The ACIT, Bhopal V. M/s Mechmen Constructive Solution Pvt. Ltd, Bhopal

ITSSA 78/IND/2009

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9132 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 18-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Keywords: Search and seizure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER IT(SS)A NOS.77 & 78/IND/2009 A.YS. - 2005-06 & 2006-07 ASSISTANT COMMISSIONER OF INCOME TAX 1(2), BHOPAL APPELLANT VS M/S. MECHMEN CONSTRUCTIVE SOLUTIONS P. LTD., MP NAGAR, BHOPAL PAN AADCM 9461 F RESPONDENT APPELLANT BY : SHRI K.K. SINGH, CIT, DR RESPONDENTS BY : SHRI PRAKASH JAIN, CA O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER BOTH THESE APPEALS ARE BY THE REVENUE AGAINST THE C OMMON ORDER OF THE LEARNED CIT(A)-I, BHOPAL, DATED 25.2.2009 ON THE FOLLOWING COMMON GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION OF 2 RS.20,45,291/- AND RS.28,02,310/- MADE ON ACCOUNT OF EXCESSIVE SALARY PAID, AND 2. IN DELETING THE ADDITION OF RS.10,09,401/- AND RS.9,23,732/- MADE ON ACCOUNT OF EXCESSIVE TOUR EXPENSES BY THE LD. ASSESSING OFFICER. 2. DURING THE HEARING OF THESE APPEALS, THE LD. CIT , DR DEFENDED THE ASSESSMENT ORDER WHEREAS LD. COUNSEL FOR THE ASSESS EE SUPPORTED THE IMPUGNED ORDER. 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. AS FAR AS THE ISSUE OF EXCESSIVE SALARY PAID IS CONCERNED, THE BR IEF FACTS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN TH E BUSINESS OF SALES AND SERVICE OF EARTH MOVING MACHINERY AND IS EXCLUS IVE DEALER OF TELCO CONSTRUCTION EQUIPMENT COMPANY LTD. FOR SALES AND S ERVICE OF ALL TYPES OF EARTH MOVING MACHINES FOR THE STATE OF MP. THE A SSESSEE IS ALSO MAINTAINING BRANCH OFFICES LOCATED AT DIFFERENT PLA CES LIKE GWALIOR, INDORE, JABALPUR, HARDA ETC. A SEARCH AND SEIZURE O PERATION WAS CARRIED OUT ON 16.9.2005 U/S 132(1) OF THE ACT IN ZEE TV GR OUP CASES WHEREIN CERTAIN DOCUMENTS AND CASH WERE SEIZED. AS PER THE ASSESSEE, DURING SEARCH OPERATION, NOTHING INCRIMINATING WAS FOUND. THE ASSESSEE PAID RS.20,45,291/- FOR ASSESSMENT YEAR 2005-06 AND RS.2 8,02,310/- FOR ASSESSMENT YEAR 2006-07, OUT OF WHICH, 20% WERE DIS ALLOWED BY THE 3 ASSESSING OFFICER, BEING EXCESSIVE AND UNWARRANTED. ON APPEAL, THE LD. FIRST APPELLATE AUTHORITY DECIDED IN FAVOUR OF THE ASSESSEE WHICH IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. 2.2 AS FAR AS THE NEXT GROUND IS CONCERNED, THE ASS ESSING OFFICER ALSO DISALLOWED 20% OUT OF TRAVELING/TOUR EXPENSES BEING EXCESSIVE AND UNWARRANTED. 3. DURING FIRST APPELLATE STAGE, IT WAS CLAIMED BY THE ASSESSEE THAT A COPY OF THE LEDGER ACCOUNT OF THE SALARY, SALARY SH EET OF EACH MONTH AND VOUCHERS WERE FILED AND THE SAME WERE PROPERLY ACKN OWLEDGED BY THE EMPLOYEES. THE SALARY HAS BEEN PAID EITHER THROUGH ACCOUNT PAYEE CHEQUE OR DIRECTLY TRANSFERRED TO THE ACCOUNTS OF T HE EMPLOYEES AS THE SALARY IS DIRECTLY PAID FROM THE HEAD OFFICE TO THE EMPLOYEES STATIONED AT DIFFERENT BRANCHES. IT WAS FURTHER CLAIMED THAT THE ASSESSEE WAS NEVER ASKED BY THE LD. ASSESSING OFFICER TO PRODUCE THE D OCUMENTARY EVIDENCE AND SIMPLY 20% WAS DISALLOWED. IDENTICALLY, KEEPING IN VIEW THE NATURE OF WORK, V ARIOUS TRAVELING/TOUR EXPENSES WERE INCURRED BY THE EMPLOY EES AS THE OFFICES OF THE ASSESSEE WERE LOCATED AT DIFFERENT PLACES AND T HE MAGNITUDE OF THE WORK WAS ALSO SUBSTANTIAL. THE BILLS FOR SUCH EXPEN SES WERE ALSO ENCLOSED CONTAINING THE DETAILS OF PLACE, TIME, DAT E, NAME OF THE CUSTOMER, NATURE OF SERVICE AND TYPE OF MACHINE ETC . THERE IS A FURTHER MENTION THAT THE EMPLOYEES UNDERTOOK 1180 VISITS/TO URS TO SERVE THE 4 CLIENTS AND MAJORITY OF EXPENSES WERE RANGING BETWE EN RS.70 TO RS.2500/-. THE OBSERVATIONS MADE IN PARA 4.2 (PAGE 4) OF THE IMPUGNED ORDER IS WORTH MENTIONING: 4.2 ON VERIFICATION, OF THE SAME, IT IS AVERRED, I T WILL BE CLEAR THAT ALL THE DISALLOWANCES OUT OF TRAVELING EXPENSES HAVE BEEN MADE BY THE LEARNED AO WITHOUT VERIFYING THE FACTS AND ON THE BASIS OF PRESUMPTIONS AND CONJECTURES AND WILD GUESS WORK. IT IS FURTHER ARGUED THAT THE LEARNED AO HAS HIMSELF ADMITTED 80% OF THE TRAVELING EXPENSES AS GENUINE AND CONSIDERING 20% AS EXCESSIVE ON THE BASIS OF CONJECTURE AND GUESSWORK AND WITHOUT ANY EVIDENCE IS BAD IN LAW. IT IS FURTHER AVERRED THAT NO MATERIAL WAS FOUND ON RECORD TO ESTABLISH THAT THE AMOUNT SPENT ON TRAVELING IS IN ANY WAY EXCESSIVE. RELIANCE IS AGAIN PLACED ON THE DECISION IN THE CASE OF NARULA TRANSPORT COMPANY VS. ACIT (2004) 87 TTJ (ASR) TRIB (803). IF THE TOTALITY OF FACTS, ARGUMENTS ADVANCED BY THE LD. RESPECTIVE COUNSEL AND THE CONCLUSION DRAWN IN PARA 5 OF THE IMPUGNED ORDER ARE ANALYSED, IT IS AN UNCONTROVERTED FACT THAT THE 20% OF THE DI SALLOWANCES OUT OF SALARY AND TRAVELING EXPENSES WAS MADE WITHOUT ANY JUSTIFICATION, THAT TOO WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD . THE ENTIRE TECHNICAL STAFF IS MAINTAINED AS PER THE REQUIREMENT OF THE P OPULATION OF THE REGION AND SINCE THE SERVICES OF THE ASSESSEE ARE OF SUCH NATURE THAT LOT OF STAFF IS REQUIRED AND CONSEQUENTLY THE SALARY AND TOUR EX PENSES ARE LIKELY TO BE PAID/INCURRED. EVEN NO DEFECT WAS FOUND BY THE A SSESSING OFFICER IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE FOR PAYMENT OF SALARY AND 5 TOUR/TRAVELING EXPENSES. THE DISALLOWANCE HAS BEEN MERELY MADE BY THE LD. ASSESSING OFFICER ON PRESUMPTIVE BASIS, THEREFO RE, THERE IS NO INFIRMITY IN THE STAND OF THE LD. CIT(A) IN DELETIN G SUCH DISALLOWANCE, CONSEQUENTLY, BOTH THESE APPEALS OF THE REVENUE ARE DISMISSED. FINALLY, BOTH THE APPEALS OF THE REVENUE ARE DISMIS SED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF L EARNED REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF HEARING ON 15 TH JUNE, 2010. (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15.6.2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE !VYAS!