, THE ONUS IS ON THE AO TO FORM AN OPINION THAT THE EXPENDITURE CLAIMED AS EXCES SIVE / UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE FOR W HICH THE PAYMENT IS MADE. THIS OPINION OF THE AO OF THE EXPENDITURE BEING 9 ITA NO.724/PUN/2014 AY.NO.2010-11 EXCESSIVE / UNREASONABLE CANNOT BE ARBITRARY BUT MUST BE ON THE BASIS OF DETERMINING THE FAIR MARKET VALUE FOR WHICH THE PA YMENT IS MADE. THE OPINION OF THE AO SHOULD BE FORMED OBJECTIVELY FROM THE POINT OF VIEW OF A PRUDENT BUSINESSMAN AND AFTER TAKING IN TO ACCOUNT ALL RELEVANT CIRCUMSTANCES AND SHOULD NOT BE, INFL UENCED BY IMMATERIAL CONSIDERATIONS. IF THE AO WAS OF THE OPINION THAT THE PAYMENT FOR WHICH DEDUCTION IS CLAIMED IS EXCESSIVE / UNREA SONABLE THEN IN THAT CASE IT IS FOR THE AO TO ASSESS THE FAIR MA RKET PRICE AND GIVE COMPARATIVE INSTANCES FOR PAYMENT FOR SIMILAR SERVICES . THE AO HAS TO PROVE THAT THE TRANSACTION IS SHAM OR NOT BONA FIDE OR THE VALUE OF GOODS AND SERVICES ARE NOT IN CONSONANCE WITH T HE FAIR MARKET VALUE. IN THE PRESENT CASE OUT OF TOTAL SALARY OF RS.16,80,000/-, AO HAS DISALLOWED 50% OF THE SALARY HOLDING T O BE EXCESSIVE AND DISPROPORTIONATE. BEFORE US, IT IS ASSESSEE S SUBMISSION THAT MRS. DIVYA KHARBANDA HAS BEEN PAID SIMILAR SALARY IN EARLIER YEARS AND SHE HAS BEEN DRAWING SAME SALARY SIN CE F.Y. 2007-08 AND ALSO IN SUBSEQUENT YEARS AND IN NONE OF THE EARLIER OR SUBSEQUENT YEARS THE DISALLOWANCE ON ACCOUNT OF SALARY B EING EXCESSIVE HAS BEEN MADE BY THE REVENUE AUTHORITIES. IT IS FURTHER SUBMITTED THAT THE ASSESSEE AND MRS. DIVYA KHARBANDA FA LL IN THE MAXIMUM MARGINAL RATE OF TAXATION AND THEREFORE BY PAYING HIGHER SALARY THERE HAS BEEN EVASION OF TAX. THE AFORESAID SUB MISSIONS OF THE ASSESSEE HAS NOT BEEN CONTROVERTED BY REVENUE B Y PLACING ANY CONTRARY MATERIAL ON RECORD. WE FURTHER FIND THAT HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INDO SAUDI SERVICES (T RAVEL) P. LTD (2009) 310 ITR 306 (BOM) AFTER CONSIDERING THE CBDT CIRCULAR NO.6-P, DT. 6 TH JULY, 1968 HAS HELD THAT NO DISALLOWANCE OF EXPENSE 10 ITA NO.724/PUN/2014 AY.NO.2010-11 CAN BE MADE WHEN THE PERSON TO WHOM THE PAYMENT IS M ADE IS ALSO ASSESSED AT HIGHER RATE AND THERE IS NO EVASION OF TAX. CONSIDERING THE AFORESAID FACTS AND RELYING ON THE AFORESAID DECISION O F HONBLE BOMBAY HIGH COURT, WE ARE OF THE VIEW THAT IN THE PRES ENT CASE, NO DISALLOWANCE OF EXPENSES U/S 40A(2)(B) IS CALLED FOR AND THEREFO RE DIRECT ITS DELETION. THUS, THIS GROUND IS ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 1 ST DAY OF MARCH, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER % / ACCOUNTANT MEMBER PUNE; ! DATED : 1 ST MARCH, 2017. YAMINI ) * +#,- .-# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. 6. COMMISSIONER OF INCOME TAX-(A)- 6, PUNE. COMMISSIONER OF INCOME TAX, V, PUNE.. #$% &&'(, * '(, + / DR, ITAT, A PUNE; %-. / / GUARD FILE. )' / BY ORDER, // 0 // TRUE COPY // 1 2345 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.