TMI Blog2020 (9) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have been recorded and if the same was done, the assessee is entitled to an opportunity of cross examination. This having not been done, the assessment order is flawed on this aspect. AO has referred to statements of four persons and on reading of selected portions of the statement, as extracted in the assessment order, does not lead to the inference that the entire transaction is bogus. The assessee's explanation is that tips were being given to the room boys and they alone were benefited and the other employees/workers raised objection and the matter was discussed in several meetings and ultimately, a settlement was arrived at between the employees union and the assessee management. Due credence should be given to the Memorandum of Settlement dated 02.08.2012 recorded in the presence of the Labour Officer. If according to the Assessing Officer, this statement is also a bogus document, then he ought to have recorded such a finding. However, law prohibits him from doing so because of the binding effect of the settlement on the management and the workmen. Therefore, in our considered view, the settlement could not have been brushed aside. CIT(A), though accepts the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any evidence to prove the claim; 2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in not allowing the genuine expenditure incurred by the Appellant as service charges to its employees in full; and 3.Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the Commissioner of Income Tax (Appeals) had not examined whether the Service Charges are really collected by the Appellant when such ground was not even raised before the Tribunal by the Appellant and also was not questioned by the Assessing Officer or the Commissioner of Income Tax in their orders. 3. Heard Mr. G. Baskar, learned counsel for the appellant/assessee and Mr.S.Rajesh, learned Junior Standing Counsel for Mr.Karthik Ranganathan, learned Senior Standing Counsel for the respondent/Revenue. 4. The assessee filed their return of income for the assessment years under consideration, viz., 2013-14 and 2014-15 on 27.09.2013 and 25.09.2014, respectively. For the assessment year 2013-14, the assessee admitted a total income of ₹ 76,16,990/- and for the assessment year 2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n support of the claim. During the course of assessment, the Assessing Officer pointed out that the assessee has debited amount towards service charges. The assessee was called upon to explain the same, who had stated that the service charges are paid in lieu of tips. Since the tips were received by the room boys only whereas, the other employees were not able to avail the same and ultimately, the matter was discussed with the employees and an agreement was entered into. The assessee furnished breakup of the service charges to the three category of employees, viz., permanent employees, managerial and other employees and administrative/temporary employees. The Assessing Officer examined a few of the employees of the assessee and also recorded statement after which, show cause notice dated 20.09.2016 was issued. The assessee submitted their reply dated 24.09.2016 giving additional details including the breakup of service charges, the Memorandum of Settlement arrived at between the assessee and the workers union dated 02.08.2012 and details of the columns and contents of the registers produced during the scrutiny proceedings. The Assessing Officer held that the assessee had resorted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee before the Assessing Officer, CIT(A) and in the paper book filed before the Tribunal. The documents being, the annual accounts; the statement of income; copy of the letter dated 23.08.2016 to the Assistant Commissioner of Income Tax enclosing the register of wages of persons employed (Form No.16 under Payment of Wages Act) for the relevant period evidencing payment of service charges to permanent employees; copies of vouchers for payment of service charges paid in cash to administrative/management/other employees; copy of service charges register for the relevant month evidencing payment to administrative/temporary employees; copy of the letter dated 09.05.2017 of the Chartered Accountant filed explaining the payment of service charges to the employees; and Memorandum of Settlement between the assessee and the Anna Thozhilalar Sangam dated 02.08.2012 under Section 18(1) of the Industrial Disputes Act, 1947. 9. The Assessing Officer while rejecting the assessee's contention has not disbelieved any of these documents. The payments effected in cash were sought to be substantiated by the assessee by producing vouchers. If the Assessing Officer was of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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