ACIT, Ajmer v. SHAH & GARG, Ajmer

ITA 1075/JPR/2010 | 2007-2008
Pronouncement Date: 22-07-2011 | Result: Dismissed

Appeal Details

RSA Number 107523114 RSA 2010
Bench Jaipur
Appeal Number ITA 1075/JPR/2010
Duration Of Justice 10 month(s) 23 day(s)
Appellant ACIT, Ajmer
Respondent SHAH & GARG, Ajmer
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 22-07-2011
Assessment Year 2007-2008
Appeal Filed On 30-08-2010
Judgment Text
1 ITA 1075(2)-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 1075/JP/2010 ASSTT. YEAR : 2007-08. THE ACIT CIRCLE-2 VS. M/S. SHAH & GARG AJMER. SARDAR PATEL MARG AJMER. (APPELLANT) (RESPONDENT) C.O. NO. 87/JP/2010 ( ARISING OUT OF ITA NO. 1075/JP/2010 ) ASSTT. YEAR : 2007-08. M/S. SHAH & GARG VS. THE ACIT CIRCLE-2 AJMER. AJMER. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : MS. ROSHANTA MEENA RESPONDENT BY : SHRI RAKESH GARG ORDER DATE OF ORDER : 22/07/2011. PER R.K. GUPTA J.M. THIS IS AN APPEAL BY DEPARTMENT AND CROSS OBJECTIO N BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2007-08. 2. IN GROUND NO. 1 & 2 THE DEPARTMENT IS OBJECTING IN RESTRICTING THE ADDITION OF RS. 8 81 209/- MADE ON ACCOUNT OF SALARY EXPENSES THOUG H THE AO GAVE DETAILED REASONS IN THE REMAND REPORT UNDER RULE 46A. 3. THE ASSESSEE IS A CHARTERED ACCOUNTANT FIRM AND DERIVES INCOME FROM THE BUSINESS OF OUTSOURCING BY WORKING FOR VARIOUS COMP ANIES WHICH REQUIRES MAN POWER FOR 2 FIELD WORK COLLECTION VERIFICATION OFFICE WORK DATA COLLECTION AND TELE-CALLING. THE AO OBSERVED THAT ASSESSEE HAS CLAIMED SALARY EXPENSES OF RS. 98 66 464/- DURING THE YEAR. INFORMATION WAS CALLED UNDER SECTION 133(6) FROM A FEW PERSONS ON RANDOM BASIS. WHILE CERTAIN LETTERS WERE DULY SERVED AND SATISFACTORY R EPLY WERE RECEIVED IN CERTAIN CASES LETTERS WERE NOT SERVED. TWO PERSONS ALSO DENIED HA VING RECEIVED ANY SALARY FROM THE ASSESSEE. THE AO THEREFORE REJECTED BOOKS OF ACCO UNT OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 145(3) AND MADE DISALLOWANCE OF RS.8 81 209/- OUT OF SALARY EXPENSES CLAIMED BY THE ASSESSEE. REASONS FOR DENY ING THE SALARY HAVE ALSO BEEN MENTIONED BY THE AO IN HIS ORDER WHICH THE LD. CIT (A) REPRODUCED AT PAGES 1 & 2 OF HIS ORDER. THE AO MADE DISALLOWANCE OF SALARIES OF 12 E MPLOYEES FOR THE REASON THAT LETTERS RETURNED UNSERVED AND THESE EMPLOYEES HAVE BEEN PAI D SALARY OF RS. 7 04 152/- AND TWO PERSONS HAVE DENIED THAT THEY RECEIVED ANY SALARY B ECAUSE THEY HAVE LEFT THE JOB. THESE TWO PERSONS HAVE BEEN PAID SALARY OF RS. 1 77 057/- . IN THIS WAY TOTAL DISALLOWANCE WAS MADE AT RS. 8 81 209/-. THE ACTION OF THE AO WAS C HALLENGED BEFORE LD. CIT (A). DETAILED SUBMISSIONS WERE FILED. IT WAS FURTHER SUB MITTED THAT ONLY TWO PERSONS HAVE DENIED TO HAVE WORKED WITH THE ASSESSEE I.E. SHRI A MIT GUPTA AND SHRI AMIT JOSHI. IN FACT THESE TWO PERSONS SERVED THE ASSESSEE DURING THE PERIOD I.E. 2007-08. HOWEVER ON A LATER STAGE THEY LEFT AND WHEN NOTICES UNDER SECTIO N 133(6) WERE SERVED ON THEM AT THAT POINT OF TIME THEY WERE NOT EMPLOYEE OF THE ASSESSE E AND THEREFORE THEY DENIED. 4. REGARDING OTHER 12 PERSONS THE ASSESSEE FILED C ONFIRMATION FROM THOSE EMPLOYEES. IT WAS FURTHER SUBMITTED THAT THE LETTER WERE RETURNED UNSERVED FOR THE REASON THAT ADDRESSES WERE NOT AVAILABLE. THEREAFTER THE ASSESSEE COLLECTED THE CORRECT ADDRESS AND CONFIRMATION HAS BEEN HAS BEEN SOUGHT FROM THE PARTIES. ACCORDINGLY IT WAS 3 SUBMITTED THAT THE ADDITION MADE BY AO WAS NOT JUST IFIED. THE PAPERS FILED BEFORE LD. CIT (A) WERE SENT TO THE AO FOR HIS REMAND REPORT. THE REMAND REPORT WAS SENT TO THE ASSESSEE BY WHICH THE AO HAS SUPPORTED THE FINDING IN THE ASSESSMENT ORDER AND CLARIFICATION WAS GIVEN THAT THE AO WHO PASSED THE ORDER HAS CONSIDERED ALL LTHE FACTS AND SUBMISSIONS OF THE ASSESSEE AND THEN ONLY THE AMOUN T OF DISALLOWANCE WHICH WAS NOT VERIFIABLE OR THE EMPLOYEES HAS STATED THAT THEY HA VE NOT RECEIVED ANY SALARY. COPY OF REMAND REPORT WAS PROVIDED TO THE ASSESSEE FOR FURT HER SUBMISSION AND DETAILED SUBMISSIONS WERE FILED BEFORE LD. CIT (A) ON BEHALF OF THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD THE LD. CIT (A) FOUND THAT ASSESSEE DESERVES TO SUCCEED IN PART. THE LD. CIT (A) RESTR ICTED THE ADDITION TO RS. 89 050/- AGAINST TOTAL ADDITION OF RS. 8 81 209/-. 5. NOW BOTH ARE IN APPEAL HERE BEFORE THE TRIBUNAL. 6. THE DEPARTMENT IS OBJECTING IN DELETING THE ADDI TION AND THE ASSESSEE THROUGH ITS CROSS OBJECTION IS OBJECTING IN SUSTENANCE OF ADDIT ION. 7. THE LD. D/R STRONGLY PLACED RELIANCE ON THE ORDE R OF AO. IT WAS FURTHER SUBMITTED THAT AO HAS DISALLOWED THE SALARY ONLY OF THAT PART WHICH COULD NOT BE VERIFIED AND THEREFORE THE ORDER OF AO IS LIABLE TO BE SUSTAIN ED. 8. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSESS EE RELIED ON THE ORDER OF LD. CIT (A) TO THE EXTENT TO WHICH THE ADDITIONS WERE DELET ED. 9. ONE OF THE EMPLOYEES WHO DENIED HAVING RECEIVED THE SALARY WAS ALSO PRODUCED AT THE APPELLATE PROCEEDINGS AS DIRECTED BY THE TRIBUN AL ON LAST HEARING. FURTHER RELIANCE WAS PLACED ON THE WRITTEN SUBMISSIONS PLACED ON REC ORD. 4 10. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD WE FIND THAT THERE IS NO INFIRMITY IN THE FINDING OF LD. CI T (A) WHO RESTRICTED THE ADDITION AT RS. 89 050/-. THE LD. CIT (A) HAS GIVEN A CATEGORICAL FINDING AND THEY REMAIN UNCONTROVERTED ALSO. THE FINDING OF LD. CIT (A) HAVE BEEN RECORDE D IN PARAS 3.5 TO 3.9 AT PAGES 7 & 8 OF HIS ORDER ARE AS UNDER :- 3.5. FACTS OF THE CASE AND ARGUMENTS OF THE APPE LLANT HAVE BEEN CAREFULLY CONSIDERED. IT WAS INTIMATED BY THE APPEL LANT THAT THE WORK INVOLVES RECOVERY FROM VARIOUS CLIENTS OF CITI BANK AND IN VIEW OF FINANCIAL IMPLICATIONS AND RISKY NATURE OF THE JOB PERSONS ARE EMPLOYED ONLY AFTER DUE VERIFICATION. IN SUPPORT OF THIS CLA IM APPELLANT FURNISHED COPIES OF RESUME RESIDENCE VERIFICATION REPORT CO PIES OF MARK SHEETS DRIVING LICENSE ETC. IN RESPECT OF THOSE 12 PERSONS TO WHOM LETTERS ISSUED BY AO WERE NOT SERVED. IT WAS ALSO INTIMATED BY THE APPELLANT THAT SOME OF THE EMPLOYEES JOIN THE CONCERN AND LEAVE THE JOB AF TER A SHORT TIME. THE PERFORMANCE OF EMPLOYEES IS CONSTANTLY MONITORED AN D THOSE EMPLOYEES WHOSE PERFORMANCE IS NOT SATISFACTORY ARE REMOVED F ROM SERVICE. IN SOME CASES SUCH PERSONS MAY HAVE A HOSTILE FEELING TOWAR DS THE APPELLANT AND THAT MAY BE THE REASON FOR NOT FURNISHING CONFIRMAT ION REGARDING RECEIPT OF SALARY. 3.6. FROM THE PERUSAL OF DETAILS FILED BY APPELLANT IT IS FOUND THAT IN THE CASE OF SHRI AMIT JOSHI COPIES OF HIS BIO DATA DR IVING LICENSE RESIDENCE VERIFICATION MARK SHEET FOR MBA WAS FILED BY APPEL LANT. COPY OF IDENTITY CARD ISSUED TO HIM ALONG WITH HIS DECLARATION CUM U NDERTAKING SIGNED ON 12.01.2006 WAS ALSO PRODUCED. HIS AFFIDAVIT REGARDI NG EMPLOYMENT WITH THE APPELLANT WAS ALSO FILED. IN SUCH A SITUATION A O IS NOT JUSTIFIED TO REJECT THE CLAIM REGARDING PAYMENT OF SALARY TO HIM MERELY ON THE GROUND THAT HE WAS NOT PRODUCED BEFORE AO. THE APPELLANT IS NOT HA VING ANY LEGAL POWERS TO ENFORCE ATTENDANCE OF A PERSON. MOREOVER IN THE CASE OF EMPLOYEE WHO 5 HAS LEFT THE SERVICE IT IS NOT POSSIBLE FOR APPELLA NT TO TRACE HIS WHEREABOUTS. IN VIEW OF DETAILS FILED BY THE APPELLANT AO SHOUL D HAVE MADE NECESSARY INQUIRY ON HIS PART. WITHOUT UNDERTAKING ANY SUCH E XERCISE PAYMENT OF SALARY TO SHRI AMIT JOSHI CANNOT BE HELD AS NON GEN UINE. 3.7. REGARDING AMIT GUPTA COPIES OF THE BIO DATA M ARK SHEET OF B.A. FINAL YEAR EXAMINATION AND HIGHER SECONDARY EXAMINA TION RESIDENCE VERIFICATION REPORT AND DECLARATION CUM UNDERTAKIN G SIGNED BY HIM ON 01.12.2006 WAS FILED. COPY OF HIS AGREEMENT WITH TH E APPELLANT WAS ALSO FILED ALONG WITH HIS AFFIDAVIT REGARDING EMPLOYMENT . IN SUCH A CASE HIS REPLY FURNISHED TO THE AO DURING THE COURSE OF ASSE SSMENT PROCEEDINGS THAT HE JOINED THE APPELLANT IN OCTOBER 2002 AND L EFT THE ENFORCED HIS ATTENDANCE AND VERIFIED THE FACTS IN THIS REGARD. I N THE ABSENCE OF ANY SUCH EXERCISE THERE IS NO JUSTIFICATION FOR DISALLOWANC E OF SALARY PAID TO HIM MERELY ON THE BASIS OF HIS DENIAL. 3.8. JOB HOPPING IS FREQUENT AMONG YOUNGSTERS NOW A DAYS. THE YOUNG GENERATION HAS A HIGH MOBILITY MOVING FROM ONE CIT Y TO ANOTHER IN SEARCH OF BETTER CAREER OPTIONS. AS INTIMATED BY APPELLANT THE NATURE OF HIS BUSINESS IS SUCH THAT NEARLY TWO HUNDRED PERSONS AR E EMPLOYED AT A TIME. MANY OF THEM LEAVE THE JOB AFTER A SHORT TIME. IT I S PRACTICALLY NOT POSSIBLE FOR A BUSINESSMAN TO KEEP TRACK OF WHEREABOUTS OF I TS EX EMPLOYEES. BUT MERELY ON THIS BASIS DISALLOWANCE OUT OF SALARY IS NOT JUSTIFIED. 3.9. REGARDING 12 EMPLOYEES TO WHOM LETTERS COULD N OT BE SERVED APPELLANT FURNISHED SIMILAR DETAILS. COPIES OF IDEN TITY CARD ISSUED TO MR. SHARAD MATHUR AND MR. DEVI SINGH ARE ON RECORD. SIM ILARLY AGREEMENT SIGNED BY SHRI RAHUL SAXENA WITH THE APPELLANT IS O N RECORD. IN THE CASE OF SHRI BABUL LAL AO MADE INQUIRY AND HE CONFIRMED RE CEIPT OF SALARY. IN THE CASE OF ROHIT SHARMA RECEIPT OF SALARY WAS CONF IRMED BUT THE AMOUNT WAS DIFFERENT. KEEPING IN VIEW ALL THESES FACTS I H OLD THAT AO IS NOT JUSTIFIED TO MAKE DISALLOWANCE OF RS.8 81 209/- OUR OF SALARY WITHOUT BRINGING ANY SPECIFIC MATERIAL RECORD. THE ONLY DIS CREPANCY DISCOVERED BY 6 AO IS OUT OF RS.89 050/- IN RESPECT OF SALARY PAYME NT TO SHRI ROHIT SHARMA. APPELLANT HAS SHOWN PAYMENT OF SALARY TO HI M AT RS.99 250/- WHEREAS HE CONFIRMED HAVING RECEIVED SALARY OF RS.1 0 200/- ONLY. IN SUCH A SITUATION THE DISALLOWANCE OUT OF SALARY IS RESTR ICTED TO RS.89 050/- AS AGAINST RS.8 81 209/- MADE BY AO. GROUND NO. 1 & 2 OF THE APPEAL ARE THUS PARTLY ALLOWED. 11. THE ABOVE FINDINGS OF LD. CIT (A) ARE ON THE BA SIS OF ARGUMENT ADVANCED BY LD. A/R REMAND REPORT SENT BY AO AND RE-JOINDER FILED ON BEHALF OF THE ASSESSEE. THE LD. CIT (A) HAS CONSIDERED ALL THE ARGUMENTS IN RIGHT P ERSPECTIVE AND THEN HAS GIVEN HIS FINDING REPRODUCED ABOVE. THESE FINDINGS OF LD. CI T (A) IN OUR CONSIDERED VIEW ARE SELF- EXPLANATORY AND FINDING OF FACT. THEREFORE WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT (A). THE GROUNDS OF THE DEPARTMENT ARE DISMISSED AS WELL AS THE GROUND OF ASSESSEE RAISED THROUGH CROSS OBJECTION. 12. NEXT ISSUE IN THE APPEAL OF THE DEPARTMENT IS A GAINST DELETING THE ADDITION OF RS. 15 000/- ON ACCOUNT OF STAFF WELFARE EXPENSES MADE BY AO. 13. FOR WANT OF PROPER VOUCHERS THE AO DISALLOWED 10% OF THE EXPENSES ON ACCOUNT OF STAFF WELFARE EXPENSES. DETAILED SUBMISSIONS WE RE FILED BEFORE LD. CIT (A). IT WAS SUBMITTED THAT THE NET PROFIT SHOWN BY ASSESSEE IS MUCH BETTER AS THE SAME IS 11.63% AGAINST 5.71% SHOWN IN EARLIER YEAR. THEREFORE DO UBTING ANY EXPENSES AND DISALLOWING ON ADHOC BASIS IS NOT JUSTIFIED. THE LD. CIT (A) W AS SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. TAKING INTO CONSIDERATION THE NUMBER OF E MPLOYEES THE LD. CIT (A) NOTED THAT THERE WAS NO JUSTIFICATION FOR ADHOC DISALLOWANCE O F RS. 15 000/-. ACCORDINGLY THE SAME WAS DELETED. 7 14. WE FIND NO INFIRMITY WITH THE FINDING OF LD. C IT (A) IN RESPECT OF THIS ISSUE ALSO. THEREFORE WE CONFIRM THE ORDER OF LD. CIT (A). TH ERE IS NO OTHER GROUND IN THE CROSS OBJECTION OF THE ASSESSEE. 15. IN THE RESULT APPEAL OF THE DEPARTMENT AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. 16. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22 .7.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR D/- COPY FORWARDED TO :- THE ACIT CIRCLE-2 AJMER. M/S. SHAH & GARG AJMER. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 1075/JP/2010) BY ORDER AR ITAT JAIPUR.