Dy.CIT, Circle 26(1) D 9, Vikas bhawan New Delhi Vs. Sh. Pawan Gupta 4 B/5, Tilak Nagar New Delhi
May, 25th 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : "F" NEW DELHI
BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND
SHRI J.SUDHAKAR REDDY, AM
ITA No: 2791/Del/2012
Dy.CIT, Circle 26(1) vs. Sh. Pawan Gupta
D 9, Vikas bhawan 4 B/5, Tilak Nagar
New Delhi New Delhi
PAN: ADKPG 6797 K
Assessee by : Sh.Taranjeet Singh Bhatia, C.A.
Revenue by: Sh. Vikram Sahay, Sr.D.R.
PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
This appeal is filed by the Revenue directed against the order of the
Ld.CIT(A)-XXIV, New Delhi dt. 27.3.2012 pertaining to the Assessment
Year (`A.Y.') 2008-09.
2. Facts in brief:- The facts of the case are brought out at para 2 of the
order of the Ld.CIT(A), which is extracted for ready reference.
" 2. Return of income was filed on 30.09.2008 declaring income at
Rs.84,31,980/-. A survey was conducted u/s. 133A of the IT. Act on
07.03.2008 by ADIT, Investigation Unit- VI, New Delhi at the business
premises of the assessee during which various discrepancies were noticed by
the survey team. The case was selected for scrutiny and statutory notice
u/s.143(2) were issued and served upon the appellant. The appellant is the
proprietor of a diagnostic centre running in the name and style or M/s. Star
Imaging & Path Lab at Tilak Nagar, New Delhi and other places in Delhi. After
calling for various details and examination of books of accounts, bills and
vouchers of all expenses claimed, the AO made following additions to the
income of the appellant :
(a) Rs.2,96,294/- on account of difference in cash found and cash as
(b) Rs.11,64,078/- being 10% of expenses claimed under the head
(c) Rs.1,11,344/- being 10% of expenses on renovation of building.
(d) Rs.5,93,602/- being 10% of expenses on repairs and
(e) Rs.3,30,925/- being 1/6th of expenses debited to P&L A/c. under
the head Staff Welfare, Postage and Telephone, Miscellaneous expenses and
Travelling expenses for personal usage."
2.1. The assessee carried the matter in appeal before the First Appellate
Authority. The First Appellate Authority has granted part relief.
2.2. Aggrieved the Revenue is in appeal before us on the following grounds.
i) On the facts and in the circumstances of the case, the Ld CIT(A) erred
in law as well as on facts by deleting the addition of Rs.2,96,294/- made by
the AO on a/c of unexplained cash by ignoring the facts stated in the
(ii) On the facts and in the circumstances of the case, the Ld CIT(A) erred
in law as well as on facts by deleting the addition of Rs.11 ,64,078/- made
by the AO on a/c of excess payment of salary and bonus by ignoring the facts
stated in the assessment order.
(iii) On the facts and in the circumstances of the case, the Ld CIT(A) erred
in law as well as on facts by deleting the addition of Rs.1, 11,344/- made by
the AO on a/c of renovation expenses in spite of the fact that during the
course of survey, it was noticed that some expenses were incurred in cash
outside the books of accounts.
(iv) On the facts and in the circumstances of the case, the Ld CIT(A) erred
in law as well as on facts by deleting the addition of Rs.5,93,602/- made by
the AO on a/c of repair and maintenance expenses by ignoring the facts
stated by the AO regarding increase in the turnover and lack of proportionate
increase in net profit of the assessee.
(v) The appellant craves the right to add any other ground(s) of appeal
during the course of hearing of this appeal.
3. We have heard Sh. Vikram Sahay, Ld.Sr.D.R. on behalf of the Revenue
and Shri Taranjeet Singh Bhatia, Ld.Counsel for the assessee.
4. On a careful consideration of the facts and circumstances of the case,
orders of authorities below, material on record and case laws cited, we hold
5. Ground no.1 is general in nature.
6. Ground no.2 is against the deletion of an addition of Rs.2,96,294/-
made by the AO on account of unexplained cash. During the course of
survey the cash on hand as per the books was Rs.23,36,547/- and where as
the actual cash physically found was Rs.17,33,117/-. The difference was
added by the AO for the reason that salary paid during that period
amounted to Rs.8,99,671/- and the assessee failed to explain the difference
of Rs.2,96,294/- i.e. (Rs.8,99,671 Rs.6,03,377). The assessee's case was
that disbursement of salaries were being carried out when the investigating
team arrived and stopped the same. It was submitted by the time of such
stoppage, only an amount of Rs.6,03,377/- was disbursed and the balance
of Rs.2,96,294/- was disbursed on the next day i.e. 8th March i.e. after the
survey team left the premises. The Ld.CIT(A) deleted the addition by
accepting this explanation. We find no infirmity in the same. Hence we
uphold the finding of the First Appellate Authority and dismiss this ground
7. Ground no.2 is against deletion of an addition of Rs.11,64,078/- on
the ground that there is excess payment of salary and bonus. The
disallowance was made on adhoc basis. The First Appellate Authority has
dealt with this issue at para 5 page 4 and 5 of his order. At para 5 he held
"5. The second addition pertains to a blanket disallowance of 10% of all expenses
claimed under the head "Salaries and Bonus", salary being Rs.1,02,94,238/- and
bonus being Rs.13,46,543/-, totaling upto Rs.l,16,40,781/-. The AO disallowed 10%
of the total amount, i.e. Rs.l1 ,64,078/- on the grounds that the appellant had falsely
booked and inflated the expenses under the head Salary and Bonus to reduce the
tax incidence on the diagnostic centre. The AO has mentioned that during the course
of survey operation, it was found from the salary paid account that the appellant had
claimed salary in the name of following four persons : (a) Smt. Dimple Bhardwaj
(Rs.l,35,000/-); (b) Ms. Rumi Agarwal (Rs.l,29,600/-); (c) Ms. Sweta Gupta
(Rs.3,60,000/-) and (d) Ms. Sangeeta Bawa (Rs.79,200/-). The AO has noted that the
names of these persons were neither reflected in the manual Attendance Register,
nor were they found present in the premises during the survey. On being asked to
clarify, the appellant submitted that the non-availability of the employees might just
be a co-incidence. The AO refuted this argument by quoting from the statement of Sh.
Alok Bhardwaj, S/o. Sh. Gopinath Sharma, whose statement was recorded by the
survey team and who was working there in the capacity of Senior Manager,
Business Development and Customer Operation's since June 2007 at a salary of
Rs.30,000/- per month. The survey team recorded the statement of Mr. Bhardwaj
whose wife Srnt. Dimple Bhardwaj was taking home a salary of Rs.15,000/- per
month. When confronted, Sh. Alok Bhardwaj accepted that it was being done at his
insistence as a measure of tax planning, since, he was employed by the Diagnostic
Centre at a salary of Rs.45,000/- per month. On this basis, the AO disallowed 10%
of Salary and Bonus expenses across the board on estimate basis amounting to
Rs.11,64,078/-. On the other hand, the appellant explained that three of the
employees namely Ms. Rumi Agarwal, Ms. Sweta Gupta and Ms. Sangeeta Bawa
were not an employee of Star Imaging and Path Lab, but were employees of its sister
concern M/s. Janta X-Ray Clinic. Ms.Rumi Agarwal was working there as an Office
Executive, Ms. Sweta Gupta as Senior Supervisor and Ms. Sangeeta Bawa as
Receptionist. The salary paid to them was being booked and duly reflected in the
accounts of M/s. Janta X-Ray Clinic. As regards, Smt. Dimple Bhardwaj, the
statement of Sh. Alok Bhardwaj was self explanatory and no inflation of expenses
under the head Salary and Bonus was being carried out by the appellant. I have
given careful consideration to the arguments of both the AO as well as the appellant.
The fact that three out of four lady employees mentioned in the survey report were
not working for the appellant, but for its sister concern M/s. Janta X-Ray Clinic, has
not been disputed, countered or rebutted by the AO. As regards the salary paid to
Smt. Dimple Bhardwaj, it appears to be an internal arrangement worked out by the
Senior Manager of the Centre Sh. Alok Bhardwaj for his personal benefit. No case can
be made out for booking of bogus expenses on this count and action if any, should be
taken by the AO of Sh. Alok Bhardwaj. The books of accounts, bills and vouchers of
the appellant are audited by a Chartered Accountant and no other discrepancy has
been pointed out by the AO in the books of accounts of the appellant. The AO has not
resorted to the provisions of Section 145(3) of the Act to reject the books of accounts
of the appellant. Under such circumstances. making an ad-hoc disallowance of 10%
out of all salaries and bonus expenses does not appear justified. The addition of
Rs.11,64,078/- is therefore deleted."
7.1. The Ld.Sr.D.R. could not controvert this factual findings of the First
Appellate Authority. Hence we do not find any infirmity in the same. Thus
we dismiss ground no.2 of the Revenue.
8. Ground no.3 is on the issue of disallowance of renovation expenses on
an adhoc basis. The Ld.CIT(A) directed the AO to verify whether the
renovation expenses in question were capitalised by the assessee or not. If a
particular expenditure has been crystallised, the question of an adhoc
disallowance and addition to the taxable income does not arise. Thus we
dismiss this ground of Revenue.
9. Ground no.4 is against the deletion of an addition of Rs.5,93,602/-
made by the AO on account of repairs and maintenance expenses here also
an adhoc disallowance of 10% has been made. After considering the
submissions of the assessee the First Appellate Authority observed that no
particular defects are pointed out in the books of accounts and under those
circumstances the board disallowance of 10% from all repairs and
maintenance expenses debited to the profit and loss a/c cannot be upheld.
We find no infirmity in these findings. In the result ground no.4 is
10. Ground no.5 is general in nature.
11. In the result, the Revenue 's appeal is dismissed.
Order pronounced in the Open Court on 22nd May, 2015.
(G.C.GUPTA) (J.SUDHAKAR REDDY)
VICE PRESIDENT ACCOUNTANT MEMBER
Dated: the 22nd May, 2015
Copy of the Order forwarded to: