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TMI Blog2024 (12) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be an employer while appointing one of its directors as whole-time director on a particular remuneration and prescribing the terms and conditions of his appointment. In common parlance, the whole-time director may not be an employee but even then the character of the receipt or remuneration having come within the definition of salary under section 17(1)(iv) being a fee or remuneration by whatever name it is called and not being excluded by the Explanation 2 to section 15. Assessee had a dual capacity. He was entrusted to manage the business. The appointment was of employment and not for employment. Therefore, having regard to the material placed before us, we are of the considered view that the appellant/assessee s receipt is assessable under the head 'Salary'. Therefore, the remuneration received by the appellant/ assessee have to be assessed income under the head 'Salary' and not as income from other sources. Accordingly, we order so for both years. AO is further directed to allow deduction of conveyance allowance and HRA, as per the law, in AY 2010-11. We are of the considered view that there is no rationale and justification for addition in AY 2011-12 under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as unexplained credit in Bank on account of sale of immovable Property in AY 2009-10. 3. Ld. CIT(A) has erred in upholding the business expenditure which are as per Audited profit and Loss Account for the relevant assessment year to the extent of Rs.18,11,296. ITA No. 1734/Del/2019, A.Y. 2011-12 1. Ld. CIT(A) has erred in upholding the additions of Rs.9,41,013/- made on account of salary received during the relevant assessment year. 2. Ld. CIT(A) has erred in upholding the additions of amount credited in the bank account to the extent of Rs.15,00,000/- during assessment year 2011-12. 3. Ld. CIT(A) has erred in upholding the additions of business expenditure in nature of direct and indirect which are as per Audited Profit and Loss Account in the relevant assessment year amounting Rs.8,41,586/-. 4. Facts of these cases giving rise to these appeals are that the appellant/assessee, Director of D-Art Furniture System Pvt. Ltd. was searched on 19.10.2010 under section 132 of the Income Tax Act, 1961 (hereinafter, the Act ) along with Suppliers of Common Wealth Games Group Cases searched together by the Income Tax Department. Thereafter, the notices under section 153A of the Act were issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso of I.T.Act, 1961 and the G.P. will comes to Rs. 36,45,006/-. In the profit and loss account the assessee has debited expense to the extent of Rs. 19,21,342/-. The assessee has not produced the evidence in support of the revenue expenditure. Expenditure is what is paid out or away and is something which is gone irretrievably as decided in the case of Indian Molasses Co (P) Ltd. v. CIT 37 ITR (SC). In the absence of any evidence, the expenses to the extent of 50% i.e. 9,60,671/- are disallowed which comes to G.P. as discussed above Rs. 36,45,006/- under the proviso of I.T.Act, 1961. Computation of Net Profit during the year as under: Gross Profit: Rs. 36,45,006/- Less: Expenses as discussed above Rs. 9,60,671/- Net profit from business Rs. 26,84,335/- (Addition: 18,11,296/-) Besides the above, certain other additions were also made by the AO. 5.1 In appeal of AY 2010-11, the Ld. CIT(A) upheld the finding of the AO assessing salary income shown in the ITR as income from other sources and consequential disallowance of conveyance allowance Housing Rent Allowance (HRA). The Ld. CIT(A) also upheld the addition of Rs.7,00,000/- out of bank deposits of Rs.28,50,025/-The disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of salary of Rs.9,41,013/- on accrual basis. The Ld. CIT(A) also upheld the addition of Rs.15,00,000/- out of bank deposits of Rs.40,64,626/- taxed as unexplained deposits on the reasoning that the appellant/assessee failed to explain the same. The disallowance of business expenditure of Rs.8,41,586/- was upheld by the Ld. CIT(A) on the reasoning that the appellant/assessee failed to produce not only the bill voucher of these expenses but also failed to establish genuineness of such expenditure. Besides, all-other additions /disallowances made by the AO were knocked off by the Ld. CIT(A). 6.2 The assessment of (i) salary income of Rs.31,50,000/- (Rs.22,08,987/- shown in the ITR + accrued salary of Rs.9,41,013/-) under the head income from other sources, (ii) unexplained bank deposit of Rs.15,00,000/- and (iii) disallowance of business expenditure of Rs.8,41,586/- are in dispute in AY 2010-11. 7. The Ld. Authorized Representative (hereinafter, the AR ) submitted that neither the Ld. CIT(A) nor the AO had brought any material on the record before inferring that there was no employee and employer relationship between the appellant/assessee and D-Art Furniture System Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the disallowances were not justified and hence, prayed for relief on this score. 10. The Ld. CIT-DR with the help of facts mentioned in the assessment order and appellate order submitted that reasonable opportunities of being heard were provided to the appellant/assessee by the AO and Ld. CIT(A) but the appellant/assessee tactfully ensured non-compliance. Reiterating the finding of the Ld. CIT(A), he prayed for upholding of orders of the lower authorities. Our attention was drawn to the fact that the Ld. AR did not bring any material on the record to explain the creditworthiness of Shri Radhey Intermediaries Pvt. Ltd. and Kanha Enterprises Pvt. Ltd. From whom loans aggregating to Rs.15,00,000/- was received in AY 2011-12. It was argued that the subsequent repayment of the said loans did not explain loans in the relevant year. The Ld. AR further contended that the Ld. AR had failed to explain the genuineness of loans aggregating to Rs.15,00,000/- received in AY 2011-12. It was also contended that the AO did not provide proper opportunity of being heard before making the addition of Rs.15,00,000/-. Thus, it was against the principle of natural justice and hence, prayed for relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Art Furniture System Pvt. Ltd. and supervises sales only. He received fixed remuneration for that. The said remuneration is not linked with the profit of D-Art Furniture System Pvt. Ltd. The director involved certain kind of responsibility to be carried out in terms of his appointment whether specified or not. The Board of Directors has a right to appoint. It has right to determine the nature of the duties to be performed by the whole-time directors. It has right to determine the salary to be paid. Therefore, the company could be an employer while appointing one of its directors as whole-time director on a particular remuneration and prescribing the terms and conditions of his appointment. In common parlance, the whole-time director may not be an employee but even then the character of the receipt or remuneration having come within the definition of salary under section 17(1)(iv) being a fee or remuneration by whatever name it is called and not being excluded by the Explanation 2 to section 15. The appellant/assessee had a dual capacity. He was entrusted to manage the business. The appointment was of employment and not for employment. Therefore, having regard to the material place ..... X X X X Extracts X X X X X X X X Extracts X X X X
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