VISHAL NARESH SAINANI,MUMBAI vs. DCIT 20(3), MUMBAI

�ारा / अ�मत श�ला अ�मत श�ला अ�मत श�ला अ�मत श�ला , �या�यक सद�य �या�यक सद�य �या�यक सद�य केकेकेके �ारा �या�यक सद�य �ारा �ारा PER AMIT SHUKLA, J.M.

This appeal was filed belatedly by seven days, hence, barred by limitation. The assessee, in support of application for condonation of delay, has also filed an affidavit stating the reasons for non filing of appeal within the statutory time limit which was due to certain unavoidable reasons. In view of the reasons stated therein, we condone the delay of seven days. We now proceed to dispose off the appeal on merits.

Ground no.1, relates to disallowance of payment of salary made to various employees for sums aggregating to ` 2,31,000.

The assessee is engaged in the business of manufacturing of PVC sheets / films and tubing. The Assessing Officer noted that the assessee has claimed salary expenses of ` 8,78,500, in the Profit & Loss Account, however, no vouchers or any other evidences were produced or furnished in respect of the payment of ` 2,31,000, paid to two employees Ms. Sangeeta and Ms. Priya. He accordingly, disallowed the said payment. The Commissioner (Appeals) too has confirmed the disallowance on the ground that the assessee has failed to furnish any evidence regarding payment of salary made to these two women.

Before us, the learned Counsel for the assessee submitted that even though the assessee could not produce any vouchers for payment of salary, however, these two office staff were there in the earlier years also, wherein the payments have been made to them. He submitted a comparative statement of staff-wise salary paid in the earlier years. Thus, he submitted that if the payment has been made in the earlier years and accepted, the same cannot be disallowed in this year.

On the other hand, the learned Departmental Representative, relying upon the findings of the Commissioner (Appeals), submitted that in the Mr. Vishal Naresh Sainani 3 absence of any evidence, such a claim for the payment of salary cannot be allowed.

After carefully considering the rival contentions and on perusal of the orders of the authorities below and the material available on record, we find that the assessee could not furnish any vouchers for payment of salary, however, it is seen that similar payment on account of salary paid to unrelated female staff have been made in the earlier years also, which have been accepted. Salary paid during the year is also in continuation and, therefore, the same cannot be held to be disallowable. In view of these facts, we set aside the impugned order passed by the Commissioner (Appeals) and hold that the payment of ` 2,31,000, made to the two women staff is an allowable expenditure. Thus, this ground raised by the assessee is allowed.

Ground no.2, relates to disallowance of ` 97,461, under the head “Tempo Charges”.

Learned Counsel for the assessee submitted before us that one Mr. Pandey, is the supervisor of the assessee company who use to arrange tempos from the open market. Therefore, the provisions of section 194C, cannot be made applicable, as he was not a contractor. In support of this, he drew our attention towards the copy of ledger account wherein various petty amounts have been made to different tempos.

On the other hand, the learned Departmental Representative relied upon the findings of the Commissioner (Appeals).

Rival contentions heard. On perusal of the orders of the authorities below and the material available on record, we find that it has not been rebutted that Mr. Pandey, is not a supervisor of the assessee. The payment has been made to various tempo drivers / owners for carrying out materials and mainly the payments have been rooted through Mr. Pandey. A copy of the ledger account shows that there is no mention

Ground no.3, relates to disallowance of 50% of indirect expenses of ` 8,18,480.

The Assessing Officer has made 70% disallowance of the expenses incurred under the head “Indirect Expenses” on the ground that that the assessee has failed to prove that the expenditures claimed are incurred wholly and exclusively for the purpose of business. Accordingly, 70% of the total expenditure of ` 14,82,000, incurred was disallowed. The Commissioner (Appeals) restricted the disallowance to 50% of the total expenditure and, accordingly, a sum of ` 4,07,240, stood disallowed (50% of 8,14,480).

Learned Counsel for the assessee, before us, submitted that in assessment year 2005-06, the Assessing Officer, in the scrutiny proceedings, under section 143(3), has disallowed 10% in similar circumstances and, in any case, disallowance of ` 50% is too high and exclusive.

Learned Departmental Representative, on the other hand, relied upon the order passed by the Commissioner (Appeals).

After carefully considering the rival submissions and the findings given by the Commissioner (Appeals), we find that the assessee could not furnish relevant documents and evidence with regard to indirect expenses. However, we find that similar indirect expenses have been consistently claimed in earlier years. In the assessment year 2005-06, the Assessing