ASSISTANT COMMISSIONER OF INCOME TAX, SAGAR vs. SHRI BIRMANAND SUNDRANI, SAGAR

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ITA 61/JAB/2017Status: DisposedITAT Jabalpur16 March 2018AY 2014-153 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the CIT(A), finding no infirmity in the decision to restrict the disallowance. The Assessing Officer had invoked Section 40A(2)(b) without substantiating the unreasonableness of the expenditure.

What were the facts?

The assessee, a railway contractor, claimed salary expenses of Rs. 49,10,000 in its profit and loss account for AY 2014-15. The Assessing Officer disallowed the entire salary under Section 40A(2)(b). The CIT(A) restricted the disallowance to 30% of the salary.

What were the issues?

Whether the CIT(A) erred in restricting the disallowance of salary expenses to 30% without proper analysis of services rendered and the applicability of Section 40A(2)(b).

Which sections of the Income-tax Act were involved?

Section 40A(2)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR

Before: SHRI KUL BHARAT & SHRI MANISH BORAD

Hearing: 14/03/2018Pronounced: 16/03/2018

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ��./ ITA No. 61/Jab/2017 �� � � � � � �  / Assessment Year : 2014-15   Asstt. Commissioner of Shri Birmanand Sundarani, Income-tax, Vs Sindhi Colony, Bina, Sagar (MP) Circle Sagar PAN : ANJPS 0520 P / (Appellant) / (Respondent)         Revenue by : Shri PD Chougule, DR Assessee by : Shri Sanjay Mishra, Adv. $ %&'/Date of Hearing : 14/03/2018 ! "# $ %&' /Date of Pronouncement: 16/03/2018 ()*+ "# .//O R D E R , - PER KUL BHARAT, JUDICIAL MEMBER:- This appeal filed by the Revenue is directed against the order of the learned Commissioner of Income-tax (Appeals)-I, Jabalpur dated 4th September, 2017 pertaining to Assessment Year 2014-15.

2.

Revenue has raised following grounds of appeal:-

“1. Whether on the facts and in the circumstances of the case, Ld. CIT(A) has erred in restricting the disallowance to 30% of salary without appreciating the fact that allowability of salary as on expenses depends entirely on service rendered and not on date of payment.

2.

Whether on the facts of the case, the Ld. CIT(A) has disallowed 30% of salary purely on estimate basis without analyzing as to what services had been rendered by so called employees.

3.

Whether on the facts and in the circumstances of the case, Ld. CIT(A) has erred in restricting the disallowance to 30% of salary ignoring the fact that the allowability of expenses in previous assessment year would not obviate the need to establish the expenditure being wholly and exclusively for the business.

ITA No. 61/Jab/2017 ACIT Vs. Shri Birmanand Sundrani AY : 2014-15

4.

The Ld. CIT(A) has erred in not giving cognizance to the fact that the amount of Rs.49,00,000/- has not been shown as current liabilities in the balance sheet for the year ending 31.03.2014 contrary to the contention of the assessee that the salary was paid in the following years.”

3.

Briefly stated facts of the case are that the assessee is a railway contractor. During the period under consideration, salary for the sum of Rs.49,10,000/- was credited and claimed in profit and loss account. The same salary was duly paid to employees in assessment year 2015-16 by account payee cheque.

3.1 For the year under consideration, the assessee filed return of income on 30.11.2014 declaring total income of Rs.49,75,140/- and the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) was framed vide order dated 29.11.2016. While framing the assessment, the Assessing Officer made addition of the entire salary paid by the assessee by invoking provisions of Section 40A(2)(b) of the Act. Against this addition, the assessee preferred appeal before the learned CIT(A) who, after considering the submissions of the assessee, partly allowed the appeal by allowing 70% of the salary claimed by the assessee.

4.

Learned Departmental Representative vehemently supported the order of the Assessing Officer and submitted that learned CIT(A) was not justified in reducing the addition to 30%. On the other hand, learned Counsel for the assessee supported the order of the learned CIT(A).

5.

We have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. We find that learned CIT(A) has given finding of facts in paragraph 7.1.3 of his

ITA No. 61/Jab/2017 ACIT Vs. Shri Birmanand Sundrani AY : 2014-15

order. These well reasoned finding of facts of ld. CIT(A) have not been controverted by the Revenue by placing any contrary material on record. Moreover, the Assessing Officer has invoked the provisions of Section 40A(2)(b) of the Act without specifying about the reasonability of the expenditure. Under these facts, we do not see any infirmity in the order of the learned CIT(A) which is upheld. The appeal of the Revenue is accordingly dismissed.

6.

In the result, appeal filed by the Revenue is dismissed.

Order pronounced in the Court on 16th March, 2018 at Jabalpur.

Sd/- Sd/-

(MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER Jabalpur; Dated 16/03/ 2018 *Bit 8/Copy of the Order forwarded to : 012 3 4 5 6 7 8 7 9 7: ;<2 7 = 1. >?@ABCD / The Appellant 2. EFGCD / The Respondent. 3. NGQR / Concerned CIT HIJIKLM NG OP 4. TUV) / The CIT(A) GQR( NGO P N S 5. ^a,/ DR, ITAT, Jabalpur KL, [\ KWXBY @G EKMKZ ]^ S TUVU \ S_`] 6. eA / Guard file. YBbc dB n/ BY ORDER, f gh i j kl m j TRUE COPY n (Dy./Asstt.Registrar) p/ o m q j r s pt u v s j g / ITAT, Jabalpur {, f r s n w p v x v r w y z s n w q | gj } j

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