2016 (1) TMI 130 - AT - Income Tax

Addition U/s 69C - as per AO furnishing of subsidiary cash book and affidavits regarding cash deposits was an afterthought - CIT(a) deleted addition - Held that - The ld CIT(A) had examined this issue thoroughly and he directed the Assessing Officer during the assessment proceedings to make inquiry on the evidences submitted by the assessee. The ld Assessing Officer in remand proceeding was able to record the statement of 15 persons who had admitted the amount was deposited with the assessee. They filed affidavit of all the particulars i.e. names, addresses and source of income has been explained through these affidavits. It is a fact that these loans were in cash. There was no negative cash balance on the basis of subsidiary cash book produced by the assessee when the ld Assessing Officer raised the query on negative cash balance. The number of affidavits i.e. total 53 affidavits were submitted by the assessee, which supports the assessee s case that deposits shown in the cash book were genuine. Therefore, the assessee has proved the cash available with her on given dates. - Decided against revenue Disallowance of salary and wages - CIT(a) deleted addition - Held that - The assessee s books of account are audited. The salaries of guards were paid by the telecom company to the assessee after verification. The working made by the ld Assessing Officer on the basis of evidence submitted by the assessee, the ld Assessing Officer have no jurisdiction to instruct how to conduct business and how to deploy the guards for security of the towers. The number of guards employment depend on the requirement of security personnel, which cannot be increased or decreased immediately on increase or decrease of business. It is continuous process and assessee had made these payments to commercial expediency as a prudent business man. The ld CIT(A) has also called for report during the appellate proceedings from the Assessing Officer, which has not been replied by him. The assessee also deducted ESI, which has been paid to the concerned department. Therefore, in absence of contrary evidence with the Assessing Officer, the ld CIT(A) was right in deleting the addition made by the Assessing Officer - Decided against revenue

Summary

Issues Involved:
1. Deletion of addition of Rs. 36,31,407/- under Section 69C of the Income Tax Act, 1961.
2. Deletion of addition of Rs. 5,60,135/- on account of disallowance of salary and wages.
3. Deletion of penalty of Rs. 12,27,064/- under Section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of addition of Rs. 36,31,407/- under Section 69C of the Income Tax Act, 1961:

The Assessing Officer (AO) observed a shortage of cash as per the cash book produced by the assessee, leading to an addition of Rs. 36,31,407/- under Section 69C. The assessee provided a subsidiary cash book and 53 affidavits to justify the cash deposits. The AO dismissed these affidavits as an afterthought, noting that all stamp papers were bought on the same date and notarized by the same notary, indicating a lack of genuineness. The AO concluded that the affidavits were an attempt to cover up the cash shortage.

The CIT(A) deleted the addition, stating that the AO ignored the subsidiary cash book without assigning reasons and failed to verify the affidavits properly. The CIT(A) directed the AO to examine the affidavits and statements of the creditors, which confirmed the loans. The CIT(A) relied on various judgments, including CIT vs. Heeralal Chaganlal and Kanhiyalal Jangid vs. ACIT, to support that the identity of creditors and confirmation of loans were sufficient to discharge the assessee's burden. The ITAT upheld the CIT(A)'s decision, noting that the AO failed to provide contrary evidence and the affidavits supported the assessee's case.

2. Deletion of addition of Rs. 5,60,135/- on account of disallowance of salary and wages:

The AO disallowed Rs. 5,60,135/- from the salary and wages claimed by the assessee, citing discrepancies in the number of guards and salary payments. The AO questioned the deployment of guards and the variation in salary payments, suggesting that the salary sheets were not consistent with the actual number of guards employed.

The CIT(A) deleted the addition, noting that the AO did not verify the revised chart and salary sheets provided by the assessee. The CIT(A) emphasized that the salary payments were subject to PF and ESI deductions, indicating their genuineness. The ITAT upheld the CIT(A)'s decision, stating that the AO had no jurisdiction to instruct how to conduct business and the assessee's salary payments were made out of commercial expediency. The ITAT also noted that the AO failed to provide any contrary evidence during the appellate proceedings.

3. Deletion of penalty of Rs. 12,27,064/- under Section 271(1)(c) of the Income Tax Act, 1961:

Since the quantum additions of Rs. 36,31,407/- and Rs. 5,60,135/- were deleted, the penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars of income could not be sustained. The ITAT dismissed the revenue's appeal regarding the penalty, aligning with the deletion of the quantum additions.

Conclusion:

The ITAT upheld the CIT(A)'s decisions to delete the additions of Rs. 36,31,407/- under Section 69C and Rs. 5,60,135/- on account of disallowance of salary and wages, and consequently, the penalty of Rs. 12,27,064/- under Section 271(1)(c) was also deleted. The appeals by the revenue were dismissed.