ITO, Ward - 50(1), Kolkata, Kolkata V. M/s. Kanjilal Jewellers, North 24 Parganas

ITA 1483/KOL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3202 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 03-11-2011
• Court: TRIBUNAL
• Department Lawyers: D K SONOWAL
• Assessee Lawyers: V N PUROHIT
• Section: 133A

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [ () . .. . . .. . , ,, , , !' #! $'# #! $'# #! $'# #! $'#, ,, , ] ]] ] [BEFORE HONBLE SRI N.S.SAINI AM & HONBLE SRI M AHAVIR SINGH, JM] '& '& '& '& /ITA NO.1483/KOL/2011 $' !()/ ASSESSMENT YEAR : 2009-2010 (+, / APPELLANT ) - ! - ( ./+, /RESPONDENT) I.T.O., WARD-50(1), M/S.KANJILAL JEWELLERS KOLKATA -VERSUS- KOLKATA (PAN:AAFFK 9147 H) +, 0 1 / FOR THE APPELLANT: SHRI D.K.SONOWAL, JCIT, SR.DR ./+, 0 1 / FOR THE RESPONDENT: SHRI V.N.PUROHIT, FCA 2!3 0 4 /DATE OF HEARING : 12.06.2013 5( 0 4 /DATE OF PRONOUNCEMENT : 6 / ORDER PER SHRI N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-XXXII, KOLKATA DATED 18.05.2011. 2. THE FIRST GROUND OF APPEAL READS AS UNDER :- 1. THE LD. CIT(A)KOL-XXXII, KOLKATA ERRED ON LAW A ND FACTS BY DELETING ADDITION FOR UNDER VALUATION OF CLOSING STOCK OF RS.21,35,052/-. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE ASESSEE IS ENGAGED IN MANUFACTURE OF ORNAMENTS AND JEWELLERY. A SURVEY U/S 133A OF TH E ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 25.03.2009. DU RING THE COURSE OF THE SURVEY ON PHYSICAL VERIFICATION GOLD JEWELLERY FOUND WAS 13,8 96.120 GMS. STOCK OFFERED ON THE BASIS OF TAKING QUANTITY OF OPENING STOCK AND PURCH ASE AND REDUCING THERE FROM QUANTITY SOLD UPTO THE DATE OF SURVEY ARRIVED AT QU ANTITY OF 16,780 GRAMS. THE SURVEY OFFICIALS HAVE NOT VERIFIED WHETHER THERE WAS ANY M ANUFACTURING LOSS OF THE QUANTITY OF GOLD OR NOT AND IF THERE WAS HOW MUCH. DURING THE C OURSE OF THE ASSESSMENT THE AO IT A NO.1483/KOL/2011 I TO,WARD-50(4), KOLKATA VS M/S.KANJILAL JEWELLERS,KO L. A.YR.2009-2010 2 ASSUMED THAT THERE WAS LOSS OF 3.5% OF GOLD IN MANU FACTURING OF GOLD JEWELLERY AND ALSO ASSUMED THAT THE ASSESSEE WAS ENGAGED IN MANUF ACTURING NOT STUDDED BUT PLAIN JEWELLERY AND THEREBY CONCLUDED THAT JEWELLERY WORT H RS.21,35,052/- WAS FOUND SHORT AND THE AO ADDED THE ENTIRE AMOUNT OF RS.21,35,052/ - TO THE INCOME OF THE ASSESSEE. 3.1. ON APPEAL THE LD. CIT(A) OBSERVED THAT THE SAL E BILLS OF THE ASSESSEE SHOWS THAT ASSESSEE WAS ENGAGED IN MANUFACTURING OF STUDDED JE WELLERY. FURTHER THE CIT(A) ALSO FOUND THAT IN CASE OF STUDDED JEWELLERY AS PER FORE IGN TRADE POLICY AND GEMS AND JEWELLERY EXPORT PROMOTION COUNCIL THE NORMAL LOSS IN MANUFACTURING IS 7% TO 9%. THE LD. CIT(A) ALSO OBSERVED THAT IN THE CASE OF AS SESSEE IN THE PAST NORMAL MANUFACTURING LOSS WAS ACCEPTED BY THE DEPARTMENT A T 8% IN A.YR.2007-08 AND 7% IN A.YR.2008-09. IN THIS VIEW OF THE MATTER THE LD. CI T(A) ACCEPTED THE LOSS AS CLAIMED BY THE ASSESSEE AND DELETED THE ADDITION OF RS.21,3 5,052/- 4. BEFORE US THE LD. DR RELIED ON THE ORDER OF THE AO. HE SUBMITTED THAT LOSS OF 3.5% DETERMINED BY THE AO WAS ON THE BASIS OF FOREI GN TRADE POLICY AND GEMS AND JEWELLERY EXPORT PROMOTION COUNCIL AND THEREFORE TH E SAME OUGHT TO HAVE BEEN ACCEPTED BY THE LD. CIT(A). 5. ON THE OTHER HAND, THE LD..AR OF THE ASSESSEE SU PPORTED THE ORDER OF THE LD. CIT(A). 6. WE FIND IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT THE MANUFACTURING LOSS TOOK PLACE IN THE BUSINESS IN WHICH THE ASSESSEE IS ENGA GED. NO REASON COULD BE POINTED OUT BY THE LD. DR AS TO WHY THE SURVEY OFFICIALS DID NO T TAKE INTO CONSIDERATION AND VERIFIED THE ACTUAL MANUFACTURING LOSS INCURRED BY THE ASSESSEE. FURTHER WE FIND THAT THE LD. DR COULD NOT DISPUTE THE FINDINGS OF THE LD . CIT(A) THAT THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE OF STUDDED JEWELLERY ALS O AS EVIDENCED BY MORE THAN 100 SALE BILLS OF THE ASSESEE WHICH WAS IMPOUNDED DURIN G THE SURVEY PROCEEDINGS. FURTHER WE FIND THAT THE LD. DR ALSO COULD DISPUTE BEFORE U S THE FINDINGS OF THE LD. CIT(A) TO THE EFFECT THAT THE MANUFACTURING LOSS RANGING FROM 8% TO 7% WAS ACCEPTED BY THE IT A NO.1483/KOL/2011 I TO,WARD-50(4), KOLKATA VS M/S.KANJILAL JEWELLERS,KO L. A.YR.2009-2010 3 DEPARTMENT IN THE CASE OF THE ASSESSEE ITSELF. THE DEPARTMENT COULD FILE ANY COMPARABLE CASE WHERE MANUFACTURING LOSS OF 3.5% ON LY WAS SHOWN. IN OUR CONSIDERED VIEW THE MANUFACTURING LOSS DEPENDS UPON THE NUMBER OF FACTORS LIKE EXPERTISE OF KARIGAHAR, QUALITY OF MACHINES USED IN THE MANUFACTURING PROCESS ETC. IT IS NOT THE CASE OF THE DEPARTMENT THAT DURING THE COUR SE OF SURVEY ANY MATERIAL WAS FOUND TO SHOW THAT THE ASSESSEE WAS ENGAGED IN SELLING GO ODS OUTSIDE THE BOOKS OF ACCOUNT. THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT ON CO NSIDERING THE MANUFACTURING LOSS AT 7% WHICH COMPARED WITH THE MANUFACTURING LOSS ACCEP TED IN THE CASE OF ASSESSEE ITSELF NO SHORTAGE OF STOCK WAS FOUND DURING THE CO URSE OF THE SURVEY. IN THE ABOVE FACTS AND CIRCUMSTANCES WE DO NOT FIND ANY GOOD REA SON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) WHICH IS CONFIRMED AND THIS GROUND O F APPEAL OF THE REVENUE IS DISMISSED. 7. GROUND NO.2 OF THE REVENUE READS AS UNDER :- 2. THE LD. CIT(A), KOL-XXXII, KOLKATA ERRED ON LAW AND FACTS BY DELETING ADDITION OF RS.2,12,308/- ON ACCOUNT OF LABOUR CHARGES. 8. THE BRIEF FACTS OF THE CASE ARE THAT THE AO WHIL E COMPLETING THE ASSESSMENT MADE A COMPARATIVE ANALYSIS OF THE LABOUR CHARGES P AID FOR THE ASSESSMENT YEAR 2000- 10, I.E. THE ASSESSMENT YEAR UNDER APPEAL WITH THAT OF THE ASSESSMENT YEAR 2008-09 AND FOUND THAT LABOUR CHARGES PAID BY THE ASSESSEE PER GRAMS OF GOLD JEWELLERY MANUFACTURE WAS 7.95 PAISE HIGHER FOR THIS ASSESSME NT YEAR UNDER APPEAL AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR AND ACCORDINGLY D ISALLOWED A SUM OF RS.2,12,308/- BEING EXCESSIVE LABOUR CHARGES PAID. 8.1. ON APPEAL BEFORE THE LD. CIT(A) THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE PERCENTAGE INCREASE IN LABOUR CHARGES PER GRAMS OF GOLD (VALUED RS.1,496/-) WAS ONLY 0.53% WHEREAS THE INDEX OF INFLATION PER YEAR IS AR OUND 10%. IF THE INFLATIONARY COST INDEX IS CONSIDERED VIS--VIS THE INCREASE IN LABOU R CHARGES, IT CAN REASONABLY CONSIDERED THAT THERE WAS NOMINAL INCREASE IN LABOU R CHARGES. THE ASSESSEE IN SUPPOT OF INCREASE IN LABOUR CHARGES HAS PUT FORWARD THE FOLLOWING REASONS :- IT A NO.1483/KOL/2011 I TO,WARD-50(4), KOLKATA VS M/S.KANJILAL JEWELLERS,KO L. A.YR.2009-2010 4 A) ALL THE LABOUR EXPENSES ARE SUPPORTED BY VOUCHE RS AND THE PAYEES ARE IDENTIFIABLE. THE LD. AO DID NOT CAUSE ANY ENQUIRY NOR CAST ANY D OUBT REGARDING THE PAYMENT MADE TO THE LABOURER. NOR THE LD. AO PROVE THAT PARTS OF ANY PAYMENTS MADE TO THE LABOURERS HAVE REVERTED BACK TO THE PAYER. B) THE BOOKS OF ACCOUNTS ARE DULY AUDITED BY THE TA X AUDITOR. C) DUE TO INFLATIONARY TREND, LABOUR CHARGES HAVE I NCREASED WHICH IS A UNIVERSALLY ACCEPTED PHENOMENON. THE LD.AO HAS MANAGED TO FORGE T THE FACT THAT EVEN THIS D.A. INCREASED TWICE A YEAR DUE TO THE INFLATIONARY TREN D. D) THE LD. AO COULD NOT FIND OUT ANY FAULT WITH THE BOOKS OF ACCOUNTS OR METHOD OF ACCOUNTING NOR COULD SAY THAT LABOUR CHARGES ARE NO T SUPPORTED BY VOUCHER AND THE SAME ARE NOT VERIFIABLE. 8.2. THE LD. AR OF THE ASSESSEE PLACED RELIANCE ON THE JUDGEMENT OF THE HONBLE HIGH COURT IN THE CASE OF PYARELAL MITTAL VS ACIT ( 2007) 291 ITR 214 (GAUHATI) WHEREIN IT HAS BEEN HELD THAT INCOME IS TO BE DEDUC ED FROM THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS FURNISHED AND THERE IS NO SCOPE FOR SURMISE CONJECTURE AND AUTHORITY CANNOT EMBARK ON SPECULATIVE ADDITIONS. 8.3. THE ASSESSEE HAS INVITED THE ATTENTION AS TO T HE JUDGEMENT OF VARIOUS COURTS WHEREIN IT HAS BEEN HELD THAT UNLESS THERE IS A LI MITATION PUT BY THE LAW ON THE AMOUNT OF EXPENDITURE, A LESSER AMOUNT THAN THE AMOUNT EXP ENDED CANNOT BE ALLOWED MERELY BECAUSE THE ASSESSING AUTHORITY THINKS THAT THE ASS ESSEE COULD HAVE MANAGED BY PAYING A LESSER AMOUNT AS A PRUDENT BUSINESSMAN. IT HAS AL SO BEEN HELD BY VARIOUS COURTS THAT THE ACID TEST OF ALLOWABILITY OF AN EXPENDITURE, O NE HAS TO EXAMINE AS TO WHETHER THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND WHETHER SUCH EXPENDITURE IS GENUINE OR NOT. UNLESS OTHERWISE PROVED SUCH EXPENDITURE CAN NEVER BE DISALLOWED WHIMSICALLY BY THE LD. AO. VARIOUS COURTS HAVE HELD THAT THE REVENUE OR COURT CANNOT JUSTIFIABLY CLAIM TO PUT IT SELF IN THE ARMCHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRE CTORS AND ASSESS THE ROLE OF ASCERTAINING HOW MUCH IS A REASONABLE EXPENDITURE H AVING REGARD TO THE CIRCUMSTANCES OF THE CASE. IT A NO.1483/KOL/2011 I TO,WARD-50(4), KOLKATA VS M/S.KANJILAL JEWELLERS,KO L. A.YR.2009-2010 5 8.4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE HELD THAT IT HAS BEEN HELD BY THE VARIOUS COURTS THAT IT IS NOT OPEN TO THE DEPARTMENT TO PRESCRIBE WHAT EXPENDITURE AN ASSESSEE SHOULD INCUR AND IN WHAT CI RCUMSTANCES HE SHOULD INCUR THAT EXPENDITURE. EVERY BUSINESSMAN KNOWS ITS INTEREST B EST. IT IS NOT THE AOS CASE THAT THE SAID EXPENDITURE WAS NOT INCURRED BY THE ASSESSEE F OR THE PURPOSE OF BUSINESS. 8.5. ON CAREFUL CONSIDERATION OF THE ASSESSMENT ORD ER AND THE SUBMISSIONS OF THE AR THE LD. CIT(A) OBSERVED THAT THE ACCOUNTS OF THE ASSESSEE AND THE TAX AUDITORS HAVE NOT POINTED ANY DEFECT IN ASSESSEES ACCOUNT IN RES PECT OF THE LABOUR CHARGES PAID BY THE ASSESSEE. HE FURTHER OBSERVED THAT THE AO HAS A LSO NOT FOUND ANY PART OF THE LABOUR CHARGES PAID BY THE ASSESSEE TO BE NON-GENUINE. HE OBSERVED THAT THE AOS CONTENTION THAT THE LABOUR CHARGES PAID BY THE ASSESSEE WERE EXCESSIVE IS BASED ONLY ON THE FACT IN THE PRECEDING YEAR THE LABOUR CHARGES WERE PAID AT A LOWER RATE THAN THE RATE AT WHICH THE PAYMENTS WERE MADE DURING THE YEAR UNDER APPEAL. THE AOS FINDING THAT THE LABOUR CHARGES PAID BY THE ASSESSEE WERE EXCES SIVE IS NOT BASED ON ANY VERIFICATION OF FACTS. 8.6. IN THIS REGARD THE LD. CIT(A) AGREED WITH THE EXPLANATION O THE ASSESSEE THAT THE LABOUR CHARGES CANNOT REMAIN CONSTANT OVER THE YEAR S CONSIDERING THE ECONOMIC INFLATION INDEX AND THE SAME MAY ALSO VARY DEPENDIN G UPON THE INTRICACY INVOLVED IN THE DESIGN OF THE ORNAMENTS MANUFACTURED. HE FURTHE R OBSERVED THAT THE AO HAS DISALLOWED THE CLAIM OF PAYMENT OF LABOUR CHARGES T O THE TUNE OF RS.2,12,308/- ONLY ON ESTIMATE BASIS TO PLUG THE PROBABLE LEAKAGE OF THE REVENUE WHICH ITSELF SHOWS THAT THE DISALLOWANCE MADE BY THE AO IS NOT BASED ON ANY FACTS. THEREFORE IT WAS HELD BY THE LD. CIT(A) THAT THE DISALLOWANCE MADE BY THE AO OUT OF LABOUR CHARGES IS FOUND TO BE NOT SUSTAINABLE AND ACCORDINGLY HE DELETED THE D ISALLOWANCE OF RS.2,12,308/- MADE BY THE AO ON ACCOUNT OF LABOUR CHARGES. 9. THE LD. DR SUPPORTED THE ORDER OF THE AO WHEREAS THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A). IT A NO.1483/KOL/2011 I TO,WARD-50(4), KOLKATA VS M/S.KANJILAL JEWELLERS,KO L. A.YR.2009-2010 6 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN T HE INSTANT CASE THE AO DISALLOWED RS.2,12,308/- OUT OF LABOUR CHARGES ON THE GROUND T HAT IN THE IMMEDIATELY PRECEDING YEAR LABOUR CHARGES INCURRED BY THE ASSESSEE WAS RS .57.52 PER GRAM WHEREAS DURING THE YEAR END LABOUR CHARGES CLAIMED BY THE ASSESSEE WAS. RS.65.47 PER GM OF JEWELLERY MANUFACTURED. WE FIND THAT THE DISALLOWANCE MADE ON THE ABOVE GROUND IS UNSUSTAINABLE. THE AO HAS NOT FOUND THAT NO LABOUR CHARGES PAID BY THE ASSESSEE WAS NOT VERIFIABLE OR NOR GENUINE. NO DEFECT IN THE REL EVANT VOUCHERS WAS POINTED OUT BY THE AO. IN ABSENCE OF ANY SUCH DEFECTS BEING BROUGH T OUT BY THE AO IT WAS NOT OPEN FOR THE AO TO DISALLOW A PART OF THE GENUINE BUSINE SS EXPENDITURE ON THE GROUND THAT THE SAME WAS MORE THAN THE PRECEDING YEAR. WE THERE FORE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE GROUND OF APPEAL OF THE REVE NUE. 11. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 21.06.2013. SD/- SD/- [ .#! $'# , ] [ .., ,, , ] [MAHAVIR SINGH ] [N.S.SAINI] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (4 4 4 4) )) ) DATE: 21.06.2013. R.G.(.P.S.) 6 0 .$$7 87(9- COPY OF THE ORDER FORWARDED TO: 1. M/S.KANJILAL JEWELLERS, JESSORE ROAD, HABRA, NORTH 24 PARGANAS, PIN-743263 2 I.T.O., WARD-50(1), KOLKATA 3 . CIT KOLKATA 4. CIT (A)-XXXII, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. /7 .$/ TRUE COPY, 62/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES IT A NO.1483/KOL/2011 I TO,WARD-50(4), KOLKATA VS M/S.KANJILAL JEWELLERS,KO L. A.YR.2009-2010 7