M/s. Nilraj Engineering Works Pvt. Ltd., Nashik V. Jt. CIT, Range-2, Nashik

ITA 826/PUN/2013

• Counselvise Citation: 82624514 RSA 2013
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 09-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.826/PN/2013 (A.Y: 2009-10) NILRAJ ENGINEERING WORKS PVT LTD., PLOT NO.D-24, MIDC, SATPUR, NASHIK 422 007 PAN: AABCN2434R APPELLANT VS. JT.CIT, RANGE-2, NASHIK RESPONDENT APPELLANT BY : SHRI PRAMOD SHINGTE RESPONDENT BY : SHRI S.P . WALIMBE DATE OF HEARING: 11.04.2014 DATE OF ORDER : 29.04.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-II, [IN SHOR T CIT(A)] NASHIK, DATED 18.03.2013 FOR A.Y. 2009-10 ON THE FO LLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED ASSESSING OFFICER ERRED DISALLOWING RISE IN DIRECTORS REMUNERATION U/S 40 A (2) (B) AT THE R ATE OF 50% I.E. RS. 4,80,000/- AND CONSIDERED 50% I.E. RS. 4,80,000/- TO BE REASONABLE. THE APPELLATE ORDER OF HONOURABLE CIT APPEAL CONFIRMED THE ADDITIONS OF RS.3,42,000/- IS UNJUSTIFIED, CONTRARY TO THE LAW A ND FACTS OF THE CASE. AGGRAVATED BY THE ORDER OF CIT A PPEALS THE APPELLANT HAS CARRIED THE MATTER IN APPEAL BEFO RE ITAT BENCH. 2 2. THE APPELLANT CRAVES FOR TO LEAVE, ADD, ALTER, MODI FY, DELETE AND ALTER ABOVE GROUND OF APPEAL BEFORE OR A T THE TIME OF HEARING, IN THE INTEREST OF NATURAL JUSTICE . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ALUMINU M CONTAINERS, METAL CAN CONTAINERS, BOTTLES, ALUMINUM EXTRUSIONS ROLLING SHUTTERS, AUTOMOTIVE COMPONENTS AND ASSEMBL Y DURING THE YEAR UNDER CONSIDERATION. THE RETURN OF INCOME WAS FILED ON 29.09.2009 DECLARING TOTAL INCOME OF 89,17,103/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND THE ASSESS ING OFFICER MADE ADDITION OF 4,80,000/- ON ACCOUNT OF DISALLOWANCE U/S.40A(2)(B) OF THE ACT IN THE ASSESSMENT ORDER. 3. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AU THORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) OBSERVED THAT THERE IS A STEEP RISE IN THE SALARIES OF DIRECTORS. WHIL E THERE IS AN INCREASE OF 87.5% OVER A.Y. 2008-09 IN THE CASE OF SHRI H.C. SANGHAVI, AN INCREASE OF 100% AND 75% HAS BEEN IN T HE CASE OF MS. V.H. SANGAVI AND SHRI R.H. SANGHAVI RESPECTIVEL Y. THE ASSESSING OFFICER HAS ALLOWED 50% INCREASE IN THE S ALARY AND THEREFORE, DISALLOWED 4,80,000/- U/S.40A(2) OF THE ACT WHICH WAS REDUCED TO 3,42,000/- BY THE CIT(A). THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF ASSESSEE AND THE LEA RNED AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THERE IS AN INCREASE IN THE TURNOVER DUE TO THE HARD WORK OF TH E DIRECTORS AND THERE WAS NO INCREASE OF SALARY SINCE 01.04.200 5. IT IS NOT IN DISPUTE THAT ALL DIRECTORS ARE WELL QUALIFIED. THE LEARNED AUTHORIZED REPRESENTATIVE ALSO HAS SUBMITTED THAT T HERE IS AN INCOME IN THE HANDS OF THE DIRECTORS IS SUFFERING T HE TAX. THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUBMITTED THA T THE ADDITION BY INVOKING THE PROVISIONS OF SECTION 40A( 2)(B) OF THE ACT IS NOT JUSTIFIED AND THE SAME SHOULD BE DELETED. O N THE OTHER 3 HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS S UPPORTED THE ORDER OF AUTHORITIES BELOW. 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE ASSESSEE COMPANY HAS MADE PAYMENT TO DIRECTORS WHO ARE QUALIFIED AS FAR AS IN THE BUSINE SS OF ASSESSEE IS CONCERN, ARE RUNNING BUSINESS OF ASSESSEE SMOOTHLY. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE DIRECTORS ARE NOT PAYING TAX ON THE REMUNERATION PAID TO THEM MEANING THEREBY, T HERE IS NO APPARENT TAX PLANNING OR DEVISE TO EVADE THE TAX. SO, LOOKING INTO THE QUALIFICATIONS AND WORK DONE BY DIRECTORS, WE A RE OF THE VIEW THAT THE ADDITION BY WAY OF DISALLOWANCE U/S.40A(2) (B) IS NOT JUSTIFIED AND THE SAME IS DIRECTED TO BE DELETED. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 29 TH OF APRIL, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 29 TH APRIL, 2014 GCVSR COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A)-II, NASHIK 4) THE CIT-II, NASHIK 5) THE DR, B BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE