M/s. Ashok Sugar Industry, Lucknow V. ITO, Lucknow

ITA 77/LKW/2011

• Counselvise Citation: 7723714 RSA 2011
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 04-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 14-02-2011
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Assessee Lawyers: PRAKASH NARAIN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA BEFORE HONBLE SHRI H.L. KARWA AND HONBLE SHRI N.K. SAINI AND HONBLE SHRI N.K. SAINI AND HONBLE SHRI N.K. SAINI AND HONBLE SHRI N.K. SAINI ITA NO.77/LKW/2011 ASSESSMENT YEAR:2006-07 M/S ASHOK SUGAR INDUSTRY 95/40, ARYA SAMAJ MANDIR ROAD GANESH GANJ, LUCKNOW V. INCOME TAX OFFICER IV (4), LUCKNOW PAN:AAGFA4793A (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PRAKASH NARAIN, ADVOCATE RESPONDENT BY: SHRI P. K. BAJAJ, D.R. O R D E R PER N.K. SAINI: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 14.12.2010 OF THE CIT(A)-II, LUCKNOW. THE FOLLOWING GROUNDS HAVE BEE N RAISED IN THIS APPEAL:- 1. THAT THE INCOME RETURNED SHOULD HAVE BEEN ACCEPTED. 2. THAT THE LEARNED LOWER COURT ERRED IN FACTS AND LEG AL CIRCUMSTANCES OF THE CASE IN DISALLOWING THE ENTIRE AMOUNT OF OVERTIME P AID TO WORKERS. 3. THAT WHEN THE PAYMENT OF OVERTIME WAS MADE WHICH WA S DULY RECEIPTED BY THE WORKERS NO DISALLOWANCE SHOULD HAVE BEEN MAD E. 4. THAT THE EXPENSES DISALLOWED ARE TOO EXCESSIVE ARBI TRARY AND WITHOUT ANY BASIS. 5. THAT THE ORDER PASSED IS AGAINST THE MERIT, CIRCUMS TANCES AND LEGAL ASPECTS OF THE CASE. 6. THAT THE APPELLANT SEEKS PERMISSION TO MODIFY AND/O R ADD ANY OTHER GROUND OR GROUNDS OF APPEAL AS THE CIRCUMSTANCES OF THE CASE MIGHT REQUIRE OR JUSTIFY. 2. FROM THE ABOVE GROUNDS, IT IS NOTICED THAT THE GRIE VANCE OF THE ASSESSEE RELATES TO THE DISALLOWANCE OF THE ENTIRE AMOUNT OF OVERTIME P AID TO THE WORKERS. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 27.10.2006 DECLARING NIL :-2-: INCOME. THE SAID RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER NOTICED THAT THE SALE OF THE ASSESSEE FOR THE PERIO D RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION WAS AT $ 9,53,84,470 AND THE NET PROFIT SHOWN BY THE ASSESSE E BEFORE INTEREST AND SALARY TO THE PARTNERS WAS AT $ 76,37,615 I.E. 8.01%. THE ASSESSING OFFICER ASKED THE COPY OF BANK ACCOUNT, STOCK REGIS TER, PRODUCTION REGISTER, BOOKS OF ACCOUNT ALONG WITH VOUCHERS AND OTHER RELEVANT DETA ILS WHICH WERE PRODUCED BY THE ASSESSEE AND THE ASSESSING OFFICER TEST CHECKED THE SAME. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE CLAIMED EXPENSES OF $ 18,86,035 UNDER THE HEAD WAGES AND $ 2,75,459 UNDER THE HEAD OVERTIME EXPENSES. AS RE GARDS TO THE CLAIM OF THE ASSESSEE RELATING TO OVERTIME EXPENSES, THE ASSESSING OFFIC ER WAS NOT SATISFIED AND MADE THE ADDITION BY OBSERVING AS UNDER:- 'DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WAGES PAYMENT REGISTER WAS CALLED FOR WHICH WERE PRODUCED ON BEHALF OF THE ASS ESSEE FIRM AND SAME WAS EXAMINED. IT WAS NOTICED THAT EXPENSES OF RS.2,75,4 59/- CLAIMED AS 'OVERTIME PAYMENT' WAS NOT MENTIONED OR RECORDED IN THE WAGES PAYMENT REGISTER DESPITE THE FACT THAT THERE WERE SPECIFIC COLUMNS ( COLUMN NO.42 & 43 ) MEANT FOR RECORDING THE DETAILS OF OVERTIME WO RK ( IN HOURS) UNDERTAKEN BY THE LABOURER AND THE PAYMENT MADE THERE FOR. VID E ORDER SHEET ENTRY DATED 13.10.2008 THE PARTNER OF THE ASSESSEE FIRM A ND LD. AR REPRESENTING THE FIRM WERE REQUIRED TO EXPLAIN AS TO WHY THIS AM OUNT OF RS.2,75,459/- BE NOT DISALLOWED SINCE IT IS NOT SUPPORTED BY DOCUMEN TS. THE 'WAGES PAYMENT REGISTER' FOR THE F. Y2005-06 ( A.Y 2006-07 ) AS PR ODUCED ON BEHALF OF THE ASSESSEE FIRM WAS RETURNED AFTER PUTTING INITIALS O N EVERY PAGE THEREON WITH THE DIRECTIONS TO PRODUCE THE SAME ON THE NEXT HEAR ING AND THE CASE WAS ADJOURNED FOR 24.10.2008. ON 24.10.2008 SHRI ROSHA N LAL AGARWAL, PARTNER AND SHRI S.D. SETH, A.R. ATTENDED, FILED WRITTEN RE PLY AND PRODUCED LOOSE SHEETS CONTAINING DETAILS OF OVERTIME PAYMENT, WHIC H WERE EXAMINED & TEST CHECKED. IT WAS NOTICED THAT FOR THE MONTH OF NOV. 2005, THE TOTAL PAYMENT, AS PER WAGES REGISTER (PRODUCED EARLIER ON 13.10.20 08) MADE TO SHRI ANOKHE :-3-: LAL WAS RS.1822+248 (P.F.) ONLY AND HE HAS BEEN SHO WN ON REST ON 07.11.2005, 14.11.05, 21.11.2005, & 28.11.2005; AND HE WAS ABSENT ON 05.11.2005, 10.11.2005, 16.11.2005, 19.11.2005, 23. 11.2005, 24.11.2005 & 25.11.2005 BUT AT THE SAME TIME HE IS SHOWN TO HAVE BEEN WORKING OVERTIME DURING THE ENTIRE MONTH OF NOV. 2005 ON ALL 30 DAYS AND THAT TOO FOR EIGHT HOURS ON 22 DAYS. 6 HOURS ON 05.11.2005, 17.11.05, 23.11.05 & 29.11.05; AND 10 HOURS ON 06.11.05, 18.11.05 & 30.11.05. FOR THE SO-CALLED OVERTIME WORK SHRI ANOKHE LAL HAS BEEN PAID RS.5,400/- I.E. AT DOUBLE RATE OF THE MONTHLY WAGES I.E. RS.2,700/- PER MONTH. IT IS WORT H NOTICEABLE THAT NO DEDUCTION FOR P.F. ETC. HAS BEEN MADE FROM THE SO-C ALLED OVER TIME PAYMENTS MADE TO THE PERSON CONCERN WHILE DEDUCTION FOR P.F. WAS MADE FROM THE AMOUNT PAID TO HIM AS WAGES ONLY, AS MENTI ONED ABOVE. FURTHER, IT IS ALSO NOT WORTH ACCEPTING THAT THE PERSON WHO DID NOT TURN-UP OR REMAINED ABSENT FOR THE NORMAL WORKING SHIFT WAS ALLOWED PAY MENT AT DOUBLE RATES FOR THE SO-CALLED OVERTIME WORK. THE ABOVE DETAILS AND DISCUSSIONS CLEARLY SHOW THAT THE OVERTIME PAYMENT REGISTER PRODUCED LATER I S FULL OF DEFECTS IT DOES NOT MATCH WITH THE DETAILS CONTAINED IN THE REGISTE R MEANT FOR WAGES RECORDING WAGES' PAYMENTS. SIMILARLY DURING THE MONTH OF DEC. 2005, THE SAME P ERSON SHRI ANOKHE LAL WAS ABSENT ON 09.12.2005 & 10.12.2005 AND WAS ON LE AVE ON 11.12.2005, AGAIN WAS ABSENT ON 12.12.2005 & 21.12.2005, AND WA S ON LEAVE ON 24.12.2005 AND WAS REST ON 28.12.2005, BUT ON ALL T HESE DATES HE HAS BEEN SHOWN AS PRESENT FOR OVERTIME WORK FOR WHICH HE HAS BEEN PAID AT DOUBLE RATE OF NORMAL WAGES. THIS AGAIN RAISES DOUBTS OVER THE GENUINENESS OF SO- CALLED OVERTIME PAYMENT REGISTER PRODUCED LATER. SIMILARLY AS TEST CHECK, CASE OF SHRI SHIV KUMAR S/ O SHRI NANDA IS ALSO DISCUSSED HEREUNDER. IN THE MONTH OF DEC. 2005, SHR I SHIV KUMAR, AS PER WAGES REGISTER HAS BEEN SHOWN ON 'REST' ON 01.12.05 & 15.12.05 WHILE ON THESE DATES HE HAS BEEN SHOWN WORKING OVERTIME AS P ER 'OVERTIME PAYMENT REGISTER. FURTHER HE WAS ABSENT ON 17.12. 05, 25.12 .05 AND WAS ON LEAVE ON 20.12.05 AS PER WAGES REGISTER BUT ON ALL THESE DAT ES HE HAS BEEN SHOWN :-4-: WORKING OVERTIME AS PER 'OVERTIME PAYMENT REGISTER' PRODUCED LATER. ALL THE ABOVE MENTIONED DETAILS CLEARLY POINT OUT A ND PROVE BEYOND DOUBT THAT THE SO-CALLED 'OVERTIME PAYMENT REGISTER' IS F ULL OF DEFECTS; NOT RELIABLE AND DESERVES TO BE REJECTED. IT IS NOTHING BUT A ME EK ATTEMPT TO PRESENT A COVER-UP FOR THE EXPENSES CLAIMED UNDER THE HEAD OV ER TIME PAYMENT, WHICH IF, WOULD HAVE BEEN GENUINELY MADE WOULD HAVE CERTA INLY HAVE FORMED INTEGRAL PART OF THE WAGES PAYMENT REGISTER WHEREIN SPECIFIC COLUMNS ( NO.42 &43 ) HAVE BEEN MEANT FOR THE SAID PURPOSE. IN VIEW OF THE ABOVE FACTS AND THE DISCUSSION I HAVE NO DOUBT IN HOLDING THAT THE SO-CALLED PAYMENT OF OVERTIME WORK AMOUNTING TO RS.2,75,459/- IS NOTHING BUT A BOGUS EXPENDITURE WHICH IS BEING DISALLOWED FOR THE REASO NS MENTIONED ABOVE. ' 3. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) A ND SUBMITTED THAT THE ASSESSING OFFICER WRONGLY DISALLOWED THE OVERTIME EXPENSES WITHOUT APPRECIATING THE FACTS. IT WAS FURTHER STATED THAT THE SALE OF THE ASSESSEE WENT UP FROM $ 3.70 CRORES TO $ 8.88 CRORES I.E. AN INCREASE OF 140%, WHILE THE TOT AL PERSONNEL EXPENSES WENT UP FROM $ 13.66 LAKHS TO $ 24.22 LAKHS ONLY I.E. AN INCREASE OF 77% ONLY. THE REFORE, THE DISALLOWANCE OF $ 2,75,459 AS MADE BY THE ASSESSING OFFICER WAS LIABL E TO BE DELETED. IT WAS FURTHER STATED THAT THE ASSESSEE MAINTAINED BOO KS OF ACCOUNT DURING THE DAY-TO-DAY COURSE OF BUSINESS AND THAT THE PURCHASE, SALES AND EXPENSES WERE ALL VOUCHED AND VERIFIABLE. IT WAS FURTHER STATED THAT AT MANY TIM ES THE WORKERS TAKE THEIR NORMAL HOLIDAY ALLOWABLE TO THEM BUT IF THEY COME FOR DUTY ON THAT HOLIDAY THEY GET ENTITLED TO THE OVERTIME. IT WAS EMPHASIZED THAT A SEPARATE RE GISTER WAS MAINTAINED AND THE OVERTIME EXPENSES HAD BEEN PAID TO THE WORKERS WHIC H HAVE DULY BEEN RECEIVED, BUT THE ASSESSING OFFICER DISALLOWED THE ENTIRE PAYMENT OF OVERTIME EXPENSES ON WRONG APPRECIATION OF FACTS SIMPLY BECAUSE A SEPARATE REG ISTER HAD BEEN MAINTAINED. 4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE DISALLOWANCE WAS FULLY JUSTIFIED. HE ACCORDING LY CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5. NOW THE ASSESSEE IS IN APPEAL. :-5-: 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE FURTHER SUBMITTED THAT THE C OMPLETE DETAILS OF THE OVERTIME EXPENSES WERE MAINTAINED BY THE ASSESSEE IN A SEPA RATE REGISTER. OUR ATTENTION WAS DRAWN TOWARDS PAGES 12 TO 16 OF THE ASSESSEES COMP ILATION. IT WAS SUBMITTED THAT THE ABOVE DETAILS WERE FURNISHED BEFORE THE ASSESSING O FFICER WHO DISALLOWED THE CLAIM OF THE ASSESSEE ARBITRARILY AND THE LD. CIT(A) WITHOUT APPRECIATING THE FACTS IN RIGHT PERSPECTIVE CONFIRMED THE ACTION OF THE ASSESSING O FFICER. 7. IN HIS RIVAL SUBMISSIONS, THE LD. D.R. STRONGLY SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSING OFFICER ASKED RELEVANT RECORDS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE ASSESSEE ON DEMAND FURNISHED THE BOOKS OF A CCOUNT, VOUCHERS, STOCK REGISTER, MANUFACTURING REGISTER AND WAGES REGISTER WHICH WER E EXAMINED AND TEST CHECKED BY THE ASSESSING OFFICER AND NO DISCREPANCY HAS BEEN P OINTED OUT DURING THE COURSE OF EXAMINATION. THE ASSESSING OFFICER DID NOT DOUBT T HE SALES AND PURCHASES AND WAS EVEN SATISFIED WITH THE NET PROFIT RATE DISCLOSED BY THE ASSESSEE. HOWEVER, THE DISALLOWANCE OF $ 2,75,459 WAS MADE. THE SAID AMOUNT WAS CLAIMED BY THE ASSESSEE ON ACCOUNT OF OVER TIME PAYMENT. THE ASSESSING OFFICER MADE THE DISALLOWANCE FOR THE REASON THAT THE ASSESSEE HAD NOT ENTERED THOSE PAYMENTS IN THE WAGE S PAYMENT REGISTER DESPITE OF THE FACT THAT THERE WERE SPECIFIC COLUMNS MADE FOR RECO RDING THE DETAILS OF OVERTIME WORK. HOWEVER, THE FACT REMAINS THAT THE ASSESSEE FURNISH ED DETAILS OF OVERTIME PAYMENTS WHICH ARE PLACED AT PAGES 12 TO 16 OF THE ASSESSEE S COMPILATION AND IT WAS CLAIMED THAT THOSE DETAILS WERE ALSO FURNISHED BEFORE THE ASSESS ING OFFICER AND THE LD. CIT(A). NO DISCREPANCY HAS BEEN POINTED OUT BY THE ASSESSING O FFICER IN THOSE DETAILS. AS REGARDS TO THE OBSERVATION OF THE ASSESSING OFFICER THAT TH E EMPLOYEES NAMELY SHRI ANOKHE LAL AND SHRI SHIV KUMAR GOT THE OVERTIME PAYMENT FOR TH E DAYS ON WHICH THEY WERE SHOWN ABSENT IN WAGES REGISTER, THE EXPLANATION OF THE AS SESSEE WAS THAT IF THE WORKERS CAME ON THE ALLOWABLE HOLIDAY DUE TO THEM, THEY WERE ALL OWED OVERTIME. THIS EXPLANATION HAS NOT BEEN REBUTTED. IF THE ASSESSING OFFICER WAS NO T SATISFIED, HE SHOULD HAVE SUMMONED THE WORKERS AND RECORDED THEIR STATEMENT, BUT SUCH AN EXERCISE HAS NOT BEEN DONE BY :-6-: THE ASSESSING OFFICER. IN OUR OPINION, WHEN THE AS SESSING OFFICER WAS SATISFIED WITH THE TRADING RESULTS OF THE ASSESSEE, WHICH WERE PROGRES SIVE AND THE INCREASE IN THE SALES IN COMPARISON TO THE INCREASE IN THE EXPENSES WAS ON H IGHER SIDE AND EVEN THE NET PROFIT RATE HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER, THEREFORE, THE DISALLOWANCE ON ACCOUNT OF OVERTIME PAYMENT AMOUNTING TO $ 2,75,459 WAS NOT JUSTIFIED ONLY ON THE BASIS THAT THE SAID PAYMENT WAS NOT ENTERED IN THE WAGES REGISTER AND WAS SHOWN SEPARATELY IN THE OVERTIME PAYMENT REGISTER. IN OUR CONSIDE RED OPINION, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED AND THE LD. CIT(A) WITHOUT APPRECIATING THE FACTS HAD CONFIRMED THE ACTION OF THE ASSESSING OFF ICER. WE, THEREFORE, DEEM IT PROPER TO SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) O N THIS ISSUE AND THE DISALLOWANCE OF $ 2,75,459 IS DELETED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 6.4.2011) SD/- SD/- [H. L. KARWA] [ N. K. SAINI] VICE PRESIDENT ACCOUNTANT MEMBER DATED:6.4.2011 JJ:0404 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR