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Income Tax Appellate Tribunal, [ DELHI BENCH “SMC”: NEW DELHI ]
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
Assessee by : N o n e; Revenue by: Shri R. K. Gupta, Sr. D. R.; Date of Hearing : 12/08/2021 Date of pronouncement : 12/08/2021 O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee against the order passed by ld CIT(A)- XXV, New Delhi dated 30.01.2019 for assessment year 2015-16 wherein, the addition made by the ld AO u/s 40A(ii)(b) of the Act of Rs. 5,04,000/- is confirmed. 2. The assessee raised the following grounds of appeal:- “1. That the honorable CIT (A)-XXV has erred in law and on facts in sustaining the addition of Rs.5,04,000.00 on illegal and untenable grounds and hence, the addition, as such, may be deleted.
2. That the honorable CIT (A)-XXV has erred in law and on facts in sustaining the addition of Rs.5,04,000.00 ignoring the fact that the this is beyond the scope of ground of limited scrutiny. Hence, the addition, as such, may be deleted.
3. That the honorable CIT (A)-XXV has erred in law and on facts in sustaining the addition of Rs.5,04,000.00 made by AO by invoking section 40A(2)(b) on illegal and untenable ground. Hence, the addition, as such, may be deleted.
4. That the appellant craves leave to add, substitute, modify or delete any grounds of appeal on or before the date of hearing and all the above grounds of appeal are independent and without prejudice to each other.”
This is the solitary issue in this appeal. Page | 1
Notice was sent to the assessee, however, none appeared. Similar is the case when earlier also on four occasions despite notice sent to the assessee none appeared and therefore, the issue is decided on the merits of the case as per information available on record.
We have heard the ld DR who relied on the orders of lower authorities. 6. Brief facts of the case shows that the assessee is engaged in the business of trading of wine and liquor. It filed its return of income on 01.10.2015 for Rs. 9,15,350/-. It was revised on 31.10.2015 at Rs. 8,65,150/-. The case of the assessee was selected for scrutiny through CASS for limited scrutiny. 7. During the course of assessment proceedings the ld AO noted that the assessee has paid salary of Rs. 1,26,000/- each to four lady employees as it is aid to related parties u/s 40A(2)(b) of the Act. The ld AO noted that salary has been paid on a fixed rate of Rs. 1,26,000/- p.a. to each to all the four ladies which lacks business expediency, reasonabless and justification. He noted that no salary was paid to these persons in last year. The assessee was asked to file the justification, however, same was not filed consequently, the assessment order was passed u/s 143(3) of the Act, wherein, the above addition/ disallowance was made. 8. The assessee preferred appeal before the ld CIT(A) who confirmed the disallowances holding that the assessee has failed to establish the credential and qualification of persons. Therefore, the assessee is in appeal before us. 9. On careful consideration of the orders of the lower authorities as well as submission made by the assessee before the ld CIT(A) we find that the assessee has paid salary of Rs. 1,26,000/- each per annum to four lady employyes of the company who are related to directors of the company. Ld AO disallowed the above sum. It is not the case of the ld AO that there is no service provided by these four alleged employees of the assessee to assessee company. Further, for invoking section 40A(2)(b) the ld AO is duty bound to form an opinion that expenditure is excessive or unreasonable having regard to the fair market value of the goods/ services or the legitimate need of the business. Thereafter, he has to disallow only such excess amount. In the present case provision of service to the assessee is not challenged by the ld AO, therefore, it is apparent that the ld AO has accepted that these four