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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI C.N. PRASAD & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-3, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) the Income Tax Act 1961, (the ‘Act’).
Though the case was fixed for hearing on 06.02.2020, 06.03.2020, 13.03.2020 and 06.01.2021, neither the assessee nor his authorized representative appeared before the Tribunal on the above dates. Therefore, considering the non-compliance by the assessee, we are proceeding to 2 Rohidas Hari Jathar dispose off this appeal after examining the materials available on record and after hearing the Ld. Departmental Representative (DR).
Briefly stated, the facts of the case are that the assessee filed his return of income for the assessment year (AY) 2010-11 on 22.09.2011 declaring total income of Rs.3,42,810/-. During the course of assessment proceedings, it is observed by the Assessing Officer (AO) that the assessee has debited Rs.3,45,190/- as incentive payment, Rs.2,56,910/- as salary payment and Rs.19,215/- as staff welfare expenses. Stating that against the gross commission receipts of Rs.10,54,139/-, the above expenses were quite high, he asked the assessee to produce the employees for examination and file confirmation. In response to it, the assessee produced Shri Sagar Bhogte to whom he had paid salary of Rs.41,600/- and incentive of Rs.62,376/-. The assessee also produced Shri Abhimanyu Singh to whom he had paid salary of Rs.40,600/- and incentive of Rs.16,520/-. In respect of other four employees the assessee expressed his inability to produce them. The AO has further observed that the assessee could substantiate the claim of salary to the tune of Rs.82,200/- and incentive payment of Rs.1,24,896/- only. Therefore, he treated the balance of salary to the tune of Rs.1,74,710/- and incentive payment of Rs.2,20,294/- as fictitious expenses. Thus he made a disallowance of the above which comes to Rs.3,94,004/-.
Further noting that the assessee has debited Rs.19,215/- as staff welfare expenses which he failed to substantiate with documentary evidence, the AO made an addition of the above amount.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) vide order dated 01.11.2018 dismissed the appeal by agreeing with the findings of the AO.
3 Rohidas Hari Jathar 4. The Ld. DR submits that the order passed by the AO is based on facts and therefore, the order of the Ld. CIT(A) be affirmed.
We have heard the Ld. DR and perused the relevant materials on record. The nature of business of the assessee is insurance commission. During the course of assessment proceedings, the AO had issued a show cause notice dated 14.02.2013 to the assessee to explain the following :
“2. During the course of assessment proceedings you were requested so submit confirmations of incentive payment and salary payment along-with the work attended by the various employees/sub agents on various occasions. However, it has been observed that you have not substantiated your claim of incentive payment and salary payment with documentary evidences. You are hereby requested to show cause as to why the incentive payment of Rs.3,45,190/- and salary payment of Rs. 2,56,910/- should not be disallowed and added to your total income. Similarly, staff welfare expenses of Rs.19,215/- should not be disallowed and added to your total income.
3 your reply, if any, should reach on or before 25/02/2013 with supporting evidences, which is the last and final date hearing in your case. Failure on your part may constrain the undersigned to presume that you have nothing to say and you do not have any objections to the proposed line of action.”
In response to the above show cause notice, the assessee could produce Shri Sagar Bhogte to whom he had paid salary of Rs.41,600/- and incentive of Rs.62,376/-. The assessee could also produce Shri Abhinanyu Singh to whom he had paid salary of Rs.40,600/- and incentive of Rs.62,520/-. In respect of the four employees, the assessee failed to produce them before the AO for examination. It is also found from the materials available on record that the assessee failed to file confirmation in the shape of supporting evidence in respect of the remaining four
4 Rohidas Hari Jathar employees. Considering the above facts, the disallowance of Rs.3,95,004/- made by the AO is affirmed.
However, the disallowance of Rs.19,215/- made by the AO in respect of staff welfare expenses is deleted on the ground that the details as called for vide questionnaire issued along with notice u/s 142(1) dated 01.10.2012 were filed by the assessee as mentioned at para 2 of the assessment order dated 01.03.2013.
In the result, the appeal is partly allowed.
Order pronounced in the open Court on 11/01/2021.