CIT, FARIDABAD vs. K.L. TANEJA, PROP. PROMPT SECURITY SERVICES, FARID

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ITA/14/2009HC Punjab & HaryanaPHHC01084215200909 January 2014Author: MR. JUSTICE SURINDER GUPTA,MR. JUSTICE RAJAN GUPTA5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court found that the CIT(A) had only discussed selected pages of the wage registers and not the entire material produced. It was also undisputed that the entire material was not examined. Therefore, setting aside the orders of the CIT(A) and the Tribunal, the matter was remanded to the Assessing Officer to pass a fresh order after examining the material produced before the CIT(A) and any other relevant material that the assessee might now produce. Regarding Question 2, in light of the decision in CIT v. Vinay Cement Limited, no addition could be made on account of delayed deposit of ESI and PF, as they were deposited before the due date of filing the return under Section 139(1). Consequently, no penalty under Section 271(1)(c) would be leviable on this ground. However, concerning the penalty for unsubstantiated wages, it was left open for the Assessing Officer to pass a fresh order after finalising the assessment proceedings on remand. The appeals were disposed of accordingly.

What were the facts?

The Revenue appealed under Section 260A of the Income Tax Act, 1961, against the Income Tax Appellate Tribunal's (Tribunal) order dated June 20, 2008, concerning assessment year 2003-04. The assessee, Shri K.L. Taneja, proprietor of Prompt Security Services, had his assessment completed under Section 143(3) at an income of ₹1,56,23,400/-, with additions for bogus wages, excess wages, late deposit of ESI and PF, and difference in total receipts. The Commissioner of Income Tax (Appeals) [CIT(A)] partly allowed the assessee's appeal. The Tribunal dismissed the Revenue's appeal. The appeals also concern penalty proceedings arising from the assessment. The Revenue's primary contention is that the CIT(A) and Tribunal failed to properly consider evidence regarding bogus wages and late deposit of ESI/PF.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in confirming the order of the CIT(A) in deleting the addition of ₹87,33,300/- made on account of bogus wages, even though the assessee failed to reconcile the figures or provide evidence of genuineness despite opportunities, and the Assessing Officer relied on evidence from ESI and PF authorities without making an estimation? (Question of law and fact, concerning Section 143(3) and Section 144 of the Act). 2. Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in confirming the order of the CIT(A) in deleting the addition of ₹3,00,138/- made on account of employer's contribution to ESI and PF, even though the same was not deposited by the due date? (Question of law and fact, concerning Section 143(3) and Section 271(1)(c) of the Act). Assessee's arguments: The assessee did not dispute that the CIT(A) and Tribunal had not referred to and discussed the entire record produced as additional evidence. The assessee did not oppose the prayer for remand but requested permission to produce further material. Regarding penalty proceedings (ITA Nos. 311 and 366 of 2010), the assessee argued that no penalty was leviable for ESI and PF disallowance, as the issue was concluded in their favour by the Supreme Court in CIT v. Vinay Cement Limited. Revenue's arguments: The Assessing Officer framed the assessment under Section 144 due to the assessee's failure to produce records. The CIT(A) allowed an application under Rule 46A, where the assessee produced material. However, the CIT(A) failed to consider the entire material, referring only to specific pages of wage registers. The Tribunal affirmed this without discussing the material. The Revenue argued for setting aside the orders and remanding to the Assessing Officer for a fresh examination of the Rule 46A material. For Question 2, the Revenue conceded it was concluded by the Apex Court's decision in CIT v. Vinay Cement Limited. For penalty, the Revenue argued for remand to the Assessing Officer for an order after reframed assessment.

Which sections of the Income-tax Act were involved?

Section 260A,Section 143(3),Section 144,Section 46A,Section 139(1),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision:09.1.2014 Commissioner of Income Tax, Faridabad ...Appellant Versus Shri K.L.Taneja, Prop. Prompt Security Services, 457, Sector 8, Faridabad.

...Respondent CORAM: HON'BLE MR.JUSTICE AJAY KUMAR MITTAL HON'BLE MS. JUSTICE ANITA CHAUDHRY Present: Mr. Tajinder K.Joshi, Advocate for the appellant. Mr. Sanjay Bansal, Sr. Advocate with Mr. Vijay Gupta, Advocate, for the respondent. Ajay Kumar Mittal,J.

1.

This order shall dispose of ITA Nos.14 of 2009, 311 and 366 of 2010 as the order in all the three appeals relates to assessment year 2003-04. ITA No.14 of 2009 relates to assessment proceedings whereas ITA Nos.311 and 366 of 2010 arise from penalty proceedings. However, the facts are being extracted from ITA No.14 of 2009. 2. ITA No.14 of 2009 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 20.6.2008, Annexure 3 passed by the Income Tax Appellate Tribunal, Delhi Bench 'G' New Delhi (in short, “the Tr4ibunal”) in ITA No.2471/Del/2007 for the assessment year 2003- Singh Gurbax 2014.03.18 17:09 integrity of this document High Court Chandigarh 04, claiming following substantial questions of law:- “A. Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in confirming the order of the CIT(A) in deleting the addition of ` 87,33,300/- made on account of bogus wages even though the assessee failed to reconcile the figures of wages nor filed evidence for the genuineness of the payment of wages despite sufficient opportunities provided to him during assessment proceedings and Assessing Officer has relied upon the evidence gathered from ESI and PF authorities and no estimation has been made? B. Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in confirming the order of the CIT(A) in deleting the addition of ` 3,00,138/- made on account of employer's contribution to ESI and PF even though the same has not been deposited by the due date?

3.

Briefly, the relevant facts as available on record are that the assessee is proprietor of the concern under the name and style of M/s Prompt Security Services, 457, Sector 8, Faridabad. It deals in supply of security and other personnel to different companies in and around Faridabad. It filed its income tax return declaring an income of ` 3,78,262/- on 1.12.2003. The assessment was completed under Section 143(3) of the Act on 24.2.2006 at an income of `1,56,23,400/- by making certain additions to the income on account of bogus wages, excess wages, late deposit of ESI and PF and difference in total receipt shown. Aggrieved by the order, the assessee preferred appeal before the Commissioner of Income Tax (Appeals) Singh Gurbax 2014.03.18 17:09 integrity of this document High Court Chandigarh [(CIT(A)]. Vide order dated 15.3.2007, Annexure 2, the CIT(A) partly allowed the appeal. Not satisfied with the order, the revenue filed appeal before the Tribunal. Vide order dated 20.6.2008, Annexure 3, the Tribunal dismissed the appeal of the revenue. The levy of penalty was also held to be unsustainable. Hence the present appeals by the revenue.

4.

We have heard learned counsel for the parties and perused the record.

5.

Learned counsel for the revenue submitted that the Assessing officer had framed the assessment under Section 144 of the Act as the assessee had failed to produce any record for finalisation of the assessment proceedings. However, on appeal by the assessee, the CIT(A) had allowed the application filed by the assessee under Rule 46A of the Income Tax Rules, 1962 (in short, “the Rules”) whereupon the assessee had produced the material. The CIT(A) while accepting the appeal, however, had failed to consider the entire material. According to the learned counsel, the CIT(A) had noticed that the details of wages paid to each employee were contained in Pages 1-308 of the additional evidence but while considering the validity of the entries therein, reference was made to certain pages like Pages No. 1, 30, 32, 44, 49 and 59 only as is discernible from the order of the CIT(A). The aforesaid order was affirmed without discussing any material by the Tribunal on appeal of the revenue. It was urged that in such circumstances, it would be appropriate that the orders of the CIT(A) as well as the Tribunal are Singh Gurbax 2014.03.18 17:09 integrity of this document High Court Chandigarh set aside and the matter is remanded to the Assessing Officer to pass a fresh order after examining the material which was produced under Rule 46A of the Rules. So far as Question No.2 is concerned, it was not disputed that the same stands concluded by the decision of the Apex court in CIT v. Vinay Cement Limited, (2007) 213 CTR 268. It was also urged that as regards the penalty which was set aside by the Tribunal, the matter requires to be remanded to the Assessing Officer to pass an order after finalisation of the assessment to be reframed on remand by this Court.

6.

Learned counsel for the assessee did not dispute that the CIT(A) and the Tribunal had not referred to and discussed the entire record which was produced by way of additional evidence before CIT (A). He did not oppose the prayer for remand of the case to the Assessing Officer, but urged that the assessee be allowed to produce any other material which is available with him but could not be produced earlier. However, it was submitted that in so far as ITA Nos.311 and 366 of 2010 are concerned, they relate to penalty proceedings which had primarily been levied on account of disallowance of contribution to ESI and PF. Since the issue is concluded in favour of the assessee in Vinay Cement Limited's case (supra), no penalty was thus leviable.

7.

After hearing learned counsel for the parties, we find that the CIT(A) had only discussed with regard to selected pages 1, 30, 32, 44, 49 and 59 only and had not referred to the entire material produced before him. Further, it was not disputed that before the CIT Singh Gurbax 2014.03.18 17:09 integrity of this document High Court Chandigarh (A), it was only some wages registers which were produced and the entire material was not examined. In such circumstances, it would be appropriate that after setting aside the orders of the CIT(A) and the Tribunal, since the assessee had produced the material before the CIT (A) and assessment was framed under Section 144 of the Act, the matter is remanded to the Assessing Officer to pass fresh order after examining the material produced by the assessee or any other relevant material which is available and now produced by him before the Assessing Officer. Ordered accordingly. In so far as question No.2 is concerned, in view of the decision in Vinay Cement Limited's case (supra), no addition could be made on account of delay in making the contribution of ESI and PF as the same was deposited before the filing of the return under Section 139(1) and therefore equally it will not be a case of levy of penalty under Section 271(1)(c) of the Act. However, as regards levy of penalty on account of unsubstantiated amount of wages paid is concerned, it shall be open for the Assessing Officer to pass fresh order after finalisation of the assessment proceedings in accordance with law.

8.

The appeals stand disposed of accordingly. (Ajay Kumar Mittal) Judge January 09, 2014 (Anita Chaudhry) 'gs' Judge Singh Gurbax 2014.03.18 17:09 integrity of this document High Court Chandigarh

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