2023 (10) TMI 376 - AT - Income Tax

Revision u/s 263 - AO made an adhoc disallowance when the assessee failed to maintain salary ledger and vouchers thereby directed to make addition of salary paid by cash - 17th time of hearing of the above appeal - HELD THAT - We have observed that adhoc disallowance to the tune of Rs. 84,000/- is upheld by ld. CIT(A). The assessee has claimed total salary of Rs. 3,43,600/- and the assessee on its part produced vouchers and details. We have observed that the assessee is in the business of cable network services and the total turnover of the assessee was Rs. 5,06,29,889/-, while total salary claimed was Rs. 3,43,600/- which is a meager sum vis- -vis total turnover. No specific defect has been pointed by the authorities below and adhoc disallowance is made. Keeping in view smallness of the amount vis- -vis turnover achieved and on preponderance of probabilities also keeping in view that adhoc disallowance is made by the authorities below, we are inclined to delete the addition of Rs. 84,000/- as sustained by ld. CIT(A). The assessee succeeds on this issue. We order accordingly. Additions to Partner s Capital account - additions sustained by ld. CIT(A) were towards goodwill earned from Den Digital which stood credited to the capital accounts of the partners for which no taxes were paid - The amount is credited in the books of the assessee, and the onus is on the assessee to substantiate that the said amount has suffered taxation, which assessee fails to prove and bring on record cogent evidences to substantiate that said amount has already suffered taxation. Thus, we don t find any infirmity in the well-reasoned appellate order passed by ld. CIT(A) confirming additions which we sustain. The assessee fails on this issue. We order accordingly. Remaining amount of additions as sustained by CIT(A), it is observed that the cash stood credited in the Partners Current Account namely Mr. Kamlesh Patel and Mr. Manojbhai Patel respectively, for which the assessee could not explain sources of cash credits in the Partners Current Account. Thus, it is a case of cash being received by the assessee ostensibly from Partners, for which no cogent explanation was forthcoming from the assessee to substantiate the sources of cash and the amount stood credited in the books of accounts of the assessee. Thus, the onus is squarely on the assessee to prove and substantiate with cogent evidences as to sources of the cash receipts as well as to satisfy the mandate of Section 68 to the satisfaction of the authorities, which does not stood satisfied as the assessee failed to substantiate. Before us, the assessee did not appear and based on material on record, we have no hesitation in upholding this addition as was sustained by Ld. CIT(A) as we do not find any infirmity in the well-reasoned appellate order passed by Ld. CIT(A), which we sustain. The assessee fails on this issue. We order accordingly. Appeal filed by the Assessee is partly allowed.

Summary

Issues Involved:
1. Disallowance of Salary Expenses
2. Addition to Partner's Capital Account

Summary of Judgment:

1. Disallowance of Salary Expenses:
The assessee filed a return declaring an income of Rs. 42,78,410/- for AY 2009-10. The Assessing Officer (AO) disallowed Rs. 60,000/- in salary expenses due to lack of vouchers and salary register. The Commissioner of Income Tax (CIT) revised the order under Section 263 of the Income Tax Act, directing an addition of Rs. 2,44,000/- for salary paid in cash. Upon reassessment, the AO added Rs. 1,84,000/- instead. The CIT(A) deleted Rs. 1,00,000/- but retained Rs. 84,000/- due to discrepancies in vouchers. The Tribunal observed that the total salary claimed was Rs. 3,43,600/- against a turnover of Rs. 5,06,29,889/-. Given the smallness of the amount and lack of specific defects, the Tribunal deleted the addition of Rs. 84,000/-.

2. Addition to Partner's Capital Account:
The AO added Rs. 72,29,762/- to the partner's capital account, which was not fully explained. The CIT(A) deleted Rs. 12,04,000/- but retained Rs. 43,51,765/-. The Tribunal noted that Rs. 14,26,003/- was goodwill from Den Digital credited to partners' accounts without tax payment. The Tribunal upheld this addition due to lack of evidence of tax payment. For the remaining Rs. 13,55,500/- and Rs. 15,59,765/-, the Tribunal observed that the assessee failed to explain the sources of cash credits in the partners' current accounts. The Tribunal upheld these additions, finding no infirmity in the CIT(A)'s order.

Conclusion:
The appeal was partly allowed, deleting the addition of Rs. 84,000/- for salary expenses but upholding the addition of Rs. 43,51,765/- to the partner's capital account.