M/S. LA TRENDZ FABRICA PVT. LTD, MUMBAI V. DCIT CC-7(4) , MUMBAI

CO 24/MUM/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9312 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-10-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-08-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 09-03-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; TDS; Set aside
• Section: 131; 40A(3); 133A; 153A; 37(1); 143(1); 143(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI KULDIP SINGH, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NOs.1535, 1536, 1537 & 1538/MUM/2021 (A.Ys. 2015-16, 2016-17, 2017-18 & 2018-19) DCIT (CC)-7(4) Room No. 658, Aayakar Bhavan M.K. Road, Mumbai - 40002 v. M/s. La Trendz Fabrica Pvt. Ltd., 29, Apporva Industrial Estate Makwana Road, Off Andheri Kurla Road Mumbai-400059 PAN: AAACL8260A (Appellant) (Respondent) C.O. Nos. 22, 23, 24 & 25/MUM/2022 [ARISING OUT OF ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 (A.Ys. 2015-16, 2016-17, 2017-18 & 2018-19)] M/s. La Trendz Fabrica Pvt. Ltd., 29. Apporva Industrial Estate Makwana Road, Off Andheri Kurla Road Mumbai-400059 PAN: AAACL8260A v. DCIT (CC)-7(4) Room No. 658, Aayakar Bhavan M.K. Road, Mumbai - 40002 (Appellant) (Respondent) Assessee by : Shri Rakesh Joshi Department by : Shri Rajesh Damor Date of Hearing : 30.08.2022 Date of Pronouncement : 31.10.2022 2 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., O R D E R PER S. RIFAUR RAHMAN (AM) 1. These appeals and cross objections are filed by the revenue and assessee respectively, against different orders of the Learned Commissioner of Income Tax (Appeals)-49, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 22.06.2021 for the A.Ys.2015-16, 2016-17, 2017-18 and 2018-19. 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal of the revenue and cross objection of the assessee for the A.Y. 2015-16 as a lead assessment year. A.Y. 2015-16 ITA.No. 1535/MUM/2021 – Revenue Appeal C.O. NO. 22.MUM/2022 - Assessee Appeal 3. Brief facts of the case are, assessee is a Domestic Limited Company, engaged in the business of manufacturing and trading of textile and job work on textile items. The original return of Income 3 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., u/s.139(1) of the Income-tax Act, 1961 (in short “Act”) was filed on 30.09.2015 declaring the total income at Nil and the same was processed u/s. 143(1) of the Act. Subsequently, on 01.02.2018, a search action was carried out in the case of M/s. Indo Count Industries Ltd (ICIL), assessee and others. The case of the assessee was centralized with Central Circle-7, Mumbai vide its order dated 25.10.2018. Accordingly, notice was issued u/s. 153A. In response to the said notice, the assessee has filed return of income on 20.03.2019 declaring total Loss of ₹.2,27,41,653/-. Subsequently, notice U/s. 143(2) was issued on 10.05.2019 by DCIT, Central Circle 7(4), Mumbai. In response, AR of the assessee attended and submitted the relevant information as called for. 4. During the course of Assessment proceedings, the Assessing Officer issued a show cause notice asking as to why Job work charges paid to various parties should not be disallowed. In response to the said notice assessee submitted its reply on 16.12.2019 along with documentary evidence to prove the genuineness of the transaction and submitted that the transactions are genuine. 4 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., 5. Further, it was submitted that the assessee is engaged in manufacturing, trading and job work of the fabrics. The only manufacturing unit of the company is situated at Hatkanangale of Kolhapur District. Assessee undertakes the job work on behalf of its various clients namely M/s Indo Count Industries Ltd., M/s Welspun India Ltd., M/s. Grasim Bhiwani Ltd., Creative Textiles Ltd. and others. Assessee had undertaken weaving work at a very competitive rate and for the same, it had further appointed the contractor to undertake the job work for weaving work at its factory premises at Kolhapur, Maharshtra at GAT No 871, Tilwani Krochi Road, Village at post Krochi Ropad, Hatkhangle, Dist. Kolhapur. This work was done through 23 contractors who worked in the factory. A memorandum of understanding was entered between the assessee and its 23 contractors whereby it was decided that the assessee would provide the necessary infrastructure/machinery, power-looms and the premises to carry out the weaving work and the contractor would incur the necessary expenses i.e., electricity charges and the labour charges in its factory at Kolhapur. Each job worker has taken electricity Connection in their name. Moreover, the Central Government in order to promote the textile industries had initiated the Group Work Shed Scheme for power 5 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., loom weavers. Under the scheme, many job workers were allowed to carry its job work at one business premise. The copy of the notification issued by the Ministry of Textile was also submitted for reference. 6. Not convinced with the submissions of the assessee, Assessing Officer proceeded to make the assessment order u/s.143(3) r.w.s. 153A of the Act and assessed the total income of the assessee at ₹.2,11,37,441/- after making disallowance of ₹.4,38,79,094/- by treating job work charges paid to various job worker as non genuine. 7. Aggrieved with the above order assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) considered the detailed submissions made by the assessee before him which is reproduced in Para Nos. 6.0 and 6.1 at Page No. 5 to 13 of the CIT(A) order and partly allowed Ground No.1 by disallowing the job work charges and allowed the issues in respect of commission income on sales with the following observations: - “6.4.1. I have considered the facts of the case, the findings of the Ld. AO as appearing in the impugned assessment order, the submissions of the assessee and the documents filed by the assessee in the paper book. 6.4.2 The assessee is a company engaged in the business of manufacturing and trading of textiles and job-work of textile items. 6 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., The assessee has manufacturing unit at Hatkanangale of Kolhapur District. The assessee undertakes job-work on behalf of its clients namely M/s Indo Count Industries Ltd., M/s Wellspun India Ltd., M/s Grasim Bhavani Ltd., and M/s Creative Textiles Ltd. A search and seizure operation were conducted in the case of M/s Indo Count Industries Ltd. and related concerns and the assessee was also covered in the said search operation. 6.4.3 The assessee company has undertaken weaving work for its clients and the claim of the assessee is that the work was performed by engaging 23 job workers at its own premises at Hatkanangale of Kolhapur District. A memorandum of understanding was drawn between the assessee and these 23 contractors whereby it was decided that the assessee would provide necessary infrastructure, machinery, power looms and the place to carry out the weaving work and the respective contractors would incur all other expenses such as electricity charges, labour charges, etc. The assessee submitted that the Central Government, in order to promote the textile industries, had initiated a 'Group Workshed Scheme' for the Powerloom Weavers. Under this scheme, many job workers were allowed to carry its job-work at one business premises. A copy of the notification issued by the Ministry of Textiles was also filed for reference. Thus, in view of the above memorandum the appellant company had provided specific area and machinery to the contractor for undertaking the job work to have better quality control competitive cost, smooth functioning of the factory production and manpower management. The copy of the letter for allotment of area and machinery to the contractor was also filed. The claim of the assessee is that multiple job workers were mainly employed to avail the competitive tariff of electricity under the 'Group Workshed Scheme' and they were provided all the machinery and equipment for performing the work whereas they were paying for the electricity bills, labour charges and other such ancillary expenses relating to the work. 6.4.4. The assessee further submitted that the charges paid to various Job workers for the weaving was as per the bills submitted by them from time to time. The claim of the assessee is that copy of the bills issued by the job worker was seized by the department at the time of the search action and that it had also submitted the 7 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., details of the persons to whom it had paid the job worker charges at time of search action, all the job work charges had been paid through the account payee cheque and the appellant company had also deducted TDS as applicable. The contention of the assessee in this regard is that work was actually done by the respective job worker. In support to claim that the weaving work had been done by the respective Job workers, the appellant company filed documents claiming that most of these documents were seized from its factory premises during the search operation, which included Ledger Account confirmation, Partywise detail of Job Work charges received, Partywise detail of Weaving Charges paid, Copy of the bank statement duly highlighting the payment made for the Weaving charges paid to contractor and Copies of the electricity charges bill paid by Job Provider. 6.4.5. On perusal of the assessment order, it is evident that the Ld. AO has primarily based his findings on the statement of Shri Santosh Singh, Shri Suresh Modi and Shri Rakesh Kumar Saini as referred to in the assessment order. The key findings of the Ld. AO are that these individuals, in their respective statements, have accepted the fact that no job-work was performed by the 23 job workers and also that these job workers do not have their own machinery or equipment and they do not have any godown to store the goods. In other words, the finding of the Ld. AO is that these job workers are mere name-lenders and they have not performed any work for the assessee and, therefore, the job-work charges paid to them was held as bogus and ingenuine and the expenditure towards the same was accordingly disallowed. 6.4.6. The contention of the assessee in this regard is that the job workers are genuine. All the machinery, infrastructure, power looms and even the premises were provided to the job workers by the assessee. They performed job accordingly and they have paid for expenses such as electricity, labour charges, etc. Further contention of the assessee is that during the course of search no evidences were found so as to form any opinion that the expenses claimed by these job workers were not genuine. The assessee has further submitted that even the bills of payments by these job workers were seized from factory premises of the assessee which proves the genuineness of those payments. The assessee has also 8 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., submitted that the Ld. AO has misinterpreted the statement of Shri Santosh Singh and Shri Suresh Modi recorded U/s. 132(4) of the Act by holding that Shri Santosh Singh and Shri Suresh Modi has accepted that the job-work charges paid to various associate entities was only on account of the power connections being in the name of those entities and in reality, no services have been rendered by these entities other than paying the power bills. The claim of the assessee is that these individuals have never stated that no job-work was done. Rather, both Shri Santosh Singh and Suresh Modi have stated that the parties are working under 'Group Workshed Scheme' to reap the benefits of concessional power tariff. These concerns have been paid job work charges and they in turn paid for labour and power charges. As to the statement of Shri Rakesh Kumar Saini recorded u/s 131 during the course of survey proceedings stating that no job-work was done by the company M/s Banbury Impex Pvt. Ltd., the claim of the assessee was that Shri Saini was working at the factory premises of Banbury Impex at Boisar, Maharashtra whereas the job work charges paid to this company was in respect of work performed by the company at the premises of the assessee, at Hatkanangale, Kolhapur, which Mr. Saini was not aware of. The assessee submitted that it was not given opportunity to cross-examine Mr. Saini. The assessee has placed reliance on judicial decisions referred to in its submission to emphasize that the statements have no evidentiary value since the opportunity of cross-examination was not given. The assessee has also submitted that no evidence was found during the course of search to hold that the expenses in the nature of labour charges, electricity expenses etc were not genuine and even during the course of assessment proceedings the AO has failed to gather any evidence to corroborate the finding that those expenses were not genuine. It was further submitted that the respective job workers have paid tax on their income and there is no loss of revenue on this account as well. 6.4.7. On perusal of the notification of the Ministry of Textile, it is found that in order to organize power loom units in a cluster and to provide improved working conditions in terms of more space, work environment, improving the work efficiency to enhance their competitiveness in the global market, the Government of India have been providing incentives for starting up new units under a 9 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., scheme known as "Group Workshed Scheme" since 2003, which was amended from time to time. The prime objective of the scheme was to facilitate establishment of work-sheds for shutterless looms in an existing or new cluster, which would provide required scale of economy for business operations. Under this scheme, a subsidy was provided in payment of power tariffs. On careful perusal of the facts of this case, it is evident that the assessee has engaged these 23 job workers to avail the benefit of this scheme. From the statement of Shri Santosh Singh and Shri Suresh Modi also it is evident that these job workers were making payments for electricity charges and to the labourers on behalf of the assessee. In other words, they were receiving payments from assessee and were passing on the same to the labourers and for other related expenses on behalf of the assessee. Needless to say, that from perusal of the material facts and evidences, it is evident that these 23 job workers are nothing but inserted entities as 'job workers' who were not performing any work but were only making payments on behalf of the assessee to the respective service providers and for bills such as electricity charges and they have been inserted as 'job workers' to avail the "Group Workshed Scheme" of the Ministry of Textiles. This is precisely why Shri Rakesh Kumar Saini, in his statement u/s 131 of the Act given during the course of survey proceedings, having been asked to provide the details of the job work done by the company M/S Banbury Impex Pvt. Ltd for the appellant, had stated that no job work has ever been done by M/s. Banbury Impex Pvt. Ltd. for M/s La Trendz Fabrica Pvt Ltd. It is, therefore, evident from his statement as well that M/S Banbury Impex Pvt Ltd, which was having its factory premises at Boisar, Maharashtra for its own business operations, had also acted as a name-lender as job worker to the assessee to facilitate the assessee in taking benefit of the "Group Workshed Scheme. 1, therefore, do not find any infirmity in the findings of the Ld. AO to the extent that these job workers were not Job Workers' in real sense as they have only been engaged by the assessee to take benefit of the "Group Workshed Scheme". 6.4.8. However, it is also evident from perusal of the facts that no evidences were found during the course of search to have a belief that the expenses incurred by these 23 entities were not genuine. 10 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., Rather, evidences have been found during the course of search itself which demonstrates that the said job workers have incurred expenditure in the nature of electricity bills, labour) charges etc. There is no dispute about the fact that all these 23 entities have been shown as operating from the premises of the assessee. There is also no dispute about the fact that they do not had any infrastructure facilities and the equipment of their own and all the equipment used for the weaving work belonged to the assessee and the assessee had provided the same to them which were used by them for the job work they claimed to have done for the assessee. Hence, even though the fact to the extent that these job workers are mere name lenders are established, there are enough evidences on record to support the claim of the assessee that they have incurred expenses for and on behalf of the assessee. In this regard, it will be pertinent to refer to statement of Shri Santosh Singh, Accountant of M/s Banbury Exports, a company which is acted as one of the job workers for the assessee, as referred to in the assessment order, wherein he has categorically stated that 23 electricity connections have been taken in the name of 23 job workers to avail the "Group Workshed Scheme". He has also categorically stated that the power bills are received in the name of these companies and they make payment individually which is reimbursed to them by the assessee company. His answer to the relevant Q.19 in this regard, is reproduced as below: "Q.19 Please provide explanation as to why huge job working charges is being paid to related individuals/HUF and other related entities. Ans. Sir, as required power connection to run this factory we have obtain under the group work shed from which company get benefit of power cost to save cost of power we have obtain about 23 connections and all have separate power meters and accordingly we receive power bills in respective name. Payment of power charges are paid from respective individual/company account and accordingly La- Trendz reimburse the same to respective person or company." (emphasis added) 11 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., 6.4.9. Similarly, Shri Suresh Modi, who is associated with the assessee company in multiple capacities, has also stated similar facts as evident from his reply to Q.14 of his statement dated 03.02.2018. The relevant Q.14 and its answer is reproduced as below: "Q.14 You are paying huge job working charges to related parties in LA-Trendz Fabrica PRIVATE Limited. Kindly explain the reason for the same, Ans. All our related parties are working under group shed scheme to reap the benefits of concessional power tariff. These concerns are paid job working charges and they in-turn pay for labour and power charges" 6.4.10. In fact, it is found that in para 6.9 of the impugned assessment order for AY 2018-19, the Ld. AO himself has noted the fact that the 23 parties were paying electricity bills, wages to labourers on behalf of the assessee without doing any job-work. The relevant part of the observation of the Ld. AO in this regard is as below: The assessee in reply to showcause has refuted the statement of Shri Santosh Singh that he has not stated that no job work is done by the related parties. On careful perusal of the statement it is seen that Shri Santosh Singh has stated that connection was taken in the name of 23 parties and the bill was reimbursed by the assessee M/s La Trendz Fabrica Private Limited. Reimbursement by the assessee for the expenses made by the related parties clearly establishes that no job work was actually done and the assessee is only diverting expense from one head to the other. The related parties were paying electricity bills and wages to labourers on behalf of the assessee without doing any job work. The bill was paid by the related parties for other expenditure and then the assessee was reimbursing the expenses in the name of job work which is not correct. 12 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., (emphasis added) 6.4.11. It is, therefore, evident that whereas there could be no doubt about the fact that the 23 parties shown as job workers are mere inserted entities and are name- lenders only who were evidently engaged to reap the benefit of "Group Workshed Scheme", it is also abundantly evident that the assessee has performed the work for its clients and there is no reason to doubt the genuineness of the work performed by the assessee through these inserted entities, as the very fact that the work was actually performed and that the payments are genuine, is evident from the statement recorded during the course of search and also from the evidences found during the course of search. 6.4.12. Hence, in my considerate view, it would not be proper to disallow the whole expenditure claimed by the assessee as job work charges which were incurred for the business of the assessee such as electricity charges, labour charges etc, genuineness of which is not in doubt. In the given facts of the case, in my considerate view, it will meet the end of justice if only the net income shown by these job workers from weaving work for the assessee is disallowed as expenditure not allowable to the assessee within the meaning of Section 37(1) of the Act for the reason that these entities have not performed any work on their own but has merely acted as name lenders to facilitate the assessee to avail the benefit of "Group Workshed Scheme" The AO is accordingly directed to compute and restrict the disallowance to the extent of net income of these 23 entities claimed for weaving work from the assessee. The ground is accordingly Partly Allowed. 8. Aggrieved, revenue is in appeal before us raising following grounds in its appeal: - “1. The Ld. CIT(A) has erred in deleting the addition made by AO of Rs.4,38,79,094/ on account of payment of Bogus Job Work Charges by the assessee ignoring the fact that the assessee could not prove the genuineness of the works provided by the 23 entities for the assessee, as the same is in doubt as any kind of work was done by the assessee through these entities. 13 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., 2. The Ld.CIT(A) has erred in deleting the addition made by AO of Rs.4,38,79,094/ with a completely new finding that the said entities have acted as mere name lenders. This fact was not raised during the course of search or the assessment proceedings and the same is mere an afterthought. 3. The Ld.CIT(A) has erred in deleting the addition made by AO of Rs.4,38,79,094/ even though Ld CIT(A) accepted that there were no Job-works performed against the payments, the Ld CIT(A) should have instead made disallowance u/s 40A(3) as the assessee would have made out-of-books payments in cash to other parties for performance of Job Works. 4. The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary.” 9. Aggrieved, Assessee has raised following grounds in its cross objection: - “1. On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in restricting the disallowance made by the Assessing Officer, to the extent of net income shown by job workers i.e amounting to Rs.61,07,667/-., without considering facts and circumstances of the case. 2. The respondent craves leave to add, amend, alter or delete the said ground of appeal.” 10. Ld.DR relied on the order of the Assessing Officer and submitted that assessee could not prove the genuineness of the works provided by the 23 entities for the assessee, as the same is in doubtful as it has not carried any kind of work as claimed by the assessee through these entities. Ld.DR submitted that Ld.CIT(A) erred in concluding the said 14 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., entities acted as a mere name lenders. Ld.DR submitted that, even though Ld.CIT(A) accepted that there were no Job-works performed against the payments, the Ld.CIT(A) should instead have made disallowance u/s.40A(3) as the assessee would have made out-of-books, the payments were made in cash to other parties for performance of Job Works. Ld.DR brought to our notice Page Nos. 16 and 17 of first appellate order and prayed that the order of the Ld.CIT(A) may be set-aside and the order of the Assessing Officer be restored. 11. Ld. AR submitted that, in view of the above memorandum the assessee had provided specific area and machinery to the contractor for undertaking the job work to have better quality control competitive cost, smooth functioning of the factory production and manpower management. The copy of the letter for allotment of area and machinery to the contractor was also submitted to Assessing Officer for reference and records. Further, the charges paid to various Job workers for the weaving is as per the bills submitted by them from time to time. The copy of the bills issued by the job worker was seized by the department at the time of the search action. Assessee had also submitted the details of the persons to whom it had paid the job work charges at time 15 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., of search action. All the job work charges had been paid through the account payee cheque and the assessee had also deducted TDS as applicable. The work was actually done by the respective job worker. The allegation of the Assessing Officer that "no weaving had been done" is totally wrong and misplaced. In support to claim that the weaving work had been done by the respective Job workers, the assessee has submitted the following documents before Assessing Officer and most of these documents were seized from factory premises at GAT No 871, Tilwani Krochi Road, Village at post Krochi Ropad, Hatkhangle, District Kolhapur, Maharashtra.  Copy of the invoices issued by the job worker  Ledger Account confirmation  Party wise detail of Job Work charges received.  Party wise detail of Weaving Charges paid.  Copy of the bank statement duly highlighting the payment made for the Weaving charges paid to contractor.  Copies of the electricity charges bill paid by Job worker. 12. Ld. AR submitted that regarding reliance placed on statement of Shri Santosh Singh and Shri Suresh Modi recorded u/s 132(4) of the Act by stating that "Shri Suresh Modi and Shri Santosh Singh have accepted that the job work charges paid to various associate entities was on account of the power connection licenses being in the name of those 16 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., entities and in reality no services have been rendered by these entities other than paying the power bills." However, it is pertinent to mention that these persons have never stated that no job work was done. It was specifically stated in the statement of Shri Suresh Modi that "All our related parties are working under group shed scheme to reap the benefits of concessional power tariff. These concerns are paid job working charges and they-in turn pay for labour and power charges." Thus, it can be seen that the Assessing Officer has completely misconstrued the statement in order to disallow the expenses. Thus, in view of the above, it is submitted that such allegations of the Assessing Officer shall not be considered. 13. Ld. AR brought to our notice the statements of Shri Santosh Singh and Shri Suresh Modi recorded u/s 132(4) of the Act are reproduced hereunder for ready reference and perusal:  Statement of Shri Suresh Modi relied on by Assessing Officer "Q You are paying huge job working charges to related parties in la-trendz Fabrica P. ltd. Kindly explain the reasons for the same. Ans. All our related parties are working under group shed scheme to reap benefits of concessional power tariff. These concerns are paid job working charges and they in-turn pay for labour and power charges." 17 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd.,  Statement of Santosh Singh on question No 19 reads as under: "Q Please provide explanation as to why huge job working charges is being paid to related individuals/HUF and other related entities. Ans. Sir, as requires power connection to run factory we have obtained under group work shed from which company get benefit of power cost. To save cost of power we have obtain about 23 connection and all have separate power meters and accordingly we receive power bills in respective names. Payment of power charges are paid from respective individual! company account and accordingly La-trendz reimburse the same to respective person or company." 14. Moreover, apart from this no other question was asked during the course of search proceedings specifically questioning the job work. 15. Further, the Assessing Officer also relied on the statement of Shri Rakesh Kumar Saini was recorded u/s 131 of the Act during the course of survey proceedings u/s 133A of the Act wherein he had been asked to provide the details of the job work done by company Banburry Impex Pvt Ltd for the assessee for last six years. In response to the Q15, he had stated that "Sir, no job work has ever been done by the company- M/s. Banbury Impex Pvt. Ltd. for the entity- M/a. La Trendz Fabrica Pvt. Ltd. since the time I am working in this company for the last nine years". Thus, on the basis of the statement of Shri Rakesh Kumar Saini and others, the Assessing Officer has alleged that the assessee was not 18 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., engaged in the job work services. However, it is submitted that Shri Rakesh Kumar Saini was working in Boiser, Maharashtra of Banburry Impex Pvt Ltd and was production supervisor in-charge of company in Boiser factory only and therefore had no connection with other factories. Moreover, no question was asked whether he was looking after the work of company in Kolhapur and no specific or pointed query was raised regarding work in Kolhapur as he did not have any knowledge whatsoever about the said factory premises. Thus, the Assessing Officer has erred in drawing adverse inference from the statements of Shri Rakesh Kumar Saini. 16. Further, the Assessing Officer had relied on the statement u/s.132(4) recorded of Shri Santosh Singh, Shri Suresh Modi and Shri Rakesh Kumar Saini to hold that no job work was performed by the assessee. In this regard, Ld. AR submitted that the statements were recorded under threat, coercion and undue influence. It is now a well decided judicial principle that mere confessional statement without there being any documentary proof shall not be used in evidence. Reliance is placed on the following case laws:  CIT vs. Sint. S. Jayalakshmi Ammal [2016] 74 taxmann.com 35 (Madras)  CIT v. Naresh Kumar Agarwal ([2015] 53 taxmann.com 306) (Andhra) 19 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd.,  CIT vs. M.P. Scrap Traders [2015] 372 ITR 507 (Gujarat)  CIT vs. Vivek Aggarwal [2015] 231 Taxman 392 (Delhi)  CIT vs. Tara Chand Mahipal [2016] 65 com29 (Calcutta)  CIT vs. Sunil Aggarwal [2015] 379 ITR 367 (Delhi) 17. Thus, it is submitted that statement recorded under section 132(4) of the Act does not constitute incriminating material found as a result of search. In view of the addition can be made only qua the incriminating material found as a result of search which is none in the instant case. 18. Further Ld. AR submitted that, even after the specific request made by the assessee the Assessing Officer has erred in not granting the cross examination of Shri Rakesh Kumar Saini. It is a settled law that opportunity to cross examine third parties must be granted to the assessee where statements of such third parties were made the basis of the impugned order. In view of this, the assessee would like to rely on the following judicial decisions wherein similar view has been upheld:  Hon'ble Supreme court of India in the recently reported case of M/S Andaman Timber Industries Ltd Vs CIT Cen Excercise, Kolkota II (Appeal No 4228 OF 2006)  ITO v. Adinath Industries (2001) 252 ITR 476(Guj.) (SLP dismissed) (2001) 247 ITR (St) 35  Hon'ble Delhi High Court in the case of Ashok Lalwani v. ITO (2011) 196 Taxman 82 20 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., 19. It was also contended that it is not the case that the job workers are ghost entity and there is nowhere about of these parties. Most of these parties are assessed with the same Assessing Officer and they are regularly filing their return and their returned income has been accepted as fat as total quantum is concerned. The Assessing Officer has treated business income offered by them as income from other sources but he has not disturbed the amount offered by them in the return of income. However, without considering the assessee's submission the Learned Assessing Officer passed assessment order u/s.143(3) r.w.s. 153A of the Income Tax Act, 1961 treating job work charges paid to various job worker as alleged non genuine. 20. Being aggrieved by the order of Assessing officer, appeal was filed Before Ld. CIT(A) wherein in addition to the above submission it was also pleaded without prejudice that, it is pertinent to mention that the Assessing Officer had never doubted the huge expenses in the nature of labour charges, electricity expenses, etc. incurred by the parties who had perform job work for the assessee. Therefore, it is submitted that in case the weaving charged paid by the assessee to the respective parties are disallowed, then the expenses such as electricity expenses, salaries, 21 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., etc. incurred by the respective parties needs to be allowed to the assessee since these expenses have been incurred in relation to the weaving work of the assessee, hence the same should be allowed. 21. Furthermore, it is submitted that the expense claimed by the assessee on account of job work charges have been duly offered to tax by the respective parties. Therefore, there is no loss of tax whatsoever and taxing the same again in the hands of the assessee would lead to double taxation. The year wise detail of expenditure incurred by respective parties along with supporting documents were also submitted before Ld. CIT(A). 22. Ld.CIT(A) accepted the alternate argument of the assessee and allowed the expenses incurred by the job-worker to carry our work of the assessee as these expenses are incurred wholly and exclusively for the purpose of business however he confirmed the disallowance of job- work charges to the extent of the income offered by the individual job worker in their individual hands. 22 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., 23. Being aggrieved by the decision of Ld.CIT(A) revenue filed appeal before Hon'ble ITAT and assessee also filed Cross objection for the disallowance confirmed by Ld.CIT(A). 24. Before the Bench, Ld. AR submitted that there no dispute with regard to job work being carried out on behalf of reputed listed company namely M/s Indo Count Industries Ltd., M/s Welspun India Ltd., M/s. Grasim Bhiwani Ltd., Creative Textiles Ltd. and others as the sales to these parties in the form of job work was duly accepted by the revenue. Once the sales in the form of job work is being accepted corresponding job work charges paid to carry out the said assignment to various parties cannot be denied. Therefore, there is no merit in the allegation of revenue that as per statement recorded during the course of search no job work carried out. Even otherwise the assessee company has proved that the reliance on statement is misplaced as discussed above. Further the claim of expenses cannot be disallowed merely on the plea that the same is being paid to related parties unless it is proved that the same is excessive and not at arm's length. Assessing Officer in the hands of such job workers assessed the said profit part as income from other sources on the plea that the said income in their hand 23 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., nothing but commission for name lending. However, nowhere in Assessing Officer order as well as Ld.CIT(A) order, there is whisper that the amount paid is unreasonable or higher. On the contrary assessee using the services of these job-workers, reduced it's electricity expenses which resulted into higher income being offered in its hand. Further as far as Income tax department is concerned they should not concern how the assessee company manages its affairs to run the business effectively. They should only concern if the affair of assessee resulted into inflation of expenses or reduction of income. There is no single allegation in the entire order of Assessing Officer as well as Ld.CIT(A) to this effect. In absence thereof the entire expenses claimed by the assessee should be allowed as deduction. The company has submitted entire documents and assessment order of these job work parties passed by the same Assessing Officer before the Bench which clearly proves the bonafide and genuineness of the expenses. Therefore, the assessee company pray the Bench to delete the entire addition and restore the returned income of the assessee. 25. On the other hand, Ld.DR submitted that the whole arrangement of taking concessional electricity is bogus. In this regard he submitted 24 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., that the Shri Rakesh Kumar Saini is not working in Kolkata. He brought to our notice Page No. 10 of the Assessment Order and submitted that the Shri Rakesh Kumar Saini worked with the assessee for nine years and his statements are very relevant. He admitted that assessee has not done any job work with M/s. Banbury Impex Private Limited entity. Further he submitted that assessee has not submitted any financial statements of job workers and submitted that the job workers do not have any infrastructure to carry out any job work. Therefore, all these entities are inserted entities. Further, he submitted that Ld.CIT(A) gave clear findings that all these entities are bogus entities. 26. With regard to cross objection, Ld. AR submitted that Ld.CIT(A) restricted the disallowance to the extent of profits of the job workers. He submitted that all the 23 units were assessed by the same Assessing Officer and these entities were carrying on the actual works for the assessee. He submitted that the entities were properly verified by the government agencies before approving them in the concessional scheme and then only the concessions were approved for them. He brought to our notice Page No. 13 of the Ld.CIT(A) order and submitted that all the 25 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., relevant details were filed before Ld.CIT(A). He also submitted the details of job work and confirmations from the parties in the Paper Book. 27. Considered the rival submissions and material placed on record and perused the orders of the authorities below. On a perusal of the order of the Ld.CIT(A), we find that the Ld.CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order. However, he restricted the disallowance made by the Assessing Officer to the extent of net income shown by job workers. While holding so, the Ld.CIT(A) observed as under: - “6.4.10 In fact, it is found that in para 6.9 of the impugned assessment order for AY 2018-19, the Ld. AO himself has noted the fact that the 23 parties were paying electricity bills, wages to labourers on behalf of the assessee without doing any job-work. The relevant part of the observation of the Ld. AO in this regard is as below The assessee in reply to showcause has refuted the statement of Shri Santosh Singh that he has not stated that no job work is done by the related parties. On careful perusal of the statement it is seen that Shri Santosh Singh has stated that connection was taken in the name of 23 parties and the bill was reimbursed by the assessee Mis La TrendzFabrica Private Limited. Reimbursement by the assessee for the expenses made by the related parties clearly establishes that ne job work was actually done and the assessee is only diverting expense from one head to the ether. The related parties were paying electricity bills and wages to labourers on behalf of the assessee without doing any job work. The bill was paid by the relatedparties for other expenditure and 26 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., then the assessee was reimbursing the expenses in the name of job work which is not correct. (emphasis added) 6.4.11. It is therefore, evident that whereas there could be no doubt about the fact that the 23 parties shown as job workers are mere inserted entities and are name- lenders only who were evidently engaged to reap the benefit of "Group Workshed Scheme", It is also abundantly evident that the assessee has performed the work for its clients and there is no reason to doubt the genuineness of the work performed by the assessee through these inserted entities, as the very fact that the work was actually performed and that the payments are genuine, is evident from the statement recorded during the course of search and also from the evidences found during the course of search. 64.12. Hence, in my considerate view, it would not be proper to disallow the whole expenditure claimed by the assessee as job work charges which were incurred for the business of the assessee such as electricity charges, labour charges etc, genuineness of which is not in doubt. In the given facts of the case, in my considerate view, it will meet the end of justice if only the net income shown by these job workers from weaving work for the assessee is disallowed as expenditure not allowable to the assessee within the meaning of Section 37(1) of the Act for the reason that these entities have not performed any work on their own but has merely acted as name lenders to facilitate the assessee to avail the benefit of "Group Workshed Scheme" The AO is accordingly directed to compute and restrict the disallowance to the extent of net income of these 23 entities claimed for weaving work from the assessee. The ground is accordingly Partly Allowed. 7.0. Material facts remain the same for rest of the AYS being A.Y.2014-15, 2015 16, 2016-17 and 2017-18, so far as disallowance of job work charges are concerned. The AO is, therefore, directed to restrict the disallowance for the aforesaid assessment years in similar manner as directed above for AY 2018-19. The grounds no.1 for these assessment years are also Partly Allowed accordingly.” 28. We observe from the findings of Ld.CIT(A) that the assessee has derived benefit from the concessional power tariffs by taking the help of the related entities by declaring that these entities were doing job work to the assessee under the approved scheme called Group Work Shed 27 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., Scheme. The concessional scheme itself is designed to provide the concessions to those units who have minimum of four looms. The assessee has managed to demonstrate the same and taken the benefit of concessional tariffs. It is relevant to note that these facilities were provided by the assessee in one roof/shed making all the entities to function under its control. It is the assessee who had arranged the facilities and all the power connections are taken under the scheme, which ultimately covered under the scheme. It clearly indicates that the assessee has utilized the power drawn from the above said scheme and reduced the cost of power to do the same production of article or weaving of cloth. It is also clear from the record that the entities utilized by the assessee to demonstrate the carrying of the job work were not genuine and nothing was brought on record to demonstrate that the assessee has actually utilized their job work services except creating record to support and utilize the concessional tariff benefits. This fact was clearly brought on record by the Ld CIT(A) and the same fact was applied to give the benefit to the assessee, for which the revenue is in appeal. Therefore, we are inclined to agree with the findings of the Ld.CIT(A) by restricting disallowance to the extent of net income shown by job workers. 28 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., 29. Before us, Ld AR submitted additional materials in order to support that the job workers actually carried on the manufacturing activities for the assessee, we are not inclined to accept those documents since we are already held in the above paragraph that the Ld CIT(A) has given benefit to the assessee on the findings that these are not genuine entities, now we cannot give findings in contrary to the findings of first appellate authority when Ld CIT(A) has set aside the information based on the finding that these are inserted entities and assessee has claimed the benefit under the above said scheme. When they are inserted entities, the evidence cannot be trusted at this stage. Therefore, we are not inclined accept the submissions of the assessee on the genuineness of the entities. 30. Accordingly, grounds raised by the revenue in appeal as well as grounds raised in cross objections by the assessee in this regard are dismissed. 31. In the result, appeal filed by the Revenue and cross objection filed by the assessee are dismissed. 29 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., A.Ys. 2016-17, 2017-18 & 2018-19 ITA NOs. 1536, 1537 & 1538/MUM/2021 – Revenue appeals C.O. Nos. 23, 24 & 25/MUM/2022 – Assessee Appeals 32. Coming to the appeals and cross objections relating to A.Ys. 2016-17, 2017-18 and 2018-19, since facts in these cases are mutatis mutandis, therefore the decision taken in A.Y. 2015-16 is applicable to these Assessment Years also. Accordingly, these appeals and cross objections are dismissed. 33. To sum-up, appeals filed by the revenue as well as cross objections filed by the assessee are dismissed. Order pronounced in the open court on 31 st October, 2022. Sd/- Sd/- (KULDIP SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 31.10.2022 Giridhar, Sr.PS 30 ITA NOs. 1535, 1536, 1537 & 1538/MUM/2021 C.O. Nos. 22, 23, 24 & 25/MUM/2022 M/s. La TrendzFabrica Pvt. Ltd., Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum