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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI N.K. BILLAIYA & SHRI PAWAN SINGH
O R D E R PER N.K. BILLAIYA, AM: These appeals by the assessee are preferred against three separate orders of the Ld. CIT(A) for Assessment years 2006-07, 2007-08 & 2008-09. Since the grievance of the assessee is common in all these years though quantum may differ, all these appeals were heard together and disposed of by this common order for the sake of convenience. – 2006-07 2. The grievances of the assessee read as under:
“1. The Ld. CIT(A) erred in confirming disallowance of Rs.816426/ being the amount paid to the relatives of the employees in lieu of remuneration payable to the employees treating the said expense as nonbusiness expense on the ground that on such payment proper TDS is not being deducted, without appreciating the fact that such expenses are incurred for the purpose of business of the appellant.
The Ld. CIT(A) erred in confirming addition ofRs.187264/ on account of sale of waste material without properly appreciating the facts of the case that sum of Rs.187264/ was received as advance and sale of the material effected was Rs.39788501/ in case of the appellant as well as sister concern as against the amount received of Rs.39975774/.
The Ld. CIT(A) erred in confirming disallowance of the depreciation on plant & machinery of Rs.1541326/ on the plea that necessary evidences for such cost of fact that such costs were incurred out of undeclared income declared by the appellant during the course of survey proceedings.
4. The Ld. Assessing Officer erred in confirming imposition of interest u/s 234A of Rs.678192/ on account of delayed filing of return in response to notice u/s 153A, without properly appreciating the fact that such interest can be imposed only on the tax payable on additional income taxed u/s 153A proceedings and not on whole of the income returned to the extent of tax payable as per return filed.” 3. The first ground relates to the disallowance of Rs. 8,16,426/- being amount paid to the relatives of the employees.
3.1. In this case, a survey action was conducted u/s. 133A of the Act. On perusing the impounded records impounded during the course of the survey, the Assessing Officer found that the assessee has paid salary to the relatives of the certain employees. When the assessee was confronted with this, it was accepted that payment being made to relatives of the employees as a part of pay package of employees. The assessee has claimed such payment as a business expenditure. This action of the assessee did not find favour with the AO who made an addition of Rs. 8,16,426/- which was confirmed by the Ld. CIT(A).
Before us, the Ld. Counsel for the assessee could not explain the reasons for the payment of salary to the relatives of the employees. After giving a thoughtful consideration to the factual matrix, we failed to understand why the salary was paid to the relatives of the employees who have not given any services to the assessee. The very nature of the transaction is dubious and defy all logic. We, therefore decline to interfere. Addition is confirmed. Ground No. 1 is accordingly dismissed.
Ground No. 2 relates to the addition of Rs. 1,87,264/- on account of sale of waste material.
5.1. The facts relating to this addition are that during the survey operation, certain documents were impounded which related to the sale of waste material not recorded in the books of account. While scrutinizing the return of income, the AO noticed that the assessee has admitted and declared undisclosed income at Rs. 3,99,75,774/-. However, the AO found that the assessee in its return of income has shown an amount of Rs. 3,97,88,501/-. Thus there was a difference of Rs. 1,87,264/-.
5.2. When the assessee was confronted with this, it was replied that this amount has been refunded to the purchasers as material could not be supplied to them. However, on finding no supporting evidence, addition was made to the tune of Rs. 1,87,264/-.
When this issue was agitated before the Ld. CIT(A), the CIT(A) once again confirmed the addition for want of supporting evidence.
Before us, the Ld. Counsel for the assessee reiterated what has been stated before the lower authorities. It is the say of the Ld. Counsel that a detailed reply was filed before the First Appellate Authority explaining the factual matrix which has not been considered by the Ld. CIT(A). The Ld. Counsel drew our attention to the copies of the documents impounded during the course of the survey operation and pointed out that the excess cash shown on account of unrecorded sales have been refunded to the parties since the material could not be supplied to them.
Per contra, the Ld. DR strongly objecting to the submissions made by the Ld. Counsel stated that neither during the course of the assessment proceedings nor before the Ld. CIT(A), the assessee has given any documentary evidence which could prove that the amount has been refunded by the assessee. It is the say of the Ld. DR that the assessee has not even mentioned the name of the person to whom the amount has been refunded.
We have considered the submissions and have carefully gone through the order of the lower authorities and with the assistance of the Ld. Counsel, we have also gone through the documentary evidences brought on record before us in the form of Paper Book. Exhibit 35 and 36 of the paper book show that the amount of the bill raised and the amount of bill entered in the books of account clearly showing the amounts accounted for and the unaccounted amount. But there is no evidence to show the repayment of Rs. 1,87,264/- though the accounted and unaccounted summary is exhibited in the impound documents. But on the basis of the summary, the repayment of Rs. 1,87,264/- will only be a presumption without being supported by any documentary evidence. Since the addition cannot be made on the basis of presumptions by the same analogy, addition cannot be deleted on the basis of presumption. On finding, no supporting evidence for the repayment of the amount therefore, we decline to interfere for the addition of Rs. 1,87,264/-. Ground No. 2 is accordingly dismissed.
Ground No. 3 relates to the disallowance of the depreciation on plant & machinery.
10.1. While scrutinizing the return of income, the AO noticed that the assessee has shown addition to plant and machinery at Rs. 15,90,89,226/-. However, the AO observed that the assessee could not furnish details in respect of addition of Rs. 1,02,75,505/-. The assessee was asked to explain as to why depreciation claimed on plant and machinery for Rs. 1,02,75,505/- should not be disallowed. The assessee filed a detailed reply explaining that since the additions were made out unaccounted sale, no bills were procured and it is only out of the undisclosed income. This explanation of the assessee was dismissed by the AO who concluded by disallowing the depreciation of Rs. 15,41,326/-.
The assessee carried the matter before the Ld. CIT(A) but without any success.
Before us, the Ld. Counsel for the assessee reiterated what has been stated before the lower authorities. It is the say of the Ld. Counsel that the amount of Rs. 1,02,75,505/- was spent towards installation of the plant and machinery. Since the amount has been spent out of the unrecorded sales and since it was incurred in cash, no supporting evidences/bills could be produced.
We have considered this claim of the assessee thoughtfully. We have also gone through the submissions made before the lower authorities. In assessment year 2004-05, the sale of surplus and sundries are shown at Rs. 50,61,040/- which was spent towards labour contractors, labourers etc. In A.Y. 2005-06, the sales have been shown at Rs. 2,95,45,431/- out of which amount spent towards labour contractors, labourers etc and in connection with the business Rs. 1,78,18,292/- thereby leaving balance of Rs. 1,02,75,505/-. This amount has been claimed having been spent towards installation of plant and machinery. In our considered opinion, the source of fund is available but the application of fund has not been proved beyond doubt. Since the application of Rs. 1,02,75,505/- is devoid of any supporting evidence justifying the claim of addition and the depreciation thereon, we decline to interfere with the findings of the Ld. CIT(A). The disallowance is confirmed. Ground No. 3 is accordingly dismissed.
Ground No. 4 relates to the levy of interest u/s. 234A of the Act. The levy of interest is mandatory. We, therefore direct the AO to charge interest as per provisions of Sec. 234A(3) of the Act. Ground No. 4 is treated as allowed for statistical purpose.
In the result, the appeal filed by the assessee is dismissed.
ITA No. 7974/Mum/2010 – A.Y. 2008-09
The assessee has raised two substantive grounds of appeal. Facts relating to ground No. 1 are identical to the facts of ground No. 1 in ITA No. 7849/M/2010. For the detailed reasons given therein, this ground is dismissed.
Facts relating to ground No. 2 are identical to the facts relating to ground No. 3 in ITA No. 7849/M/2010. For the detailed reasons given therein, this ground is dismissed. – A.Y. 2007-08 18. The assessee has raised two substantive grounds of appeal. Facts relating to ground No. 1 are identical to the facts of ground No. 1 in ITA No. 7849/M/2010. For the detailed reasons given therein, this ground is dismissed.
Facts relating to ground No. 2 are identical to the facts relating to ground No. 3 in ITA No. 7849/M/2010. For the detailed reasons given therein, this ground is dismissed.
In the result, all the appeals filed by the assessee are dismissed.
Order pronounced in the open court at the time of hearing on 11th December, 2015.
(PAWAN SINGH) (N.K. BILLAIYA) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER मुंबई Mumbai; �दनांक Dated : 11th December, 2015 व.�न.स./ Rj , Sr. PS