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1.5 Further, the Appellant submits that even after considering 49 new employees which were employed only in FY 2012-13, total salary expenses for the FY 2012-13 amounts to only Rs.5,56,89,030 as against annualized -salary expenses of Rs.5,90,34,991 which would have been incurred in FY 2011-12. The working of the same is also attached DCIT vs. Cytespace Research Pvt. Ltd.

Asst.Year -2013-14 in Annexure 5. Thus, on an overall basis, your Honour would appreciate that salary expenses in the FY 2012-13 has decreased by approximately 5.6% as compared to salary expenses in FY 2011-12. As against the above decrease in salary cost. the turnover of the Appellant had increased by almost 27% from Rs. 4,10,44,812 in F.Y. 2011-12 to Rs.5,21,24,174/- in FY 2012-13. In this regards, it is submitted that the learned AO, Para 3 on page 4 of his assessment order has stated that turnover of the Appellant had reduced by Rs.1,10,79,362 in FY 2012-13 as compared to turnover in FY 2011-12 when in fact it had increased by the said amount of Rs. 1,10,79,362 over the previous year. The same can also be verified from financial statements of FY 2012-13 attached as Annexure 1 above. In view of the above, it is stated that the allegation of the learned AO that there is a sharp increase in salary as compared to the turnover of the Appellant is incorrect and without any basis.

2.5.1. Further, the Appellant submits that even after considering 49 new employees which were employed only in FY 2012-13, total salary expenses for the FY 2012-13 amounts to only Rs.5,56,89,030/- as against annuallzed salary expenses of Rs. 5,90,34,991/- which would have been incurred in FY 2011-12. The working of the same is a/so attached in Annexure 5. Thus, on an overall basis, it would be appreciated that salary expenses in the FY 2012-13 has decreased by approximately 5.6% as compared salary expenses in FY 2011-12. As against the above decrease in salary cost, the turnover of the Appellant had increased by almost 27% from Rs.4,10,44,812/- in FY 2011-12 to Rs.5,21,24,174/- in FY 2012-13. In this regards, it is submitted that the AO, para 3 on page 4 of his assessment order has stated that turnover of the Appellant had reduced by Rs. 1,10,79,362/- in FY 2012-13 as compared to turnover in FY 2011-12 when in fact it had increased by the said amount of Rs. 1,10,79,362/- over the previous year.

2.6.1. Further, as per the signed financial statements submitted by the Appellant, the turnover of the Appellant, has increased by almost 27 percent from Rs, 4,10,44,812/- in AY 2012-13 to Rs. 5,21,24,174/- in AY 2013-14. Therefore, the contention of the AO that there is a sharp increase in salary expenses whereas the turnover has decreased is factually incorrect. As regards increase in salary paid to the two directors namely Himanshu Shah and Suresh Ramu in AY 2013-14, it is again observed that both of them were only employed for 6 months in AY 2012-13 whereas they were employed for the full part in AY 2013-14. As per the employment contract signed between the Appellant company and Suresh Ramu and Himanshu Shah, it is observed that they were both appointed on 1 October, 2011. Hence, their salary in AY 202-13 was only for 6 months whereas in AY 2013-14, they were employed for a complete period of 12 months. Hence, there is no actual increase in the salary paid to them in AY 2013-14.