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TMI Blog2024 (9) TMI 1654X X X X Extracts X X X X X X X X Extracts X X X X ..... payable for Rs.14.84 Lacs during FY 2015-16 and claimed deduction of the same on actual payment basis. Therefore, the disallowance, to that extent, could not be upheld. The balance provision of Rs.14.69 Lacs has been made on 31- 03-2017. The aggregate provision as on 31-03-2017 was Rs.29.53 Lacs which has fully been paid by the assessee through banking channels in the month of April and May, 2017 which is evident from ledger of salaries payable. Therefore, the impugned disallowance in toto, is not sustainable in law. We order so. The corresponding ground raised by the assessee stand allowed. - HON BLE SHRI ABY T. VARKEY, JM AND HON BLE SHRI MANOJ KUMAR AGGARWAL, AM For the Assessee : Shri S. Sridhar (Advocate)- Ld.AR For the Revenue : Shri R. Clement Ramesh Kumar (CIT)-Ld. DR ORDER Manoj Kumar Aggarwal (Accountant Member) 1.1 Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order passed by learned Commissioner of Income Tax (Appeals), Chennai-20, [CIT(A)] on 31-03-2024 in the matter of an assessment framed by Ld. Assessing Officer (AO) u/s 143(3) r.w.s. 153A of the Act on 04-05-2022. 1.2 The grounds raised by the assessee read as under: - 1. The ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the Appellant in the normal course of business and the disallowance of such expenses as not genuine was wholly unjustified and not sustainable both on facts and in law. 10. The CIT (Appeals) - 20, Chennai failed to appreciate that the Appellant had rectified the return of income filed u/s 153A of the Act in claiming the actual expenses relatable to the assessment year under consideration and further ought to have appreciated that the Assessing Officer having considered the reversal of such provision in the said return of income, the action to deny the claim of actual expenses relatable to the assessment year under consideration would distort the financial results of the Appellant Company. 11. The CIT (Appeals) - 20, Chennai failed to appreciate that the wages expenses were wrongly denied both in the year of claim (as per original return of income) as well as in the actual year of outflow (as per 153A return) would defy the principles of fairness in taxation there by vitiating the related findings in the impugned order. 12. The CIT (Appeals) - 20, Chennai failed to appreciate that having not found any discrepancy in the expenditure incurred by the Appellant and further h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai failed to appreciate that having not found any discrepancy in the expenditure incurred by the Appellant and further having not disputed the fact that the major portion of salary payable being paid through proper banking channels, the findings recorded in doubting the genuineness of such expenses was wholly unjustified and unwarranted thereby negating the related findings in the impugned order. 20. The CIT (Appeals) - 20, Chennai failed to appreciate that the return of income filed in response to the notice issued u/s 153A of the Act should be construed as implied retraction to the statement recorded at the time of search and further ought to have appreciated that the presumption of non retraction till date was wholly unjustified especially in view of its contention before both the lower authorities. 21. The CIT (Appeals) - 20, Chennai failed to appreciate that there was no independent examination carried out by the Revenue despite the availability of entire documents forming part of the search records and the sole reliance on the statement recorded in the absence of any corroborative evidence for denying the salary expenses should be reckoned as bad in law. 22. The CIT (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Measurement books (M Books). Some of such M Books were seized during search. Based upon the entries in the M Books, labour excel sheets were prepared on weekly basis and the payment was made to the contractors through banking channels. These labour payments excel sheets for different financial years were maintained in the tally server of the assessee which was also seized. 2.3 On comparison of workers wages expenses for FY 2018-19 as maintained in Tally system vis- -vis actual wage payments as per excel sheets, it was found that for the month of April, 2018 to June, 2018, the workers wages expenses accounted in the tally system was lesser than the actual payment made during the year. The payments that were made through banks were used to set-off the previous year wages payable even though the wages expenses were incurred during FY 2018-19. On examination of tally data, it was noted that huge amount of wages payable was entered in the last month of financial years and claimed as expense. For FY 2018-19, the wages payable entered in the tally system was not set-off as on the date of search. The partner of the firm Shri S. Anandavadivel admitted to booking of bogus wages payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating material. The disallowance of Rs.62.75 Lacs represents actual wages paid by the assessee during the year which was evidenced by the ledger extracts. The said amount was claimed as provision in original return of income. Therefore, the same ought to have been allowed on actual payment basis during this year. 3.2 The Ld. CIT(A) rejected the legal arguments of the assessee and held that Ld. AO could make regular addition also with respect to any issue that comes to his notice. The Managing Director admitted that the wages were cleared on weekly basis. Further, at year-end wages payable were shown to reduce the profits. Therefore, wages payable would reflect wages artificially inflated by recording non-existent expenditure. The question of actual payment in subsequent year as claimed by the assessee would not arise at all. The findings of Ld. AO would lead to a presumption that actual expenditure incurred by the assessee for any financial year in initial three months towards wages is suppressed to the extent of provisions made for wages for previous year. Accordingly, the impugned addition was confirmed. 3.3 The addition on account of salary payable was also confirmed on the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent year. If the same is not allowed, the assessee would suffer disallowance in both the years. 5. The assessee has reconciled the income as filed u/s 139(1) and as filed u/s 153A (placed on Page No.280 of Paper Book Volume-1) as under: - Year FY 14-15 FY I5-16 FY I6-17 FY 17-18 FY I8-19 FY 19-20 FY 20-21 Original Return of Income Filed u/s 139(1) 10,89,38,235 5,52,27,996 15,78,68,526 11,39,91,605 14,45,24,107 29,07,17,231 67,59,66,220 Wages Payable Reversed 50,91,741 62,74,999 3,91,07,396 4,24,49,502 6,04,23,983 Actual Wages Paid Claimed -50,91,741 -62,74,999 -3,91,07,396 -4,24,49,502 Salary Payable - Reversed 14,84, 105 33,72,150 49,18,047 Actual Salary Paid Claimed -14,84,105 -33,72, 150 Sub Contractor Reversed 11,85,29,029 1,40, 18,600 Purchase Reversed 2,35,08,822 5,53,25,652 Additions - Asst.143 (3) 30,05,474 Esha Sales Reversed -68,00,000 -6,00,000 Revised Income as per Return Filed in response to Notice U/s 153A 11,02,35,450 5,72,95,358 19,07,00,923 11,58,49,606 30,79,08,589 36,16,07,280 67,59,66,220 It could be seen that the assessee has reversed provision of wages payable for Rs.62.75 Lacs in FY 2015-16 and claimed the same on actual payment basis in FY 2016-17. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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