Chiman Lal, Barnala V. ITO, Barnala

ITA 967/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86134 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 967/CHD/2014 ASSESSMENT YEAR: 2009-10 SHRI CHIMAN LAL, VS. THE ITO PROPRIETOR. M/S SINGLA SANITARY BARNALA & TILE HOUSE K.C. ROAD CHANDIGARH PAN NO.AARPL1362M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEEPAK AGGARWAL RESPONDENT BY : SHRI. S.K. MITTAL DATE OF HEARING : 21/01/2015 DATE OF PRONOUNCEMENT : 23/01/2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29.08.2014 PASSED BY THE CIT(A) PATIALA 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: I. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADD ITION OF RS. 3,36,000/- UNDER SECTION 40A(2)(B) ON THE GROUND TH AT EXCESSIVE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE TO HIS SONS AND DAUGHTER IN-LAWS IN COMPARISON TO THE NORMAL SALARI ES WHEREAS, AS PER THE ASSESSEE THE ADDITION ON THIS COUNT IS ARBI TRARY AND WITHOUT ANY BASIS, THEREFORE THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE CIT(A) MAY KINDLY BE DELETED. II. (A) THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 54,113/- ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS ON THE GROUND THAT THE HOUSEHOLD WITHDRAWALS ARE NOT IN COMMENSUR ATE WITH THE SIZE OF THE FAMILY WHEREAS AS PER THE ASSESSEE THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) IS AN ADHO C ADDITION AND THEREFORE THE SAME IS BEING PRAYED TO BE DELETED. (B) THAT ALTERNATIVELY AND WITHOUT PREJUDICE TO TH E ABOVE THE ASSESSEE ALSO DISPUTES THE QUANTUM OF THE ADDITION CONFIRMED BY THE LD. CIT(A). 2 3. OUT OF THE ABOVE GROUND NO. 2 WAS NOT PRESSED BE FORE US AND THEREFORE SAME MAY DISMISSED AS NOT PRESSED. GROUND NO. 1 4. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAV E PAID A SUM OF RS. 1,80,000/- TO SMT. RUCHIKA SINGLA WHO WAS DA UGHTER IN LAW OF THE ASSESSEE AS SALARY FURTHER A SUM OF RS. 1,80,00 0/- WAS PAID TO SMT. POOJA SINGLA WHO WAS ALSO DAUGHTER IN LAW OF THE AS SESSEE. IN RESPONSE TO THE QUERY REGARDING JUSTIFICATION OF TH E SALARY IT WAS STATED THAT BUSINESS WAS BEING LOOKED AFTER BY THE SONS AND DAUGHTER IN LAWS. EVEN THE LADIES WERE EXAMINED DUR ING THE ASSESSMENT PROCEEDINGS AND THERE STATEMENTS HAVE BE EN RECORDED. THE AO MADE COMPARISON OF THE SALARY PAID TO THESE SALE PERSONS WITH SALARY PAID BY M/S SHREE BALAJI JEWELLERS, M/S SHRI GANESH JEWELLERS ETC AND ULTIMATELY HELD THAT SALARY @ 10, 000 PER MONTH WAS REASONABLE IN BOTH THE CASES. FURTHER ASSESSEE HAS PAID SALARY AMOUNTING TO RS. 1,44,000/- TO SH. KIMAT RAI AND RS . 1,44,000 TO SH.HIRA LAL WHO WERE SONS OF THE ASSESSEE. IN THESE TWO CASES ALSO SALARY WAS HELD TO BE REASONABLE ONLY TO THE EXTENT OF RS. 8,000/- EACH AND REST BALANCE OF THE AMOUNT WAS HELD TO BE EXCESSIVE PAYMENT UNDER SECTION 40A(2)(B). IN THIS BACKGROUND A SUM OF RS. 3,36,000/- WAS DISALLOWED. 5. ON APPEAL THE ACTION OF THE AO WAS CONFIRMED BY THE LD. CIT(A). 6. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AO HAS ALREADY ACCEPTED THE PART OF THE SALARY PAID TO THE SONS AS WELL AS DAUGHTER IN LAWS THEREFORE RENDERING OF SERVICES BY THESE PERSONS HAS NOT BEEN DENIED. HE CONTENDED THAT IT IS ALMOST IMPOSSIBLE TO COMPARE THE SALARY OF ONE PERSON WITH ANOTHER BECAU SE SAME DEPENDS ON THE QUALIFICATION AS WELL AS EXPERIENCE AND GENERAL INTELLIGENCE OF PARTICULAR PERSON. THE SALARY OF PE RSON FURTHER DEPENDS ON TRUST WORTHINESS, CLOSE RELATIVE LIKE SO N AND DAUGHTER IN 3 LAW ARE TOTALLY TRUST WORTHY THEREFORE DISALLOWANCE U/S 40A(2)(B) IS NOT JUSTIFIED. 7. ON THE OTHER HAND LD. DR STRONGLY SUPPORTED THE ORDER OF LD. CIT(A) 8. AFTER CONSIDERING THE RIVAL SUBMISSION CAREFULLY WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. NO DOUBT AO HAS COMPARED THE SALARY PAID BY OTHER BUSINESS FIRMS IN RESPECT OF SALES STAFF. IT REMAINS FACT THAT SALARY OF TWO PERSONS C ANNOT BE EASILY COMPARED, A SALES MAN MAY BE DRAWN 5,000/- PER MONT H BUT ANOTHER SALES MAN MAY BE DRAWING 50,000/- PER MONTH , IT DEPENDS ON THE QUALIFICATION, EXPERIENCE, AND GENERAL INTEL LIGENCE AND TRUST WORTHINESS OF THE EMPLOYEE. THESE CHARACTERISTICS C ANNOT BE EASILY COMPARED. FURTHER AO HAS ALSO ACCEPTED RENDERING OF SERVICES BY ALLOWING THE PART OF THE SALARY THEREFORE, IN OUR O PINION THE DISALLOWANCE OF PART OF THE SALARY UNDER SECTION 40 A(2)(B) IS NOT JUSTIFIED BECAUSE IT IS DIFFICULT TO COMPARE THE SA LARY OF ONE PERSON WITH ANOTHER AND TO FIND OUT THAT THE EXCESSIVE AMO UNT PAID BY THE ASSESSEE. THEREFORE WE SET ASIDE THE ORDER OF LD.CI T(A) IN RESPECT OF THIS GROUND AND DELETE THE ADDITION. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/01/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23/01/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR