TaxTMI 
TaxTMI 
2019 (6) TMI 998
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....of foreign exchange. For the Assessment Year (for short "A.Y") 2011-2012, the petitioner submitted ereturn of income declaring total income of Rs. 4,37,543/. During the course of the assessment proceedings, the petitioner submitted audit report and financial statement wherein in profit and loss account under the caption "Expenditure", there was a debit of Rs. 36,53,147/under the head "Administrative and Other Expenses", the breakup of which was at Schedule10, wherein salary and bonus was stated to be Rs. 8,49,818/. The notice dated 27.9.2012 under section 143 (2) of the Act and notice dated 31.7.2013 under section 143(2) of the Act were issued by the Assessing Officer with annexure thereto inquiring about 19 items mentioned there under. As per item No.16, the petitioner was asked to furnish ledger copy of salary and wages expenses along with other three items. The petitioner furnished the details sought for by the Assessing Officer. The Assessing Officer by letter dated 4.12.2013 called upon the petitioner to furnish further details which were supplied by the petitioner vide letter dated 12.12.2013, wherein copies of various expenditure accounts were submitted. The assessment order....
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....ded vide serial no. 25 of the inventory of books as per AnnexureA prepared during the course of survey. 4. The said salary register contains details of payment of salary for entire year. Separate page has been opened for each month in the salary register. On verification of the said salary register, it has been found that total amount of salary payment of Rs, 2,78,700/only has been recorded in it for entire twelve months. At the other hand, on verification the profit and loss account of the assessee, it has been found that the assessee has debited an amount of Rs. 8,49,818/to the P& L account as salary and bonus (other than directors remunerations). 4.1 Case of the assessee for the A.Y. 2011-12 has been scrutinized and assessment order u/s 143 (3) of the Act was passed on 31.01.2014. During the scrutiny proceedings the assessee submitted the ledger amount of salary/bonus expenses. On verification it has been found that the amount of salary expenses claimed by the assessee is of Rs. 7,81,100/( excluding bonus). As against this, evidence of payment of Rs. 2,78,700/only has been found during the course of survey. 5. Thus, it has become very clear that the as....
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....ts, I have reason to believe that it is a failure on the part of the assessee, who has not disclosed fully and truly all material fact necessary for assessment of income for the A.Y. 2011-12, and the income of the assessee, to the extent of Rs. 5,02,400/as discussed above, has escaped assessment within the meaning of section 147 of the IT Act. I am satisfied that the assessment has escaped income to the extent of Rs. 5,02,400/for the reasons mentioned above and the case of the assessee is fit case for invoking the provisions of section 147 of the Income tax Act and issue of notice under Section 148 of the Income Tax Act. 9. Therefore, notice u/s. 148 of the I.T. Act is issued to the assessee." 5. The petitioner filed the objections to the aforesaid reasons on 16.8.2018 contending interalia that the petitioner had two offices; one at Navsari and other at Bardoli with staff at both the places and the expenditure of Rs. 7,81,100/was the total of the salary register at Navsari and Bardoli; salary at Navsari unit was Rs. 2,78,700/. It was pointed out that salary register of Navsari unit was impounded, but the salary register of Bardoli unit was not impounded and therefore, i....
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....6 of the Constitution of India challenging the impugned notice. 7. Learned advocate Mr. Manish Shah for the petitioner submitted that the impugned notice under section 148 of the Act and the order rejecting the objections are bad in law inasmuch as the condition precedent for reopening a scrutiny assessment beyond a period of four years as laid down by the proviso to section 147 of the Act is that the escapement of income from assessment must be by reason of omission or failure on part of the assessee to disclose fully and truly all material facts necessary for assessment. It was submitted that this condition is not fulfilled by the respondent on the facts of the case. The petitioner disclosed not only all facts pertaining to salary and wages during the course of assessment, by supplying the information when asked for by the Assessing Officer, but in fact, the respondent ought to have been convinced after reading the objections that the very foundation of the reasons recorded was the salary register of one unit, when in fact, the petitioner had two units and Rs. 7,81,100/was the sum total of the salary recorded in the salary register of two units situated at Navsari and Bardoli.....
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....s under : "3. The objections of the assessee have been considered and the same are not found to be tenable for the following reasons: 3.1 The reopening has been made after duly recording the reasons by the A.O. The facts suggest that the reopening of the assessment u/s147 has been done after following the due procedures of law and hence there is no illegality involved therein. Copies of impounded material and statements recorded have been supplied to the assessee company when a request received from its end. 3.2 In this case, an survey action u/s. 133 A of the I.T. Act, 1961 was carried out on 14/15.09.2018 wherefrom a salary register for F.Y. 201011 relevant to AY 201112 was found and impounded from the business premises of the assesseecompany. As per the said salary register a payment of Rs. 2,78,700/has been recorded for whole FY 201011 whereas in the books of accounts the same has been debited to tune of Rs. 7,81,100/which reveals this fact salary expenses were bogus and inflated to the tune of Rs. 5,02,400/. During the course of survey proceeding, Shri. Chetanbhai A. Kapadia, Director of the Company, was examined on oath and he failed to explanation ....
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.... view of the discrepancy between the salary register impounded and expenses debited in profit and loss account, there is a failure on part of the petitioner to disclose truly and fully all material facts and, therefore, the impugned notice under section 148 of the Act is legal and valid. 10. This is a classic case of total non application of mind on behalf of the respondent while passing an order rejecting the objections filed by the petitioner pursuant to the issuance of notice under section 148 of the Act. The respondent has brushed aside the justification, explanation and reconciliation furnished by the petitioner in the objections to the effect that the impugned notice is issued only considering the salary register of Navsari unit and the salary register of Bardoli unit has not been taken into consideration. In view of reconciliation furnished by the petitioner in the objections, any prudent person would have dropped the reopening proceedings. In facts of the case, the respondent while rejecting the objections, without considering the justification and reconciliation provided by the petitioner, has rejected the same as empty formality. The Apex Court in case of GKN Driveshaf....
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....ated as under : "On verification of detailed furnished by you vide letter dated 18.08.2013, it is observed that: (i) You have balance with scheduled bank in fixed deposit to the tune of Rs. 45,52,610/and you have shown interest income thereon of Rs. 2,54,746/. Further, you have obtained unsecured loans from Director of Rs. 23,47,277/and interest paid thereon to the tune of Rs. 3,71,138/. It is noted that the said payment is covered u/s. 40 A(2)(b) of the Act. Considering the above, you are requested to explain why the interest given on unsecured loan to Directors is restricted to 6% instead of 12% paid by you as you earned interest on fixed deposits hardly @ 6%. (ii) On verification of audit report, it is further observed that you have paid Director Remuneration of Rs. 5,78,400/to Smt. Sheetaben A. Kapadia and salary of Rs. 1,76,000/to Mrs.Pinalben C. Kapadia. The payment given to these two lady is specified under section 40 A (2)(b) of the Act. Therefor, you are requested to furnish the details of qualification and natures of work/duty performed by these two ladies and justify you claim." 12. The petitioner furnished information with regard to the pay....