DCIT, Ludhiana v. M/s Shiva Texfabs Ltd., Ludhiana

ITA 363/CHANDI/2013 | 2010-2011
Pronouncement Date: 28-10-2013 | Result: Dismissed

Appeal Details

RSA Number 36321514 RSA 2013
Assessee PAN AXACT1961A
Bench Chandigarh
Appeal Number ITA 363/CHANDI/2013
Duration Of Justice 6 month(s) 25 day(s)
Appellant DCIT, Ludhiana
Respondent M/s Shiva Texfabs Ltd., Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 28-10-2013
Date Of Final Hearing 21-10-2013
Next Hearing Date 21-10-2013
Assessment Year 2010-2011
Appeal Filed On 03-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.363/CHD/2013 ASSESSMENT YEAR : 2010-11 THE DY. COMMISSIONER OF VS M/S SHIVA TEXFABS LTD. INCOME TAX 8-L MODEL TOWN CENTRAL CIRCLE-III LUDHIANA. LUDHIANA. PAN : AACCS-0279A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 21.10.2013 DATE OF PRONOUNCEMENT : 28.10.2013 O R D E R PER SUSHMA CHOWLA JM THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF THE CIT(APPEALS) DATED 24.01.2013 RELATING TO ASSESSMEN T YEAR 2010-11 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF TH E INCOME-TAX ACT 1961 ( 'THE ACT' FOR SHORT). 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1.I). THAT THE LD. CIT(A)-I LUDHIANA HAS ERRED I N LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 23 46 000/- MADE BY THE AO ON ACCOU NT OF UNEXPLAINED SALARY EXPENSES. L(II). THAT THE LD. CIT(A)-1 LUDHIANA HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT DURING THE COURSE OF AS SESSMENT PROCEEDINGS THE ASSESSEE HAD NOT PRODUCED FULL DETAILS OF SALARY PA ID AND ALSO SHOWN ITS INABILITY TO PRODUCE THE PERSONS IN WHOSE NAMES SUCH SALARY HAS BEEN DEBITED SINCE THIS IS CONTRARY TO THE FACT THAT FULL DETAILS OF THE EMPLO YEES ARE OBTAINED BY EVERY COMPANY FOR RECORDS AT THE TIME OF RECRUITMENT. 2 L(III).. THAT THE LD. C1T(A)-I LUDHIANA HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION EVEN THOUGH ASSESSEE'S COMPANY HAS FAILED TO DISCHARGE ITS ONUS OF PROVING WITH EVIDENCE THE PAYMENT OF SALARY MADE. 2(I). THAT THE LD. CIT(A)-I LUDHIANA HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2 00 000/- MADE BY THE AO ON ACC OUNT OF UNEXPLAINED MISC. EXPENSES. 2(II). THAT THE LD. CIT(A)-I LUDHIANA HAS ERRED I N LAW AND ON FACTS IN NOT APPRECIATING THE FACTS THAT THE ENTRIES IN BOOKS OF ACCOUNTS WITHOUT ANY EVIDENCE ARE BASELESS AND IN THE PRESENT CASE THE AO HAD FOUND THAT SOME EXPENSES WERE DEBITED ON THE BASIS OF SELF PREPARED VOUCHERS. 3. THE ISSUE IN GROUND NO. 1 RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS. 23 46 000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED SALARY EXPENSES. 4. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT S EARCH & SEIZURE OPERATION UNDER SECTION 132 OF THE ACT WERE CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 16.12.2009. DURING THE COURSE OF SURVEY CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AND SEIZ ED. IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 142(1) OF THE AC T THE ASSESSEE FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME O F RS. 36.39 CR WHICH INCLUDED SURRENDERED AMOUNT OF RS. 35.25 CR A ND BOOK PROFIT UNDER SECTION 115JB OF RS. 58.66 CR. THE ASSESSING OFFICER NOTED THAT THE TOTAL SALARY EXPENSES CLAIMED BY THE ASSES SEE WERE RS. 6.78 CR AS AGAINST EXPENDITURE OF RS. 2.07 CR INCURRED D URING THE PRECEDING YEAR. THE ASSESSEE HAD MADE CERTAIN PAYM ENTS OF SALARY IN CASH TO VARIOUS PERSONS AND THE ASSESSEE WAS ASKED TO PRODUCE SUCH PERSONS. IN RESPONSE IT WAS EXPLAINED BY THE ASSE SSEE THAT THE SAID CASH PAYMENT WAS MADE TO CERTAIN CLERICAL STAFF AND MOST OF THEM HAVE LEFT THE JOB AND THE SAID PERSONS COULD NOT BE PRODUCED. THE ASSESSING OFFICER DISALLOWED THE TOTAL PAYMENT MADE IN CASH AMOUNTING TO RS. 23 46 000/-. 3 5. BEFORE THE CIT(APPEALS) THE ASSESSEE FURNISHED WRITTEN SUBMISSIONS WHICH ARE INCORPORATED UNDER PARA 4 AT PAGES 2 TO 5 OF THE APPELLATE ORDER. THE CONTENTION OF THE ASSESSE E BEFORE THE CIT(APPEALS) WAS THAT THE SAID EXPENDITURE WAS AS P ER THE SALARY REGISTER AND COMPLETE DETAILS OF PAYMENT OF SALARY IN CASH WERE MAINTAINED AND WERE PRODUCED BEFORE THE ASSESSING O FFICER. THE ASSESSEE CLAIMED TO HAVE PRODUCED THE SALARY REGIST ER ALSO BEFORE THE ASSESSING OFFICER WHERE THE NAME OF EACH AND EVERY PERSON ALONGWITH DESIGNATION NUMBER OF WORKING DAYS AND O THER DETAILS WERE GIVEN AND THE SAID REGISTERS WERE ALSO SIGNED BY EACH AND EVERY STAFF IN TOKEN OF RECEIPT OF THE SALARY PAYMENT. T HE INCREASE IN SALES DURING THE YEAR WAS ATTRIBUTED TO A NEW UNIT BEING ESTABLISHED AT VILLAGE BHATTIAN NEAR MACHHIWARA. FURTHER THE ASS ESSEE CLAIMED THAT IT HAD STARTED MANUFACTURING HIGHLY TECHNICAL ITEM I.E. POLYESTER ORIENTED YARN AND HIGHLY PAID PROFESSIONALS WERE EN GAGED WHICH RESULTED IN THE INCREASE IN SALES BOTH DURING THE Y EAR UNDER CONSIDERATION AND IN THE SUCCEEDING YEARS. THE CIT (APPEALS) FORWARDED THE NAMES AND ADDRESSES OF THE EMPLOYEES TO THE ASSESSING OFFICER FOR SAMPLE VERIFICATION INCLUDING THE CONFI RMATIONS RECEIVED FROM SOME EMPLOYEES. THE ASSESSING OFFICER IN THE REMAND REPORT CLAIMED THAT LETTERS WERE WRITTEN TO 8 PERSONS ON R ANDOM BASIS OUT OF WHICH FOUR LETTERS WERE RECEIVED BACK AS UNDELIVERE D AND THE BALANCE LETTERS REMAINED UN-COMPLIED WITH. THE ASSESSEE I N REJOINDER POINTED OUT THAT THE CASH PAYMENTS WAS MADE TO CASU AL EMPLOYEES WHO DID NOT HAVE PERMANENT PLACE OF RESIDENCE IN TH E CITY/STATE AND CONSEQUENTLY THE NON-COMPLIANCE BY THE SAID PERSONS . THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THERE WAS JUSTIFICATION IN THE INCREASE IN THE SALARY AND THERE WAS NO MERIT IN ANY DISALLOWAN CE OUT OF THE SALARY EXPENDITURE. THE CIT(APPEALS) VIDE PARA 7 TO 9 HELD AS UNDER : 4 7. I HAVE CONSIDERED THE BASIS OF DISALLOWANCE MADE BY ASSESSING OFFICER ARGUMENTS OF AR ON THE ISSUE THE VERIFICATION REPO RT OF THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS AND THE AR'S REJOINDER ON THE SAME. IT IS APPARENT THAT THE ASSESSING OFFICER HAS ONLY RAISED SUSPICION REGARDING GENUINENESS OF SALARIES DEBITED TO THE TU NE OF RS.23 46 000/- OUT OF A TOTAL SALARY DEBITED TO THE TUNE OF RS.6 78 64 83 7/-. IT IS QUITE APPARENT THAT THERE HAS BEEN A DISPROPORTIONATE INCREASE IN THE SALARIES VIZ-A-VIZ THE TURNOVER WHICH IS MORE APPARENT FROM THE PERUSAL OF THE FOLLOWING CHART: FINANCIAL YEAR SALES SALARY % OF SALARY 2007-08 2454014435 13393531 0.63% 2008-09 5007195161 20760546 0.41% 2009-10 7083127013 67864837 0.96% 2010-11 9388287123 109420402 1.17% 8. THE AR IN THIS REGARD WAS THEREFORE DIRECTED TO JUSTIFY THE DISPROPORTIONATE INCREASE AS NO PRUDENT MANAGEMENT WOULD PERSIST INCURRING CERTAIN EXPENDITURE WITHOUT A CORRESPONDING INCREAS E IN THE REVENUE. IT WAS THEREFORE REQUIRED THAT THERE MUST BE SOME MANAGERI AL JUSTIFICATION FOR INCURRING DISPROPORTIONATE EXPENDITURE UNDER THE HE AD SALARIES. THE AR WITH REFERENCE TO THE SAME SUBMITTED FOLLOWING CHART OF SALARIES DEBITED AND THE TURNOVER IN THE FOLLOWING YEARS : . 9. THE PERUSAL OF THE ABOVE CHART CLEARLY SHOWS THA T THE INCREASE OF EXPENDITURE UNDER THE HEAD SALARIES HAD EVENTUALLY LED TO THE CORRESPONDING DISPROPORTIONATE INCREASE IN THE TURN OVER IN THE LATER YEARS. THEREFORE I AM OF THE VIEW THAT THE MANAGEM ENT WAS JUSTIFIED IN INVESTING INTO THE RECRUITMENT AND RETENTION OF MANPOWER FOR NUMBER OF YEARS SO AS TO ULTIMATELY ACHIEVE THE INT ENDED OBJECTIVE OF INCREASE IN TURNOVER. THIS MEANS THAT THE INCREASE IN EXPENDITURE IN ONE PARTICULAR YEAR CAN NOT BE EXAMINED PROPERLY AN D RATIONALLY IF THE COMPARISON IS LIMITED ONLY TO ONE OR TWO YEARS AS S UCH THE ENTIRE EXPENDITURE UNDER THE HEAD SALARY CAN NOT BE SAID T O BE DISPROPORTIONATE. FURTHER THE ASSESSING OFFICER HA S DISALLOWED THE SALARIES PAID IN CASH AND IGNORED THE FACT HAT THE FULL DETAILS REGARDING THE NAMES AND ADDRESSES OF SUCH EMPLOYEES HAVE BEEN MAINTAINED BY THE ASSESSEE AT THE TIME OF RECRUITMENT SO MUCH SO THE PHOTO ID CARDS HAD FINANCIAL YEAR SALES SALARY % OF SALARY 2007-08 2454014435 13393531 0.63% 2008-09 5007195161 20760546 0.41% 2009-10 7083127013 67864837 0.96% 2010-11 9388287123 109420402 1.17% 2011-12 10263699500 125126692 1.22% 5 ALSO BEEN MADE WHICH HAVE BEEN PRODUCED FOR VERIFIC ATION DURING ASSESSMENT PROCEEDINGS. THE MERE FACT THAT THE EMPL OYEES HAVE LEFT THE JOB WITH THE ASSESSEE COMPANY LATER ON AND ARE NOT AVAILABLE ON THE GIVEN ADDRESSES DOES NOT MAKE THE PAYMENT OF SALARI ES AS UNJUSTIFIED OR NON GENUINE. IT IS ALSO AN IMPORTANT FACT THAT THE PREMISES OF THE ASSESSEE COMPANY AND ITS GROUP CONC ERNS HAD BEEN SEARCHED U/S 132 OF INCOME TAX ACT 1961 AND NO EVID ENCE REGARDING BOGUS DEBITING OF ANY KIND OF EXPENDITURE HAS BEEN BROUGHT ON RECORD. IN THE CIRCUMSTANCES THERE IS NO GROUND TO DOUBT T HE CASH SALARIES PAID BY THE ASSESSEE COMPANY WHICH AMOUNT ONLY TO 3 .46% OF THE TOTAL EXPENDITURE UNDER THIS HEAD. KEEPING INTO VIE W THE ABOVE ED ANALYSIS OF FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION Y THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT(APPEALS). 7. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDER OF THE ASSESSING OFFICER AND THE LD. AR FOR THE ASSESSEE P LACED RELIANCE ON THE ORDER OF THE CIT(APPEALS). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WHERE DURING THE YEAR UNDER CONSIDERATION THE TOTAL SALES OF TH E ASSESSEE HAD INCREASED TO RS. 708.31 CR AS AGAINST RS. 500.72 CR SHOWN IN THE PRECEDING YEAR WE FIND MERIT IN THE CLAIM OF THE A SSESSEE IN RESPECT OF THE INCREASE IN SALARY EXPENDITURE. THE TOTAL SA LARY EXPENDITURE FOR THE YEAR UNDER CONSIDERATION WAS RS. 6.78 CR AS AGA INST RS.2.07 CR. INCURRED DURING THE PRECEDING YEAR. THE JUSTIFICAT ION FOR THE INCREASE IN THE SALARY WAS THE SETTING UP OF ANOTHER UNIT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND ALSO THE INCREASE IN CAPACITY OF EXISTING UNIT PLUS THE EXPENDITURE INCURRED ON HIGH LY QUALIFIED PROFESSIONALS FOR RUNNING THE BUSINESS OF THE ASSES SEE. 9. THE CIT(APPEALS) UNDER PARA 8 HAS TABULATED THE SALES FOR THE FINANCIAL YEAR 2007-08 AND 2011-12 AND THE INCREASE IN THE 6 EXPENDITURE IS JUSTIFIABLE IN VIEW OF THE INCREASE IN THE TURNOVER OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND T HE SUCCEEDING YEAR. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANC ES OF THE CASE WE FIND NO MERIT IN THE OBSERVATIONS OF ASSESSING OFFI CER IN HOLDING THE SALARY EXPENDITURE TO BE DIS-PROPORTIONATE. IN RES PECT OF THE CASH EXPENDITURE UNDER THE HEAD SALARY THE ASSESSEE H AVING MAINTAINED AND FURNISHED COMPLETE INFORMATION IN RESPECT OF TH E SALARY PAID TO VARIOUS CASUAL EMPLOYEES IN CASH WHICH IN TURN IS B ACKED BY THE SALARY REGISTER MAINTAINED BY THE ASSESSEE AND OTHE R RELATED DOCUMENTS THERE IS NO MERIT IN THE DISALLOWANCE OF RS. 23 46 000/-. UPHOLDING THE ORDER OF CIT(APPEALS) WE DISMISS GRO UND NO. 1 RAISED BY THE REVENUE. 10. THE ISSUE IN GROUND NO. 2 RAISED BY THE REVENUE IS AGAINST DELETION OF ADDITION OF RS. 2 00 000/-. THE ASSESS EE HAD INCURRED AN EXPENDITURE OF RS. 10 05 072/- UNDER THE HEAD MISC ELLANEOUS EXPENSES DURING THE YEAR UNDER CONSIDERATION AND T HE ASSESSING OFFICER HAD DISALLOWED RS. 2 00 000/- OUT OF THE SA ID EXPENDITURE AS THE EXPENDITURE INCURRED DURING THE YEAR UNDER CONS IDERATION WAS HIGHER THAN THE EXPENDITURE INCURRED DURING THE PRE CEDING YEAR AT RS. 335 384/-. THE ASSESSEE HAD FURNISHED COMPLETE DET AILS BEFORE THE ASSESSING OFFICER BUT AN ADHOC ADDITION WAS MADE BY THE ASSESSING OFFICER OF RS. 2 00 000/-. THE CIT(APPEALS) ALLOWE D THE CLAIM OF THE ASSESSEE AFTER CONSIDERING THE VERIFICATION REPORT OF THE ASSESSING OFFICER DURING REMAND PROCEEDINGS AND THE REJOINDER OF THE ASSESSEE ON THE SAME AND HELD AS UNDER : 12. I HAVE CONSIDERED THE BASIS OF DISALLOWANCE MA DE BY ASSESSING OFFICER ARGUMENTS OF AR ON THE ISSUE THE VERIFICA TION REPORT OF THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS AND THE AR'S REJOINDER ON THE SAME. IT IS APPARENT THAT THE ASSE SSING OFFICER HAS NOT POINTED OUT ANY UNVOUCHED EXPENDITURE NOR POINT ED OUT ANY DEFECT IN 7 THE SAME APART FROM THE FACT THAT SOME OF THE PAYME NTS HAD BEEN MADE IN CASH. THIS TO MY MIND IS NO GROUND FOR THE DISALL OWANCE TO BE MADE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT CE RTAIN EXPENDITURE WAS INCURRED FOR PURPOSES OTHER THAN BUSINESS AND IT IS APPARENT THAT THE DISALLOWANCE IS PURELY ADHOC. THE ADDITION MADE IS THEREFORE DIRECTED TO BE DELETED. 11. THE LD. DR FOR THE REVENUE HAS FAILED TO CONTRO VERT THE FINDINGS OF THE CIT(APPEALS) AND IN VIEW THEREOF WE FIND NO MERIT IN GROUND NO. 2 RAISED BY THE REVENUE AND THE SAME IS DISMISS ED. 12. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER 2013. SD/- SD/- ( T.R.SOOD) (SUSHMA C HOWLA) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED: 28 TH OCTOBER 2013 POONAM COPY TO: THE APPELLANT THE RESPONDENT THE CIT(A) THE CIT DR ASSISTANT REGISTRAR ITAT CHD.