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TAXAP/2103/2009 4/ 4 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 2103 of 2009
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COMMISSIONER
OF INCOME TAX-I - Appellant(s)
Versus
BROADWELD
PRIVATE LIMITED - Opponent(s)
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Appearance
:
MR MR BHATT,
SR.ADV. with MRS
MAUNA M BHATT for Appellant(s) : 1,
None for Opponent(s) :
1,
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CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 11/04/2011
ORAL
ORDER
(Per
: HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The
Revenue is in appeal against the common judgment of the Tribunal
dated 5.12.2008. In different appeals different questions arise.
However, all questions arising in all appeals can be summarized as
under:-
“[A] Whether,
on the facts and in the circumstances of the case, the Tribunal was
right in law in deleting the disallowance of salary debited in the
name of Hasubhai Chokshi without appreciating the fact that finding
that the name of Shri Hasubhai Chokshi was not appearing on the
muster roll of the company?
[B] Whether, on
the facts and in the circumstances of the case, the Tribunal was
right in law in upholding the order of the CIT(A) deleting the
addition on account of suppression of closing stock without
appreciating the fact that on the basis of diary found during the
survey, the Assessing Officer worked out the suppression of closing
stock ?
[C] Whether, on
the facts and in the circumstances of the case, the Tribunal was
right in law in upholding the order of the CIT(A) deleting the
addition on account of suppression of net profit without appreciating
the fact that additions were made on the basis of notings in the
diary found during the survey action u/s. 133A of the Act?”
2. With
respect to the first question, by a separate order passed today, we
have found that no question of law is arising in this appeal.
Observations made today in Tax Appeal No.2096 of 2009, is reproduced
as under:-
“1. Revenue
is in appeal against the judgment of the Income Tax Appellate
Tribunal (“the ITAT” for short) dated 5.12.2008 raising
following question for our consideration:-
“Whether,
on the facts and in the circumstances of the case, the Tribunal was
right in law in deleting the disallownace of salary debited in the
name of Hasubhai Chokshi without appreciating the fact that finding
that the name of Shri Hasubhai Chokshi was not appearing on the
mustor roll of the company?”
2. With the
assistance of the learned counsel for the Revenue we have perused the
orders on record. Issue pertains to disallowance of Director’s
salary. The Assessing Officer disallowed the salary in total. The
issue is carried in appeal by the assessee. CIT(Appeals) limited the
disallowance to 50% of the salary. There were, therefore,
cross-appeals by the assessee as well as the Revenue. ITAT granted
full relief and allowed the entire salary by way of deduction by the
impugned order. Thereupon, the present Tax Appeals have been filed by
the Revenue.
3. We find that
the entire question is factual in nature. The Tribunal, on the basis
of the evidence on record, found that the Director’s salary could not
have been disallowed. The Assessing Officer’s view that the Director
was not signing the muster roll was discarded by the Tribunal opining
that the Director of the company is not expected to put his
attendance in the Register. It was further observed that the
Assessing Officer thus exceeded his jurisdiction. Services rendered
by the Director were not denied. Once the Director has rendered his
services, the remuneration paid to him is allowable and the same
ought not to have been denied by the Assessing Officer except to the
extent provided in Section 40A(2) of the Income Tax Act. Thus, the
Tribunal found that the onus was on the Assessing Officer to prove
that the assessee had incurred expenditure by paying remuneration to
the Director more than the fair market value of the services rendered
by him. The Tribunal found that no iota of evidence was brought on
record in this regard. Considering the observation of the Tribunal
and the material on record, we are of the view that the entire issue
is based on facts. The Tribunal has, applying evidence on record,
come to the conclusion that the Director’s salary could not have been
disallowed. We see no reason to interfere. Tax Appeal is, therefore,
dismissed. ”
3. With
respect to second question, we find that the Tribunal, after
considering the evidence on record, held and observed as under:-
” If a
diary has been seized and the paper found therein contains details
which have not been disowned by the assessee, the figures stated
therein have to be accepted as it is. The Assessing Officer, in our
opinion, can make the addition on the basis of this paper only during
assessment year 1998-99 and 2000-01, not in the other assessment
years. We, therefore, set aside the order of the CIT(A) and direct
the Assessing Officer to make the addition of Rs.62, lacs in
assessment year 1998-99 and Rs.91,38,000/- in assessment year
2000-01. Thus, Ground No.3 for assessment years 1996-97,
1997-98,1999-2000 and 2001-20 is allowed while Ground No.3 for
assessment years 1998-99 and 2000-01 stands dismissed. While the
Revenue’s Grounds 1(ii) and (iii) assessment year 1996-97, Ground
No.1(ii) for assessment year 1997-98, Ground No.1(ii) and (iv) for
assessment year 1999-2000 and addition ground in assessment year
2000-01 stands dismissed, and the additional Ground for assessment
year 1998-99 as well as Ground No.1(ii) and (iii) for assessment year
2001-02 are allowed.”
4. Upon
perusal of the orders on record, in particular that of the Tribunal,
relevant portion of which has been reproduced hereinabove, we find
that the entire issue is based on facts, the
Tribunal having gathered the facts and having applied statutory
provisions to such facts, no question of law arises.
5. With
respect to third question also, we find that the Tribunal, after
taking note of the evidence on record and the orders passed by the
Assessing Officer as well as CIT(Appeals) on the issue, observed as
under:-
” We have
carefully considered the rival submissions and perused the material
on record and have also gone through the diary appearing at page 260
of the paper book. Although we do not agree with the findings of the
CIT(A) that the figures given at pages-10 and 12 are merely
objections. We have already held that the assessee has worked out the
net profit on the basis of net profit and sustained the addition to
that extent. The assessee has also worked out the stock after
reducing the discount and once on this paper net profit has been
worked out and has duly been sustained by us, the profit is always
worked out after considering the closing stock. Therefore, in our
opinion, no separate addition can be made in respect of closing stock
as this has duly been considered and valued by the assessee in the
diary at page-10 after reducing there from the discount. Stock is
always valued at cost or market value, whichever is less. Therefore,
we are of the view that no separate addition can be made on account
of closing stock. The order of the CIT(A) is sustained only to the
extent that the addition on account of closing stock stands deleted,
although on different reasons.”
6. Here
also we find that the Tribunal has, on the basis of evidence on
record given its conclusion and no question of law is arising. In the
result, all Tax Appeal is dismissed.
(Akil
Kureshi, J. )
(Ms.
Sonia Gokani, J. )
sudhir
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