IN INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JM AND SHRI RAJESH KUMAR, AM . I.T.A. No.612 Mum 2013 ( Assessment Year : 2005-06) Mediline Pharmaceuticals Income Tax Officer, (India) Private Limited, Ward 8(2)(4), Vs. nd 39, Nand Ghanshyam Room No.213, 2 Floor, Industrial Estae, Aayakar Bhavan, Mahakali Caves Road, M.K.Road, Andheri (E), Mumbai-400020 Mumbai-400093 . PAN :AAECM1773B Assessee by None Revenue by Shri Sanjeev Jain Date of Hearing : 31.5.2016 Date of Pronouncement :14.10.2016 ORDER PER RAJESH KUMAR, AM This is appeal filed by assessee challenging order of ld.CIT(A) - 17, Mumbai dated 21.12.2012 for assessment year 2005-06. 2. Despite of service of notice, none appeared on behalf of assessee, therefore, we proceed to decide appeal ex-parte without presence of assessee on basis of material available before us and after hearing ld.DR. 2 ITA No.612 Mum 2013 3. issue raised in grounds of appeal no.1 is against upholding disallowance of Rs.64000 - as made by AO on account of not allowing salary. 4. Brief facts of case are that assessee filed return of income on 29.3.2006 declaring total income at Rs.3,00,840 -. assessee company was engaged in business of commission agent of pharmaceutical products. During course of assessment proceedings, AO observed that sum of Rs.1,08,000 - was outstanding to five persons as salary for three months. AO observed that no employee could remain without salary for period of three months and hence issued notice dated 26.12.2007 to assessee calling upon assessee to show cause as to why amount of Rs.1,08,000 - should not be disallowed as non genuine expenses. assessee in reply to said show cause notice submitted that salary payable to employees was legitimate business expenses and was rightly claimed. However, AO not finding reply of assessee as tenable, rejected claim of assessee and added same to total income of assessee by framing assessment u s 143(3) of Act vide order dated 31.12.2007 and income was assessed at Rs.5,78,840 -. Aggrieved by order of AO, assessee preferred appeal before ld.CIT(A), who has given part relief to assessee by holding that assessee could produce proofs only in respect of Rs.44,000 -, therefore, 3 ITA No.612 Mum 2013 remaining amount of Rs.64,000 - could not be verified and accordingly upheld same. 5. After hearing ld.DR and on perusal of material placed before us including orders of authorities below, we find that assessee has failed to produce records as regard salary payments, of Rs.64,000 -. We are, therefore, in agreement with findings of ld.CIT(A) that unvouched salary which could not be proved by assessee during appellant proceedings could not be allowed. Accordingly, after considering merits of case and orders of authorities below, we are inclined to uphold order of ld.CIT(A). This ground of appeal is dismissed. 6. issue raised in second ground of appeal is with respect to confirmation of addition of Rs.1,70,000 - by ld. CIT(A) which was disallowed by AO for non deduction of tax at source u s 40(a)(ia) of Income Tax Act, 1961. 7. Assessing Officer observed that assessee has debited sum of Rs.1,70,000 - under head Consultancy Charges on which no TDS has been deducted by assessee. Accordingly, assessee was given show cause notice which was replied by assessee from time to time during assessment proceedings. During assessment proceedings, it was submitted by assessee before AO that said consultation charges represented salary 4 ITA No.612 Mum 2013 paid to Mr. K L Narayan who is ful time employee of company. said payment was shown under sub- head Consultancy Charges under main head Selling and Distribution expenses. ld.AR further submitted before AO vide letter dated 3.10.2007 Rs.1,70,000 - were paid as delivery charges. assessee also submitted before AO that salary paid to Shri K L Narayan who was full time employee on which professional tax was deducted and deposited to government treasury. AO rejected submissions of assessee as being self contradictory and disallowed amount of Rs.1,70,000 - being consultancy charges and added to total income of assessee u s 40(a)(ia) of Act r.w.s.200(1) of Act for non deduction of tax u s 194J of Act. 8. In appellate proceedings, ld. CIT(A) upheld action of AO on this issue by observing and holding as under : 6.3 I have considered submissions of appellant and order of AO. appellant has been continuously changing its stance and claimed amount to be initially as consultancy charges and then mentioned same as delivery charges and also gave bifurcation of same and later claimed same as salary paid to Shri K.L. Narayan. appellant has not been able to satisfactorily explain changes in stance taken by it. appellant has also not deducted any TDS if same was paid as consultancy charges. If it was paid as delivery charges even then u s. 194C, TDS should have been deducted, which has not been done. Therefore, stand of AO is upheld and ground of appeal of appellant is dismissed." 9. After hearing ld.DR and on perusal of orders of authorities below, we find that payment made to Shri K L Narayan on account of salary was 5 ITA No.612 Mum 2013 disallowed by AO by holding that assessee had made self contradictory statements. AO observed that if payment was by way of salary how, it could be shown under head Consultancy Charges , whereas assessee time and again reiterated before AO that payment was on account of salary on which processional tax has been deducted. ld. CIT(A) dismissed appeal of assessee on ground that no TDS was deducted and deposited in government treasury. In our opinion, ends of justice would meet, if matter is restored back to file of AO for verifying whether recipient of salary has paid tax on said income by filing his return of income and if so, AO to allow claim of assessee as per second proviso to section 40(a)(ia) of Act. second ground of appeal is allowed for statistical purposes. 10. In result, appeal filed by assessee is partly allowed for statistical purposes. Order pronounced in open court on 14.10.2016. Sd sd (MAHAVIR SINGH ) (RAJESH KUMAR) Judicial Member Accountant Member Mumbai; Dated :14.10.2016 Sr.PS:SRL: 6 ITA No.612 Mum 2013 Copy of Order forwarded to : 1. Appellant 2. Respondent 3. ( ) CIT(A) 4. CIT concerned 5. , , DR, ITAT, Mumbai 6. Guard File BY ORDER, True copy (Dy. Asstt. Registrar) , ITAT, Mumbai Mediline Pharmaceuticals (India) Private Limited v. Income-tax Officer, Ward 8(2)(4), Mumbai