M/s Winner Security Services Orissa (P) Ltd, Bhubaneswar v. ITO, Bhubaneswar

ITA 9/CTK/2011 | 1999-2000
Pronouncement Date: 27-01-2011

Appeal Details

RSA Number 922114 RSA 2011
Assessee PAN AAACW3886B
Bench Cuttack
Appeal Number ITA 9/CTK/2011
Duration Of Justice 22 day(s)
Appellant M/s Winner Security Services Orissa (P) Ltd, Bhubaneswar
Respondent ITO, Bhubaneswar
Appeal Type Income Tax Appeal
Pronouncement Date 27-01-2011
Appeal Filed By Assessee
Bench Allotted SMC
Tribunal Order Date 27-01-2011
Assessment Year 1999-2000
Appeal Filed On 05-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (SMC) CUTTACK BENCH CUTTACK () BEFORE . . HONBLE SHRI K.K.GUPTA ACCOUNTANT MEMBER. / I.T.A.NO.009/CTK/2011 / ASSESSMENT YEAR 1999 - 00 M/S.WINNER SECURITY SERVICES (ORISSA) (P) LTD. PLOT NO.722/738 TANKAPANI ROAD BHUBANESWAR 751 014 KHURDA ORISSA PAN: AAACW 3886 B - - - VERSUS - INCOME - TAX OFFICER WARD 1(1) BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI A.K.PADHY AR / FOR THE RESPONDENT: / SHRI S.C.MOHANTY DR / ORDER (SMC) . . SHRI K.K.GUPTA ACCOUNTANT MEMBER . THE ASSESSE IS IN A PPEAL AGITATING THE ACTION OF THE LEARNED CIT(A) CONFIRMING THE DISALLOWANCE OF EXPENSES PAYABLE UNDER THE HEAD SALARY IN VIEW OF OBSERVING THAT THE AUDITORS HAD NOTED ABOUT ADOPTING EXPENSES ON THE BASIS OF CASH SYSTEM OF ACCOUNTING WHEN THE ASSESSEE WA S STATUTORILY REQUIRED TO FOLLOW MERCANTILE SYSTEM OF ACCOUNTING. 2. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENT SUBMITTED THAT FOR THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE FILED RETURN OF LOSS OF 4 45 474 WHEN THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 143(3)/147 DISALLOW ED A SUM OF 7 14 766 BY VERIFYING THE CLAIM OF PAYMENT OF SALARY AMOUNTING TO 45 31 435. HE VERIFIED THAT THE ASSESSEE HAD ACTUALLY MADE PAYMENT OF 38 16 669 ONLY A S THE AUDITORS HAS QUALIF IED THE BALANCE SHEET AND NOTED THAT THE ASSESSEE HAD ADOPTED CASH SYSTEM OF ACCOUNTING FOR EXPENSES IN THE IMPUGNED ACCOUNTING YEAR. AGGRIEVED THE / I.T.A.NO.009/CTK/2011 2 ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHEN THE LEARNED CIT(A) ON THE BASIS OF THE SUBMISSIONS BEFORE HIM HELD THAT THE ASSESSEE HAD INDULGED IN CHANGE IN ACCOUNTING SYSTEM VIS - - VIS IN THE IMMEDIATELY PRECEDING YEAR. IN THE SCHEDULE B RELATING TO CURRENT LIABILITY AND PROVISIONS LIABILITY REGARDING SALARY HAD INCREASED FROM 37 47 770 TO 44 62 535 THEREFORE MISMATCHED THE AUDITORS NOTINGS AND THE ASSESSEES CLAIM OF SALARY HAVING BEEN PAID IN CASH WHETHER COULD BE ACCOUNTED AS PAYABLE IN THE IMPUGNED ASSESSMENT YEAR. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BY FU RNISHING THE AUDITED FINANCIAL STATEMENTS AND NOTES THEREON AND CATEGORICALLY DENIED THAT THE ASSESSEE INVOLVED IN PROVIDING SECURITY SERVICES AND GUARD DUTIES HAD NOT INTENDED TO HOLD BACK THE SALARY WHICH HAD ALREADY BEEN CLAIMED AT 45 31 435.40.HE SUBM ITTED THAT THE FIGURE AS PROPOSED TO BE CONSIDERED TO BE TALLIED HAS BEEN DERIVED FROM THE DIFFERENCE BETWEEN THE SALARY EXPENSES INCURRED IN THE FY 1997 - 98 VIS - - VIS IN THE FY 1998 - 99.HE POINTED OUT THAT BOTH THE AUTHORITIES THEREFORE HAVE MISDIRECTED TH EMSELVES TO BRING TO TAX ON THE AMOUNT WHICH DID NOT MATCH THE CONTENTION OF THE AUDITORS EVEN IF NOT ACCEPTABLE IN THE MERCANTILE SYSTEM OF ACCOUNTING THOUGH CANNOT BE THE CAUSE TO TAX IN THE IMPUGNED ASSESSMENT YEAR. THIS AMOUNT STANDS PAID IN THE YEAR ITSELF AS THE AMOUNT PAID AND CLAIMED IN THE PROFIT & LOSS ACCOUNT AT 45 31 435 IS ON THE CASH SYSTEM THEREFORE THE PROVISIONS OF 44 62 535 WOULD AT BEST RESULT IN DISALLOWANCE OF THE DIFFERENCE BETWEEN THE TWO. HE PRAYED FOR A SUITABLE DIRECTION THEREON. 3. THE LEARNED DR SUBMITTED THAT THE AUDITORS IN THEIR REPORT HA VE OBSERVED THAT ALL THE EXPENDITURES MADE IN CASH HAVE BEEN CHARGED TO THE PROFIT & LOSS ACCOUNT EXCEPT FOR PAYABLE OF AMOUNTS BROUGHT FORWARD FROM THE EARLIER YEAR WHICH LIABILITY HAD BEEN CREATED IN THE EARLIER YEAR. THIS CLEARLY INDICATED THAT THE LIABILI TY HAD INCREASED BY A SUM OF 7 14 766 WHICH / I.T.A.NO.009/CTK/2011 3 THE ASSESSEE COULD NOT EXPLAIN EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE LEARNED CIT(A). THE ASSESSING OFFICER THEREFORE RIGHTLY ASSESSED THE RETURNED LOSS BY ENHANCING THE SAME TO COMPUTE INCOME AT 2 69 296 IN ACCORDANCE WITH THE ASSESSEES OWN CONTENTION. 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON MY CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES I AM INCLINED TO HOLD THAT THE ASSESSEE COULD NOT BE TAXED ON THE BASIS OF AUDITORS NOTINGS THAT THE AMOUNT HAS BEEN CLAIMED ON THE BASIS OF CASH SYSTEM OF ACCOUNTING WITHOUT DISTURBING THE MERCANTILE SYSTEM OF ACCOUNTING. THE NOTINGS ON ACCOUNTS CLEARLY INDICATE THAT IN VIEW OF THE ASSESSEE - COMPANY NOT ABLE TO ENTERTAIN FRESH BUSINESS H AD TO RESORT TO HOLDING BACK THE LIABILITIES WHICH WERE PAYABLE ON THE FIRST DAY OF THE IMPUGNED ASSESSMENT YEAR AND CONTINUED TO PAY SALARY ON CASH BASIS WHEN HAVING CLAIMED 45.31 LAKHS SALARY THE AMOUNT OF 44.62 LAKHS WAS SHOWN PAYABLE. THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS APPROPRIATE IN VIEW OF THE FA C T THAT ON ADOPTING THE CASH SYSTEM THE ASSESSEE HAS CHOSEN TO PAY AND CHOSE ONLY THOSE EMPLOYEES WHO CONTINUED WORKING INCLUDING THOSE WHO ARE ON ITS ROLLS BUT HAD NOT BEEN PAID SALA RY ON 31.3.1998. OBVIOUSLY IT CANNOT BE THAT THE ASSESSEE HAD CLAIMED 45.31 LAKHS BUT STILL HOLDS 44.62 LAKHS AS PAYABLE. NO EMPLOYEE WOULD FUNCTION WITHOUT HAVING BEEN PAID TO RUN THEIR PERSONAL HOUSE - HOLD EXPENSES. HOWEVER 7 LAKHS DIFFERENCE HAS TO B E IDENTIFIED ON THE BASIS OF EITHER WHETHER WAS ADOPTING CASH SYSTEM OF ACCOUNTING I.E. IN THE IMPUGNED ASSESSMENT YEAR OR WHETHER WAS THE LIABILITY ALREADY SHOWN AS ON 31.3.1998 WHETHER HAD BEEN PAID IS TO BE CLARIFIED BY THE ASSESSEE BEFORE THE ASSESS ING OFFICER. FOR THE LIMITED PURPOSE OF THE ASSESSING OFFICER TO BE SATISFIED ON THE PRESUMPTION THAT EXCESS SALARY HAS BEEN PAID IN THE IMPUGNED ASSESSMENT YEAR 7 14 766 THE ISSUE IS RESTORED TO HIS FILE TO / I.T.A.NO.009/CTK/2011 4 OBTAIN THE DETAILS OF EMPLOYEES WHO HAVE BEEN P AID WHETHER PERTAIN TO ASSESSMENT YEAR 1998 - 99 OR WERE ON ROLLS OF ASSESSMENT YEAR 1999 - 00 REMOVE THE PRESUMPTIONS IN THE MIND OF THE ASSESSING OFFICER OF CONVERSION OF CASH SYSTEM OF ACCOUNTING COULD RESULT IN EXCESS CLAIM OF THE SALARY. THE ORDER OF THE LEARNED CIT(A) IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE SAME AS NOTED ABOVE. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUN CED IN OPEN COURT ON DT. 27.01.2011 SD/ - (. . ) (K.K.GUPTA) ACCOUNTANT MEMBER. () DATE: 27.01.2011 - COPY OF THE ORDER FORWARDED TO: 1. / THE APPELLANT : M/S.WINNER SECURITY SERVICES (ORISSA) (P) LTD. P LOT NO.722/738 TANKAPANI ROAD BHUBANESWAR 751 014 KHURDA ORISSA 2 / THE RESPONDENT: INCOME - TAX OFFI CER WARD 1(1) BHUBANESWAR. 3. / THE CIT 4. ()/ THE CIT(A) 5. / DR CUTTACK BENCH 6. GUARD FILE . / TRUE COPY / BY ORDER [ ] SENIOR PRIVATE SECRETARY ( ) (H.K.PADHEE) SENIOR.PRIVATE SECRETARY.