2015 (9) TMI 381 - AT - Income Tax

Disallowance of wages - CIT(A) deleted part addition - Held that - Perusal of the remand report shows that the Assessing Officer has examined all the facts and evidences. The assessee submitted Muster Sheet of wages before the Assessing Officer. Nothing adverse therein has been found by the Assessing Officer. Further, it may be seen from the history chart that the ratio of wages in the year under consideration is lowest in four years. There is no prohibition under the law that the wages cannot be paid in cash. It is a widely prevalent practice that wages are usually paid in cash in our country. The workers do not necessarily have bank accounts. The law itself has provided the provision of making payment in cash subject to the limits as have been laid in section 40A(3) of the Act. Thus, something which is permitted by law itself cannot be taken back by the Assessing Officer indirectly. Further, the Assessing Officer had before him complete facts and evidence and he was free to make any further verification if he had any doubts. Thus, in our considered opinion, the learned CIT(A) was very fair in reducing the disallowance to 10% of the total claim made by the assessee. - Decided against revenue. Disallowance of salary - CIT(A) deleted addition - Held that - complete details and evidences have been furnished before the learned CIT(A). The Assessing Officer has examined the details and evidences and nothing adverse was found and he was free to examine whatever further he required and the disallowance cannot be sustained merely on the ground that salary was paid in cash, particularly when complete details and evidences are available. It is further seen that the assessee submitted Salary Muster, and nothing adverse has been reported in the remand report. Keeping in view the facts and submissions and material placed before us, we find that no interference is called for in the order of the learned CIT(A).- Decided against revenue. Admission of additional evidence by the learned CIT(A) in terms of rule 46A of the I.T. Rules, 1962 - Held that - No case has been brought out by the learned Departmental Representative to convince us as to how and in what manner provisions of rule 46A has not been complied with by the learned CIT(A). On the other hand, it is seen by us that the learned CIT(A) had called for the remand report, providing thus adequate opportunity to the Assessing Officer to examine all the details and evidences being relied upon by the assessee. Under the circumstances, the learned CIT(A) was justified in considering the evidences and submissions submitted by the assessee. See CIT v/s Virgin Securities & Credits Pvt. Ltd. 2011 (2) TMI 207 - DELHI HIGH COURT - Decided against revenue.

Summary

Issues involved:
1. Disallowance of wages by the Assessing Officer and reduction of disallowance by CIT(A).
2. Disallowance of salary by the Assessing Officer and deletion of disallowance by CIT(A).
3. Admission of additional evidence by CIT(A) under rule 46A of the I.T. Rules, 1962.

Issue 1: Disallowance of wages
The Assessing Officer disallowed a portion of claimed wages by the assessee, restricting it to 30% of total receipts, resulting in a disallowance of Rs. 1,82,01,975. CIT(A) reduced the disallowance to Rs. 26,00,282, which the Revenue challenged. The Departmental Representative supported the Assessing Officer's decision, while the assessee's Counsel argued for no disallowance. The remand report highlighted the lack of supporting evidence for the wage claim. The ITAT affirmed CIT(A)'s decision, noting the Assessing Officer had the opportunity to verify facts and evidence, and the wage payment in cash was permissible under the law. The ITAT upheld the reduced disallowance of 10% and dismissed the Revenue's appeal.

Issue 2: Disallowance of salary
The Assessing Officer disallowed 50% of the claimed salary amounting to Rs. 14,61,310 due to insufficient details and evidence provided by the assessee. CIT(A) deleted this disallowance after examining the details and evidence presented. The Departmental Representative sought to restore the Assessing Officer's decision, while the assessee's Counsel supported CIT(A)'s deletion of the disallowance. The ITAT found that complete details were furnished, the Assessing Officer had examined the evidence, and no adverse findings were reported. As salary muster and other evidence were submitted, the ITAT upheld CIT(A)'s decision to delete the disallowance, dismissing the Revenue's appeal.

Issue 3: Admission of additional evidence
The Revenue contested the admission of additional evidence by CIT(A) under rule 46A of the I.T. Rules, 1962. The ITAT found that the Revenue failed to demonstrate non-compliance with rule 46A and noted that CIT(A) had provided ample opportunity for the Assessing Officer to review the evidence. Citing a judgment, the ITAT upheld CIT(A)'s decision to consider the additional evidence, ultimately dismissing the Revenue's grievance.

In conclusion, the ITAT upheld CIT(A)'s decisions in reducing the disallowance of wages and deleting the disallowance of salary. Additionally, the ITAT dismissed the Revenue's appeal regarding the admission of additional evidence, finding no grounds for non-compliance with rule 46A.