SANDEEP SHUKLA,MUMBAI vs. ITO , WARD- 2 (4), MUMBAI

These appeals are filed by the assessee against different orders of Learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter for short "Ld. CIT(A)] dated 28.06.2022 and 20.07.2022 for the A.Y.2013-14 and 2014-15 respectively.

Briefly stated the facts are, assessee an individual engaged in the business of Contractor-Toll Plaza and Vehicle parking, filed return of income on 28.09.2013 declaring income of ₹.31,62,590 for the A.Y.2013-14 and the return was processed u/s. 143(1) of the Act. The case was selected for scrutiny under CASS and notice u/s. 143(2) and 142(1) of Income-tax Act, 1961 (in short “Act”) were issued and served on the assessee. In response AR of the assessee attended and submitted the relevant information as called for.

During the assessment proceedings, Assessing Officer noticed from the Profit & Loss A/c., that assessee has claimed expenses under the head "Salary & Wages" at ₹.3,61,36,485/-. Assessee was asked to furnish details in support of these expenses such as name & addresses of the persons to whom salary was paid and also furnish Salary/Wages register and further asked to furnish the breakup of salary and wages. In response Assessee filed payment voucher under the head "Salary & Wages" for the 3 ITA.NOs. 2063 & 2064/MUM/2022 Sandeep Shukla whole year paid in cash, amounting to ₹.3,61,36,485/- and filed a summary of month wise Salary & Wages from April, 2012 to March, 2013 totaling to ₹.3,61,36,485/-.

Assessing Officer noticed that a survey u/s.133A of the I.T. Act, 1961 was carried out at the business premises of the assessee and his family member's proprietorship concerns on 19/03/2015. During the course of survey action, details in respect of month wise expenses of toll Naka and vehicle parking managed by the assessee during the current F.Y. 2014-15 were found. It is noticed that the family members including the assessee were engaged in the business of Toll plaza and vehicle parking, receives details of monthly expenses from all the Toll Naka and parking which comprises expenses such as Salary & Wages, Stationery items, Staff Welfare, Conveyance, Petrol & Diesel, Kirana items, Tea, Milk, Water, Nasta for staff, Mobile recharges, Room rent, Medical expenses, Paper roll etc. For the F.Y. 2014-15, the assessee maintains toll Nakas and vehicle parkings spread across the state of Gujrat and Haryana. During the course of survey action, it is noticed in the case of M/s S.S.Enterprises, a proprietorship concern run by his father that the total receipt for the F.Y.2014-15 is around ₹.300 crores. The approximate expenses for the F.Y. 2014-15 in respect of all the toll Nakas and Car Parking run by 4 ITA.NOs. 2063 & 2064/MUM/2022 Sandeep Shukla M/s.S.S. Enterprises are not more than ₹.10 crores which comprises Salary & wages, Stationery items, Staff welfare, Conveyance, Petrol & diesel, Kirana items, Tea, Milk, Water milk, Nasta for staff, Mobile recharges, Room rent, Medical expenses, Paper roll etc. It is noticed that in assessee's case also, there is huge inflation of expenses claimed in respect of various Toll nakas and vehicle parking run by the assessee. During the course of survey action, the books of accounts of the assessee were not found at the business premises of the assessee and therefore, Manager Accounts Shri Rajesh Nagar was asked to produce books of accounts if the same are lying at a place other than the business premises covered during survey action. In the statement recorded during Survey action, Shri Rajesh Nagar, Manager Accounts of the assessee, has stated that the books of accounts are not maintained for Financial Year 2014-15 and it is noticed that assessee has not maintained the Books of Accounts for the Financial Year 2014-15.

Assessing Officer opined that during the assessment proceedings, the Authorized Representative of the assessee failed to furnish any corroborative contemporaneous documentary evidences in support of his claim to have actually incurred expenses under the head "Salary & Wages at ₹.3,61,36,485/- and therefore, the same are not verifiable. The nature

Further, Assessing Officer vide letter dated 09.03.2016 asked to show cause as to why disallowance out of Salary & wages expenses to the extent of Rs. 2,16,81,891/- (60% of total Salary & Wages i.e. 60% of Rs. 3,61,36,485/-). In response to the same the assessee vide his letter dated 26.03.2016 submitted as under: - "Our business operations continue to be identical as in the earlier years. The daily collection continues to be derived in cash, being Licensed Contractor of Toll Plaza Collection & Managing Parking Sites at various places all over the Country Since the Toll Plazas / Parking sites are in interiors/ rural areas it is very difficult to enter transactions through banks as a routine. Due to the work necessitates the expenses are to be defrayed by us in Cash. The expenses which includes Local Conveyance to and fro visit to Bank and/ or concerned local authorities, Vehicle expenses (used for Patrolling at certain sites, Telephone expenses (recharging) for daily updates and reports, Milk, Tea & Coffee expenses, Kirana items, room rents, uniforms for employees debited under the ledger head Sundry expenses. The Assessee is in the business of Toll Plaza's which are located at remote geographical areas. Since various Toll sites which are 30 to 60 km far from the city/town so have to be provided to the employee

Not convinced with the submissions of the assessee, Assessing Officer proceeded to complete the assessment by disallowing Salary & Wages expenses of ₹.2,16,81,891 (60% of total salary & wages i.e. 60% of ₹.3,61,36,485/-) and further disallowed 50% of the expenses relating to Conveyance ₹.8,81,463/-, Sundry Expenses ₹.22,34,856/-, Staff Welfare ₹.6,32,417/-, Repair & Maintenance ₹.32,21,023/-, Printing & Stationery ₹.38,52,419/-, which comes to ₹.54,11,089/-.

Aggrieved, assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) after considering the evidences and submissions of the assessee restricted the addition to 10% of “Salary and wages expenses” and other various expenses.

Aggrieved, assessee filed an appeal before ITAT raising following grounds in its appeal: - “1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred confirming the addition made by Ld. A.O. of Rs. 36,13,648/- on account of adhoc expenses i.e. 10% of Expenses.

Ld. DR relied on the orders of the Authorities below.

Considered the rival submissions and material placed on record. It is observed in assessee’s sister concern case in ITA.No. 5592 & 5593/Mum/2018 dated 02.05.2019 in which the Coordinate Bench held as under: -

Now in this regard assessee is in appeal before us that the addition of estimate of profit made by the Ld. CIT(A) is on higher side and Revenue has also filed appeal against the Ld. CIT(A)'s order.

Upon careful consideration we note that the facts and circumstances of the average profit of the assessee for the period A.Y. 2009-10 to 2013-14 is as under: A.Y. Profit % 2009-10 1.78 2010-11 1.71 2011-12 2.53 2012-13 2.18 2013-14 1.90 The average of the profit of other two units in the same industry are 1.86% and 3.7% respectively. In these circumstances in our opinion the estimate of profit at the rate of 3% offered by the assessee before Ld. CIT(A) served the interest of justice. We also note that rate of profit is a matter of fact and it has been so admitted by the assessee before Ld. CIT(A). We direct accordingly."

Respectfully following the above decision and considering the similar facts on record, we are inclined to accept the fact that the profit is around 3%. However, the whole expenses including the salary and wages were incurred only in cash, it is difficult to cross verify the same. considering the overall facts on record we deem it fit to direct Assessing Officer to disallow 5% of the expenses as reasonable. Therefore, the appeal filed by the assessee is partly allowed.

In the result, appeals filed by the assessee are partly allowed.