ITO, Faridabad V. Shri K.L. Taneja, Faridabad

ITA 941/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5673 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-02-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 13-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Assessee Lawyers: J P GULATI
• Keywords: Unexplained expenditure; Depreciation; Opportunity of being heard; Wrong claim
• Section: 69C; 144

Judgement Text

ITA NO. 941/DEL/2009 A.Y. 2004-05 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 941/DEL/2009 A.Y. : 2004-05 ASSTT. COMMISSIONER OF INCOME TAX, VS. SHRI K.L. TANEJA, CIRCLE-I, FARIDABAD PROP. M/S PROMPT SECURITY SERVI CES 457, SECTOR-8, FARIDABAD [PAN: AAGPT9031N] (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI J.P. GULATI, ADV. DEPARTMENT BY : SHRI BK GUPTA, SR. DR O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDERS OF THE LD. CIT(A) DATED 22.1.2009 PERTAINING TO ASSESSMENT YEAR 2004-05. 2. THE ISSUE RAISED IS THAT LD. CIT(A) ERRED IN DEL ETING THE ADDITION OF RS. 1,53,12,667/- MADE BY THE AO ON ACCOUNT OF BOGUS CLAIM OF WAGES. 3. IN THIS CASE AO NOTED THAT THE ASSESSEE HAS FILE D RETURN OF INCOME DECLARING INCOME AT RS. 393481/-. THE SAID RETURN WAS ACCOMPANIED BY COMPUTATION OF INCOME, LIST OF TDS C ERTIFICATE, AUDITOR REPORT OF AUDITOR U/S 44AB OF THE IT ACT, 1 961, FORM NO. 3CD, NOTES ON ACCOUNT SIGNIFICANT ACCOUNTING POLICE S AND TDS CERTIFICATES. AO FURTHER NOTED THAT OTHER DOCUMEN TS REQUIRED TO BE ITA NO. 941/DEL/2009 A.Y. 2004-05 2 FURNISHED UNDER SECTION 44AB I.E. BALANCE SHEET, PROFIT AND LOSS ACCOUNT, BANK ACCOUNT, DEPRECIATION CHART, LIST OF DEBTORS AND CREDITORS ETC. WERE NOT FILED WHICH WERE FILED LATE R ON 7.3.2006 ONLY WHEN THESE WERE REQUISITIONED. AO FURTHER NOTED TH AT ASSESSEE HAD NOT PRODUCED ANY BOOKS OF ACCOUNTS, ORIGINAL WAGES REGISTER, BANK STATEMENT ETC. AO FELT THAT THERE IS NO ALTERNATIV E EXCEPT TO FRAME THE ASSESSMENT U/S 144 OF THE IT ACT, 1961. AO NOT ED THAT ASSESSEE WAS ENGAGED IN PROVIDING PERSONNEL ON CONT RACT BASIS TO VARIOUS ESTABLISHMENTS IN OR AROUND FARIDABAD. AO FURTHER OBSERVED AS UNDER:- THE PERUSAL OF THE RECORDS SHOW THAT MAJOR PART OF THE RECEIPTS IS SPENT ON THE WAGES AND SALARY OF THE EMPLOYEES AS DURING THE YEAR, ASSESSEE HAS DEBITED WAGES OF RS. 3,24,98,166/- IN THE PROFIT AND LOSS ACCOUNT AS AGAINST THE TOTAL RECEIPTS OF RS. 3,34,8 7,519/- WHICH IS ALMOST 97% OF THE TOTAL RECEIPTS. THE AS SESSEE HAS FILED THE RETURN OF INCOME SHOWING A NET INCOM E OF RS. 3,93,481/- WHICH IS ONLY 1.12% OF THE TOTAL RE CEIPTS. 3.1 AFTER FURTHER EXAMINATION OF THE MATTER, AO CON CLUDED AS UNDER:- IN THE ABSENCE OF ANY PLAUSIBLE EXPLANATION OFFERE D BY THE ASSESSEE AND NON-PRODUCTION OF BOOKS OF ACCOUNT S AND VOUCHERS ETC., FOR VERIFICATION, THE UNDERSIGNE D IS LEFT WITH NO OTHER ALTERATIVE BUT TO DECIDE THE ISSUE ON MERIT AND MATERIAL AVAILABLE ON THE RECORDS. THERE IS OB VIOUSLY A DIFFERENCE OF RS. 1,66,79,959/- IN THE FIGURES RE PORTED TO THE ESIC DEPTT. AND WAGES CLAIMED AT RS. 3,24,98,166/- IN THE PROFIT AND LOSS ACCOUNT BY THE ASSESSEE WHICH WAS NOT RECONCILED EVEN THOUGH THE ASSESSEE WAS AFFORDED SUFFICIENT OPPORTUNITIES EVEN BEFORE ITA NO. 941/DEL/2009 A.Y. 2004-05 3 THE WORTHY JOINT COMMISSIONER OF INCOME TAX, RANGE- I, FARIDABAD IN THE PROCEEDINGS U/S 144A OF THE IT ACT , 1961 TO SUBSTANTIATE HIS CLAIM. I AM THEREFORE S ATISFIED AND HOLD THAT THE DIFFERENCE OF RS. 1,66,79,959/- I S A BOGUS CLAIM ON ACCOUNT OF WAGES CLAIMED BY THE ASSE SSEE IN HIS PROFIT AND LOSS ACCOUNT. ACCORDINGLY, AN AM OUNT OF RS. 1,66,79,959/- IS ADDED BACK TO THE INCOME OF TH E ASSESSEE AS UNEXPLAINED EXPENDITURE U/S 69C OF THE IT ACT, 1961. 3.2 AO FURTHER MADE ADDITION ON ACCOUNT OF EXCESS W AGES PAYABLE AT RS. 33,69,430/-. 4. UPON ASSESSEES APPEAL THE LD. CIT(A) NOTED THAT ASSESSEE HAD FILED WRITTEN SUBMISSIONS, APPLICATION UNDER RULE 46A, CHART FOR WAGES PAID TO EMPLOYEES ENGAGED WITH DIFFERENT PAR TIES WITH PHOTOCOPIES OF WAGE REGISTERS AND STATED THAT CHART ERED ACCOUNTANT HAD SUBMITTED THE AUDIT REPORT AND THE ACCOUNTANT H AD MAINTAINED THE BOOKS OF ACCOUNTS AND THE ASSESSEE D EPENDED UPON THEM. BUT BOTH OF THEM HAVE DESERTED THE ASSESSEE . LD. CIT(A) FURTHER CONSIDERED THE ISSUE AND HE OBSERVED AS UND ER:- IN MY OPINION, THE AO WAS LEGALLY NOT CORRECT IN M AKING THE ADDITION OF RS. 1,66,79,959/- U/S 69C OF THE AC T, AS THE SOURCE OF RECEIPTS QUA WAGES PAID ARE APPARENTL Y FROM THE RECEIPTS DECLARED BY THE ASSESSEE. I ALSO CONSIDER THAT EVEN BOOKS OF ACCOUNT NOT PRODUCED AN D EXPARTE ASSESSMENT IS MADE, BUT THE ADDITION HAS TO BE MADE WITH SOME RATIONALE AND NOT ARBITRARILY OR CAPRICIOUSLY. I ALSO FIND THAT THE AO WHILE REJECT ING BOOKS OF ACCOUNT HAS WRONGLY ACCEPTED THE OVERALL ACCOUN TS EXCEPT WAGES, WITHOUT PROPER EXAMINATION OF THE VARIOUS EXPENSES AND HAS WHOLLY AND EXCLUSIVELY REL IED UPON THE PROFIT AND LOSS ACCOUNT. IT IS THUS EVIDE NT THAT HIS JUDGEMENT IS CONTRADICTORY IN ITSELF. ITA NO. 941/DEL/2009 A.Y. 2004-05 4 4.1 LD. CIT(A) FURTHER OBSERVED THAT HE HAS PERUSED THE PARTICULARS OF RECEIPTS AND WAGES ETC. GIVEN IN THE WRITTEN SUBMISSIONS. IN HIS OPINION AO HAS ACCEPTED THE D ATA COMPILED BY THE ASSESSEE IN THE WAGE CHART. HOWEVER, THE AO HA D ALSO NOTED THAT ASSESSEE WAS ASKED TO PRODUCE THE BOOKS OF ACC OUNT INCLUDING CASH BOOK AND LEDGER TO FIND THE CORRECTNESS OF THE DATA COMPILED BY THE ASSESSEE. THE ASSESSEE DID NOT PRODUCE THE SA ME. STATING THAT THE SAME WERE NOT READILY AVAILABLE. LD. CIT(A) F OUND THIS REMARK OF AO WAS QUITE IRRELEVANT AND IMMATERIAL. BASING HIS APPELLATE ORDER ON THE SUBMISSIONS AND THE WAGE REGISTER PROD UCED, LD. CIT(A) CONCLUDED THAT TOTAL OF RS. 31130874/- SHOU LD BE ALLOWED AS WAGES AS AGAINST WAGES ALLOWED BY THE AO AT RS. 15857398/-. HENCE, AS AGAINST THE ADDITION OF RS. 16679959/-, H E UPHELD THE ADDITION OF RS. 1367292/-. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 6. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. LD. CIT(A) OBSERVED THAT WHEREAS THE AO HAS REJECTE D THE BOOKS OF ACCOUNT, BUT HAS COMPUTED THE TOTAL INCOME DECLARE D UNDER THE PROFIT AND LOSS ACCOUNT AND DID NOT DISPUTE ANY EXP ENDITURE EXCEPT WAGES. WE FIND THAT THIS OBSERVATION BY THE CIT(A) IS SIGNIFICANT. AS ONCE THE BOOKS OF ACCOUNTS HAD BEEN REJECTED, I T WAS IMPERATIVE TO MAKE THE ESTIMATED ADDITION ON THE BASIS OF PAST RECORDS OR THE COMPARISON WITH SIMILAR ENTITIES IN THE FIELD. WH ILE THE AO HAS POINTED OUT DISCREPANCIES IN THE WAGES PAID, LD. CI T(A) HAS PROCEEDED TO ALLOW THE ASSESSEES CLAIM ON THE BASI S OF WAGE REGISTER SUBMITTED. THE WAGE REGISTERS ARE NOT AT ALL BACKE D BY ANY BOOKS OF ITA NO. 941/DEL/2009 A.Y. 2004-05 5 ACCOUNTS NAMELY CASH BOOKS, LEDGER ETC. IN THE ABSE NCE OF THE BASIC RECORDS, IN OUR CONSIDERED OPINION, THE VERACITY O F THE WAGE REGISTER IN ISOLATION CANNOT BE ESTABLISHED AND TO THAT EXTE NT IN OUR CONSIDERED OPINION LD. CIT(A) HAS ALSO ERRED IN GIV ING SUCH A CONCLUSION. IN THIS REGARD, WE DRAW SUPPORT FROM THE APEX COURT DECISION IN THE CASE OF KAPURCHAND SHRIMAL VS. CIT, 131 ITR 451 WHEREIN IT WAS HELD THAT THE APPELLATE AUTHORITY H AS JURISDICTION AS WELL AS THE DUTY TO CORRECT THE ERRORS IN THE PROCE EDINGS UNDER APPEAL. 6.1 UNDER THE CIRCUMSTANCES, WE REMIT THIS ISSUE T O THE FILES OF THE AO TO CONSIDER THE ISSUE AFRESH AFTER GIVING TH E ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11/02/2010 UPON CONCLUSION OF THE HEARING. SD/- SD/- [C.L. SETHI) [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 11/02/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES