2011 (5) TMI 263 - HC - Income Tax

Addition - on account of salary paid by the assessee to his employees and thereafter having received the said salary back from them - search and seizure - Assessing Officer has himself mentioned that he was making addition on the basis of certain circumstantial evidence - The increase in salary from assessment years 2005-06 to 2006-07, in itself would further not constitute conclusive evidence that the appellant claimed certain in genuine expenses under the head - No perversity or illegality could be pointed out by the learned counsel for the appellant in the aforesaid findings recorded by the Tribunal. The only endeavour of the learned counsel was to reappreciate the evidence so as to pursuade this Court to take a different view, which is not permissible - Appeals are dismissed

Summary

Issues:
1. Whether the addition of salary paid by the assessee to employees and subsequently received back from them was rightly deleted by the ITAT?
2. Whether the Assessing Officer was correct in holding that the assessee inflated expenses under the head "salary to staff"?

Analysis:
1. The High Court dealt with the appeal filed by the revenue under section 260A of the Income-tax Act, 1961 against the ITAT's order deleting the addition of Rs. 14,33,132 made by the Assessing Officer on account of salary paid by the assessee to employees and received back from them. The Tribunal concluded that the Assessing Officer was not justified in holding that the assessee had inflated expenses under the head "salary to staff." The Tribunal considered various pieces of evidence, including statements of employees and circumstantial evidence, to reach its decision. The HC upheld the Tribunal's findings, emphasizing that there was no evidence to support the Assessing Officer's conclusion and dismissed the appeal by the revenue.

2. The High Court analyzed the Assessing Officer's decision to add Rs. 14,33,132 on account of inflation of expenditure under the head "salary to staff." The CIT(A) had reduced the addition of capitation fees but fully deleted the other two additions. The Tribunal affirmed the CIT(A)'s decision, highlighting that the Assessing Officer's conclusion was based on the statement of one employee, while statements of 11 other employees supported the assessee's version. The HC found no perversity or illegality in the Tribunal's findings, stating that the learned counsel's attempt to reappreciate the evidence was impermissible. Consequently, the HC dismissed the appeals, ruling that no substantial question of law arose in the case.