2021 (1) TMI 35 - AT - Income Tax

Difference of receipts as per Form 26AS - Addition of income - HELD THAT - When the ld. AO had examined the particulars filed by the assessee and was satisfied that the addition is not warranted because the amount stands reconciled then the Ld. CIT(A) ought to have granted relief to that extent unless there is a contrary finding. But, under the pretext that the assessee has not raised the ground before him the Ld. CIT(A) has unjustly confirmed the entire addition. Therefore, we hereby direct the Ld. AO to delete the addition made on this count and further we remit the matter back to the file of Ld. AO with respect to the balance unreconciled amount thereby giving the assessee one more opportunity to reconcile the difference before the Ld. AO. It is ordered accordingly. Addition made towards Salaries and other benefits to the employees, Managing Director and Vice President of the assessee company - Since the assessee did not furnish the details of the salaries paid to the individual employees such as the name, designation, PAN, amount of salary paid to each individual, details of TDS made thereon, the ld. AO opined that 10% of the aggregate amount should be disallowed on estimate basis - CIT(A) enhanced the disallowance from 10% to 50% - HELD THAT - It is a relevant fact that the entire business operation of the assessee company has been technically operated and controlled by the Professionally Qualified Managing Director and Vice President of the assessee company. Therefore, we are of the considered view that the salary paid to the Managing Direction and the Vice President is commensurate with the professional qualification, experience and job executed by them on behalf of the assessee Company. Further, the assessee has furnished all the particulars of the salary and other benefits paid to the other employees of the assessee company which was verified and accepted by the Ld. AO. The Ld. CIT(A) could also not find any fault with the same. Therefore, We are of the view that the expenditure incurred by the assessee Company is justified and hence hereby direct the ld. AO to delete the entire addition made on this count. Addition being 10% of the expenditure claimed towards Travelling Conveyance, Internet Telephone charges, office maintenance, Petrol Diesel expenditure because the assessee could not produce proper bills and vouchers - HELD THAT - AO observed that bills vouchers were not available only with respect to Petrol Diesel expenses amounting to ₹ 1,32,692/-. However, it appears that the Ld. CIT(A) failed to adjudicate the issue. Since, the issue is a petty issue, We are of the considered view only to the extent of 1/3rd of the expenditure incurred towards petrol diesel is required to be disallowed keeping in view of the facts and circumstances of the case. Difference in cash book and Bank Statement - AO added the difference to the income of the assessee - HELD THAT - CIT(A) failed to adjudicate the issue. Since the amount of ₹ 1,33,132/- is reconciled and verified by the Ld. AO, We are of the considered view that the addition is not sustainable. Therefore, in the interest of justice, We hereby direct the Ld. AO to delete the addition.

Summary

Issues:
1. Addition made for ?22,28,560
2. Addition made towards Salaries and other benefits to the employees, Managing Director, and Vice President
3. Disallowance of ?1,47,721
4. Disallowance of ?1,33,132

Issue 1: Addition made for ?22,28,560:
The Assessing Officer (AO) noted a discrepancy in the gross receipts declared by the assessee and the amount reflected in Form 26AS, leading to an unexplained difference of ?22,28,560. The AO made an addition based on this variance. During the remand proceedings, the assessee reconciled a significant portion of the difference, leaving only ?55,082 unreconciled. However, the Commissioner of Income Tax (Appeals) upheld the entire addition without considering the reconciled amount. The Tribunal found the CIT(A)'s decision unjust and directed the AO to delete the addition of ?21,73,478 and further investigate the remaining unreconciled amount of ?55,082.

Issue 2: Addition made towards Salaries and other benefits:
The AO disallowed ?11,02,482 as the assessee failed to provide detailed information on salaries paid to individual employees, estimating a 10% disallowance. In the subsequent proceedings, the assessee furnished the necessary details, which the AO found genuine. However, the CIT(A) increased the disallowance to 50%, specifically focusing on the salaries of the Managing Director and Vice President, considering them excessive compared to the company's turnover. The Tribunal, after considering arguments from both sides, concluded that the salaries were justified given the technical qualifications and roles of the individuals. Consequently, the entire addition on this account was directed to be deleted.

Issue 3: Disallowance of ?1,47,721:
The AO disallowed ?1,47,721 due to lack of proper documentation for certain expenses. In the remand proceedings, it was revealed that only bills for petrol and diesel expenses worth ?1,32,692 were unavailable. The CIT(A) failed to address this issue adequately. The Tribunal decided to partially uphold the disallowance, directing 1/3rd of the petrol and diesel expenses, amounting to ?44,230, to be disallowed, considering the circumstances of the case.

Issue 4: Disallowance of ?1,33,132:
The AO noted a discrepancy in the bank balance disclosed by the assessee and the bank statement, leading to an addition of ?1,33,132. Although the assessee provided a reconciliation statement during the remand proceedings, the CIT(A) did not address this issue. The Tribunal, after verifying the reconciliation and finding it acceptable, directed the AO to delete the addition of ?1,33,132. Consequently, this ground raised by the assessee was allowed in its favor.

In conclusion, the Tribunal partially allowed the assessee's appeal, directing the deletion of certain additions and confirming others based on detailed analysis and considerations of the facts presented during the proceedings.