SMT MADHU DEVI , JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE-6, JAIPUR

ITA 831/JPR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9360 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 21-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KARNI DAN SINGH JT CIT DHK
• Assessee Lawyers: SHRI PRASHANT BANSAL
• Keywords: Corroborative evidences; Onus to prove

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B, JAIPUR JH JES'K LH- 'KEKZ] YS[KK LNL; ,O A H JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA-@ ITA NO. 831/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2014-15. SMT. MADHU DEVI SHREE SHYAM ASSOCIATES, S-1, MEHAI APARTMENT, PLOT NO. 99, NEAR SAND DUNES SCHOOL, VIVEK VIHAR, NEW SANGANER ROAD, JAIPUR. CUKE VS. THE DCIT, CIRCLE 6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ALKPD 8453 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SHRI PRASHANT BANSAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI KARNI DAN SINGH (JT. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 30.05.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 01/07/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 27.04.2018 OF LD. CIT (A)-2, JAIPUR FOR THE ASSESSMENT YEAR 2014- 15. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. RS. 5,00,000/-: THE LD. CIT (A) ERRED IN LAW A S WELL AS FACTS OF THE CASE IN CONFIRMING THE ADDITION UP TO RS. 5,00, 000/- MADE BY THE LD. AO ON ACCOUNT OF SALARY EXPENSES WITHOUT ANY BASE OR SPECIFIC QUERY. THE ADHOC LUMPSUM BASIS PRORATE ADD ITION SO MADE AND CONFIRMED BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, KINDLY BE DELETED IN FULL. 2. RS. 2,62,790/-: THE LD. CIT (A) ERRED IN LAW AS WELL AS FACTS OF THE CASE IN CONFIRMING THE ADDITION MADE BY THE LD. AO ON ACCOUNT OF ALLEGED MESS EXPENSES ON LUMP SUM WITHOU T ANY BASE OR SPECIFIC QUERY. THE PERCENTAGE DISALLOWANCE , PRORATE 2 ITA NO. 831/JP/2018 SMT. MADHU DEVI, JAIPUR. DISALLOWANCE ADDITION SO MADE AND CONFIRMED BEING C ONTRARY TO THE PROVISIONS OF LAW AND FACTS, KINDLY BE DELETED IN FULL. 3. THAT THE ASSESSEE RESERVES THE RIGHT TO ADD, AM END, ALTER, DELETE OR MODIFY OR WITHDRAW ANY OR ALL OF THE ABOVE GROUN DS OF APPEAL BEFORE OR AT THE TIME OF HEARING. GROUND NO. 1 IS REGARDING DISALLOWANCE OF SALARY EX PENSES FOR WANT OF SUPPORTING VERIFIABLE EVIDENCE. 2. THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM HOUSE PROPERTY, MANUFACTURING AND TRADING OF STONE GRITS ETC. THE ASSESSEE FILED HER RETURN OF INCOME ON 29.11.2014 DECLARING TOTAL INCOME OF RS. 20,76,660/-. DURING THE SCRUTINY ASSESSMENT, THE AO NOTED THAT THE ASSESSEE HAS CLAI MED SALARY AND WAGES EXPENSES OF RS. 3,56,00,782/-. THE AO ASKED THE ASSESSEE TO PRODUCE THE DETAILS OF EXPENSES ALONG WITH THE SUPPORTING EVIDENCE. THE ASSESSEE P RODUCED MONTH-WISE PAYMENTS OF SALARY AND WAGES. ON EXAMINATION OF VOUCHERS AN D SALARY REGISTER, THE AO FOUND THAT MOST OF THE PAYMENTS HAVE BEEN MADE TO THE LAB OURERS WHO ARE ENGAGED ON DAILY PAYMENT BASIS. THE PAYMENTS ARE MADE IN CASH AND THE VOUCHERS ARE SELF MADE. THE AO FURTHER NOTED THAT EVEN THE NAMES AND ADDRESSES OF THE LABOURERS/RECIPIENTS WERE NOT MENTIONED IN THESE VO UCHERS AND ONLY THUMB IMPRESSIONS HAVE BEEN OBTAINED IN SOME OF THE CASES WITHOUT EVEN MENTIONING THE NAME. THUS THE AO HELD THAT THE EXPENDITURE CLAIMED IS NOT SUBJECTED TO VERIFICATION. ACCORDINGLY THE AO MADE DISALLOWANCE @ 2% OF THE EXPENSES WHICH AMOUNTS TO RS. 7,12,015/-. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A). THE LD. CIT (A) THOUGH UPHELD THE ACT ION OF THE AO, HOWEVER INSTEAD OF 3 ITA NO. 831/JP/2018 SMT. MADHU DEVI, JAIPUR. 2% OF THE TOTAL SALARY & WAGES, THE LD. CIT (A) HAS RESTRICTED THE DISALLOWANCE TO RS.5,00,000/-. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE AO HAS DISALLOWED THE SALARY AND WAGES EXPENSES WITHOUT AN Y SPECIFIC DEFECT, THEREFORE, THE DISALLOWANCE IS MADE ON PERCENTAGE/ESTIMATE BASIS O NLY. THE ADHOC DISALLOWANCE MADE BY THE AO IS NOT PERMISSIBLE UNDER THE LAW. F URTHER, THE LD. CIT (A) HAS ALSO ERRED IN LAW AND FACTS BY CONFIRMING THE DISALLOWAN CE UP TO RS. 5,00,000/- ON LUMP SUM BASIS. IN SUPPORT OF HIS CONTENTION, HE HAS RE LIED UPON THE FOLLOWING DECISIONS :- BALBIR SINGH VS. ACIT ITA NO. 121/JP/2013 (ITAT JAIPUR) M/S. VIJAY INFRASTRUCTURE LTD. VS. ACIT ITA NO. 254/LKW/2015 (ITAT LUCKNOW) TRIPAT KAUR VS. ACIT ITA NO. 3244/DEL/2012 (ITAT DELHI) ITO VS. LAKE PALACE HOTELS AND MOTELS PVT. LTD. ITA NO. 332/JP/1981(13 TTJ (JP) 216.) MUKESH KUMAR MAHAWAR VS. ITO ITA NO. 615/LKW/2014 (ITAT LUCKNOW) ITO VS. M/S. BUILDCON ENGINEERS ITA NO. 2648/AHD/2011 AND 2490/AHD/2011 (ITAT AHM EDABAD) SHRI GURDAS MANN VS. DCIT ITA NOS. 300 TO 302/CHD/2012 (ITAT CHANDIGARH) THE LD. A/R OF THE ASSESSEE HAS CONTENDED THAT THE ADHOC DISALLOWANCE MADE BY THE AO IS NOT PERMISSIBLE UNDER THE LAW AND THE SAME MA Y BE DELETED. 4. THE LD. D/R HAS SUBMITTED THAT THE AO HAS POINTE D OUT SPECIFIC DEFECTS IN THE CLAIM AND SUPPORTING EVIDENCE PRODUCED BY THE ASSES SEE. EVEN THE ASSESSEE HAS 4 ITA NO. 831/JP/2018 SMT. MADHU DEVI, JAIPUR. NOT PRODUCED ANY VERIFIABLE SUPPORTING EVIDENCE, TH EREFORE, THE CLAIM OF EXPENDITURE WHICH IS NOT PROVED BY THE ASSESSEE CANNOT BE CONSI DERED AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS MADE 2% OF THE TOTAL CLAIM OF S ALARY AND WAGES EXPENDITURE FOR WANT OF VERIFIABLE SUPPORTING DOCUMENTARY EVIDENCE. THE AO HAS SPECIFICALLY POINTED OUT THAT THE WAGES PAID TO THE LABOURERS HIRED ON D AILY BASIS ARE SUPPORTED BY SELF MADE VOUCHERS WITHOUT HAVING THE COMPLETE DETAILS O F THE RECIPIENTS. EVEN THE NAMES AND ADDRESSES OF THE RECIPIENTS WERE NOT MENT IONED IN SUCH VOUCHERS AND ONLY THUMB IMPRESSIONS WERE OBTAINED. IN THESE FACT S, THE VOUCHERS PRODUCED BY THE ASSESSEE CANNOT BE VERIFIED. THOUGH THE LD. A/R OF THE ASSESSEE HAS RAISED THE CONTENTION AGAINST SUCH ADHOC DISALLOWANCE WITH THE SUPPORT OF VARIOUS DECISIONS, HOWEVER, THE ASSESSEE HAS NOT PRODUCED ANY RECORD B EFORE US TO SHOW THAT THE FINDING OF THE AO THAT THE PAYMENTS WERE MADE IN CA SH AND VOUCHERS ARE SELF MADE WITHOUT HAVING PARTICULARS OF THE RECIPIENTS IS CON TRARY TO RECORD THEN IN THE ABSENCE OF ANY CONTRARY MATERIAL BROUGHT BEFORE US BY THE A SSESSEE, THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED. THE LD. CIT (A) HAS DE ALT WITH THIS ISSUE IN PARA 3.3 AS UNDER :- 3.3. I HAVE PERUSED THE FACTS OF THE CASE, THE A SSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. ON VERIFICATION OF MO NTH WISE PAYMENT OF SALARY AND WAGES EXPENSES, THE AO NOTED THAT MOST OF THE P AYMENTS HAVE BEEN MADE TO LABOUR WHO WERE ENGAGED ON DAILY PAYMENT BA SIS. THE VOUCHERS ARE SELF MADE AND COMPLETE NAME AND ADDRESS OF RECIPIEN TS IS MISSING AND IN 5 ITA NO. 831/JP/2018 SMT. MADHU DEVI, JAIPUR. SOME CASES ONLY THUMB IMPRESSIONS HAVE BEEN TAKEN. EVEN IN THE PAYMENTS OF RS. 5000 OR MORE SIGNATURES OF THE RECIPIENT ON THE REVENUE RECEIPTS IS NOT TAKEN AND IN VIEW OF THESE DEFECTS THE AO DISALLOWE D 2% OF THE TOTAL WAGES. IN THE PRESENT PROCEEDINGS, THE AR SUBMITTED THAT T HE ADDITION IS HYPOTHETICAL AND ON ASSUMPTIONS. HE SUBMITTED THAT THE AO HAD VE RIFIED THE BOOKS OF ACCOUNTS AND VOUCHERS AND IT WAS ALSO SUBMITTED THA T THE APPELLANT HAD WITHDRAWN RS. 8,48,403/- FROM CAPITAL ACCOUNT FOR P ERSONAL EXPENSES. THE DISALLOWANCE HAS BEEN MADE BY THE AO AS THE EXPENDI TURE IS NOT COMPLETELY VERIFIABLE, THAT FACT REMAINS UNCONTROVERTED EVEN I N THE PRESENT PROCEEDINGS. IN VIEW OF THE SAME, THE DISALLOWANCE MADE IS CONFI RMED BUT RESTRICTED TO RS. 5 LAKHS LUMPSUM WHICH IS FOUND TO BE REASONABLE. TH E GROUND OF APPEAL IS PARTLY ALLOWED. THUS IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE ASSESSEE HAS FAILED TO DISCHARGE HER ONUS TO SUBSTANTIATE THE CL AIM BY PRODUCING THE SUPPORTING EVIDENCE REGARDING THE EXPENDITURE ON SALARY AND WA GES, THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LD. CIT (A) TO THE EXTE NT OF RS. 5,00,000/- OUT OF THE TOTAL EXPENDITURE OF RS. 3,56,00,782/- IS VERY REAS ONABLE. HENCE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD . CIT (A). 5.1. AS REGARDS THE DECISIONS RELIED UPON BY THE AS SESSEE, IT IS SETTLED PROPOSITION OF LAW THAT IF THE ASSESSEE IS ABLE TO PRODUCE THE RECORD TO SUBSTANTIATE THE CLAIM WHICH DISCHARGE THE ONUS ON THE ASSESSEE, THEN THE AO IS NOT PERMITTED TO MAKE AN ADHOC DISALLOWANCE ON THE BASIS OF DOUBT AND SUSPIC ION. IN THE CASE IN HAND, THE A.O HAS POINTED OUT SPECIFIC DEFECTS IN THE SUPPORT ING DOCUMENTS FILED BY THE ASSESSEE, THEREFORE, IT WAS NOT EVEN POSSIBLE TO VE RIFY THE CORRECTNESS AND GENUINENESS OF THE VOUCHERS PRODUCED BY THE ASSESSE E. HENCE THOSE DECISIONS CITED BY THE LD. A/R CANNOT BE APPLIED BLINDLY WITHOUT CO NSIDERING THE SPECIFIC FACTS OF EACH CASE. 6 ITA NO. 831/JP/2018 SMT. MADHU DEVI, JAIPUR. GROUND NO. 2 IS REGARDING DISALLOWANCE OF 10% OF ME SS EXPENSES. 6. THE AO NOTED THAT THE ASSESSEE HAS CLAIMED MESS EXPENSES OF RS. 26,27,898/-. THE AO ASKED THE ASSESSEE TO PRODUCE THE DETAILS AND THE SUPPORTING VOUCHERS. IN REPLY, THE ASSESSEE FURNISHED THE DETA ILS OF MESS EXPENSES ALONG WITH SOME VOUCHERS. ON VERIFICATION OF THE VOUCHERS PROD UCED BY THE ASSESSEE, IT WAS FOUND THAT MAXIMUM NUMBERS OF VOUCHERS WERE SELF MA DE AND PAYMENTS WERE MADE IN CASH. THUS THE AO HELD THAT THE EXPENDITUR E CANNOT BE VERIFIED AND CONSEQUENTLY THE AO MADE DISALLOWANCE OF 10% OF THE EXPENSES AMOUNTING TO RS.2,62,790/-. THE LD. CIT (A) HAS CONFIRMED THE DI SALLOWANCE MADE BY THE AO. 7. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE AO HAS MADE THE DISALLOWANCE ON LUMP SUM BASIS WHEREAS THE ASSE SSEE SUBMITTED VOUCHERS WITH SUPPORTING BILLS AND LEDGER OF MESS EXPENSES INCURR ED BY THE ASSESSEE. THUS THE ADHOC DISALLOWANCE MADE BY THE AO WITHOUT POINTING OUT SPECIFIC DEFECT IS NOT PERMISSIBLE. ONLY BECAUSE THE VOUCHERS WERE SELF MA DE AND PAYMENTS WERE MADE IN CASH, THE LAW DOES NOT ALLOW THE AO TO DISALLOW THE EXPENSES ON PRORATE/PERCENTAGE BASIS. THUS THE DISALLOWANCE MADE BY THE AO IS NOT SUSTAINABLE IN LAW. THE AO HAS NOT INVESTIGATED OR CONDUCTED ANY ENQUIRY REGARDING THE MESS EXPENSES INCURRED BY THE ASSESSEE. THE LD. CIT (A) HAS ALSO ERRED IN LA W AND FACTS IN CONFIRMING THE ADDITION. HE HAS PLACED RELIANCE ON THE DECISIONS A S CITED ABOVE. 8. ON THE OTHER HAND, THE LD. D/R HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE PAYMENTS WERE MAD E IN CASH AND VOUCHERS ARE SELF MADE THEN THE CLAIM IS NOT VERIFIABLE. ACCORDI NGLY, A REASONABLE DISALLOWANCE @ 10% IS JUSTIFIED. 7 ITA NO. 831/JP/2018 SMT. MADHU DEVI, JAIPUR. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE MESS EXPENSES AS CLAIMED BY THE ASSESSE E ARE NOT IN THE NATURE OF ESSENTIAL OR INEVITABLE EXPENSES FOR THE BUSINESS A CTIVITY OF THE ASSESSEE. THE ASSESSEE HAS NOT DISPUTED THE DEFECT POINTED OUT BY THE AO THAT MOST OF THE EXPENSES WERE INCURRED IN CASH AND ONLY PART OF THE M SUPPORTED BY SELF MADE VOUCHERS. THEREFORE, THERE IS A CLEAR CUT FAILURE O N THE PART OF THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF MESS EXPENSES WHEN THE AS SESSEE HAS NOT PRODUCED THE SUPPORTING VOUCHERS AND FURTHER ALL THE PAYMENTS WE RE MADE IN CASH. THE AO HAS MADE THE DISALLOWANCE @ 10% OF THE CLAIM WHICH IS C ONFIRMED BY THE LD. CIT (A) IN PARA 4.3 AS UNDER :- 4.3. I HAVE PERUSED THE FACTS OF THE CASE, THE AS SESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE AO NOTED THAT AN EXPENDITURE OF RS. 26,27,898/- HAD BEEN DEBITED UNDER THE HEAD MESS EX PENSES. HE ALSO NOTED THAT THIS EXPENDITURE WAS NOT PROPERLY SUPPORTED AN D THE VOUCHERS WERE SELF- MADE AND DID NOT BEAR THE COMPLETE DETAILS. IT WAS ALSO NOTICED THAT MOST EXPENDITURE WAS IN CASH AND IN VIEW OF THE FACT THA T SUPPORTING BILLS AND VOUCHERS WERE NOT AVAILABLE, THE SAME WAS NOT VERIF IABLE. THE AO DISALLOWED 10% OF THIS EXPENDITURE. IN THE PRESENT PROCEEDINGS THE AR STATED THAT THE AMOUNTS WERE DISALLOWED WITHOUT AFFORDING AN OPPORT UNITY AND SOME EXPENSES LIKE VEGETABLE AN ACTOR PURCHASES WERE IN CASH BUT WERE VERIFIABLE. IT WAS ALSO SUBMITTED THAT NO SPECIFIC EXPENDITURES WERE POINTED OUT. IN VIEW OF THE FINDINGS OF THE AO REGARDING THE NON-AVAILAB ILITY OF COMPLETE SUPPORTING VOUCHERS, THE DISALLOWANCE MADE AT 10% I S REASONABLE AND CONFIRMED. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, WHEN THE ASSESSEE HAS FAILED TO DISCHARGE HER ONUS TO PROVE THAT THE EXPENDITURE HAS BEEN INCURRED WHOLLY AND 8 ITA NO. 831/JP/2018 SMT. MADHU DEVI, JAIPUR. EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN MAKING A REASONABLE DISALLOWANCE @ 10 %. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 01/07/20 19. SD/- SD/- ( JES'K LH- 'KEKZ ) ( FOT; IKY JKWO (RAMESH C. SHARMA ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 01/07/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SMT. MADHU DEVI, JAIPUR. 2. THE RESPONDENT THE DCIT, CIRCLE-6, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 831/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR