M/s PRV Info Services Pvt Ltd, Hyderabad V. THE DCIT, Hyderabad

ITA 966/HYD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53669 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 29-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T H VIJAY LAKSHMI
• Assessee Lawyers: MOHD AFZAL
• Keywords: Unexplained cash credit
• Section: 68; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA NO.966/HYD/2010 ASSESSMENT YEAR 2005-06 M/S. PRV INFO SERVICES PVT. LTD., HYDERABAD. (PAN: AACCP 7169 E) VS THE DCIT, CIR - 16(3), HYDERABAD. (APPELLANT) ITA NO.1028/HYD/2010 ASSESSMENT YEAR 2005-06 THE DCIT, CIR- 16(3), -VS- HYDERABAD. (APPELLANT) (RESPONDENT) M/S. PRV INFO SERVICES PVT. LTD., HYDERABAD. (PAN: AACCP 7169 E) (RESPONDENT) A SSESSEE BY: : SHRI MOHD. AFZAL DEPARTMENT BY : SMT. T.H. VIJAY LAKSHMI DATE OF HEARING: - -2011. DATE OF PRONOUNCEMENT: 14-10-2011. O R D E R PER AKBER BASHA, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDE R PASSED BY THE CIT (A)-V, HYDERABAD, DATED 13-5-2010 AND TH EY PERTAIN TO THE ASSESSMENT YEAR 2005-06. ITA NOS. 966 AND1028 OF 2010 PRV INFO SERVICES PVT.LTD. HYD. ======================== L.L 2 2. THE GROUNDS RAISED BY THE ASSESSEE IN THIS APPE AL ARE AS UNDER:- 1. THE ORDER OF THE CIT (A), HYDERABAD IS AGAINST THE LAW, WEIGHT OF EVIDENCE AND PROBABILITIES OF THE CASE. 2. THE CIT (A)-V, HYDERABAD ERRED IN CONFIRMING THE ORDER OF THE AO IN RESPECT OF RS.12,10,920/- BEING 10% OF SA LARIES DISALLOWED BY THE ASSESSING OFFICER ON SURMISES AND CONJUNCTURES. 3. THE CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE IN SPITE OF PRODUCING RELEVANT RECORDS BEFORE THE ASSESSING OFF ICER AND ALSO BEFORE THE CIT (A) AND WHERE IN NONE OF THEM H AVE POINTED ANY DEFECTS/IRREGULARITY. 4. THE CIT (A)-V, HYDERABAD ERRED IN STATING THAT T HE APPELLANT HAS NOT BEEN ABLE TO DISCHARGE ITS ONUS OF SUBSTANT IATING THE EXPENSES DEBITED TO PROFIT & LOSS ACCOUNT IN SPITE OF PRODUCING ALL THE RECORDS AND ALSO FOUR EMPLOYEES O F THE ASSESSEE, WHO HAVE CONFIRMED THE RECORDS ON WHICH T HEY HAVE ACKNOWLEDGED THE RECEIPT OF SALARIES. 5. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR M ODIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIM E OF HEARING OF THE APPEAL, IF IT IS CONSIDERED NECESSAR Y. 3. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL BEFORE US ARE AS FOLLOWS:- ITA NOS. 966 AND1028 OF 2010 PRV INFO SERVICES PVT.LTD. HYD. ======================== L.L 3 I. THE CIT (A) ERRED IN DELETING THE ENTIRE ADDITION O F RS.6,74,232/- BASED ON THE STATEMENT OF ONLY FOUR P ERSONS AGGREGATING TO RS.42,000/-. II. THE CIT (A) OUGHT TO HAVE APPRECIATED THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE IN RESPECT OF DEPOSITS RECEIV ED OF RS.6,74,232/- DURING ASSESSMENT PROCEEDINGS AND REM AND PROCEEDINGS. III. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PRIVATE LIMITED COMPANY AND ITS NATURE OF BUSINESS IS HAR DWARE AND SOFTWARE. THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME ON 30-10-2005 DECLARING AN INCOME OF RS.11,37,570/- AND THE RETUR N WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 31-3-2006. AS T HE CASE WAS SELECTED FOR SCRUTINY, A NOTICE UNDER SECTION 143(2) WAS ISS UED ON 21-6-2006. IN RESPONSE TO THE STATUTORY NOTICES ISSUED TO THE ASS ESSEE, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE COMPANY ATTENDED FRO M TIME TO TIME AND FURNISHED THE INFORMATION CALLED FOR. THE ASSESSIN G OFFICER ADDED TO THE INCOME OF THE ASSESSEE AN AMOUNT OF RS.6,74,232/- I N CONNECTION WITH THE DEPOSITS RECEIVED DURING THE YEAR UNDER CONSIDE RATION AS UNEXPLAINED CASH CREDITS WITH REGARD TO DISALLOWANC E OUT OF EXPENDITURE UNDER SALARIES, THE ASSESSING OFFICER FOR WANT OF D ETAILS, 10% OF RS.1,21,09,200/- AMOUNTING TO RS.12,10,920/- DISALL OWED AND ADDED TO THE INCOME OF THE ASSESSEE. ACCORDINGLY, THE ASSES SING OFFICER COMPUTED THE INCOME OF THE ASSESSEE UNDER SECTION 143(3) OF THE ACT AT RS.30,22,726/-. AGGRIEVED BY THE ORDER OF THE ASSE SSMENT OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). ON APPE AL, THE CIT (A), ITA NOS. 966 AND1028 OF 2010 PRV INFO SERVICES PVT.LTD. HYD. ======================== L.L 4 DISCUSSING THE GROUNDS SEPARATELY IN HIS ORDER, DEL ETED THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.6,74,232/- UNDE R SECTION 68 OF THE ACT FOR WHICH THE DEPARTMENT IS IN APPEAL BEFORE US WHEREAS HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN MA KING ADDITION OF RS.12,10,920/- ON ACCOUNT OF DISALLOWANCE OUT OF SA LARY PAYMENT FOR WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS TAKEN A SUB-CONTRACT FROM NITT FOR IMP ARTING COMPUTER EDUCATION IN GOVT. SCHOOLS IN SOME OF THE DISTRICTS OF ANDHRA PRADESH AND IN THE STATE OF ASSAM. FOR THIS PURPOSE, THE A SSESSEE HAS APPOINTED FACULTY AS PER THE REQUIREMENT OF STRENGT H OF THE STUDENTS OF EACH SCHOOL. THE ASSESSEE APPOINTED THE FACULTY WI TH MINIMUM QUALIFICATION OF GRADUATION AND BASIC KNOWLEDGE OF COMPUTERS. THIS FACULTY WAS TRAINED FOR THE JOB AND THEY WERE SENT BACK TO THE RESPECTIVE SCHOOLS FOR IMPARTING THE COMPUTER EDUCATION. THE FACULTY WAS CONTROLLED BY THE COORDINATORS AND THE COORDINATORS WERE UNDER THE CONTROL OF DISTRICT IN-CHARGE. THE ASSESSEE WAS MO NITORING THE WORK OF FACULTY THROUGH DISTRICT IN-CHARGE AND COORDINATORS . SALARIES WERE DISTRIBUTED THROUGH DISTRICT IN-CHARGE AND COORDINA TORS BY OBTAINING THE SIGNATURE ON THE SCROLLS MAINTAINED BY THE COORDINA TORS. THESE SCROLLS ARE SUBMITTED BEFORE THE ASSESSING OFFICER AND CIT [A] FOR PERUSAL AND ALSO SUBMITTED IN THE FORM OF 3 PAPER BOOKS BEFORE THE TRIBUNAL FOR PERUSAL. IN RESPECT OF WORK OF KAVERI PROJECT I.E. , COMPUTERIZATION OF RECORDS OF SUB-REGISTRAR OFFICE, THE SAME PROCEDURE OF PAYMENT OF SALARIES WAS FOLLOWED BY APPOINTING COORDINATORS AN D DISTRICT IN- CHARGERS. THE OBSERVATIONS OF THE ASSESSING OFFICE R ARE TOTALLY INCORRECT ITA NOS. 966 AND1028 OF 2010 PRV INFO SERVICES PVT.LTD. HYD. ======================== L.L 5 AS ALL THE EMPLOYEES ARE EDUCATED PERSONS AND CAPAB LE OF SIGNING ON THE SCROLLS AND RECEIPTS. THE ASSESSEE HAS NOT OBTAINED ANY THUMB IMPRESSION ON THE SCROLLS OR ANY OF THE VOUCHERS IN RESPECT OF SALARIES PAID. WITH REGARD TO THE OBSERVATION OF THE ASSESS ING OFFICER THAT THE ASSESSEE FAILED TO FURNISH TOTAL BILLS FOR ITS CLAI M IS OUT OF CONTEXT, AS THERE CANNOT BE ANY BILLS EVIDENCING THE PAYMENT OF SALARIES. IT IS FURTHER SUBMITTED THAT THE CIT (A) AFTER PRODUCING THE SCROLLS WAS OPINED THAT THE ASSESSEE HAS NOT PRODUCED THE MATERIAL WHI CH WAS PRODUCED BEFORE THE ASSESSING OFFICER AND SUBMISSIONS OF THE ASSESSEE THAT THE ASSESSEE PRODUCED ONLY SCROLLS BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO DURING TH E COURSE OF REMAND PROCEEDINGS WAS NOT CONSIDERED BY THE CIT WITHOUT A NY REASON. THE CIT HAS NOT APPRECIATED THE FACT THAT ALL THE EMPLO YEES ARE EDUCATED PERSONS AND CAPABLE OF SIGNING THE SCROLLS AND RECE IPTS. IT IS PERTINENT TO MENTION HERE THAT THE SALARIES WERE NOT DIRECTLY DISTRIBUTED BY THE ASSESSEE, BUT, THE DISTRIBUTION WAS CONTROLLED BY T HE ASSESSEE THROUGH THE DISTRICT IN-CHARGE AND COORDINATOR AS THE ASSES SEE WAS IMPARTING EDUCATION AND UNDER TAKING THE COMPUTERIZATION OF J OB AT NUMBER OF PLACES AND THEREFORE IT IS COMPULSORY TO THE ASSESS EE TO HAVE THE SIGNATURE OF RECIPIENT AS PROOF OF DISBURSEMENT. T HEREFORE, THERE CANNOT BE AN UNSIGNED SCROLL IN RESPECT OF PAYMENT OF SALA RIES. FURTHER, THE ASSESSEE HAS TO SATISFY HIMSELF IN RESPECT OF PROPE R DISBURSEMENT OF SALARIES WHICH CAN ONLY BE HAPPEN BY OBTAINING THE APPROPRIATE SCROLLS FROM THE DISTRICT IN-CHARGE AND COORDINATOR. IT IS FURTHER SUBMITTED THAT THE PROOF OF PAYMENT OF SALARIES IS SUPPORTED BY TH E SCROLLS SUBMITTED IN THE FORM OF PAPER BOOKS 1,2 AND 3, AND THE PAYMENT OF SALARIES DISTRICT WISE FOR FACULTY, COORDINATOR, DISTRICT IN-CHARGE A ND ALSO IN RESPECT OF ITA NOS. 966 AND1028 OF 2010 PRV INFO SERVICES PVT.LTD. HYD. ======================== L.L 6 OTHERS IS WORKED OUT AND THE SAME IS SUBMITTED. IT IS SUBMITTED THAT THE AGGREGATED AMOUNT OF SALARIES AS PER THE WORKING SH EET WORKS OUT TO RS.1,20,48,000/- AND THE ASSESSEE HAS DEBITED AN AM OUNT OF RS.1,21,09,200/- TOWARDS SALARIES IN THE PROFIT & L OSS A/C AND THEREFORE THERE IS A DIFFERENCE OF RS.61,200/- BETWEEN THE AC TUAL EXPENDITURE CLAIMED AND EVIDENCE PRODUCED IN THE FORM OF SCROLL S. IT IS FURTHER SUBMITTED THAT THE ASSESSEE INCURRED THIS AMOUNT OF RS.61,200/- TOWARDS SALARIES OF OFFICE BOYS ETC., BUT THE EVIDE NCE WAS MISPLACED OVER A PERIOD OF TIME. IT IS SUBMITTED THAT THE GENUINE NESS OF PAYMENT OF SALARIES WAS NOT DOUBTED IN THE SUBSEQUENT ASSESSME NT YEAR 2006-07 WHICH HAS BEEN ACCEPTED UNDER SECTION 143(1) OF THE ACT. IN RESPECT OF ASSESSMENT YEAR 2007-08, THE CASE WAS SELECTED FOR SCRUTINY, ON EXAMINATION OF BOOKS OF ACCOUNTS AND SALARIES SCROL LS, THE EXPENDITURE IN RESPECT OF PAYMENT OF SALARIES WAS ACCEPTED IN TOTO . WITH REGARD TO THE ADDITION OF CASH CREDIT UNDER SECTION 68 OF THE ACT , HE RELIED ON THE ORDER OF THE CIT [A]. 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITTED THAT THE CIT [A] DELETED THE ENTIRE ADDIT ION OF RS.6,74,232/- BASED ON THE STATEMENTS OF ONLY FOUR PERSONS AGGREG ATING TO RS.42,000/- IN SPITE THE FACT THAT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE IN RESPECT OF DEPOSITS RECEIVED BY IT RS.6 ,74,232/- DURING THE ASSESSMENT PROCEEDINGS AND REMAND PROCEEDINGS. WITH REGARD TO THE 10% DISALLOWANCE ON ACCOUNT OF SALARIES PAYMENT, HE RELIED ON THE ORDER OF THE LOWER AUTHORITIES. ITA NOS. 966 AND1028 OF 2010 PRV INFO SERVICES PVT.LTD. HYD. ======================== L.L 7 7. WE HAVE GONE THROUGH THE SUBMISSIONS OF THE LEA RNED DEPARTMENTAL REPRESENTATIVE AND THE RELEVANT MATERI AL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE COMPANY FILED PA PER BOOK COMPRISING THE PROOF OF PAYMENT OF SALARIES TO FACULTIES, COOR DINATOR, DISTRICT IN- CHARGE AND ALSO IN RESPECT OF OTHERS, WHICH ARE SUP PORTED BY THE SCROLLS. THE AGGREGATE AMOUNT OF SALARIES AS PER THE WORKING SHEET WORKS OUT TO RS.1,20,48,000/- AND THE ASSESSEE COMPANY HAS DEBIT ED AN AMOUNT OF RS.1,21,09,200/- TOWARDS SALARIES IN THE PROFIT AND LOSS ACCOUNT AND DIFFERENCE OF RS.61,200/- BETWEEN THE ACTUAL EXPEND ITURE CLAIMED AND EVIDENCE PRODUCED IN THE FORM OF SCROLLS APPEARS TO HAVE BEEN PAID TOWARDS SALARIES OF OFFICE BOYS ETC., WE FIND THAT THE GENUINENESS OF PAYMENT OF SALARIES WAS NOT DOUBTED BY THE DEPARTME NT IN THE SUBSEQUENT ASSESSMENT YEARS, IN PARTICULAR, FOR THE ASSESSMENT YEAR 2007-08, WHICH WAS COMPLETED UNDER SECTION 143 [3] OF THE ACT, ON EXAMINATION OF BOOKS OF ACCOUNTS AND SALARIES SCROL LS, THE EXPENDITURE IN RESPECT OF PAYMENT OF SALARIES WAS ACCEPTED IN TOTO . THE ADDITIONS MADE BY THE LOWER AUTHORITIES ARE ON THE BASIS OF S USPICIONS AND SURMISES WITHOUT GIVING ANY COGENT REASONS OR EVIDE NCE. IN VIEW OF THE ABOVE AND IN OUR CONSIDERED VIEW, THE ADDITIONS MAD E BY THE LOWER AUTHORITIES ARE NOT JUSTIFIED AND ACCORDINGLY THEY ARE LIABLE TO BE DELETED. WE DO SO ACCORDINGLY. THE GROUND RAISED BY THE AS SESSEE ON THIS ISSUE IS ALLOWED. 8. NOW, WE WILL TAKE UP THE GROUND RAISED BY THE D EPARTMENT WITH REGARD TO THE ADDITION OF RS.6,74,232/- UNDER SECTION 68 OF THE ACT. WE FIND THAT THE CIT (A) DELETED THE AFORESAID ADDI TION ONLY ON THE BASIS OF REMAND REPORT OF THE ASSESSING OFFICER WHEREIN T HE ASSESSING OFFICER ITA NOS. 966 AND1028 OF 2010 PRV INFO SERVICES PVT.LTD. HYD. ======================== L.L 8 HAD CONFIRMED THAT THE DEPOSITS ARE MADE BY THE FAC ULTY MEMBERS ONLY THROUGH A SAMPLE CHECK. THE CIT (A) ALSO OBSERVED THAT THE DEPOSIT IN QUESTION WERE NOT FROM UN-KNOWN PERSONS OR SOURCE. AFTER CONSIDERING THE TOTALITY FACTS AND CIRCUMSTANCES OF THE CASE, W E FIND THAT THE CIT (A) RIGHTLY DELETED THE AFORESAID ADDITION. IN VIEW OF THE SAME, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE CIT (A) AND A CCORDINGLY THE SAME IS CONFIRMED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14- 10- 20 11. SD/- SD/- (G.C. GUPTA) (AKBER BASHA) VICE PRESIDENT. ACCOUNTANT MEMBER. DT/- 14 -10-2011. COPY FORWARDED TO: 1. MOHD. AFZAL, ADVOCATE, 11 - 5 - 465, SHERSONS RESIDENCY, FLAT NO. 402, CRIMINAL COURT ROAD, RED HILLS, HYDERABAD. 2. DY. CIT, CIR - 16(3), AAYAKAR BHAVAN, HYDERABAD. 3. CIT(A) - V , HYDERABAD. 4. CIT, AP, HYDERABAD. 5. THE D.R., ITAT, HYDERABAD. JMR* ITA NOS. 966 AND1028 OF 2010 PRV INFO SERVICES PVT.LTD. HYD. ======================== L.L 9