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2018 (12) TMI 1503 - AT - Income TaxDisallowing assessee s salary expense as bogus - CIT DR vehemently contends seeking to revive the impugned salary disallowance as bogus expenditure - Held that - We make it clear first of all that assessee has already filed a compilation chart of its total salary and wages vis-a-vis service income right from assessment year 2009-10 to impugned assessment year 2011-12 sufficiently indicating the impugned expenditure to be within same range. It has come on record that assessee runs 24 working establishments at different places and its payees ESI/PF details form part of record. AO never made even a single effort to either summon any of the assessee s payees or for getting their records verified from State Insurance or PF authorities. We therefore conclude that the CIT(A) has rightly reversed assessment findings disallowing assessee s salary expenditure claimed to be bogus in this peculiar facts and circumstances. The Revenue fails in its instant first substantive ground therefore. Addition in the nature of undisclosed income due to alleged difference shown and Form 26AS - Held that - Assessee has successfully reconciled the impugned difference emanating for the sole reason of non-recognition of income in the impugned assessment year. The Revenue fails to dispute all these clinching reconciliation details. - Decided against revenue
Issues Involved
1. Disallowance of salary expenses amounting to ?3,16,72,524/- as bogus. 2. Deletion of addition of ?6,19,764/- in the nature of undisclosed income due to alleged difference shown in Form 26AS. Detailed Analysis 1. Disallowance of Salary Expenses Revenue’s Argument: The Revenue contended that the CIT(A) erred in reversing the Assessing Officer’s (AO) action of disallowing ?3,16,72,524/- as bogus salary expenses. The AO based the disallowance on discrepancies observed during a survey, comparing the salary expenses recorded in Tally Books of Accounts up to 08/03/2011 with those claimed for the entire financial year. CIT(A)’s Findings: The CIT(A) found that the AO presumed the accounts posted in the Tally Software as of the survey date were complete and final, which was not the case. The CIT(A) noted that there was no finding of discrepancy during the survey itself, and the computer printout used by the AO was not a complete record of all transactions. The CIT(A) further observed that the high statutory payments towards EPF and ESI vis-a-vis the salary indicated that the accounts were not fully posted. The final audited Profit & Loss account and statutory payments towards employee social security schemes were presented as evidence. Appellate Tribunal’s Decision: The Tribunal upheld the CIT(A)’s decision, emphasizing that the AO did not make any effort to verify the records from State Insurance or PF authorities or summon any of the payees. The Tribunal concluded that the salary expenses were within the same range as previous years and were supported by credible statutory evidence. Therefore, the disallowance of ?3,16,72,524/- was deleted. 2. Deletion of Addition of ?6,19,764/- as Undisclosed Income Revenue’s Argument: The Revenue argued that the CIT(A) erred in deleting the addition of ?6,19,764/- as undisclosed income, which was due to a difference shown in Form 26AS. CIT(A)’s Findings: The CIT(A) found that the assessee had successfully reconciled the difference, which arose solely due to non-recognition of income in the impugned assessment year. The reconciliation details were undisputed by the Revenue. Appellate Tribunal’s Decision: The Tribunal upheld the CIT(A)’s decision, noting that the reconciliation details provided by the assessee were convincing and undisputed. Therefore, the deletion of the addition of ?6,19,764/- was justified. Conclusion The Revenue’s appeal was dismissed, and the assessee’s cross-objection was rendered infructuous. The Tribunal upheld the CIT(A)’s findings on both issues, confirming that the salary expenses were not bogus and that the addition of ?6,19,764/- as undisclosed income was correctly deleted. The order was pronounced in the open court on 30/11/2018.
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