IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: NEW DELHI BEFORE SHRI G. D. AGRAWAL, VICE PRESIDENT AND SMT SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A .No.-312/DEL/2014 (ASSESSMENT YEAR 2009-10) M/s. Ashok & Co vs ITO 8 DAV School Building, Ward-24(2) Yusuf Sarai, New Delhi New Delhi 110 017 AABFA0373R (APPELLANT) (RESPONDENT) Appellant by Sh. R. S. Singhvi, CA Respondent by Sh. S. K. Jain, SR. DR Date of Hearing 10.08.2016 Date of Pronouncement 20.10.2016 ORDER PER SUCHITRA KAMBLE, JM This appeal is filed by assessee against order dated 19/11/2013 passed by CIT(A)-XXVIII, New Delhi. 2. grounds of appeal are as follows:- 1. order of Learned CIT (Appeal)-XXVIII is bad in law and on facts of case. 2. Learned CIT (A) erred in treating alleged personal expenses of partner in hand of partnership firm without any evidence. 3. learned CIT (A) erred in confirming following additions made by Learned Assessing Authority. a. Marriage Expenses of Partner s daughter 35,06,000/- b. Alleged Inflated salary 6,25,210/- 4. Learned Assessing Officer erred in making addition of estimated marriage expenses of Rs. 35,06,000/- on basis of rough piece of paper without any supporting evidence. 5. learned Assessing Officer erred in not taking into consideration following sources for marriage expense. a) Payment from personal saving bank A/c 2,18,081/- b) Contribution by Mr. Ram Avtar 5,80,000/- c) Sagan from relatives & Friends 15,10,800/- d) Personal source of Mrs. Mukta Gupta & Vaishali Gupta 1,85,000/- e) Personal saving of Mr. Subhash Gupta 45,000/- 6. learned CIT(A) has not considered that following marriage functions were held and payment were made from personal sources of Mr. Subhash Gupta:- a. Ring Ceremony 1,00,431/- b. Marriage Ceremony 1,17,650/- c. Family relatives & friends for get together 45,000/- 7. Learned Assessing Authority failed to bring on record any amount of inflated salary. On contrary higher payment of salary was considered by learned visiting official again actual salary paid to employee as per record of firm. 8. Learned Assessing Authority did not consider attendance register of employee for purpose of allowing salary expenses. No specific item was pointed out which was not allowable or inflated. 9. assessee craves leave to add, amend or delete or withdraw any ground of appeal at time or before hearing of appeal. 3. Survey under Section 133A of Income Tax Act, 1961 was carried out in case of assessee and surrender of Rs.85,00,000/- was made in two separate assessment years i.e. Rs. 41,31,210/- in A.Y. 2009-10 and Rs.43,68,790/- in A.Y. 2010-11. In relevant year surrender composed of Rs.35,06,000/- as unexplained expenses and Rs.6,25,210/- on account of inflated salary expenses. Assessing Officer made addition of surrendered amount. 4. In appellate proceedings, assessee challenged addition of Rs.35,06,000/- added on account of unexplained marriage expenses on basis that Assessing Officer had not considered following sources for meeting marriage expenses. i) Payment from persoan bank A/c & Savings.2,18,081/- ii) Contribution by Mr. Ram Avtar 5,80,000/- iii) Shagan From relatives & Friends 15,10,800/- iv) Persona Sources of Mrs. Mukta 1,85,000/- Gupta & Mrs. Vaishali Gupta v) Personal svings of Mr. Subhash Gupta 45,000/- 25,38,881/- assessee enclosed with his submissions list of alleged cash and other gifts received at time of marriage alongwith confirmations of persons who had allegedly given gifts. assessee also filed claim in regard to personal sources and withdrawals from bank. To verify genuineness and authenticity of claim of assessee, assessee was asked to produce following documents vide order sheet entry dated 09.10.2013. Bills of marriage Photographs of marriage functions Video/CD of marriage functions List of Guest who attended marriage ceremony Bills of marriage ceremony Details of expenditure incurred on various marriage ceremonies. Bills of all purchases made for purpose of gifts to bride, bride groom and his family and friends. Number of Invitation Cards sent Expenditure incurred on stay arrangements for Guests. Expenditure of gifts given to daughter. In response, assessee vide letter dated 12th November, 2013 referred to only two bills already produced as per first bill payment of Rs. 1,17,650/- made in respect of function held at Faridabad on 17th February, 2009 and as per second bill Rs.1,00,430/- had been spent on Lunch on 13th February,2009. Further, assessee claimed that there was no record of attendance or dispatch of cards and there was no video or CD available. CIT(A) gave finding that it was also confirmed that there was no bills regarding expense on purchase of clothes, Jewellery and other ancillary items for bride, bride groom and other relatives. CIT(A) further observed that list of expenses totaling Rs.35,06,000/- also does not contain any expenditure on clothes, jewellery and gifts or any expenditure on catering, tents on marriage functions. list only includes expenditure on dry fruits, silver items, quilt, suitcase, electronic items, clothes, and not on jewellery and on reception etc. Besides, two bills enclosed by assessee shows that there is gap of 5 days between function held on 13th and that held on 17th. Thus there were other marriage ceremonies/ functions in intervening days and from bills it is apparent that they are not bills on account of main marriage ceremony. claim of assessee that expense on marriage is explained as it has been met out of withdrawals and gifts from relatives and friends was not accepted by CIT(A) as surrender made by assessee was clearly over and above expense which has been met out of allegedly explained sources. addition of Rs.35,06,000/- was therefore confirmed by CIT(A). 5. As regards disallowance of salary of Rs. 6,25,210/-, CIT(A) held that during appellate proceedings, in response to specific query, assessee produced copy of attendance register with details of salary paid. assessee was however, unable to produce receipts/vouchers showing actual payment of salary, on plea that same were misplaced. It was apparent from facts that expense on salary has been inflated. disallowance of salary of Rs.6,25,210/- was confirmed by CIT(A). 6. Ld. AR submitted that return of assessment year 2009-10 was filed declaring income of Rs. 3,08,530/- and same was subsequently revised to 5,52,580/-. assessment was made by Assessing Officer vide order dated 22.12.2011 on income of Rs. 46,83,790/-. additions were made on basis of statement of Mr. Subhash Gupta who is one of partners of firm. firm was formed vide partnership deed dated 01.04.2005 which was valid w.e.f. 01.04.2005. It constituted Sh. Subhash Gupta, Sh. Ram Avtar Gupta, Smt. Mukta Gupta. There was survey u/s 133A of Act on 16.11.2009 at business premises namely shop no. 8 DAV School Building, Yusuf Sarai, New Delhi and statement of Sh. Subhash Gupta, partner of firm was recorded on oath. Ld. AR submitted that no addition can be made on basis of statement unless same is supported by any evidence. Ld. AR relied on following case laws wherein it was held that statements given by assessee on oath during search could not be treated as of evidentiary value in assessment, as assessee had retraced these statements. case laws relied upon are as follows: i) CIT V Dr. N. Thippa Setty 525 ITR 322 (Karn) ii) CIT V M/s. Dhingra Metal Works 2010 TIOL 693 HC Del-IT iii) Paul Mathews & Sons V CIT 263 ITR 101 (Ker) iv) Kader Khan 300 ITR 157 (Mad) v) S Arjun Singh V CWT 1989 175 ITR 91 vi) Asst. CIT V Monorajyam 1996 54 TTJ 97 (Coch) vii) Ashok Manilal Thakkar V A. CIT 2005 97 ITD 361(Ahd) 7. Ld. AR further submitted that vide instruction no. F. No. 286/2/2003-IT (Inv) dated March 10, 2003; Board has pointed instances where assessee has been forced to confess undisclosed income during course of search, seizure and survey operation. Such confession, if not based upon credible evidence are later retracted by concern assessee while filing returns of Income, do not serve any useful purpose and therefore, there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed. No attempt should be made to obtain confession as to undisclosed income. 8. As relates to marriage expenses, Ld. AR submitted that there was marriage ceremony of Ms. Vaishali Gupta D/o Sh. Subhash Gupta during financial year 2008-09 (A.Y. 2009-10). Ld. AR submitted that any personal expenditure incurred in individual capacity cannot be treated as income of firm on basis of confessional statement of one of partner. There was no evidence to prove that firm paid any amount to Sh. Subhash Gupta out of its undisclosed income. income has been added on assumption basis. If any income has to be added it should have been taken in hands of concerned partner instead of firm. No evidence / material was found to prove existence of such income of earnings in hands of firm. Ld. AR relied on judgment of Hon ble Apex Court in case of Girdhari Lal Nannelal Vs. Sales Tax Commissioner, M.P. (1977) 109 ITR 726 (SC) wherein it was held that in absence of any material, mere absence of explanation regarding source of expenses would not justify conclusion that sum in dispute represented profits of firm derived from undisclosed sales. 9. Ld. AR submitted in respect of disallowance of salary of Rs. 6,25,210/- that visiting official did not check attendance record for verification of employees who have left job or were on outside duty during survey. assessee was not allowed to consult his accountant or check firm record for verification of salary paid to each employees. In many cases salary expenses claimed by assessee was lower than stated in Sh. Subhash Gupta s statement. comparison figure of salary claimed and allowed as per survey reports. No enquiry was made by visiting officer from staff present with regard to salaries received by them. No discrepancy was pointed out in salary expenses claimed by assessee or item of any inflated salary. details of other employees as per question no. 19 were not recorded in statement of assessee. Ld. AR further submitted that Assessing Officer has disregarded books of accounts produced by assessee during assessment proceedings under Section 143(3) of Act and other primary record solely on ground that assessee has made confessional statement during survey proceedings and voluntary payment of tax against income from undisclosed source surrendered during survey proceedings. assessee retracted during assessment proceedings that salary was paid to employees who has worked or working with assessee firm. copy of attendance register with details of salary was submitted. Assessing Officer has not pointed out any payment which is in excess of actual payment. retraction of assessee was bonafide. 10. Ld. DR submitted that CIT(A) has taken all aspects of case and disallowance on unexplained expenses out of firms income of Rs. 35,06,000/- and Inflated salary expense of Rs. 6,25,210/- was just and proper. Ld. DR also submitted case laws referred by Ld. AR are not relevant. 11. We have heard both parties and perused relevant documents. assessee is partnership firm. submission of Ld. AR that any personal expenditure incurred in individual capacity cannot be treated as income of firm on basis of confessional statement of one of partner. There was no evidence to prove that firm paid any amount to Sh. Subhash Gupta out of its undisclosed income. income has been added on assumption basis. If any income has to be added it should have been taken in hands of concerned partner instead of firm. No evidence / material was found to prove existence of such income of earnings in hands of firm except statement made by partner Sh. Subhash Gupta. Ld. AR relied on judgment of Hon ble Apex Court in case of Girdhari Lal Nannelal Vs. Sales Tax Commissioner, M.P. (1977) 109 ITR 726 (SC) wherein it was held that in absence of any material, mere absence of explanation regarding source of expenses would not justify conclusion that sum in dispute represented profits of firm derived from undisclosed sales. said case law apply in present case as explanation was given by Assessee during assessment proceedings but documents which were shown was not taken congnizance by Assessing Officer for expenses incurred. statement of partner cannot be sole criteria for making addition. Thus CIT(A) was not right in confirming addition in hands of Assessee firm. 12. In respect of disallowance of salary of Rs. 6,25,210/- submission of Ld. AR that no enquiry was made by visiting officer from staff present with regard to salaries received by them. No discrepancy was pointed out in salary expenses claimed by assessee or item of any inflated salary. Assessing Officer has disregarded books of accounts produced by assessee during assessment proceedings under Section 143(3) of Act and other primary record solely on ground that assessee has made confessional statement during survey proceedings and voluntary payment of tax against income from undisclosed source surrendered during survey proceedings. copy of attendance register with details of salary was submitted during assessment proceedings. Assessing Officer has not pointed out any payment which is in excess of actual payment in assessment order. Thus relevant material to establish genuineness of assessee firm was established which was overlooked by CIT(A) as well as by Assessing Officer. 13. In result, appeal of assessee is allowed. order is pronounced in open court 20th of October, 2016. Sd/- Sd/- (G. D. AGRAWAL) (SUCHITRA KAMBLE) VICE PRESIDENT JUDICIAL MEMBER Dated: 20/10/2016 R. Naheed * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Date 1. Draft dictated on 10.08.2016 PS 2. Draft placed before author 10.08.2016 PS 3. Draft proposed & placed before .2016 JM/AM second member 4. Draft discussed/approved by JM/AM Second Member. 5. Approved Draft comes to 20.10.2016 PS/PS Sr.PS/PS 6. Kept for pronouncement on PS 7. File sent to Bench Clerk 20.10.2016 PS 8. Date on which file goes to AR 9. Date on which file goes to Head Clerk. 10. Date of dispatch of Order. 13 ITA NO. 312/DEL/2014 M/s. Ashok & Co v. ITO, Ward-24(2), New Delhi