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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI G. D. AGRAWAL & SMT SUCHITRA KAMBLE
ORDER PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order dated 19/11/2013 passed by CIT(A)-XXVIII, New Delhi.
The grounds of appeal are as follows:-
The order of the Learned CIT (Appeal)-XXVIII is bad in law and on the facts of the case. 1.
2. The Learned CIT (A) erred in treating the alleged personal expenses of the partner in the hand of the partnership firm without any evidence.
The learned CIT (A) erred in confirming the following additions made by the Learned
Assessing Authority. a. Marriage Expenses of Partner’s daughter 35,06,000/- b. Alleged Inflated salary 6,25,210/-
The Learned Assessing Officer erred in making addition of estimated marriage expenses of Rs. 35,06,000/- on the basis of rough piece of paper without any supporting evidence.
The learned Assessing Officer erred in not taking into consideration the following sources for marriage expense. a) Payment from personal saving bank A/c 2,18,081/- b) Contribution by Mr. Ram Avtar 5,80,000/- c) Sagan from relatives & Friends 15,10,800/- d) Personal source of Mrs. Mukta Gupta & Vaishali Gupta 1,85,000/- e) Personal saving of Mr. Subhash Gupta 45,000/-
6. The learned CIT(A) has not considered that the following marriage functions were held and the payment were made from personal sources of Mr. Subhash Gupta:- a. Ring Ceremony 1,00,431/- b. Marriage Ceremony 1,17,650/- c. Family relatives & friends for get together 45,000/-
7. The Learned Assessing Authority failed to bring on record any amount of inflated salary. On the contrary higher payment of salary was considered by the learned visiting official again the actual salary paid to employee as per record of the firm.
8. The Learned Assessing Authority did not consider the attendance register of the employee for the purpose of allowing salary expenses. No specific item was pointed out which was not allowable or inflated.
9. The assessee craves leave to add, amend or delete or withdraw any ground of appeal at the time or before the hearing of appeal.
3. Survey under Section 133A of the Income Tax Act, 1961 was carried out in the case of the assessee and a surrender of Rs.85,00,000/- was made in two separate assessment years i.e. Rs. 41,31,210/- in A.Y. 2009-10 and Rs.43,68,790/- in A.Y. 2010-11. In the relevant year the surrender composed of Rs.35,06,000/- as unexplained expenses and Rs.6,25,210/- on account of inflated salary expenses. The Assessing Officer made the addition of the surrendered amount.
4. In the appellate proceedings, the assessee challenged the addition of Rs.35,06,000/- added on account of unexplained marriage expenses on the basis that the Assessing Officer had not considered the following sources for meeting the marriage expenses. i) Payment from persoan bank A/c & Savings.2,18,081/- ii) Contribution by Mr. Ram Avtar 5,80,000/- iii) Shagan From relatives & Friends 15,10,800/- iv) Persona Sources of Mrs. Mukta 1,85,000/- Gupta & Mrs. Vaishali Gupta v) Personal svings of Mr. Subhash Gupta 45,000/- 25,38,881/- The assessee enclosed with his submissions a list of alleged cash and other gifts received at the time of marriage alongwith confirmations of the persons who had allegedly given the gifts. The assessee also filed claim in regard to the personal sources and withdrawals from bank.
To verify the genuineness and authenticity of the claim of the assessee, the assessee was asked to produce the following documents vide order sheet entry dated 09.10.2013.
Bills of the marriage • Photographs of the marriage functions • Video/CD of the marriage functions • List of Guest who attended the marriage ceremony • Bills of marriage ceremony • Details of expenditure incurred on various marriage • ceremonies. Bills of all purchases made for the purpose of gifts to the • bride, bride groom and his family and friends. Number of Invitation Cards sent • Expenditure incurred on stay arrangements for Guests. • Expenditure of gifts given to the daughter. •
In response, the assessee vide letter dated 12th November, 2013 referred to the only two bills already produced as per first bill a payment of Rs. 1,17,650/- made in respect of function held at Faridabad on 17th February, 2009 and as per the second bill Rs.1,00,430/- had been spent on a Lunch on 13th February,2009. Further, the assessee claimed that there was no record of attendance or dispatch of cards and there was no video or CD available. The CIT(A) gave a finding that it was also confirmed that there was no bills regarding expense on purchase of clothes, Jewellery and other ancillary items for the bride, bride groom and other relatives. The CIT(A) further observed that the list of expenses totaling Rs.35,06,000/- also does not contain any expenditure on clothes, jewellery and gifts or any expenditure on catering, tents on the marriage functions. The list only includes expenditure on dry fruits, silver items, quilt, suitcase, electronic items, clothes, and not on jewellery and on reception etc. Besides, the two bills enclosed by the assessee shows that there is gap of 5 days between the function held on 13th and that held on 17th. Thus there were other marriage ceremonies/ functions in the intervening days and from the bills it is apparent that they are not the bills on account of the main marriage ceremony. The claim of the assessee that the expense on marriage is explained as it has been met out of withdrawals and gifts from relatives and friends was not accepted by the CIT(A) as the surrender made by the assessee was clearly over and above the expense which has been met out of allegedly explained sources. The addition of Rs.35,06,000/- was therefore confirmed by the CIT(A).
5. As regards the disallowance of the salary of Rs. 6,25,210/-, the CIT(A) held that during appellate proceedings, in response to a specific query, the assessee produced the copy of attendance register with details of salary paid. The assessee was however, unable to produce the receipts/vouchers showing actual payment of salary, on the plea that the same were misplaced. It was apparent from the facts that the expense on salary has been inflated. The disallowance of salary of Rs.6,25,210/- was confirmed by the CIT(A).
The Ld. AR submitted that the return of the assessment year 2009-10 was filed declaring an income of Rs. 3,08,530/- and the same was subsequently revised to 5,52,580/-. The assessment was made by the Assessing Officer vide order dated 22.12.2011 on an income of Rs. 46,83,790/-. The additions were made on the basis of the statement of Mr. Subhash Gupta who is one of the partners of the firm. The firm was formed vide partnership deed dated 01.04.2005 which was valid w.e.f. 01.04.2005. It constituted Sh. Subhash Gupta, Sh. Ram Avtar Gupta, Smt. Mukta Gupta. There was survey u/s 133A of the Act on 16.11.2009 at business premises namely shop no. 8 DAV School Building, Yusuf Sarai, New Delhi and the statement of Sh. Subhash Gupta, partner of the firm was recorded on oath. The Ld. AR submitted that no addition can be made on the basis of the statement unless the same is supported by any evidence. The Ld. AR relied on the following case laws wherein it was held that the statements given by the assessee on oath during search could not be treated as of evidentiary value in assessment, as the assessee had retraced these statements. The case laws relied upon are as follows: i) CIT V Dr. N. Thippa Setty 525 ITR 322 (Karn) ii) CIT V M/s. Dhingra Metal Works 2010 TIOL 693 HC Del-IT iii) Paul Mathews & Sons V CIT 263 ITR 101 (Ker) iv) Kader Khan 300 ITR 157 (Mad) v) S Arjun Singh V CWT 1989 175 ITR 91 vi) Asst. CIT V Monorajyam 1996 54 TTJ 97 (Coch) vii) Ashok Manilal Thakkar V A. CIT 2005 97 ITD 361(Ahd)
The Ld. AR further submitted that vide instruction no. F. No. 286/2/2003-IT (Inv) dated March 10, 2003; the Board has pointed the instances where the assessee has been forced to confess undisclosed income during the course of search, seizure and survey operation. Such confession, if not based upon credible evidence are later retracted by the concern assessee while filing returns of Income, do not serve any useful purpose and therefore, there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed. No attempt should be made to obtain confession as to the undisclosed income.
As relates to marriage expenses, the Ld. AR submitted that there was marriage ceremony of Ms. Vaishali Gupta D/o Sh. Subhash Gupta during the financial year 2008-09 (A.Y. 2009-10). The Ld. AR submitted that any personal expenditure incurred in the individual capacity cannot be treated as income of the firm on the basis of confessional statement of one of the partner. There was no evidence to prove that the firm paid any amount to Sh. Subhash Gupta out of its undisclosed income. The income has been added on assumption basis. If any income has to be added it should have been taken in the hands of the concerned partner instead of the firm. No evidence / material was found to prove the existence of such income of earnings in the hands of the firm. The Ld. AR relied on the judgment of the Hon’ble Apex Court in case of Girdhari Lal Nannelal Vs. Sales Tax Commissioner, M.P. (1977) 109 ITR 726 (SC) wherein it was held that in the absence of any material, the mere absence of explanation regarding the source of the expenses would not justify the conclusion that the sum in dispute represented profits of the firm derived from undisclosed sales.
The Ld. AR submitted in respect of the disallowance of the salary of Rs. 6,25,210/- that the visiting official did not check the attendance record for verification of employees who have left the job or were on outside duty during the survey. The assessee was not allowed to consult his accountant or check the firm record for verification of salary paid to each employees. In many cases salary expenses claimed by assessee was lower than stated in Sh. Subhash Gupta’s statement. The comparison figure of salary claimed and allowed as per survey reports. No enquiry was made by the visiting officer from the staff present with regard to salaries received by them. No discrepancy was pointed out in the salary expenses claimed by the assessee or the item of any inflated salary. The details of other employees as per question no. 19 were not recorded in the statement of the assessee. The Ld. AR further submitted that the Assessing Officer has disregarded the books of accounts produced by the assessee during the assessment proceedings under Section 143(3) of the Act and other primary record solely on the ground that the assessee has made a confessional statement during the survey proceedings and voluntary payment of tax against the income from undisclosed source surrendered during the survey proceedings. The assessee retracted during the assessment proceedings that the salary was paid to employees who has worked or working with the assessee firm. The copy of the attendance register with details of salary was submitted. The Assessing Officer has not pointed out any payment which is in excess of the actual payment. The retraction of the assessee was bonafide.
The Ld. DR submitted that the CIT(A) has taken all the aspects of the case and the disallowance on unexplained expenses out of firms income of Rs. 35,06,000/- and Inflated salary expense of Rs. 6,25,210/- was just and proper. The Ld. DR also submitted the case laws referred by the Ld. AR are not relevant.
We have heard both the parties and perused relevant documents. The assessee is a partnership firm. The submission of the Ld. AR that any personal expenditure incurred in the individual capacity cannot be treated as income of the firm on the basis of confessional statement of one of the partner. There was no evidence to prove that the firm paid any amount to Sh. Subhash Gupta out of its undisclosed income. The income has been added on assumption basis. If any income has to be added it should have been taken in the hands of the concerned partner instead of the firm. No evidence / material was found to prove the existence of such income of earnings in the hands of the firm except the statement made by the partner Sh. Subhash Gupta. The Ld. AR relied on the judgment of the Hon’ble Apex Court in case of Girdhari Lal Nannelal Vs. Sales Tax Commissioner, M.P. (1977) 109 ITR 726 (SC) wherein it was held that in the absence of any material, the mere absence of explanation regarding the source of the expenses would not justify the conclusion that the sum in dispute represented profits of the firm derived from undisclosed sales. The said case law apply in the present case as the explanation was given by the Assessee during the assessment proceedings but the documents which were shown was not taken congnizance by the Assessing Officer for the expenses incurred. The statement of the partner cannot be the sole criteria for making an addition. Thus the CIT(A) was not right in confirming the addition in the hands of the Assessee firm.
In respect of the disallowance of the salary of Rs. 6,25,210/- the submission of the Ld. AR that no enquiry was made by the visiting officer from the staff present with regard to salaries received by them. No discrepancy was pointed out in the salary expenses claimed by the assessee or the item of any inflated salary. The Assessing Officer has disregarded the books of accounts produced by the assessee during the assessment proceedings under Section 143(3) of the Act and other primary record solely on the ground that the assessee has made a confessional statement during the survey proceedings and voluntary payment of tax against the income from undisclosed source surrendered during the survey proceedings. The copy of the attendance register with details of salary was submitted during the assessment proceedings. The Assessing Officer has not pointed out any payment which is in excess of the actual payment in the assessment order. Thus the relevant material to establish the genuineness of the assessee firm was established which was overlooked by the CIT(A) as well as by the Assessing Officer.
In result, the appeal of the assessee is allowed.
The order is pronounced in the open court 20th of October, 2016.