ACIT Vs M/S. Jay Ushin Ltd.

1. This appeal by the Revenue is directed against the order of ld. CIT (Appeals)-XXVI, New Delhi dated 15.05.2017 pertaining to AY 2014-15.

2. The grounds of appeal taken by the Revenue read as under :-

“I. The Ld. CIT(A) has erred on facts and in law in deleting the addition made on account of excess availability of cash over and above its cash balance as per books of account amounting to Rs.40,00,000/- as the assessee failed to explain the same satisfactorily during the course of search & seizure operation in the premise of the assessee as well as assessment proceeding.

II. The Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs.2,40,00,000/- made on account of none genuine claim of reimbursement of expenditure to employees by the assessee company.”

3. Apropos addition of Rs.2,40,00,000/- : This addition pertained to the amount paid to employees as reimbursement of expenses. The AO at para 4 of the assessment order highlighted that statement of Sh. Deepak Pandey, Cashier had been recorded wherein he had admitted practice being followed in the company whereby part of the salary paid to the employees was in the form of conveyance/travelling vouchers reimbursement. It was stated by Sh. Deepak Pandey that the said travelling/conveyance vouchers were not representative of any actual travelling or conveyance but part of an agreed amount to be paid to an employee and therefore was part of salary and in the process, no TDS on such amount representing reimbursement was deducted. The AO highlighted the statement of Sh. Deepak Pandey as under:

"Q.13: Please state whether any part of salary is paid in cash to the employees of the company.

Ans: Part of the salary is paid in cash which is looked in the head of conveyance/travelling expenses. This cash is paid to 25-30 employees. Total monthly 18-20 lacs rupees.

Q.14: Please state whether any TDS is deducted from this payment.

Ans. No TDS deduction is made on this payment.

Q.15: Please state whether travelling bills and expenses incurred are reimbursed to these employees.

Ans.: Actual expenses incurred by all the employees are reimbursed. This reimbursement includes these employees also.

Q.16: Please state whether actual conveyance incurred is also paid to these employees.

Ans. Yes that is also paid.

Q.17: Please state then why the cash paid on the name of travelling expense should not be considered as part of salary.

Ans. Yes this payment is part of salary only. However it is booked under head of travelling expenses."

The AO after confronting the said statement to the assessee estimated such an amount to be Rs.2.4 crores on the basis that Sh. Deepak Pandey had projected such reimbursement at Rs. 20 lakh per month approximately. The AO held that in the given facts and circumstances of the case, it could be easily inferred that the impugned amount was nothing but part of the salary given to the employees and therefore Rs.2.4 crores was added to the total income of the assessee.

4. Upon assessee’s appeal, ld. CIT (A) referred to the submissions of the assessee and deleted the addition by observing as under :-

“ From the perusal of the above it may be observed that disallowance / addition made by the learned Assessing officer on the ground that TDS have not been deducted on the said expenses shows lack of application of mind and is against the statutory provisions of Income Tax Act and the same may be observed from the perusal of the following:-

i) The learned Assessing officer disallowed the expenses on the ground that the assessee avoided the TDS liability by not showing the expenses under the head salary. In this regard it may be observed that only section for disallowing the expenses for non deducting / depositing the TDS is section 40(a)(ia) of the Income Tax Act. In this regard from perusal of section 40(a) (ia) of the Income Tax Act it may be observed that expenses under the head Interest. Commission, rent, professional fees and contract expenses etc is covered under section 40(a) (ia) of the Income Tax Act and expenses incurred under the salary is not covered u/s 40(a)(ia) of the Income Tax Act. As such no disallowance can be made on the ground that TDS have not been deducted on salary expense by showing the same under the head conveyance / travelling expenses.

 ii) The statement of Shri Deepak Pandey have been recorded on 21/09/2013 and the addition / disallowance have been made for the period from 01/04/2013 to 31/03/2014 (that means disallowance have been made even in respect of subsequent periods on the basis of assumption)

iii) In response to the query of the Assessing officer it has been submitted that Deepak Pandey is a mere cashier of the company having a very limited accounting and procedural knowledge and accordingly, he is only performing duties of collecting and disbursing cash in terms of instructions of his supervisors and department head. The statement have been given out of unknown fear or pressure and these facts have been reproduced in the assessment order

iv) The amount of disallowance of Rs 2,40,00,000/- is only based on assumption and have no base. In the statement so recorded the amount of expenses on which TDS have been assumed to be given as per statement is Rs.18 to 20 lacs and the said assumption is contrary to the facts on record.

From the perusal of the above, it may be observed that disallowance made by the Assessing Officer is neither sustainable in view of the facts of the case and is also against the statutory provisions of Income Tax Act and as such addition made by the learned Assessing officer may please be deleted.”

5. Against the above order, Revenue is in appeal before us. We have heard both the parties and perused the records.

6. Ld. DR for the Revenue relied upon the order of Assessing Officer.

7. Per contra, ld. Counsel for the assessee relied upon the order of ld. CIT (A).

8. Upon careful consideration, we note that the entire addition has been made by the AO on the basis of statement of Deepak Pandey, cashier of the assessee. No cogent material is available apart from that statement. Hence, the analysis done by the ld. CIT (A) is sustainable. Accordingly, we uphold the order of ld. CIT (A) on this issue.

9. Apropos issue of cash balance of Rs.40,00,000/- : during the assessment proceedings, from the perusal of the seized material and related documents, AO observed that a sum of Rs.57,34,120/- was found at the office-cum-factory of assessee situated at GP-14, HSIDC, Sector 18, Gurgaon. On being asked the source of this cash, AO noted that assessee could not explain for the same. Thereafter, AO referred to the reply of the assessee in this regard which reads as under :-

“With reference to your query to explain the cash found from Jay Ushin Ltd of Rs.40,00,000 we would like to draw your kind attention that the said cash have been found from the premises at GP-14, Sector - 18, Gurgaon. The premise at GP-14, Sector - 18, Gurgaon is the corporate office of the JP Minda group. However the Panchanama have been prepared in the name of Jay Ushin Ltd as the company jay Ushin Ltd is the flagship company of JP Mnda Group.

During the course of search cash have also been found from the premises at K-l0/29, DLF Phase - II, Gurgaon and premises at P9, Sector 31, Gurgaon (residence of Shri Ashwani Minda and Shri Anil Mnda). These premises are also used by Shri J P Minda being the father of Shri Ashwani Minda and Shri Anil Minda.

Now we would like to draw your kind attention to the details of cash found and seized during the course of search from the residential premises and office premises of JP Minda group

In this connection it is also important to note that JP Minda family is one family being headed by Shri JP Minda. Shri JP Minda is the father of Shri Ashwani Minda and Shri Anil Minda.

Further being the head of the JP Minda Group the cash in respect of company is also being handled by Shri J P Minda as there is no safe/ locker in the name of the company.

As the JP Minda group is one family and as such the cash balance available in the hands the entities of the JP Minda group is given below :-

From the perusal of the above it may be observed that out of the cash of Rs.1,30,00,000 found during the course of search, cash of Rs 51,66,624 was available in the books of accounts. Now we would like to draw your kind attention that Shri J P Minda and Shri Ashwani Minda has earned undisclosed income of Rs.5,00,38,760 and the taxes on the same have already been paid (the details of surrender of income have already been filed). As such balance cash (which is out of the books of accounts) found during the course of search have been kept by Shri J P Minda and Shri Ashwani Minda out of the undisclosed income earned and surrendered during the course of search.”

10. AO was not satisfied. He did not accept the assessee’s contention that cash of Rs.44,53,136/- was available in the books of the group companies. Since from the assessee’s books only Rs.17,13,406/- was could be verified, the AO added the sum of Rs.40,00,000/-.

11. Upon assessee’s appeal, ld. CIT (A) elaborately considered this issue and deleted the addition by observing as under :-

“12. I have considered the facts of the case, the basis of addition made by the AO and the arguments of the appellant during assessment as well as appellate proceedings. The facts of the case as highlighted by the AO and adduced from the reply of the appellant made during the course of assessment as well as appellate proceedings show that a total amount of Rs.57,34,120/- had been found from the assessee’s premises out of which Rs.17,13,406/- has been accepted by the AO to be the cash in hand as per books of accounts on the date of search.

13. The AO has not accepted the argument put forward by the appellant company that the cash found at the premises of Jay Ushin Ltd. was also pertaining to various other entities of the group as the given address i.e. GP-14, Sector -18, Gurgaon represents the location of number of other entities of J P Minda group. The conclusion of the AO in this regard does not speak of any reasoning except for the view that such an arrangement would not be possible. The fact of matter is that the appellant group of entities known as J P Minda group are being controlled by individuals like J P Minda and Ashwini Minda through different entities most of which in terms of their operations are located at GP-14, Sector- 18, Gurgaon. The claim of the appellant that cash belonging to the individuals as well as other entities could be available at GP-14, Sector 18, Gurgaon is reasonable in view of the above factual situation. The strict compartmentalisation of cash belonging to particular entity being available at a centralised location is a common feature seen over a period of time especially in view of the fact that various entities and individuals of the group operate from common address. It is also apparent that cash seizure had been made in the hands of the two entities i.e. Jay Ushin to the tune of Rs.40,00,000/- and Anu Auto Industries Ltd. to the tune of Rs.6,00,000/- even though cash in hand with respect to other entities was also as per their books of accounts at the given address. Therefore the claim of the appellant in this regard being logical cannot be brushed aside without bringing on record any adverse evidence.

14. It is further seen that various documents had been seized from the premises of the Sh Ashwani Minda evidencing generation of unaccounted income and its application in the form of expenses etc. The said documents have been seized as page number 12 to 51 of annexure AA-6. The perusal of the impugned seized documents clearly show that it is a cash book wherein the cash balance as on 31.08.2013 was 1.18 crore. It is also a fact that Ashwani Minda along with other members of the J P Minda group had accepted the unaccounted nature of documents seized and in consequence thereof disclosure had been made in the return of income in the case of the individuals for different financial years. It is also a fact that Ashwani Minda had surrendered a sum of Rs.3,01,16,100/- on the basis of documents found and seized from him at page number 12 to 51 of annexure AA-6 and the said surrender had been duly disclosed in the return income filed for different years and the said surrender had been accepted by the AO as well. The only question which remains to be addressed is as to in what form the impugned unaccounted income had been kept by the appellant. The seized record in the form of cash book highlighted by the appellant in its written submissions and also discussed by the AO in the assessment order of Sh Ashwani Minda clearly points out that the Ashwani Minda had cash in hand as per the said cash book. Therefore the recovery of physical cash on the date of search is nothing unexpected in the given circumstances of the case. The income earned and recorded in the unaccounted cash book has to be in the form of some assets which in the present case happens to be the cash recovered from the premises of entities appellant group to the tune of Rs.57,34,120/-. Since the income has already been surrendered and disclosed in the return of income, there cannot be any separate addition for the cash found at different location which in this case happens to be the office headquarters of JP minda group at GP-14, Sector -18, Gurgaon. In view of the above detailed facts and circumstances of the case, the addition made by the AO to the tune of Rs.40,00,000/- is directed to be deleted.”

12. Against the above order, the Revenue’s is in appeal before us. We have heard both the parties and perused the records.

13. We note that the ld. CIT (A) has analyzed the facts properly and noted that AO has not accepted the argument of the assessee company that cash found at the premises of assessee was also pertaining to various other entities of the group as the given address i.e. GP-14, Sector 18, Gurgaon represented the location of number of other entities of J.P. Minda group. Ld. CIT (A) has correctly noted that AO has rejected the explanation by only observing that such arrangement could not be possible. However, on the facts of the case, ld. CIT (A) found that it is quite possible. We have gone through the order of ld. CIT (A) and we find that deletion has been rightly done. Hence, we affirm the order of ld. CIT (A) on this issue.

14. In the result, this appeal by the Revenue stands dismissed.