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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT
Date of hearing 03.09.2019 Date of pronouncement 30.10.2019 ORDER PER O.P. KANT, AM:
This appeal by the assessee is directed against order dated 25/11/2016 by the Ld. Commissioner of Income-tax (Appeals)-7, New Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2011-12 raising following grounds:
1. That the impugned order dated 25.11.2016 passed by the CIT(A) is bad in law and wrong on facts. 2.1 That CIT(A) erred both on facts and in law in disallowing a sum of Rs.5,76,286/- for non-submission of documents and non-deduction of TDS on reimbursements made to Dr. Rajen Ghadiok and Ms.Rachna Kamra on account of Petrol, Drivers’ Salary and Mobile Expenses. 2.2 That CIT(A) erred both on facts and in law in disallowing a sum of Rs. 11,52,572/- for non-submission . of documents and non- deduction of TDS on reimbursements made to four other employees on account of Petrol, Drivers’ Salary and Mobile Expenses.
3. That CIT(A) has erred both on facts and in law in disallowing the aforesaid amount without considering the fact that no TDS is deductible on the aforesaid reimbursements made to the employees.
4. The appellant reserves to itself, the right to add, alter, amend, substitute, withdraw and/or any Ground(s) of Appeal at or before the date of hearing.
2. Briefly stated facts of the case are that the assessee company was engaged in the business of providing consultancy in the medical field. The assessee filed return of income for the year under consideration on 30/09/2011, declaring loss of ₹ 3,12,06,323/- which was further revised on 06/11/2012 due to inadvertent claim of excess TDS. The case was selected for scrutiny and assessment under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) was completed on 13/03/2014 at assessed loss of ₹ 2,24,69,930/- after making addition of ₹ 75,83,824/- and ₹ 11,52,572/-. The addition of ₹ 75,83,824/-was made on account of excessive claim of the salary in the name of Dr. Rajen Ghadiok and Ms. Rachna Karma. Addition of ₹ 11,52,572/-was made for non-deduction of tax at source on the difference of amount in salary debited in profit and loss account and salary amount appearing in form No. 16 in case of the four persons. On further appeal, before the learned CIT(A), the assessee filed form No. 16A in respect of Dr Rajen Ghadiok and Ms. Rachna Karma, as additional evidences. The Ld. CIT(A) found that in the case of Dr Rajen Ghadiok salary was debited off Rs.63,09,463/- in profit and loss account, but gross amount of salary of ₹ 60,21,320/- was only appearing in form No.16A. Similarly, in the case of Ms. Rachna Kamra salary of ₹ 12,74,361/- was debited in the profit and loss account, whereas in form No. 16A, gross salary of ₹ 9,86,218/- was only shown. Thus, according to the Ld. CIT(A), difference of ₹ 2,88,143/- was found in salary claimed in books of account and salary shown in Form No. 16A in case of both the employees. The assessee explained that the amount of ₹ 2,88,143/- was reimbursed to the employees towards driver salary, petrol expenses and mobile expenses, on which no tax was deductible at source, and therefore, same did not appear in form No. 16A issued to the employees. 2.1 The Ld. CIT(A) found that amount of reimbursement of ₹ 2,88,143/- claimed for expenses was fixed in case of all employees, despite differential payment under different heads during the year. The learned CIT(A) further observed that only ledger accounts of drivers salary, petrol and mobile reimbursement were filed and no evidence by way of vouchers submitted by the concerned employees, evidencing payments to claim the alleged reimbursement, was furnished. According to the Ld. CIT(A), the alleged reimbursement was nothing but a fixed amount being paid in cash to the employees, which being in the nature of the salary/fixed allowance, on which TDS was deductible. In view of absence of any documentation to support the alleged reimbursement, the Ld. CIT(A) sustained that amount of ₹ 2,88,143/- for both the employees, namely, Dr. Rajen Ghadiok and Ms. Rachna Kamra, totalling to Rs. 5,76,286/-. In respect of balance amount out of ₹ 75,83,824/-, relief was also allowed subject to verification of the TDS in the government account.
2.2 The disallowance of ₹ 11,52,572/- on account of non- deduction of TDS in case of other four employees was also sustained in view of no documentation in support of the alleged reimbursement of ₹ 2,88,143/- to each of the four employees. 2.3 Aggrieved with the disallowance of ₹ 5,76,286/- in the case of two employees, namely, Dr. Rajen Ghadiok and Ms. Rachna Kamra and disallowance of ₹ 11,52,572/- in case of four employees sustained by the Ld. CIT(A), the assessee is in appeal before the Tribunal, raising the grounds as the reproduced above.
We have heard the rival submission of the parties on the issue in dispute in the light of the order of the lower authorities and paper book containing pages 1 to 26 filed by the assessee and other material available on record.
In the grounds raised by the assessee, the first issue relates to nature of the amount of ₹ 2,88,143/- paid to two employees, namely, Dr Rajen Ghadiok and and Ms. Rachna Kamra and amount of ₹ 2,88,143/- paid to other four employees namely Sh. JS Puri, Jasbir Grewal, Sh. Sanjeev Vashisht and Sh. Harshvendra Sain. According to the assessee, the payments are in the nature of reimbursement of drivers salary, petrol and mobile expenses, which have been paid in cash monthly along with the salary. But on being asked by the lower authorities, the assessee failed to produce any documentary evidence to substantiate that those employees incurred those expenses and claimed the reinvestment from the assessee. In absence of any such documentary evidences, the learned CIT(A) has held the amoount debited in the profit and loss account of ₹ 2,88,143/- to each of the six employees as in the nature of the salary/fixed allowance on which TDS was deductible, and in view of the failure on the part of the assessee to deduct TDS, he sustained the disallowance. The relevant part of his finding in case of disallowance of ₹ 11,52,572/- is reproduced as under: “4.2. The AO noted that there was a difference in the salary claimed in the P & L A/c and as per Form No. 16 issued to four employees. He accordingly, treated the difference of Rs.11,52,572/- on which TDS was not deducted and also since no documentary evidence with reference to the difference in the two amounts was furnished as not allowable and accordingly made the impugned disallowance. The Ld. AR stated that the difference amount pertains to reimbursement viz. driver’s salary, petrol and mobile reimbursement paid to employees. Since these reimbursements were not taxable, TDS was not deducted and therefore, did not appear in the form No. 16 issued to the employees. It is noted that the alleged reimbursements in the all the cases is always Rs.2,88,143/- despite differentia payment under different heads during the year, the only evidence filed are ledger accounts of driver’s salary, petrol and mobile reimbursements. No evidence by way of vouchers submitted by the employees evidencing payments to claim the alleged reimbursements is furnished. It is also not understood as to how with respect to all employees, the reimbursement amount is a fixed figure of Rs.2,88,143/-. It is quite evident that cash is being disbursed to the concerned employees in the guise of reimbursement so as to avoid deduction of tax on this cash component of salary. It is also noted that the alleged reimbursement is not with reference to the amount of salary claimed in the P & L A/c. In the light of these facts, it is held that the so called reimbursement is nothing but a fixed amount being paid in cash to the employees and is clearly in the nature of salary/fixed allowance on which TDS was deductible. In view of these facts and in the absence of any documentation to support the alleged reimbursement, the disallowance of Rs.11,52,572/- made by the AO is in order and is sustained. This ground of appeal is ruled against the appellant.”v
5. In respect of the disallowance of alleged reimbursement to two employees, namely, Dr. Rajen Ghadiok and Ms. Rachana Kamra also, he sustained the disallowance on similar grounds.
We find that the learned CIT(A) has sustained the disallowance mainly on the ground of non-production of details of evidences, therefore, to support its ground of appeal
, the onus was on to the assessee to produce those relevant documents before the Tribunal. Before us, the Ld. counsel of the assessee did not produce any such vouchers of incurring expenses by those employees and claimed as reimbursement. In absence of any documentary evidences of incurring of expenditure by the concerned employees, the issue, whether the amounts are reimbursement to the employees, cannot be examined. Moreover, being the identical amount to all the employees, the payments appear in the nature of allowance rather than reimbursement of actual expenses incurred on behalf of the assessee.
7. In such circumstances, we do not find any error in the order of the learned CIT(A) on the issue in dispute and accordingly, we uphold the disallowance sustained by the learned CIT(A). The grounds of the appeal of the assessee are accordingly dismissed.
8. In the result, the appeal of the assessee is dismissed. Order is pronounced in the open court on 30TH October, 2019. Sd/- Sd/- (H.S. SIDHU) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 31st October, 2019. RK/-(D.T.D.) Copy forwarded to:
1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR