TMI Blog2010 (1) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, the addition of ₹ 25,65,489/- is challenged on account of outstanding leave salary expenses. The Assessing Officer noted that the Gross Profit of the assessee is lower and on further examination, it revealed that out of the above, a sum of ₹ 25,65,489/- stood outstanding, i.e. it was unpaid liability. The assessee was called upon to produce details of actual payments with outstanding dues to its guards. However, the assessee showed its inability to produce such details. The Assessing Officer further observed that the said guards are only on paper and are not existing, or no payments of the nature have been made by the assessee. As per proviso to sub-section 43B(f) of the I.T. Act, 1961, the deduction has to be allowed only in the year in which such sum is actually paid by him. This liability being unpaid, the Assessing Officer disallowed the same in the assessment order. It was submitted before the Learned CIT(Appeals) that the amounts were outstanding leave expenses and had been paid before the due date of filing of the return. However, the assessee has not furnished the address of the said guards in whose case the leave case was outstanding. The Learned CIT(App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961, would effect retrospectively, with effect from 01/04/1988, therefore, it is clear that no disallowance could be made with the help of section 43B(f) of the I.T. Act, 1961 as it is done by the Assessing Officer. The assessee filed details of payment made on account of leave salary expenses at page No.2 of the paper-book which support the contention of the ld. counsel for the assessee that the amount in question have been paid on or before the due date of filing of the return. However, such details were not filed before the Assessing Officer for his examination. It is also clear that the complete addresses of the guards were not filed before the Assessing Officer for consideration at the level of the authorities below. The ld. counsel for the assessee, however, submitted during the course of assessment proceedings that the guards generally leave the places from place of addresses. Therefore, it would not be possible to file the present addresses of the guards. However, the assessee could produce the ledger accounts of the guards, place of their working, working hours, register of the guards and their addresses given at the time of employment and the details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere filed, therefore, the same were treated as unexplained credits and addition of ₹ 20 lacs was made u/s.68 of the I.T. Act, 1961. Interest of ₹ 63,000/- was also disallowed. Accordingly, total addition was made of ₹ 20,63,000/-. It was submitted before the Learned CIT(Appeals) that assessee filed copies of ledger account with their PANs including copy of the passbook of the loan creditors. It was, further, submitted that during the course of assessment proceedings, assessee filed ledger accounts in respect of the two of the depositors; namely, Shri Vinod C.Gheewala and Heena Himanshu Gheewala with their PANs and supported by bank statements and evidences of such payments. Therefore, finding of the Assessing Officer is incorrect in respect of these parties. However, in respect of other parties, the assessee could not file cogent evidences to prove the same. The Learned CIT(Appeals) considering the explanation of the assessee and evidences on record in the case of Heena Himanshu Gheewala and Shri Vinod C.Gheewala noted that assessee had filed signed copies of ledger account along with the PANs of those creditors and their bank statements to show the genuine credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Revenue Department. The Learned CIT(Appeals) considering evidences and material on record was justified in deleting the addition. As a result, Departmental appeal on this ground is accordingly dismissed. However, as regards, appeal of the assessee is concerned, we find that Assessing Officer has specifically noted in the assessment order that even in other cases, the ledger accounts are not singed by the concerned parties. No confirmations from these parties were filed before the Assessing Officer. However, it is clear that the remaining three parties were also assessed to tax as per details given in the paperbook- 5. Copies of their PANs, bank accounts in the case(s) of Shri Santinath Silk Industries and Shri Shantinath Silk Mills are filed. In the Paper-book it is shown that payments are made through banking channel. At the first appellate stage, the assessee submitted before the Learned CIT(Appeals) that in respect of these parties, the assessee could not file cogent evidences to prove its claim. Considering the above facts in the light of the finding given by the Assessing Officer and submission of the assessee before the Learned CIT(Appeals), it is clear that assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is highly volatile and, therefore, the employees who were in the pay rolls in the assessment year may not be in the current year. The Assessing Officer being not satisfied with the reply of the assessee, disallowed 20% out of the above expenditure and made the addition of ₹ 30,67,266/-. The assessee reiterated the submissions made before the Assessing Officer. The Learned CIT(Appeals) in this view of the matter noted that assessee was asked to produce supporting details on the issue and despite that the same is not complied with. There is failure on the part of the assessee to give names of all the guards with their addresses. The Learned CIT(Appeals), however, considering the nature of the business of the assessee noted that disallowance is still on higher side and, accordingly, restricted to 10%. Remaining addition was deleted. The Revenue as well as assessee are in appeal on the above grounds as noted above. 15. The ld. counsel for the assessee reiterated the submissions made before the authorities below and submitted that assessee produced all the wage register of different units before the Assessing Officer and it was also explained that in the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of earning security charges is the necessary component and without employment of the employees, the earning of the income is not possible, therefore, Learned CIT(Appeals) in the overall facts and circumstances of the assessee correctly came to the conclusion that disallowance of 10% out of salary payable expenses is justified. The finding of the Learned CIT(Appeals) are based upon the fact that assessee did not produce sufficient material before the Assessing Officer to claim full deduction on account of salary payable. Considering the overall facts and circumstances and in the light of the finding of the Learned CIT(Appeals), we are of the view that the Learned CIT(Appeals) was justified in restricting the disallowance to 10% out of salary payable expenses. We confirm his findings and dismiss the appeal of the assessee as well as appeal of the Revenue on this issue. 18. As a result, ground No.3 of appeal of the assessee and ground No.2 of Revenue are dismissed. 19. Issue No.4: - On ground No.4 in the appeal of the assessee an addition of ₹ 95,098/- on account of telephone expenses is challenged. According to Assessing Officer, the assessee has debited sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that loan is advanced to one of the major partners who is pioneer of the business and they thought it is not rational, moral and ethical to charge interest from him. The Assessing Officer, however, did not accept the contention of the assessee and calculated the interest @ 18% and made the addition of ₹ 90,000/-. It was submitted before the Learned CIT(Appeals) that there is opening debit balance of ₹ 5 lacs on the first day of the previous year. No other submission was made. The Learned CIT(Appeals), therefore, noted that there is a diversion of interest-bearing funds for non-business purposes and, accordingly, upheld the addition. 23. The ld. counsel for the assessee reiterated the submissions as were made before the authorities below and referred to paper-book at page No.19 which is account of Shri R.P.Singh to show that on 01/04/2002, there is an opening balance of ₹ 5 lacs. He has, therefore, submitted that since this amount is coming up from the earlier year and is opening balance only in the assessment year under appeal, therefore, Assessing Officer was not justified in making the addition on account of noncharging of the interest. He has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : - On ground No.6, the assessee challenged the addition for belated payment of employees contribution to PF u/s.43B of the I.T. Act, 1961. The Revenue on ground No.3 has challenged the order of the Learned CIT(Appeals) in deleting the addition made by the Assessing Officer on account of belated payment of PF Employer s contribution of ₹ 38,97,466/-. The Assessing Officer disallowed ₹ 79,85,372/- on account of belated payment of PF in terms of second proviso to section 43B read with Explanation below clause (va) of section 36(1) and subclause( x) of section 2 (24) of the I.T. Act, 1961. According to provisions of section 36(1)(va) of the I.T. Act, 1961, a deduction is allowable in computing total income if paid by due dates as prescribed under the provisions of PF Rules. The Assessing Officer relied upon the decision of Hon'ble Andhra Pradesh High Court in the case of Hitech (India) Pvt.Ltd. vs. Union of India Others 227 ITR 446 (A.P.) and decision of Hon'ble Kerala Court in the case of CIT vs. South India Corporation Ltd. 242 ITR 114(Ker.) in support of his findings to disallow the deduction. The Learned CIT(Appeals) considering the issue regarding employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.M. Electronics Ltd. 313 161 (Delhi) in which Hon'ble High Court following the decision of Supreme Court in the case of Vinay Cement Ltd.(supra), dismissed the Departmental appeal. The ld. counsel for the assessee also referred to the order of ITAT Ahmedabad Bench D in the case of Shreeomsingh B.Rawat, Baroda vs. ITO (by way of ITA No.1908/Ahd/2009), dated 18/09/2009 in which the Tribunal following its earlier order in the case of Gujarat Containers Ltd. vs. ACIT (in ITA No.2609/Ahd/2008) by following the decision of P.M. Electronics(supra) and of Vinay Cement Ltd.(supra), allowed the claim of the assessee and deleted the addition. 29. On the other hand, the Learned Departmental Representative relied upon the order of the Learned CIT(Appeals) and submitted that for employees contribution, no deduction could be allowed and relied upon the decision of Hon'ble Kerala High Court in the case of CIT vs. South India Corporation Ltd. 242 ITR 114(Ker.), in the case of CIT vs. Synergy Financial Exchange Ltd. (2006)205 CTR 481(Mad.) and in the case of CIT vs. Salem Co-operative Spinning Mills Ltd. 258 ITR 360 (Mad.). 30. We have considered the rival submissions and perused t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation statement before the Learned CIT(Appeals) showing the difference of ₹ 1,55,311/-. The Learned CIT(Appeals) after satisfying himself on the reconciliation statement and material on record accepted the explanation of the assessee and deleted the substantial addition, however, it was undisputed fact before him that the assessee could not reconcile the figure of ₹ 1,55,311/-. The addition to that extent was confirmed and the remaining addition was deleted. The ld. counsel for the assessee submitted that assessee could not file more better re-conciliation on this issue and, therefore, submitted that benefit of the TDS may be given in a sum of ₹ 1,55,311/- in the year in which the corresponding income is shown by the assessee. Considering the above submission of the ld. counsel for the assessee, we confirm the addition in the assessment year under appeal and dismiss the appeal of the assessee on ground No.7. However, the Assessing Officer is directed to give credit of the TDS to the assessee in the year in which the corresponding income is shown by the assessee. With the above observations, ground No.7 of the appeal of the assessee is dismissed. 33. Issue No.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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