I.T.O Wd - 46(1),kolkata, Kolkata V. Farida Begum, Howrah

ITA 1307/KOL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4990 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2013
• Court: TRIBUNAL
• Department Lawyers: SUDIPTA GUHA
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Keywords: Revised return
• Section: 144

Judgement Text

I.T.A. NO. 1307/KOL./2013 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 97/KOL/2013 (ARISING OUT OF ITA NO. 1307/KOL/2013) ASSESSMENT YEAR : 2007-2008 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1307/KOL/ 2013 ASSESSMENT YEAR: 2007-2008 INCOME TAX OFFICER,................................ ................................APPELLANT WARD-46(1), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 -VS.- SMT. FARIDA BEGUM,................................. ..............................RESPONDENT VILLAGE- PANCHLA (SEPIA PARA), P.O. & P.S. PANCHLA, HOWRAH-711 322 [PAN : AGZPB 5832 A] & C.O. NO. 97/KOL/2013 (IN I.T.A. NO. 1307/KOL/ 2013) ASSESSMENT YEAR: 2007-2008 SMT. FARIDA BEGAM,................................. ............................CROSS OBJECTOR VILLAGE- PANCHLA (SEPIA PARA), P.O. & P.S. PANCHLA, HOWRAH-711 322 [PAN : AGZPB 5832 A] -VS.- INCOME TAX OFFICER,................................ ............................RESPONDENT WARD-46(1), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 APPEARANCES BY: SHRI SUDIPTA GUHA, JCIT, SR. D.R., FOR THE DEPARTMENT SHRI SOUMITRA CHOWDHURY, ADVOCATE, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : FEBRUARY 10, 2016 DATE OF PRONOUNCING THE ORDER : MARCH 04, 2016 I.T.A. NO. 1307/KOL./2013 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 97/KOL/2013 (ARISING OUT OF ITA NO. 1307/KOL/2013) ASSESSMENT YEAR : 2007-2008 PAGE 2 OF 6 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLKATA D ATED 21.12.2012 AND THE SAME IS BEING DISPOSED OF ALONG WITH CROSS OBJECTION FILED BY THE ASSESSEE BEING C.O. NO. 97/KOL/2013. 2. THE SOLITARY ISSUE INVOLVED IN THE APPEAL OF THE REVENUE RELATES TO THE DELETION BY THE LD. CIT(APPEALS) OF THE ADDITIO N OF RS.34,84,677/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLA INED LIABILITY TOWARDS LABOUR CHARGES. 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO IS MAINLY ENGAGED IN THE BUSINESS OF DOING EMBROIDERY AND OTH ER WORK EXECUTED ON CONTRACT BASIS. THE RETURN OF INCOME FOR THE YEAR U NDER CONSIDERATION WAS ORIGINALLY FILED BY HER ON 29.10.2007 DECLARING TOT AL INCOME OF RS.9,91,090/-. SUBSEQUENTLY REVISED RETURN WAS FILE D BY THE ASSESSEE ON 29.11.2007 DECLARING TOTAL INCOME OF RS.17,62,400/- . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSES SING OFFICER THAT THE GROSS PROFIT DECLARED BY THE ASSESSEE AT 4.41% FOR THE YEAR UNDER CONSIDERATION WAS LOWER THAN THE GROSS PROFIT RATE OF 8.11% SHOWN BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR. ALTHOUG H THE TURNOVER OF THE ASSESSEE HAD INCREASED SUBSTANTIALLY DURING THE YEA R UNDER CONSIDERATION, THE ASSESSING OFFICER CONSIDERED IT NECESSARY TO VE RIFY THE DRASTIC FALL IN THE GROSS PROFIT RATE. HE, THEREFORE, ISSUED NOTICE S TO THE ASSESSEE FIXING THE HEARING FROM TIME TO TIME. THERE WAS, HOWEVER, NO COMPLIANCE ON THE PART OF THE ASSESSEE TO THE SAID NOTICES AND THE AS SESSING OFFICER, THEREFORE, WAS LEFT WITH NO OPTION BUT TO COMPLETE THE ASSESSMENT TO THE BEST OF HIS JUDGMENT UNDER SECTION 144 OF THE ACT. IN THE ASSESSMENT SO COMPLETED UNDER SECTION 144 VIDE AN ORDER DATED 08. 04.2009, THE ASSESSING OFFICER ESTIMATED THE INCOME OF THE ASSES SEE BY APPLYING A I.T.A. NO. 1307/KOL./2013 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 97/KOL/2013 (ARISING OUT OF ITA NO. 1307/KOL/2013) ASSESSMENT YEAR : 2007-2008 PAGE 3 OF 6 HIGHER GROSS PROFIT RATE OF ABOUT 6.91% AND MADE A TRADING ADDITION OF RS.10,00,000/-. HE ALSO MADE A FURTHER ADDITION OF RS.34,84,677/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAI NED/BOGUS LIABILITY TOWARDS LABOUR CHARGES FOR THE FOLLOWING REASONS GI VEN IN PARAGRAPH NO. 5 OF THE ASSESSMENT ORDER:- 5. IN THE AUDITED BALANCE SHEET THE ASSESSEE SHOWN LIABILITY OF RS.75,46,700/- ON ACCOUNT OF LABOUR CHARGES. AS PER BALANCE SHEET FILED WITH REVISED RETURN THE ASSESSEE SHOWN LIABILITY OF RS.67,75,433/- ON ACCOUNT OF LABOUR CHARGES. ON VER IFICATION OF THE RETURNS IT WAS FOUND THAT THE DIFFERENCE OF RS. 7,71,267/- IN LIABILITIES ON ACCOUNT OF LABOUR CHARGES IN THE BAL ANCE SHEETS OCCURRED DUE TO REDUCTION IN LIABILITY MADE BY THE ASSESSEE AND THE SAME WAS ADDED TO THE TOTAL INCOME IN THE REVIS ED RETURN. IT MEANS LIABILITY IN THE AUDITED BALANCE SHEET IS NOT CORRECT. IN THE P&L A/C., THE ASSESSEE DEBITED RS.3,94,89,073/- ON ACCOUNT OF LABOUR CHARGES. IN CASE OF WORKS EXECUTED THROUG H LABOUR, PAYMENTS ARE GENERALLY MADE WEEKLY OR MONTHLY BASIS . THEREFORE, THE LIABILITY ON ACCOUNT OF LABOUR CHARG ES WILL BE PAYMENT OF ONE MONTH. THE FACT IS ALSO SUPPORTED BY THE FACTS OF ASSESSEE'S CASE OF ASSESSMENT YEAR 2006-07, WHER E IN TOTAL LABOUR CHARGES WERE RS.1,23,45,150/- AND OUTSTANDIN G LABOUR CHARGE WAS RS.10,44,700/-, WHICH IS ABOUT 1/12TH OF TOTAL LABOUR CHARGES DEBITED DURING THE YEAR. THEREFORE, CONSIDERING THE FACTS OF THE CASE RS.32,90,756/- WHICH IS 1/12T H OF TOTAL LABOUR CHARGES SHOWN BY THE ASSESSEE IS CONSIDERED TO BE LIABILITY OF THE ASSESSEE ON ACCOUNT OF LABOUR CHAR GES AND THEREFORE, RS.44,55,944/- IS CONSIDERED TO BE EXCES S LIABILITY SHOWN BY THE ASSESSEE. SINCE THE ASSESSEE HERSELF C ONSIDERED RS.7,71,267/- AS BOGUS LIABILITY AND ADDED TO HER T OTAL INCOME IN THE REVISED RETURN, RS.34,84,677/- (RS.75,46,700 /- - RS.7,71,267/- - RS.32,90,765/-) IS ADDED TO THE TOT AL INCOME OF THE ASSESSE ON ACCOUNT OF CASH CREDIT SPECIFICALLY UNEXPLAINED/BOGUS LIABILITY ON ACCOUNT OF LABOUR CH ARGES SHOWN IN THE BALANCE SHEET U/S.68 OF IT ACT. PENALT Y U/S.271(1)(C) IS INITIATED SEPARATELY. 4. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 144, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE A SSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) CONFIRMED THE TRADING ADDITION OF RS.10,00,000/- MADE BY THE ASSESSING OF FICER. HE, HOWEVER, DELETED THE ADDITION OF RS.34,84,677/- MADE BY THE ASSESSING OFFICER ON I.T.A. NO. 1307/KOL./2013 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 97/KOL/2013 (ARISING OUT OF ITA NO. 1307/KOL/2013) ASSESSMENT YEAR : 2007-2008 PAGE 4 OF 6 ACCOUNT OF UNEXPLAINED OUTSTANDING LIABILITY TOWARD S LABOUR CHARGES FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 5.2 OF HIS IMPUGNED ORDER:- 5.2 THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CON SIDERED AND IT IS SEEN THAT THE A.O. HAS DISALLOWED RS.34,84,67 7/- FROM OUTSTANDING LIABILITY ON ACCOUNT OF LABOUR CHARGES SHOWN AS ON 31.03.2007 IN THE BALANCE SHEET U/S.68 ON ESTIMATE BASIS BY WORKING OUT THE SAME ON THE BASIS OF 1/12TH OF TOTA L LABOUR CHARGES AFTER COMPARING THE SAME WITH THE CLAIM IN EARLIER YEARS DEBITED IN THE P&L A/C., HOLDING THE SAME TO BE A BOGUS LIABILITY. IT IS SEEN THAT WHILE THE A.O. HAS MADE THE ADDITION BY ESTIMATING THE GROSS PROFIT HE HAS ALSO MADE A FURT HER ADDITION TOWARDS BOGUS LIABILITY ON GROUNDS OF THE CLAIM OF THE APPELLANT BEING NOT VERIFIABLE AND EXCESSIVE. AT TH E OUTSET, IT MAY BE MENTIONED THAT THE ADDITION TOWARDS OUTSTAND ING LIABILITY FOR LABOUR CHARGES CANNOT BE MADE U/S.68 AS THE SAME ARE NOT 'CASH CREDITS'. EVEN OTHERWISE, ON THE MERI T OF THE ADDITION IT IS SEEN THESE LIABILITIES FORM PART OF THE EXPENSES DEBITED IN THE TRADING ACCOUNT AGAINST WHICH THE A. O. HAS MADE AN ESTIMATED ADDITION TO THE GROSS PROFIT. SINCE TH E ASSESSMENT HAD BEEN MADE U/S.144 THE ESTIMATION OF GROSS PROFI T BY THE A.O. WAS JUSTIFIED IN THE ABSENCE OF ANY SUPPORTING DETAILS AND DOCUMENTS OF THE EXPENSES CLAIMED IN THE TRADING AC COUNT. HOWEVER, FOR THE AO TO AGAIN MAKE A DISALLOWANCE TO WARDS ALLEGED BOGUS LIABILITY ON ACCOUNT OF LABOUR CHARGE S DEBITED IN THE TRADING ACCOUNT WOULD AMOUNT TO A DOUBLE ADDITI ON. IT IS FURTHER NOTED THAT THE APPELLANT HAS ALREADY OFFERE D TO TAX A SUBSTANTIAL AMOUNT OF THESE OUTSTANDING LIABILITIES FOR LABOUR CHARGES IN ITS REVISED RETURN OF INCOME WHICH HAS N OT BEEN REJECTED BY THE A.O. FURTHER CONSIDERING THE BUSINE SS OF THE APPELLANT WHERE THE ONLY DIRECT EXPENDITURE IS IN F ACT LABOUR AND EMBROIDERY CHARGES WHICH MAY BE CONSIDERED AS I NFLATED IN THE PRESENT CASE HOWEVER THE ENTIRE EXPENSES CANNOT BE RULED OUT AS BEING BOGUS. IT IS SEEN THAT THE A.O. HAS AL READY ESTIMATED THE GROSS PROFIT AND HAS MADE A LUMP SUM ADDITION TO THE GROSS PROFIT OF THE APPELLANT OF RS.10,00,00 0/-. FURTHERMORE, THE ESTIMATED DISALLOWANCE MADE BY THE A.O. HAS ALSO BEEN DONE WITHOUT ANY PROPER BASIS, SINCE HE H AS ASSUMED THAT THE PAYMENTS WERE IN THE NATURE OF WAGES AND H AS THEREFORE ESTIMATED THE OUTSTANDING AMOUNT AT 1 MON TH OR 1/12TH OF THE LABOUR CHARGES DEBITED IN THE TRADING ACCOUNT. IN THE CASE OF THE APPELLANT THE OUTSTANDING PAYMENTS WERE TOWARDS LABOUR CHARGES PAYABLE TO OUTSIDE PERSONS O R KARIGARS AND NOT WAGES THEREFORE THE SAME COULD BE OUTSTANDI NG FOR MORE THAN A MONTH, THEREFORE THE BASIS ITSELF FOR T HE DISALLOWANCE IS NOT CORRECT. THEREFORE, CONSIDERING ALL OF THE ABOVE, IT IS HELD THAT THE A.O. WAS NOT JUSTIFIED I N AGAIN MAKING A DISALLOWANCE FROM THE OUTSTANDING LIABILITIES TOW ARDS LABOUR I.T.A. NO. 1307/KOL./2013 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 97/KOL/2013 (ARISING OUT OF ITA NO. 1307/KOL/2013) ASSESSMENT YEAR : 2007-2008 PAGE 5 OF 6 CHARGES AND THE DISALLOWANCE MADE BY THE A.O. OF RS.34,84,677/- IS DELETED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING BEFORE US, THE LD. D.R. R ELIED ON THE ORDER OF THE ASSESSING OFFICER IN SUPPORT OF THE REVENUES C ASE ON THIS ISSUE WHILE THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THE ISSUE UNDER CONSIDERATION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY H ELD BY THE LD. CIT(APPEALS), WHEN THE INCOME OF THE ASSESSEE WAS E STIMATED BY THE ASSESSING OFFICER BY APPLYING A HIGHER GROSS PROFIT RATE, THERE WAS NO CASE FOR MAKING A SEPARATE DISALLOWANCE ON ACCOUNT OF LA BOUR CHARGES, WHICH HAD BEEN DEBITED TO THE TRADING ACCOUNT. ONCE THE G ROSS PROFIT OF THE ASSESSEE WAS ESTIMATED BY THE ASSESSING OFFICER BY APPLYING A HIGHER GROSS PROFIT RATE, ALL THE ITEMS APPEARING IN THE T RADING ACCOUNT WERE DEEMED TO HAVE BEEN CONSIDERED BY THE ASSESSING OFF ICER WHILE COMPUTING GROSS PROFIT ON ESTIMATED BASIS AND THE A CTION OF THE ASSESSING OFFICER IN MAKING A DISALLOWANCE SEPARATELY ON ACCO UNT OF LABOUR CHARGES, WHICH WERE DEBITED TO THE TRADING ACCOUNT, IN OUR O PINION, CLEARLY RESULTED IN DOUBLE ADDITION AS RIGHTLY HELD BY THE LD. CIT(APPEALS). AT THE TIME OF HEARING BEFORE US, THE LD. D.R. HAS ALSO NO T BEEN ABLE TO RAISE ANY CONTENTION TO DISPUTE OR CONTROVERT THIS POSITION. WE, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPE ALS) DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOU NT OF OUTSTANDING LIABILITY TOWARDS LABOUR CHARGES AND UPHOLDING THE SAME ON THIS ISSUE, WE DISMISS THE APPEAL OF THE REVENUE. I.T.A. NO. 1307/KOL./2013 ASSESSMENT YEAR: 2007-2008 & C.O. NO. 97/KOL/2013 (ARISING OUT OF ITA NO. 1307/KOL/2013) ASSESSMENT YEAR : 2007-2008 PAGE 6 OF 6 7. AS REGARDS THE CROSS OBJECTION OF THE ASSESSEE, IT IS OBSERVED THAT GROUND NO. 1 RAISED THEREIN ONLY SUPPORTS THE IMPUG NED ORDER OF THE LD. CIT(APPEALS) DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED LIABILITY TOWARDS LABOUR CHARGES, WHILE GROUND NO. 2 RELATING TO THE TRADING ADDITION OF RS.10,00,000/- MADE BY THE ASSE SSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) IS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US. THE CROS S OBJECTION FILED BY THE ASSESSEE IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 04, 201 6. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 4 TH DAY OF MARCH, 2016 COPIES TO : (1) INCOME TAX OFFICER, WARD-46(1), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 (2) SMT. FARIDA BEGUM, VILLAGE- PANCHLA (SEPIA PARA), P.O. & P.S. PANCHLA, HOWRAH-711 322 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-XXX, KOLK ATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.