Commissioner Of Income Tax (Central), Ludhiana v. M/S S.s.r.d. Somany Sikshan Sansthan

ITA No. 775 of 2010 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 775 of 2010 Date of Decision: 2.5.2011 Commissioner of Income Tax (Central), Ludhiana ....Appellant. Versus M/s S.S.R.D. Somany Sikshan Sansthan ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Standing Counsel, for the appellant. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 775 and 784 of 2010as according to the learned counsel, an identical question of law isinvolved therein. For brevity, the facts are being taken from ITA No.775 of 2010. 2.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 4.12.2009 passed by the Income Tax AppellateTribunal, Delhi Bench “D”, New Delhi (hereinafter referred to as “theTribunal”) in ITA No. 3804/Del/2009, for the assessment year 2007-08,claiming the following substantial questions of law:- “Whether, on the facts and circumstances of thecase, the Hon'ble ITAT was right in law in deleting the addition of Rs.14,33,132/- made by the A.O. onaccount of the salary paid by the assessee to hisemployees and thereafter having received the saidsalary back from them?” 3.Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that a search and seizure operation wascarried out on 24.8.2006 at the premises of the assessee and during thesearch, certain incriminating documents were found and seized. Thebooks of accounts, i.e. cash books, ledger etc. were not found uptodate.The assessee filed its return in Form ITR-7 on 28.3.2008 declaring nilincome. The case was taken up for scrutiny and the Assessing Officervide order dated 20.11.2008 made the following additions:- (i)Rs.18,87,000/- on account of capitation fees receivedoutside the books of account.outside the books of account. (ii)Rs.14,33,132/- on account of inflation of expenditureunder the head 'salary to staff'.under the head 'salary to staff'. (iii)Rs.11,92,806/- on account of cash found duringsearch as per books of account.search as per books of account. 4.Feeling aggrieved, the assessee filed an appeal before theCommissioner of Income Tax (Appeals) [in short “the CIT(A)”] who videorder dated 11.6.2009 reduced addition of Rs.18,87,000/- toRs.3,60,400/- and deleted the other two additions fully. Against theorder of the CIT(A), the revenue as well as the assessee approachedthe Tribunal. The Tribunal vide order dated 4.12.2009 dismissed theappeal filed by the revenue and allowed that of the assessee. Hence,the present appeal by the revenue. 5.We have heard learned counsel for the appellant. 6.The point for consideration in these appeals is whether theassessee had taken back the amount from the employees which waspaid to them as salary and, therefore, the same was taxable in thehands of the assessee itself. 7.The Tribunal while affirming the findings of CIT(A), afterelaborate discussion had concluded that the Assessing Officer was notright in holding that the assessee had inflated the expenses under thehead “salary to staff”. The relevant findings recorded by the Tribunal inparas 13 and 14 of its order are as under:- “13.We have heard the rival submissions and have gonethrough the material available on record. We find that theLd CIT(A) has decided this issue after discussing all thefacts in proper perspective and hence we reproduce belowthe finding of Ld CIT(A) from page No.13 to 15 of hisorder:- 7.The Tribunal while affirming the findings of CIT(A), afterelaborate discussion had concluded that the Assessing Officer was notright in holding that the assessee had inflated the expenses under thehead “salary to staff”. The relevant findings recorded by the Tribunal inparas 13 and 14 of its order are as under:- “13.We have heard the rival submissions and have gonethrough the material available on record. We find that theLd CIT(A) has decided this issue after discussing all thefacts in proper perspective and hence we reproduce belowthe finding of Ld CIT(A) from page No.13 to 15 of hisorder:- “I have carefully considered the contention of the Ldcounsel for the appellant and perused the relevantrecord. The Assessing Officer has made thisaddition mainly on the basis of statements of ShriSurinder Miglani S/o Shri Om Prakash Miglani, whowas a lecturer of MBA with SSRD since August,2005. This statement was recorded during thecourse of search. Though Shri Miglani has retractedfrom his statement by filing affidavit before theAssessing Officer, this affidavit has not been accepted by the Assessing Officer on the ground thatShri Surinder Miglani was not an assessee, whofacing search action when his statement on oath wasrecorded. However, the Assessing Officer cannot besaid to be justified in rejecting the sworn affidavit ofShri Miglani on the above ground. Though I agreewith the Assessing Officer that none can be allowedto retract from the statement made during the courseof search, unless there was evidence to establishthat such statement was recorded under duress etc.in the case of appellant, though there is apparentlyno evidence of such duress etc. this aspect is to beseen keeping in view the totality of the facts andcircumstances. As brought out in the assessmentorder also, the statements of other 11 employeeswas also recorded during the course of search. Eventhe names of these persons are mentioned in para10.2 of the assessment order. The Assessing Officeradmits in the assessment order itself that all thesestatements were in favour of the appellant. However,he has rejected such evidence on the ground that theemployees would speak in conformity with interest oftheir employees. However, again the AssessingOfficer cannot be held to be justified in rejecting theevidence as above on this ground. Whereas he hasbased his entire assessment order on the basis of statement of one such employee, he has ignored thestatement of other 11 similar employees. If thestatements of all these 11 persons are considered,the adverse inference drawn by the Assessing Officeragainst the appellant is not sustainable. In addition to the above evidence, the AssessingOfficer has himself mentioned that he was makingaddition on the basis of certain circumstantialevidence. Circumstantial evidence may be importantfor deciding an issue in the assessment proceedingsin a normal case. However, in my opinion, when anassessee is subjected to search and all the importantpremises are covered, there could not be any scopefor making such huge additions on the basis ofcircumstantial evidence. Finding of blank signedcheques books of the employees have beenconsidered for adverse inference by the AssessingOfficer. However, as brought out in para 10.2 of theassessment order itself, in the statement recordedduring the course of search itself, Shri Anil SharmaAccountant of SITM has duly explained the reasonsfor the same. What has been stated by Shri AnilSharma is the consistent stand on the appellant rightfrom the date of search. Therefore, the conclusiondrawn by the Assessing Officer that the amount fromthe respective bank accounts of the employees is first withdrawn by the appellant and then part of it ishanded over to the employees after pocketing thebalance is without evidence. Not even single seizeddocument has been discussed which showed that theappellant did not retain part of cash withdrawn fromthe respective bank accounts of the employees. Ifthe version of the Assessing Officer was correct,there should have been least some evidence foundduring the course of search in this regard. Theincrease in salary from assessment year 2005-06 to2006-07, in itself would further not constituteconclusive evidence that the appellant claimedcertain in genuine expenses under the head.Keeping in view the above discussion, I am notinclined to agree with the Assessing Officer that theappellant inflated expenses under the head “Salary”.Though on the basis of statement of Shri SurinderMiglani recorded during the course of search,adverse inference could be drawn against theappellant, as far as payment of salary to him alone isconcerned, keeping in view the entirely of the factsand circumstances i.e. statement of 11 otheremployees recorded during the course of search andthe subsequent affidavit of Shri Miglani which hasbeen rejected by the Assessing Officer not for somegood and valid reasons, it would not be appropriate even to sustain addition even in respect of salarypaid to Shri Miglani. In view of the above, addition ofRs.14,33,132/- made by the Assessing Officer is,therefore, deleted.” 14.From the above, we find that Ld. CIT(A) has decidedthis issue in proper perspective because the AssessingOfficer has based his conclusion on the statement of oneemployee whereas 11 other employees have stated in thestatements that they were getting full salary as debited bythe assessee in its books. We also find that the statementof one employee of Shri Miglani was also retracted by himby filing an affidavit. Under these facts we find no goodreason to interfere in the order of the Ld. CIT(A) on thisissue and hence we uphold the same. This ground of therevenue is dismissed.” 8.No perversity or illegality could be pointed out by thelearned counsel for the appellant in the aforesaid findings recorded bythe Tribunal. The only endeavour of the learned counsel was toreappreciate the evidence so as to pursuade this Court to take adifferent view, which is not permissible. 9.In view of the above, no substantial question of law arisesin these appeals. Accordingly, the appeals are dismissed. (AJAY KUMAR MITTAL) JUDGE May 2, 2011gbs (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE ITA No. 775 of 2010 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 784 of 2010 Date of Decision: 2.5.2011 Commissioner of Income Tax (Central), Ludhiana ....Appellant. Versus M/s S.S.R.D. Somany Sikshan Sansthan ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL, ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Standing Counsel, for the appellant. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see the detailed order of even date recorded in ITA No. 775 of 2010 (Commissioner of Income Tax (Central), Ludhiana v. M/s S.S.R.D. Somany Sikshan Sansthan). (AJAY KUMAR MITTAL) JUDGE May 2, 2011gbs (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE