DINESHKUMAR HEMANTKUMAR BOMBAYWALE,PUNE vs. ITO, WARD-2(1), PUNE`

First issue raised in this appeal is against the confirmation of disallowance of unpaid salary amounting to Rs.3,96,000/-.

Facts apropos this issue are that the assessee is engaged in the business of Onion, Potato, Garlic and other agricultural products and also Commission Agent. A sum of Rs.8.77 lakh was debited under the head ‘Salaries and Bonus’. On perusal of details, it was observed that a sum of Rs.1.32 lakh each was paid to Shri Sudhakar B. Jangam, Shri Shantaram Shankar Junghare and Smt. Priya Shah. The Assessing Officer (AO) observed that such sum of Rs.3.96 lakh was shown as payable.

Having heard both the sides and gone through the relevant material on record, it is observed from the explanation tendered before the ld. CIT(A) that the above named 3 employees rendered services not only to the assessee but also to its 3 other related concerns and the salary paid to them was Dineshkumar Hemantkumar Bombaywale divided amongst the 4 concerns. Salary to such employees was withdrawn by them from the other 3 concerns side by side and the amount in question was actually paid through cheque on 02-12-2011. This position has not been controverted by the authorities. Once the assessee tendered an explanation about the non-payment of salary to the above persons for the reasons stated, it was obligatory on the part of the AO to examine such persons and disprove the assessee’s contention before not accepting the same. Here is a case in which the AO has simply brushed aside the assessee’s explanation without examining the persons as to the version give by the assessee before him. Similar position continued during the first appellate proceedings as well. Considering the facts in totality, I am satisfied that the authorities below were not justified in making this addition by disallowing the amount of salary to 3 persons who are unrelated to the assessee and to whom salary has also been paid by the other 3 concerns and more so when the amount in question has also been paid through cheque on 02-12-2011. I, therefore, order to delete the addition. This ground is allowed.

The next ground is against the confirmation of disallowance of certain expenses.

The facts of this ground are that the assessee recorded expenses of Rs.15,72,514/- under the head Business Promotion, Packing expenses, Shop expenses, Travelling Expenses and Car expenses. The AO observed that most of the expenses were covered by self-made vouchers and were not fully supported by external evidence. A major part of the expenses was also found to have been incurred in cash.

Having heard both the sides and gone through the relevant material on record, it is an admitted position that some of the expenses were admittedly not properly backed by evidence. Taking a holistic view of the matter, I am of the considered opinion that it would be just and fair if the disallowance is reduced from 25% to 10% of the expenses. I order accordingly.

The last ground regarding imposition of cost on the Revenue to the tune of Rs.1.00 lakh is unfounded and without any force. The same is, ergo, dismissed.

In the result, the appeal is partly allowed.