The ITO, Ward-2, Navsari V. Shri Jayendra Sumatilal Shah, Navsari

ITA 1607/AHD/2010

• Counselvise Citation: 160720514 RSA 2010
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH SR DR
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.1607/AHD/2010 ASSESSMENT YEAR :2006-07 INCOME TAX OFFICER, WARD-2, NAVSARI V/S . SHRI JAYENDRA SUMATILAL SHAH, A/101, RIDHI SIDHI APARTMENT, MANEKLAL ROAD, NAVSARI [ PAN NO.ABKPS 9245C ] / APPELLANT .. / RESPONDENT) /BY APPELLANT SHRI D.K. SINGH, SR-DR /BY RESPONDENT NONE /DATE OF HEARING 13-12-2012 /DATE OF PRONOUNCEMENT 21-12-2012 / // / O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS), VALSAD (CIT( A) FOR SHORT) DATED 13-12-2009 PERTAINING TO ASSESSMENT YEAR (AY) 2006- 07. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A), VALSAD HAS ERRED IN DIRECTING TO AD OPT N.P. @ 6% OF TOTAL TURNOVER AS AGAINST THE TOTAL DISALLOWANCE OF ITA NO.1607/AHD/2010 A.Y. 2006-07 ITO WD-2, NVS V. SH JAYENDRA S SHAH PAGE 2 RS.58,94,855/- MADE BY THE AO BEING BOGUS LABOUR PA YMENTS OF RS.58,94,855/- AND THEREBY GIVING RELIEF OF 56,57,1 46/-. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A), VALSAD HAS ERRED IN DIRECTING TO AD OPT N.P. @ 6% OF TOTAL TURNOVER RATHER THAN ADJUDICATE WHETHER TH E LABOUR PAYMENT OF RS.58,94,855/- STATED TO HAVE BEEN MADE BY THE ASSESSEE WAS GENUINE OR IN-GENUINE. 2. NONE APPEARED ON BEHALF OF ASSESSEE DESPITE THE NOTICE OF SERVICE WAS DULY SERVED AS ACKNOWLEDGEMENT DUE CARD IS ON R ECORD. HENCE, WE PROCEED TO DISPOSE OF THIS APPEAL AFTER HEARING LD. DR. 3. THE BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A DIAMOND LABOUR CONTRACTOR AND THE CASE OF THE ASSESSEE WAS SELECTE D FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S. 143(3) OF THE IN COME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED W HEREBY THE ASSESSING OFFICER (AO)MADE ADDITION ON ACCOUNT OF BOGUS PAYME NT OF LABOUR CHARGES OF RS.58,94,855/-. AGAINST THIS ORDER ASSES SEE FILED APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISS IONS OF ASSESSEE PARTLY ALLOWED THE APPEAL, WHILE ALLOWING THE APPEA L, LD. CIT(A) DIRECTED THE AO TO ADOPT NET PROFIT (NP) @ 6% OF TOTAL TURNO VER WHICH COMES TO RS.3,62,427/- AND THUS THE ADDITION OF RS.58,94,855 /- WAS REDUCED TO THE EXTENT OF RS.3,62,427/-. THE REVENUE AGAINST THIS O RDER HAS FILED THIS APPEAL BEFORE TRIBUNAL. 4. LD. SR-DR VEHEMENTLY SUPPORTED THE ORDER OF ASSE SSING OFFICER AND SUBMITTED THAT LD. CIT(A) ERRED IN DIRECTING TH E ASSESSING OFFICER TO ADOPT NP @ 6%. ITA NO.1607/AHD/2010 A.Y. 2006-07 ITO WD-2, NVS V. SH JAYENDRA S SHAH PAGE 3 5. WE HAVE HEARD LD. SR-DR AND PERUSED THE MATERIAL S AVAILABLE ON RECORD. THE ASSESSING OFFICER IN THIS CASE CAME TO THE CONCLUSION THAT ASSESSEE IS SUPPRESSING THE TAXABLE PROFIT BY MAKIN G CLAIM OF LABOUR CHARGES ON THE BASIS OF STATEMENT OF ONE SHRIHITESH M PATEL AND SANJAY P YADAV. THE AO ALSO OBSERVED THAT THE AFFIDAVITS E XECUTED BY THE PERSONS ARE FALSE BUT THE UNDISPUTED FACT REMAINS T HAT THE AO HAS DISALLOWED THE ENTIRE LABOUR CHARGES OF RS.58,94,85 5/- ON THE GROUND THAT SUCH LABOUR CHARGES AS CLAIMED BY THE ASSESSEE NEVER HAPPENED. THE AO HAS ISSUED SHOW-CAUSE NOTICE TO THE ASSESSEE DATED 26-12- 2008 WHEREIN HE HAS CALLED UPON THE ASSESSEE TO EXP LAIN THE LABOUR PAYMENT OF RS.58,94,855/- TO THE DIFFERENT PERSONS OUT OF THE INCOME EARNED THROUGH LABOUR CONTRACT OF RS.60,40,552/- FR OM ONE SHRI K.M. SHAH. WE FIND THAT LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND THE REMAND REPORT OF THE AO RESTRICTED THE DISALLOWANCE TO THE EXTENT @ 6% OF THE NP OF TOTAL TURNOVER WHICH C OMES TO RS.3,62,427/-. WE FIND THAT LD. CIT(A) HAS CONSIDER ED THE REMAND REPORT, WHEREIN AO STATED THAT NP RATIO @ 100% DOES NOT HAPPEN IN THIS TYPE OF BUSINESS. THE LD. CIT(A) HAS DELETED THE DI SALLOWANCE FOLLOWING THE INSTRUCTIONS OF BOARDS CIRCULAR NO.F NO. 153/0 7/2007 INSTRUCTION NO.2 DATED 22-02-2008 IN SUCH TYPE OF BUSINESS AND DIRECTED THE AO TO ADOPT NP @ 6% OF TOTAL TURNOVER. WE FIND THAT LD. C IT(A) HAS FOLLOWED THE BOARDS CIRCULAR RESTRICTING THE NP @ 6% OF TOT AL TURNOVER. THE REVENUE HAS NOT PLACED ANYTHING ON RECORD SUGGESTIN G THAT SUCH TYPE OF BUSINESS NP CAN BE MORE THAN 6% AS ADOPTED BY LD. C IT(A). IN ABSENCE OF SUCH MATERIAL, WE DO NOT FIND ANY INFIRM ITY INTO THE ORDER PASSED BY LD. CIT(A) FOLLOWING THE CBDTS CIRCULAR NO.2 DATED 22-02- 2008, WHEREIN THE BOARD HAS ACCEPTED THE BOOK RESUL T FOR ENGAGING DIAMOND MANUFACTURING AND SLAP OR TRADING IS NP IS SHOWN @ 6% OR ITA NO.1607/AHD/2010 A.Y. 2006-07 ITO WD-2, NVS V. SH JAYENDRA S SHAH PAGE 4 ABOVE. THEREFORE, THE ORDER OF LD. CIT(A) IS HEREBY UPHELD. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP !' #- 21/12/2012 ()* + ,,- ,,- ,,- ,,- .- .- .- .- / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '*',1 2 / CONCERNED CIT 4. 2- / CIT (A) 5. -56 ,,,1, ,1 , ()* / DR, ITAT, AHMEDABAD 6. 69: ;< / GUARD FILE. BY ORDER/ , =/( '> ,1 , ()* + STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 18/12 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 18/12 4) DATE OF CORRECTION 19/12 5) DATE OF FURTHER CORRECTION - - 6) DATE OF INITIAL SIGN BY MEMBERS 19/12 7) ORDER UPLOADED ON 21/12 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 21/12