What did the Tribunal hold?

The Tribunal acknowledged that the assessee did employ people and paid salaries, but the quantum required verification. Therefore, the issue was remitted back to the AO for examination of the details to be provided by the assessee.

The assessee-firm claimed salary and bonus paid to employees, but failed to provide supporting evidence to the Assessing Officer (AO) and CIT(A). The AO disallowed the expenditure, and the CIT(A) confirmed the addition.

What were the issues?

Whether the disallowance of salary and bonus paid to employees is justified when the assessee fails to provide supporting evidence to the tax authorities.

Sri Agency vs DCIT | ITAT Bangalore 2015

Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE

Before: SHRI PRAMOD KUMAR & SMT. P. MADHAVI DEVI

For Appellant: Shri Narayan Hatwar, CA

For Respondent: Shri P.Dhivahar, JCIT(DR)

Hearing: 16/04/2015Pronounced: 11/06/2015

This appeal by the assessee is directed against the order of the CIT(A)-VI, Bangalore, dated 26/03/2014 for the assessment year 2009-10. The assessee is aggrieved by the order of the CIT(A) in confirming the disallowance of salary paid by the assessee-firm to its employees for the services rendered by such employees and also in not allowing bank charges paid by Sri Agency Page 2 of 4 the firm to clear various cheques received by the firm amounting to Rs.25,650/-.

Brief facts of the case are that the assessee-firm filed its return of income on 27/09/2009 admitting income of Rs.3,27,29,880/-. During the assessment proceedings u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] the Assessing Officer (AO) examined the claim of the assessee and found that the assessee has not filed any evidence/proof in support of its claim of salary and bonus and other expenditure paid to its employees. Therefore, the AO made the disallowance and brought it to tax.

Aggrieved, the assessee preferred an appeal before the CIT(A) who has confirmed the additions holding that the assessee has not filed any details before him as well. Aggrieved, the assessee is in appeal before us.

Learned counsel for the assessee submitted that there is no dispute that the assessee-firm had employees who rendered services for which the assessee was bound to make payment of salary. He submitted that necessary details are available with the assessee and he may be given an opportunity to present the same before the AO.

The learned Departmental Representative, on the other hand, supported the orders of the authorities below and Sri Agency Page 3 of 4 submitted that the assessee ought to have filed all the details before the authorities below.

Having regard to the rival contentions and the material on record, it is not in dispute that the assessee-firm employed certain people and these people must have rendered services to the assessee-firm. In such cases, payment of salary cannot be doubted but the quantum of payment may have to be examined. For verification, the assessee is required to file all the relevant details before the authorities below. In view of the fact that the assessee has not filed the details before the AO and the CIT(A) and having regard to the submissions of the learned counsel for the assessee that the assessee possesses all the required documents, in the interest of justice and equity, we deem it fit and proper to remit this issue to the file of the AO with a direction to examine the details to be filed by the assessee in accordance with law. The assessee shall co-operate with the AO by filing all the required details.

In the result, the assessee’s appeal is treated as allowed for statistical purposes.

SRI AGENCY,BANGALORE vs. DCIT, BANGALORE

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

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