Shri Khimji Bachu Sathwara, GANDHIDHAM V. The Assistant Commissioner of Income Tax, Gandhidham Circle, GANDHIDHAM

ITA 170/RJT/2013

• Counselvise Citation: 17024914 RSA 2013
• Duration Of Justice: 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR J B JHAVERI DR
• Assessee Lawyers: KALPESH DOSHI
• Keywords: Rejection of books of accounts; Business expenditure; Wrong claim
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM AND SHRI B. R. JAIN, A M ITA NO. 170/RJT/2013 / ASSESSMENT YEAR : 2009-10 SHRI KHIMJI BHACHU SATHWARA, PROP. M/S. SAGAR HANDLING, SHOP NO.23, VRUNDAVAN COMPLEX, PLOT NO.20, GANDHIDHAM PAN : AFHPS 5856 C ( / APPELLANT) ACIT GANDHIDHAM CIRCLE GANDHIDHAM / RESPONDENT ITA NO. 219/RJT/2013 / ASSESSMENT YEAR : 2009-10 ITO, WARD-2, GANDHIDHAM ( / APPELLANT) SHRI KHIMJI BHACHU SATHWARA, PAN : AFHPS 5856 C / RESPONDENT ! ' #$ / ASSESSEE BY SHRI KALPESH DOSHI, CA % ! ' #$ / REVENUE BY DR. J. B. JHAVERI, DR # & ' ! ( / DATE OF HEARING 02.01.2014 ) ! ( / DATE OF PRONOUNCEMENT 10.01.2014 / ORDER .. , / T. K. SHARMA, J. M.: THESE CROSS APPEALS ARE AGAINST ORDER DATED 19.02.2013 OF LD. CIT(A)-II, RA JKOT FOR THE ASSESSMENT YEAR 2009-10. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL. HE IS ENGAGED IN THE BUSINESS OF TRANSPORT AND LABOUR CONTRACTOR IN HIS PROPRIETORSHIP CONCERN NAMELY M/S SAGAR HANDLING. FOR THE ASSESSMENT YEAR UNDER APPEA L, HE FILED THE RETURN OF INCOME ON 23.09.2009 DECLARING TOTAL INCOME AT RS.17,05,54 0/- AND AGRICULTURE INCOME AT RS.1,30,000/-. THE ASSESSING OFFICER FRAMED THE ASS ESSMENT U/S 143(3) OF THE INCOME- TAX ACT ON 21.12.2011, WHEREIN HE DISALLOWED RS.38, 38,630/- BEING BONUS LIABILITY FOR THE DETAILED REASON GIVEN IN PARAGRAPH NO.6 OF THE ASSESSMENT ORDER. FOR MAKING THE AFORESAID DISALLOWANCE, IN PARAGRAPH NO.2 OF THE AS SESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT IN THE ASSESSMENT YEAR UNDER APPEAL THE TOTAL RECEIPTS ARE 170 & 219-RJT-2013 SHRI KHIMJI BACHU SATHWARA 2 RS.5,43,55,998/- ON WHICH THE GP SHOWN IS RS.44.35 LACS AND THE NET PROFIT IS RS.17,05,539/- I.E. 3.14% ONLY. AS PER THE DETAILS MADE AVAILABLE IN COLUMN NO. 21 OF FORM NO.3CB, THE PAYMENT OF THE ALLEGED UNPAID LIAB ILITIES OF BONUS RS.38,38,630/- WAS SHOWN AND IT WAS CLAIMED THAT THE SAME HAS BEEN PAI D IN THE MONTH OF JULY 2009. THE ASSESSING OFFICER EXAMINED BONUS REGISTER AND FOUND THAT THERE ARE SAME THUMB IMPRESSION PRIMA-FACIE APPEARED AT MANY PLACES AND THEREFORE HE CONSIDERED IT NECESSARY TO CARRY OUT FURTHER INVESTIGATION IN THE MATTER. THEREAFTER, THE ASSESSING OFFICER IMPOUNDED THE BONUS REGISTER ALONGWITH WAGE SHEETS ETC. UNDER PROVISION OF SECTION 131(3) OF THE INCOME-TAX ACT. 3. IN PARAGRAPH NO.3 OF THE ASSESSMENT ORDER THE AS SESSING OFFICER OBSERVED THAT HE OBTAINED FORENSIC REPORT FROM THE FORENSIC SCIEN CE LABORATORY, AHMEDABAD IN RESPECT OF THUMB IMPRESSION OF BONUS PAYMENT REGIST ERS. IN THIS REPORT, FINGER PRINT EXPERT OPINED THAT 979 ENTRIES FROM THE AVAILABLE S AMPLE WERE EXAMINED AND IT WAS FURTHER OPINED THAT OUT OF THESE 979 ENTRIES THERE WERE AS MANY AS 681 ENTRIES WHERE FIVE INDIVIDUALS ONLY HAD PUT THEIR THUMB IMPRESSIO N AND IN RESPECT OF THE REMAINING THUMB IMPRESSIONS, IT WAS OPINED THAT THEY WERE FOU ND EITHER SMUDGED/SUPERIMPOSED AND THEREFORE UNFIT FOR COMPARISON. THE ASSESSING O FFICER CONFRONTED THE FORENSIC REPORT TO THE ASSESSEE. THE ASSESSEE SUBMITTED REPL Y DATED 14.12.2011, WHEREIN HE MADE THE FOLLOWING SUBMISSIONS:- IT IS POINTED HERE THAT TOTAL THREE BONUS REGISTE R ARE MAINTAINED BY US FOR MAKING PAYMENT AND SAID ARE DIVIDED IN FIVE PART, P ART 1 CONTAINS TOTAL BONUS OF RS.9,42,447 WHICH INVOLVES 979 LABOURERS, PART II C ONTAINS TOTAL BONUS OF RS.8,62,454 WHICH INVOLVES, 841 LABOURERS, PART III CONTAINS TOTAL BONUS OF RS.8,97,284 WHICH INVOLVES 1101 LABOURERS, PART IV CONTAINS TOTAL BONUS OF RS.7,91,096 WHICH INVOLVES 999 LABOURERS AND PART V CONTAINS TOTAL BONUS OF RS.3,45,349 WHICH INVOLVES 360 LABOURERS, ALL TOGET HER MAKING TOTAL BONUS OF RS.38,38,630 WHICH INVOLVES TOTAL OF 4280 LABOURERS . FINGER PRINT EXPERTS REPORT CONTAINS THE REPORT OF ONLY PART I (REGISTER 1) WHICH INVOLVES TOTAL BONUS OF RS.9,42,447 AND ;TOTAL LABO UR OF 979. OUT OF SAID 979, REPORT OF 681 ARE ONLY MADE SUBJECT TO OPINION OF E XPERT AND IT IS OPINIONED IN THE REPORT THAT 5 INDIVIDUALS HAVE PUT THEIR THUMB IMPR ESSIONS AGAINST 681 NAMES OUT OF TOTAL OF 979 ENTRIES IN THE SAID REGISTER THE REPORT DOES NOT MENTION ANY THING AND IS SILENT ABOUT 999 ENTRIES WHICH CONTAINS THE BONUS OF RS.7,91,096 AS CONTAINED IN P ART IV WHICH ARE ALSO THERE IN THE SAID REGISTER ITSELF. FACTS ARE DURING THE YEAR 2008-09, TOTAL WAGES OF R S.4,60,82,000 HAVE BEEN INCURRED AND DEBITED TO PROFIT AND LOSS ACCOUNT. IT HAS BEEN PRACTICE FOLLOWED BY 170 & 219-RJT-2013 SHRI KHIMJI BACHU SATHWARA 3 US THAT IN APPRECIATION OF GOOD WORK DONE BY LABOUR ER AND IN ORDER TO RECOGNIZE THEIR WORK, THEY ARE PAID BONUS AND THE CALCULATION OF SAID IS DONE AT THE YEAR END AND SAID ARE PAID IN THE NEXT FINANCIAL YEAR. TOTAL BONUS OF RS.38,38,630/- HAS BEEN INCURRED DURING THE YEAR. IT IS QUITE COMM ON PRACTICE THAT IN LABOUR ORIENTED CONCERNS PAYMENTS ARE SOME TIMES MADE TO T HE GROUP LEADER. IT IS ALSO PREVALENT THAT WHEN ANY LABOURER CANNOT COME PERSON ALLY TO COLLECT THE AMOUNT, THEN HE INSTRUCTS HIS OR HER CO-LABOURER TO COLLECT AND THE, LABOURER COLLECTING THE AMOUNT PAYS TO THE WAGES EARNING LABOURER. DURING T HE YEAR, TOTAL WAGE INVOLVED ARE MORE THAN 4000 LABOURER AND THE SAID ARE DULY P AID ON WAGE SHEET, WHICH ARE DULY PRODUCED BEFORE YOU FOR VERIFICATION. ALSO THE FACT TO BE NOTED IS THAT BONUS IS PAID AFTER THE END OF THE YEAR AND BY VERY NATURE OF LABOURERS, THEY ARE NOT STATE TO ON PARTY BUT WORK FOR MANY DIFFERENT P ARTIES AND BECAUSE THEY ARE DAILY RATED, IT IS NOT POSSIBLE FOR THEM TO LEAVE T HEIR DAILY WORK TO COLLECT THE BONUS. THUS IN GENERAL PRACTICE BONUS IS NORMALLY C OLLECTED BY GROUP LEADER AND HE IN TURN GIVES THE BONUS TO DIFFERENT LABOURE RS. HOWEVER SINCE HE IS COLLECTING THE BONUS ON BEHALF OF MANY, HIS THUMB I MPRESSIONS ARE OBTAINED AGAINST THE NAME OF PERSONS ON WHOSE BEHALF HE IS C OLLECTING THE BONUS. BETWEEN THE GROUP OF 100 TO 150 LABOURERS, THERE IS GENERALLY ONE GROUP LEADER. THIS IS IN GENERAL PRACTICE AND MANY A TIME S, LABOURERS ARE DIRECTLY COMING FOR COLLECTING BONUS AND IN THAT CAST, THUMB IMPRESSIONS ARE OBTAINED AGAINST THEIR NAMES IN THE BONUS REGISTER. IT IS SUBMITTED THAT WE KEEP SUPERVISORS/ACCOUNTANT S AT THE SITE OF WORK. MUSTER ROLLS AND BONUS REGISTER ARE PREPARED BY SUPERVISOR /ACCOUNTANT. ATTENDANCE IS TAKEN BY THE SUPERVISOR. WAGES FOR EVERY MONTH BASE S ON SUCH MUSTER ROLLS ARE PAID AND DEBITED BY THE ACCOUNTANT IN THE ACCOUNTS BOOKS. THE PAYMENT OF WAGES AND BONUS ARE MADE BY THE EMPLOYEES OF OUR CO MPANY AND ON ACTUAL PAYMENT, THUMB IMPRESSION ARE OBTAINED AND RECORDED . NO PAYMENTS ARE MADE DIRECTLY BY PROPRIETOR TO THE LABOURERS. IT IS TO BE NOTED THAT IN THE PAST IN THE FIRM NAME SAVANI FREIGHT CARRIER OF WHICH I WAS PROPRIETOR, THE LABOUR BONUS OF RS.22,79,325/ - FOR AY 2007-08 AND LABOUR BONUS OF RS.33,84,883 FOR AY 2008-09 HAS BEEN INCUR RED AND DEBITED AND THE SAID HAS BEEN ACCEPTED BY THE DEPARTMENT AND ASSESS MENT ORDER U/S 143(3) HAS BEEN PASSED FOR SAID YEARS ALSO. ALSO AT THIS STAGE, IT IS WORTH TO DISCUSS THE EVID ENTIARY VALUE OF THE SUCH REPORT OF FINGER PRINT EXPERT. THE EVIDENCE OF AN EXPERT IS NOT CONCLUSIVE THE HON BLE SUPREME COURT OF INDIA IN S. GOPAL REDDY VS. STATE OF ANDHRA PRADESH (AIR 1996 SC 2184) HAS OBSERVED THAT THE EVIDENCE OF AN EXPERT IS A RATHE R WEAK TYPE OF EVIDENCE AND THE COURTS DO NOT GENERALLY CONSIDER IT AS OFFERING CONCLUSIVE PROOF AND THEREFORE SAFE TO RELY UPON THE SAME WITHOUT SEEKING INDEPEND ENT AND RELIABLE CORROBORATION. IN MAGAN BIHARI LAL V. STATE OF PUNJ AB (AIR 1977 SC 1091), WHILE DEALING WITH THE EVIDENCE OF A HANDWRITING EXPERT, THIS COURT OPINED WE THINK IT WOULD BE EXTREMELY HAZARDOUS TO CONDEMN THE APPELLA NT MERELY ON THE STRENGTH OF OPINION EVIDENCE OF A HANDWRITING EXPERT. IT IS NOW WELL SETTLED THAT EXPERT OPINION MUST ALWAYS BE RECORDED WITH GREAT CAUTION AND PERHAPS NONE SO WITH MORE CAUTION THAN THE OPINION OF A HANDWRITING EXPE RT. THERE IS A PROFUSION OF PRECEDENTIAL AUTHORITY WHICH HOLDS THAT IT IS UNSAF E TO BASE A CONVICTION SOLELY ON EXPERT OPINION WITHOUT SUBSTANTIAL CORROBORATION. T HIS RULE HAS BEEN UNIVERSALLY ACTED UPON AND IT HAS ALMOST BECOME A RULE OF LAW. IT WAS HELD BY THIS COURT IN RAM CHANDRA V. STATE OF U.P. (AIR 1957 SC 381) THAT IT IS UNSAFE TO TREAT EXPERT HANDWRITING OPINION AS SUFFICIENT BASIS FOR CONVICT ION, BUT IT MAY BE RELIED UPON WHEN SUPPORTED BY OTHER ITEMS OF INTERNAL AND EXTER NAL EVIDENCE. THIS COURT AGAIN POINTED OUT IN ISHWARI PRASAD MISRA V. MOHD. ISA (AIR 1963 SC 1728) THAT EXPERT EVIDENCE OF HANDWRITING CAN NEVER BE CONCLUS IVE BECAUSE IT IS AFTER ALL, OPINION EVIDENCE, AND THIS VIEW WAS REITERATED IN S HASHI KUMAR BANERJEE V. SUBODH KUMAR BANERJEE (AIR 1964 SC 529) WHERE IT WA S POINTED OUT BY THIS COURT THAT EXPERTS EVIDENCE AS TO HANDWRITING BEIN G OPINION EVIDENCE CAN RARELY, 170 & 219-RJT-2013 SHRI KHIMJI BACHU SATHWARA 4 IF EVER, TAKE THE PLACE OF SUBSTANTIVE EVIDENCE AND BEFORE ACTING ON SUCH EVIDENCE, IT WOULD BE DESIRABLE TO CONSIDER WHETHER IT IS CORROBORATED EITHER BY CLEAR DIRECT EVIDENCE OR BY CIRCUMSTANTIAL EVIDENCE . THIS COURT HAD AGAIN OCCASION TO CONSIDER THE EVIDENTIARY VALUE OF EXPER T OPINION IN REGARD TO HANDWRITING IN FAKHRUDDIN V. STATE OF M.P. (AIR 196 7 SC 1326) AND IT UTTERED A NOTE OF CAUTION POINTING OUT THAT IT WOULD BE RISKY TO FOUND A CONVICTION SOLELY ON THE EVIDENCE OF A HANDWRITING EXPERT AND BEFORE ACT ING UPON SUCH EVIDENCE, THE COURT MUST ALWAYS TRY TO SEE WHETHER IT IS CORROBOR ATED BY OTHER EVIDENCE, DIRECT OR CIRCUMSTANTIAL. THUS FROM THE ABOVE DISCUSSION IT IS CLEAR THAT EXP ERT OPINION HAS NOT GOT ANY EVIDENTIARY VALUE IN THE ABSENCE OF ANY CLEAR DIREC T EVIDENCE. IT IS BROUGHT TO THE NOTICE THAT NO DEFECTS HAS BEE N POINTED OUT WITH RESPECT TO SAID WAGES SHEET & BONUS REGISTER AND ALSO NO DEFEC TS IN THE BOOKS OF ACCOUNTS HAS BEEN FOUND NOR ANY SPECIFIC MISTAKE OR DISCREPA NCY IN ANY OF THE RECORDED ENTRIES IS FOUND IN THE BOOKS OF ACCOUNTS. BOOKS OF ACCOUNTS ARE PROPERLY MAINTAINED AND SAID ARE DULY AUDITED BY CHARTERED A CCOUNTANTS AS PER THE PROVISIONS OF SECTION 44AB OF THE INCOME TAX ACT, 1 961. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO PROVE THAT ANY PART OF THE BON US PAYMENT MADE IS BOGUS OR FICTITIOUS. NOT A SINGLE WAGES EARNER HAS EVER COMP LAINED THAT HE HAS NOT RECEIVED THE PAYMENT FOR BONUS OR HAS RECEIVED LESS PAYMENT OF BONUS OUT OF THE PAYMENT SHOWN TO HAVE BEEN MADE. FINGER PRINT EXPERT SIMPLY SAYS THAT THESE THUMB IM PRESSIONS APPEARS TO BE IDENTICAL OR OF SAME PERSONS. THIS DOES NOT LEAD TO THE CONCLUSION THAT PAYMENT TO ALL THE LABOURERS WERE NOT MADE. THE REPORT OF T HE EXPERT DOES NOT LEAD TO THE CONCLUSION THAT ALL THESE LABOURERS DOES NOT EXIT N OR IT ESTABLISHES THAT PAYMENT WERE NOT MADE TO THEM AS SHOWN IN THE BOOKS OF THE ACCOUNTS. IT IS STATED IN THE NOTICE THAT THE FULL BONUS EXPE NDITURE DEBITED TO PROFIT AND LOSS IS BOGUS WHEREIN IT IS HUMBLY SUBMITTED THAT FINGER PRINT REPORT HAS BEEN OBTAINED ONLY FOR ONE PART OF REGISTER (PART 1 OF REGISTER 1 ) WHEREIN ONLY PART OF BONUS ARE COVERED AND BASED ON THAT SAMPLE, IT CANNOT BE CONC LUDED THAT ALL THE EXPENSES DEBITED ARE BOGUS. ALSO NO OTHER INDEPENDENT EVIDENCE ARE ON RECORDS T O SHOW THAT PAYMENT OF BONUS ARE NOT MADE TO LABOURERS. IN ORDER TO FURTHER SUBSTANTIATE OUR STAND, WE ARE IN PROCESS OF LOCATING THE GROUP LEADER WHO HAS COLLECTED THE BONUS ON BEHALF OF LAB OURERS AND ALSO IN PROCESS OF LOCATING SOME OF THE LABOURERS WHO HAVE RECEIVED THE BONUS FROM GROUP LEADER BUT AS THE TIME OF MORE THAN 3 YEARS HAS PAS SED, AND THE LABOURERS BY THEIR NATURE NOT CONFINED TO ANY PARTICULAR BOUNDAR Y OF THE CITIES AND ALSO IT IS LEARNT THAT SOME OF THE GROUP LEADER HAS BEEN MIGRA TED TO SOME OTHER STATES FOR WORK, FINDING HARD TO LOCATE SUCH PERSONS AND WE WI LL REQUEST TO KINDLY GRANT US ONE MONTH TIME TO PRODUCE SUCH PERSONS BEFORE YOU F OR VERIFICATION OF THE FACT. TO SUM UP, 1. THE REPORT OF FINGER PRINTER EXPERT IS NOT CONCL USIVE EVIDENCE OF THE FACT THAT BONUS HAS NOT BEEN PAID TO THE LABOURERS. 2. ALSO THE REPORT IS ONLY WITH RESPECT TO PART OF BONUS PAID AMOUNTING TO RS.9,42,447 AND FROM THAT IT CANNOT BE INFERRED, TH AT WHOLE PAYMENT OF BONUS MADE IS NOT GENUINE. 3. THERE ARE NO OTHER INDEPENDENT EVIDENCE TO SUPPO RT THE CONTENTION THAT THE BONUS DEBITED TO PROFIT AND LOSS ACCOUNTS IS NOT GE NUINE AND AS HELD BY SUPREME COURT IN NUMBER OF DECISIONS, EXPERT REPORT CANNOT BE FORMED BASES IN THE ABSENCE OF OTHER CLEAR DIRECT EVIDENCE. 4. IN THE PAST ALSO SIMILAR KIND OF BONUS HAS BEEN PAID AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT. 170 & 219-RJT-2013 SHRI KHIMJI BACHU SATHWARA 5 5. NO DEFECTS HAVE BEEN FOUND IN THE WAGE SHEET AND BONUS REGISTER AND OTHER BOOKS OF ACCOUNTS MAINTAINED. 6. BONUS HAS BEEN PAID TO THE GROUP LEADER BECAUSE IT WAS PRACTICALLY IMPOSSIBLE FOR SO MANY LABOURERS TO COME PERSONALLY FOR COLLECTING THE BONUS. THUS FROM THE ABOVE, IT IS SUBMITTED THAT BONUS EXP ENSES DEBITED TO PROFIT AND LOSS ACCOUNT ARE GENUINE AND HAS BEEN INCURRED FOR BUSINESS PURPOSE ONLY AND IT IS PRAYED THAT BOOK RESULT SHOULD BE ACCEPTED. 4. THE ASSESSING OFFICER CONSIDERED THE AFORESAID S UBMISSIONS IN PARAGRAPHS 6 & 7 OF THE ASSESSMENT ORDER AND ULTIMATELY HELD THAT AN AMOUNT OF RS.38,38,630/- DEBITED TO PROFIT & LOSS A/C. TOWARDS PAYMENTS OF BONUS LIABIL ITY IS A FALSE CLAIM OF EXPENDITURE AND HE ACCORDINGLY DISALLOWED THE SAME. ON APPEAL, IN THE IMPUGNED ORDER, LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS.26,87,041/- FOR T HE DETAILED REASON GIVEN ON PAGE NO.13 OF THE ASSESSMENT ORDER WHICH IS REPRODUCED H EREUNDER:- HOWEVER, THE QUESTION WHICH REQUIRES TO BE FURTHER DELIBERATED UPON IS REGARDING THE QUANTUM OF THE DISALLOWANCE. THE A.O. HAS DISAL LOWED THE ENTIRE LABOUR BONUS PAYMENTS ON THE BASIS OF THE OPINION OF THE F INGER PRINT EXPERT. HOWEVER, IT IS SEEN THAT THE EXPERTS OPINION IS ONLY IS RESPEC T OF 681 ENTRIES OUT OF 979 ENTRIES REFERRED TO HIM. THIS IS ALMOST 70% OF THE TOTAL ENTRIES REFERRED TO THE EXPERT. IT WOULD BE THEREFORE FAIR TO RESTRICT THE DISALLOWANCE TO 70% OF THE DISALLOWANCE, APPLYING THE SAME RATIO OF THE NUMBER OF BOGUS THUMB IMPRESSIONS TO THE TOTAL THUMB IMPRESSIONS REFERRED TO THE FING ER PRINT EXPERT. 70% OF RS.38,38,630/- COMES TO RS.26,87,041/-. THE DISALLO WANCE ON ACCOUNT OF PAYMENT TOWARDS BONUS LIABILITY IS THEREFORE RESTRI CTED TO RS.26,87,041/-. THIS GROUND IS PARTLY ALLOWED. AGGRIEVED WITH THE ORDER OF LD. CIT(A), BOTH SIDES ARE IN APPEAL BEFORE THIS TRIBUNAL. 5. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ARE AS UNDER:- 1. THAT, THE LEARNED CIT(A) HAS WRONGLY CONFIRMED THE ADDITION OF RS.26,87,041/- ON ACCOUNT OF LABOUR BONUS EXPENDITU RE. 2. THAT, THE FINDING OF THE LEARNED CIT(A) IS NOT J USTIFIED IN LAW AS WELL AS FACTS OF THE CASE AND REQUIRED TO BE DELETED. 6. THE GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE ON ACCOUNT OF PAYMENT TOWARDS BONUS LIABILITY TO RS .26,87,041/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 170 & 219-RJT-2013 SHRI KHIMJI BACHU SATHWARA 6 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE E XTENTS. 7. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE, SHRI KALPESH DOSHI, CA, APPEARED AND CONTENDED THAT THE ASSESSEE MAINTA INED WAGE REGISTER, LABOUR REGISTER, REGULAR BOOKS OF ACCOUNTS AND OTHER DETAI LS. THE BOOKS OF ACCOUNTS ARE DULY AUDITED U/S 44AB OF THE INCOME-TAX ACT, 1961. NO DE FECTS IN THE MAINTENANCE OF BOOKS OF ACCOUNTS IS POINTED OUT EITHER BY AUDITOR OR BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, EXCEPT THE MISTAKE COMMITTED BY G ROUP LEADERS/MUKADAM IN OBTAINING THE THUMB IMPRESSIONS ON PAYMENT OF BONUS . THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER ONLY CONSIDERE D REGISTER PERTAINING TO 979 LABOURERS OUT OF TOTAL 4280 LABOURERS, OUT OF WHICH ONLY REPORT OF 681 LABOURERS WERE FOUND AND THEREFORE OUT OF TOTAL PAYMENTS REPORT IS AVAILABLE FOR 16% ONLY. THE ASSESSEE HAS EMPLOYED MORE THAN 4000 LABOURERS AND ALL THE LABOURERS ARE LOCATED AT VARIOUS DIFFERENT LOCATIONS; THEREFORE THE LABOUR P AYMENT HAS BEEN MADE THROUGH GROUP LEADERS AND MUKADAM. THE THUMB IMPRESSION OF THE GR OUP LEADERS ARE TAKEN FOR THE PAYMENT OF BONUS AND THEREFORE THE FINGER PRINT REP ORT CANNOT BE CONSIDERED FOR SUCH TRANSACTIONS. THE EVIDENCE OF FINGER PRINT IS NOT C ONCLUSIVE AND NO OTHER INDEPENDENT EVIDENCE IS ALSO THERE WHICH INDICATE THAT PAYMENTS TO LABOURERS ARE NOT GENUINE. THE PROFIT MARGIN DECLARED BY THE ASSESSEE IN THE ASSES SMENT YEAR UNDER APPEAL IS QUITE REASONABLE AS IS EVIDENT FROM THE FOLLOWING:- PARTICULARS A.Y. 2009 - 10 A.Y. 2008 - 09 A.Y. 2007 - 08 TURNOVER 5,43,55,998/- 5,69,59,291/- 5,41,98,712/- NET PROFIT 17,05,539/- 17,44,203 15,64,477/- N.P. RATIO 3.14% 3.06% 2.89% THE LD. COUNSEL OF THE ASSESSEE FURTHER POINTED OU T THAT IN THE ASSESSMENT YEAR 2006-07, ON SIMILAR ISSUE, THE ASSESSING OFFICER RE JECTED THE BOOKS OF ACCOUNTS AND ESTIMATED NET PROFIT @ 5%. ON APPEAL, LD. CIT(A) RE STRICTED THE NET PROFIT @ 3% IN THAT YEAR AND DEPARTMENT HAS NOT FILED FURTHER APPEAL. ON THIS BASIS, THE NET PROFIT DECLARED BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER APPEAL WHICH IS 3.14% IS FAIR AND REASONABLE; THEREFORE NO DISALLOWANCE OUT OF BONUS EXPENSES IS CALLED FOR. 170 & 219-RJT-2013 SHRI KHIMJI BACHU SATHWARA 7 8. ON THE OTHER HAND, DR. J. B. JHAVERI, DR, APPEAR ED FOR THE REVENUE VEHEMENTLY POINTED OUT THAT THE LD. CIT(A) OUGHT TO HAVE CONFI RMED THE DISALLOWANCE OF BONUS OF RS.38,38,630/- AS IT IS THE DUTY OF THE ASSESSEE TO PROVE THE IDENTITY OF THE PARTY ALONGWITH EVIDENCE OF PAYMENT OF BONUS. THE ONUS IS ON THE ASSESSEE TO FURNISH THE ADDRESS OF THE LABOURERS TO WHOM THE PAYMENT OF BON US IS MADE ALONGWITH EVIDENCES. SINCE THIS HAS NOT BEEN DONE IN THE PRESENT CASE, T HE ENTIRE DISALLOWANCE OF BONUS OF RS.38,38,630/- BE RESTORED. 9. IN REJOINDER, THE LD. COUNSEL OF THE ASSESSEE DR EW OUR ATTENTION TO PARAGRAPH 5 OF THE ASSESSMENT ORDER AND CONTENDED THAT THE ASSESSE E HAS MAINTAINED TOTAL 5 BONUS REGISTERS. TOTAL NUMBER OF LABOURERS TO WHOM BONUS WAS PAID ARE 4280. THE ASSESSING OFFICER HAS SENT REGISTER PERTAINING TO PART I IN W HICH TOTAL NUMBER OF LABOURERS RECORDED ARE 979. OUT OF SUCH 979 LABOURERS, THE ASSESSING O FFICER HAS OBTAINED REPORT AGAINST THE ASSESSEE OF 681 LABOURERS. THEREFORE, OUT OF TO TAL 4280 LABOURERS, THE ASSESSING OFFICER HAS OBTAINED REPORT OF 681 LABOURERS. ON TH IS BASIS, THE PERCENTAGE COMES OUT TO APPROXIMATELY 16% OF THE TOTAL LABOURERS IN WHOSE C ASES THERE WAS DISCREPANCY. THEREFORE, THE LD. COUNSEL OF THE ASSESSEE CONTENDE D THAT DISALLOWANCE EVEN OTHERWISE SHOULD BE RESTRICTED ONLY TO 16% OF TOTAL PAYMENT W HICH WORKS OUT TO RS.6,14,181/-. 10. WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIA L ON RECORD. THE APPELLANT IS IN THE BUSINESS OF HANDLING LABOUR AND ACT AS A TRANSP ORT CONTRACTOR. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DISCLOSED TURNOVER OF RS.5,43,55,998/- ON WHICH NET PROFIT OF RS.17,05,539/- YIELDING NET PROFIT @ 3.14 % HAS BEEN DECLARED AS AGAINST TURNOVER OF RS.5,69,59,291/- YIELDING NET PROFIT @ 3.06% IN THE IMMEDIATELY PRECEDING YEAR. NO CHANGE IN BUSINESS ACTIVITY HAS BEEN REPOR TED OR BROUGHT ON RECORD. IN THE ASSESSING YEAR 2006-07, ON SIMILAR FACTS, THE ASSES SING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED NET PROFIT @ 5%. THIS PROFIT RATE HAS BEEN RESTRICTED TO 3% IN THE APPEAL BY THE LD. CIT(A) AND THE REVENUE HAD AC CEPTED THE ORDER OF LD. CIT(A). DURING THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER, HOWEVER, DISALLOWED THE ENTIRE AMOUNT OF RS.38,38,630/- PAID AS BONUS EXPEN SES TO THE WORKERS/LABOURERS. HE, HOWEVER, ALLOWED THE DEDUCTION OF LABOUR CHARGES PA ID TO SUCH PERSON IN ENTIRETY. THE ONLY REASON TAKEN FOR NOT ALLOWING THE DEDUCTION IS THAT THE THUMB IMPRESSIONS ON THE 170 & 219-RJT-2013 SHRI KHIMJI BACHU SATHWARA 8 RECEIPTS ARE NOT BY THE PERSON IN WHOSE NAME THE PA YMENTS ARE SHOWN TO HAVE BEEN MADE. IT IS NOT THE CASE OF THE REVENUE THAT THE A SSESSEE WAS NOT REQUIRED TO PAY BONUS TO THE EMPLOYEES WHO HAVE ACTUALLY WORKED AND TO WHOM THE ASSESSEE HAS PAID WAGES DURING THE WHOLE YEAR WHICH WAS ALLOWED BY TH E ASSESSING OFFICER AS BUSINESS EXPENDITURE. THE ASSESSEE CASE IS THAT HE HAS PAI D BONUS TO EMPLOYEES THROUGH GROUP LEADERS/MUKADAM AND IT IS THE NORMAL PRACTICE WHICH IS FOLLOWED BY HIM FROM YEAR TO YEAR. THE REVENUES CASE IS ALSO NOT THAT T HE PAYMENTS HAVE NOT REACHED TO RESPECTIVE LABOURERS WHOSE ACCOUNTS LABOUR CHARGES PAID STOOD ALLOWED AS DEDUCTION. UNDER THE PRESENT CIRCUMSTANCES AND HAVING REGARD T O THE PAST HISTORY OF THE CASE, IT IS CONSIDERED APPROPRIATE TO RESTRICT THE DISALLOWANCE TO 16% OUT OF THE BONUS PAID TO TOTAL LABOURERS AS THE ASSESSING OFFICER HAS ONLY OBTAINE D THE REPORT OF 681 LABOURERS, OUT TO TOTAL 4280 LABOURERS, WHERE THE DISCREPANCIES WERE FOUND BY THE ASSESSING OFFICER. THEREFORE, CONSIDERING THE CONSPICUOUS FACTS OF THE CASE, WE ARE OF THE VIEW THAT IT WILL MEET THE ENDS OF JUSTICE IF THE DISALLOWANCE IS RES TRICTED TO 16% OF THE TOTAL BONUS PAID TO LABOURERS WHICH COMES OUT TO RS.6,14,181/- (16% OF RS.38,38,630/-), AS AGAINST THE TOTAL DISALLOWANCE MADE BY THE ASSESSING OFFICER AT RS.38,38,630/-. WE ACCORDINGLY RESTRICT THE DISALLOWANCE OUT OF BONUS EXPENSES TO RS.6,14,181/- AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE BALANCE AMOUNT OF RS.32,24,449/-. BEFORE PARTING WITH, WE MAY ADD THAT THIS SHALL NO T BECOME A PRECEDENT FOR SUBSEQUENT YEARS AS THE ASSESSEE IS EXPECTED TO MAI NTAIN PROPER RECORDS IN RESPECT OF SALARY AND WAGE REGISTER. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . THIS ORDER PRONOUNCED IN OPEN COURT ON THE DATE MEN TIONED HEREINABOVE. SD/- SD/- (B. R. JAIN) (T. K. SHARMA) $( #*% / ACCOUNTANT MEMBER #*% /JUDICIAL MEMBER *$+ ,*-/ ORDER DATE 10.01.2014 /RAJKOT *BT 170 & 219-RJT-2013 SHRI KHIMJI BACHU SATHWARA 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- SH. KHIMJI BHACHU SATHWARA,PROP. M/S. SAGAR HANDLING, GANDHIDHAM 2. /RESPONDENT- ACIT, GANDHIDHAM CIRCLE, GANDHIDHAM 3. #-2- & 3 / CIT-I, RAJKOT 4. & 3 - / CIT (A)-II, RAJKOT 5 . 678 , , / DR, ITAT, RAJKOT 6 . 89 :; / GUARD FILE. *$+ #$ / BY ORDER , TRUE COPY PRIVATE SECRETARY, , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.