The ACIT, Circle-7, Surat V. M/s, Veer Gems, Surat

ITA 1723/AHD/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6103 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-04-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 30-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: RASHESH SHAH
• Keywords: Speculation loss; Corroborative evidences; Revenue expenditure
• Section: 43(5); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUN AL AHMEDABAD D BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 1723/AHD/2011 (ASSESSMENT YEAR: 2007-08) THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-7, SURAT V/S M/S. VEER GEMS 7/2982 PARSI SHERI SAIYEDPURA, SURAT (APPELLANT) (RESPONDENT) PAN: AABFV6446L APPELLANT BY : SHRI SURENDRA KUMAR, CIT/ DR RESPONDENT BY : SHRI RASHESH SHAH, A.R. ( )/ ORDER DATE OF HEARING : 06 -04-201 7 DATE OF PRONOUNCEMENT : 25-04-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)- V, SURAT DATED 17.03.2011 PERTAINING TO A.Y. 2007-0 8. ITA NO. 1723 /AHD/2011 . A.Y. 2008-09 2 2. THE REVENUE HAS RAISED AS MANY AS FIVE SUBSTANTIVE GROUNDS. THE FIRST GRIEVANCE OF THE REVENUE RELATES TO THE DELETION OF THE ADDITION OF RS. 30,27,85,170/- BEING EXPENDITURE DISALLOWED BY THE A.O. ON ACCOUNT OF FOREIGN EXCHANGE CONTRACT BY TREATING THEM AS SPECU LATION U/S. 43(5) OF THE ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AT LENGTH. HAVING HEARD THE RIVAL SUBMISSIONS, WE HAVE CAREFULLY PERUSED THE ORDERS O F THE AUTHORITIES BELOW AND THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON R ECORD IN THE LIGHT OF RULE 18(6) OF THE ITAT RULES. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 30,2 7,85,170/- IN THE PROFIT AND LOSS ACCOUNT AS LOSS IN FORWARD CONTRACT CANCEL LATION. THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF FORWARD CONTRACTS AN D THE REASONS FOR THE LOSS IN FORWARD CONTRACTS. 5. THE ASSESSEE FILED A DETAILED REPLY IN JUSTIFICATIO N OF ITS CLAIM OF LOSS. IT WAS EXPLAINED THAT THE CONTRACTS WERE MADE TO HEDGE THE FUTURE FLUCTUATION IN THE FOREIGN CURRENCY RATE AGAINST THE EXPORT/IMPORT ORDERS OF DIAMONDS. THE ASSESSEE FURNISHED THE BANK-WISE DETAILS OF NET FOREIGN EXCHANGE FORWARD CONTRACT LOSS WHICH IS AS UNDER: (I) ABN AMRO BANK (-) RS. 30,29,26,409/- (II) HDFC BANK RS. 2,95,55,932/- ITA NO. 1723 /AHD/2011 . A.Y. 2008-09 3 (III) ICICI BANK (-) RS. 2,94,14,693/- NET LOSS RS. 30,27,8 5,170/- 6. THE A.O. SOUGHT DETAILS FROM THE BANK AND THE BANKS FILED THE NECESSARY DETAILS AS CALLED BY THE A.O. AFTER EXAMINING THE D ETAILS FILED BY THE BANKS, THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS T O PROVE WITH DOCUMENTARY EVIDENCES THAT THE FOREIGN EXCHANGE CON TRACTS WERE REALLY MEANT FOR THE PURPOSE OF MINIMIZING ITS FOREIGN EXC HANGE LOSSES DURING ITS REGULAR BUSINESS OF IMPORT OF ROUGH DIAMONDS AND EX PORT OF POLISH DIAMONDS AND NOT FOR ANY OTHER PARTIES OTHER THAN I TS REGULAR BUSINESS ACTIVITY OF IMPORT AND EXPORT OF DIAMONDS. THE A.O. WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE NEXUS BETWEEN THE HEDGING OF THE FOREIGN EXCHANGE FLUCTUATION CURRENCY CONTRACTS QUA ITS BUSINESS. THE A.O. ACCORDINGLY DISALLOWED THE CLAIM OF RS. 30,27, 85,170/- TREATING IT AS SPECULATION LOSS. 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED WHAT HAS BEEN SUBMITTED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 8. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) WAS CONVINCED THAT SINCE THE ASSESSEE IS EXPOSED TO SIG NIFICANT RISK ARISING OUT OF FLUCTUATION IN RATE OF CURRENCY, THEREFORE IT HAS T O ENTER INTO THE CONTRACTS FOR HEDGING ITS PROBABLE LOSSES. THE LD. CIT(A) FU RTHER OBSERVED THAT THE ASSESSING OFFICER HAS NO WHERE DENIED THAT ASSESSEE IS NOT EXPOSED TO SUCH RISK. THE LD. CIT(A) FURTHER OBSERVED THAT THIS IS NOT THE FIRST YEAR IN WHICH ITA NO. 1723 /AHD/2011 . A.Y. 2008-09 4 SUCH KIND OF FORWARD CONTRACTS HAVE BEEN MADE WITH BANKING AUTHORITIES AS IN PAST YEARS ALSO. ASSESSEE HAS ENTERED INTO SUCH TRANSACTIONS. THE LD. CIT(A) CONCLUDED BY HOLDING THAT THE LOSS ARISING O N ACCOUNT OF THE CANCELLATION OF CONTRACT IS NOTHING BUT BUSINESS LO SS AND THE SAME CANNOT BE TREATED AS A SPECULATION LOSS. THE DISALLOWANCE MADE BY THE A.O. WAS DELETED. 9. BEFORE US, THE LD. D.R. STRONGLY SUPPORTED THE FIND INGS OF THE A.O. AND THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED UP ON THE DECISION OF THE LD. CIT(A) . 10. THE UNDISPUTED FACT IS THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING, IMPORT AND EXPORT OF DIAMONDS. IT IS IN THIS LINE OF ACTIVITIES, THE ASSESSEE WAS HEAVILY EXPOSED TO FOREIGN EXCHANG E CURRENCY FLUCTUATION DURING ITS REGULAR BUSINESS ACTIVITIES. IT IS NOT T HE CASE OF THE ASSESSING OFFICER THAT ASSESSEE IS A DEALER IN FOREIGN CURREN CY. ALTHOUGH, THE A.O. HAS TREATED THE ASSESSEE AS A DEALER IN FOREIGN CURRENC Y ONLY ON THE STRENGTH OF THE VOLUME OF TRANSACTIONS ENTERED INTO BY THE ASSE SSEE TO HEDGE ITS PROBABLE LOSSES IN FOREIGN EXCHANGE RATE FLUCTUATIO N. 11. ON IDENTICAL SET OF FACTS, THE HONBLE HIGH COURT O F CALCUTTA IN THE CASE OF SOORAJMULL NAGARMULL 129 ITR 169 HAD THE OCCASION TO CONSIDER THE FOLLOWING FACTS AND HELD ACCORDINGLY:- ITA NO. 1723 /AHD/2011 . A.Y. 2008-09 5 THE ASSESSEE-FIRM CARRIED ON THE BUSINESS OF IMPO RT AND EXPORT OF JUTE. IN THE COURSE OF ITS BUSINESS IT USED TO ENTER INTO FORWAR D CONTRACTS IN FOREIGN EXCHANGE IN ORDER TO COVER THE LOSS ARISING DUE TO DIFFERENC E IN FOREIGN EXCHANGE VALUATION. THE ASSESSEE HAD ENTERED INTO FOREIGN EXCHANGE CONT RACTS IN 1952 WITH THE HINDUSTAN MERCANTILE BANK. THE DIFFERENCE PAYABLE B Y THE ASSESSEE ON THE FORWARD CONTRACT WAS DETERMINED IN DECEMBER, 1952, BUT THE ASSESSEE DISPUTED ITS LIABILITY. THE DISPUTE WAS SETTLED IN 1955, AND ITS ACCOUNT IN THE BANK WAS DEBITED IN JUNE,1955. THE ASSESSEE CLAIMED THIS LOS S AMOUNTING TO RS. 80,491/- AS A REVENUE EXPENDITURE IN THE ASSESSMENT YEAR1956-57 . THE ITO DISALLOWED THE CLAIM ON THE GROUND THAT THE LOSS WAS A SPECULATION LOSS AND, IN ANY EVENT, AS THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM, IT CO ULD NOT CLAIM THE LOSS IN 1956- 57. THE AAC FOUND THAT THE TRANSACTION IN WHICH THE LOSS AROSE WAS NOT SPECULATIVE AND THIS FINDING WAS UPHELD BY THE TRIB UNAL. THE AAC HELD THAT THE LOSS DID NOT RELATE TO THE RELEVANT ACCOUNTING YEAR BUT THE TRIBUNAL HELD THAT IT WAS ALLOWABLE IN 1956-57 ON A REFERENCE: HELD, (I) THAT THE ASSESSEE WAS NOT A DEALER IN FOR EIGN EXCHANGE. FOREIGN EXCHANGE CONTRACTS WERE ONLY INCIDENTAL TO THE ASSE SSEES REGULAR COURSE OF BUSINESS. THE AAC HAD MADE A CATEGORICAL FINDING TO THIS EFFECT WHICH HAD BEEN UPHELD BY THE TRIBUNAL. THE LOSS WAS NOT A SPECULAT IVE LOSS BUT WAS INCIDENTAL TO THE ASSESSEE BUSINESS AND ALLOWABLE AS SUCH. 12. A SIMILAR VIEW WAS TAKEN BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF BADRIDAS GAURIDU PVT. LTD. IN 261 ITR 256, THE R ELEVANT PART READS AS UNDER:- THE ASSESSEE WAS AN EXPORTER OF COTTON. THE ASSESS EE HAD ENTERED INTO FORWARD CONTRACTS WITH THE BANKS IN RESPECT OF FOREIGN EXCH ANGE. SOME OF THESE CONTRACTS COULD NOT BE HONOURED BY THE ASSESSEE FOR WHICH IT HAD TO PAY RS. 13.50 LAKHS, WHICH WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT. T HE ASSESSEE CLAIMED THE SAME AS BUSINESS LOSS. THE ASSESSING OFFICER HELD THAT T HE LOSS WAS NOT DEDUCTIBLE AS A ITA NO. 1723 /AHD/2011 . A.Y. 2008-09 6 BUSINESS LOSS AS IT WAS INCURRED IN A SPECULATIVE T RANSACTION. THE TRIBUNAL HELD THAT IT WAS A BUSINESS LOSS. ON FURTHER APPEAL TO T HE HIGH COURT: HELD, DISMISSING THE APPEAL, THAT THE ASSESSEE WAS NOT A DEALER IN FOREIGN EXCHANGE. THE ASSESSEE WAS AN EXPORTER OF COTTON. I N ORDER TO HEDGE AGAINST LOSSES, THE ASSESSEE HAD BOOKED FOREIGN EXCHANGE IN THE FORWARD MARKET WITH THE BANK. HOWEVER, THE EXPORT CONTRACTS ENTERED INTO BY THE ASSESSEE FOR EXPORT OF COTTON IN SOME CASES FAILED. IN THE CIRCUMSTANCES, THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION IN RESPECT OF RS. 13.50 LAKHS AS A BUSINESS LOSS. 13. AS MENTIONED ELSEWHERE, THE ASSESSEE HAS ENTERED IN TO THE CONTRACTS IN ITS REGULAR COURSE OF BUSINESS TO HEDGE AGAINST FOREIGN EXCHANGE FLUCTUATION. THEREFORE, THE ACTIVITY OF THE ASSESSEE CANNOT BE A S A SPECULATION ACTIVITY. 14. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE H ONBLE HIGH COURT (SUPRA), WE DECLINE TO INTERFERE WITH THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. THE FIRST GRIEVANCE IS ACCORDINGLY DISMI SSED. 15. THE SECOND GRIEVANCE RELATES TO THE DELETION OF THE ADDITION OF RS. 2,69,00,000/- MADE BY THE A.O. ON ACCOUNT OF UNEXPL AINED CAPITAL INTRODUCED BY THE PARTNERS. 16. WHILE SCRUTINIZING THE RETURN OF INCOME FOR THE YEA R UNDER CONSIDERATION, THE A.O. NOTICED THAT DURING THE YEAR PARTNERS INTR ODUCED CAPITAL AS UNDER:- (I) MUKESH SHAH RS. 13,00,000/- (II) PIYUSH SHAH RS. 3,00,000/- (III) HINA SHAH RS. 2,53,00,000/- ITA NO. 1723 /AHD/2011 . A.Y. 2008-09 7 17. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF CAP ITAL INTRODUCED BY THESE PARTNERS WITH SUPPORTING EVIDENCES. THE ASSESSEE FI LED THE COPY OF THE RETURNS OF THE PARTNERS ALONG WITH SUPPORTING DOCUM ENTARY EVIDENCES. THE A.O. WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS F AILED TO EXPLAIN THE CREDIT ENTRIES IN THE PARTNERS CAPITAL ACCOUNT AND MADE TH E ADDITION OF RS. 2.69 CRORES U/S. 68 OF THE ACT. 18. BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS STRONG LY CONTENDED THAT SINCE THE ASSESSEE HAS FILED THE NECESSARY EVIDENCES PERT AINING TO THE INCOME TAX RETURNS OF THE PARTNERS WHO ARE ASSESSED TO TAX AND THE CAPITAL INTRODUCTION MADE BY PARTNERS STANDS REFLECTED IN THEIR RESPECTI VE RECORDS, THE SAME CANNOT BE TREATED AS UNEXPLAINED IN THE HANDS OF TH E ASSESSEE. 19. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND DRAWING SUPPORT FROM THE DECISION OF THE HONBLE HIGH COURT OF GUJARAT I N THE CASE OF PANKAJ DYESTUFF INDUSTRIES IN TAX APPEAL NO. 241 OF 1993, THE LD. CIT(A) DELETED THE ADDITION. 20. BEFORE US, THE LD. D.R. SUPPORTED THE FINDINGS OF T HE A.O. AND THE LD. COUNSEL RELIED UPON THE ORDER OF THE FIRST APPELLATE AUTHOR ITY. 21. IT IS TRUE THAT THE ASSESSEE HAS FILED THE TAX DETA ILS OF ALL THE PARTNERS. IT IS ALSO TRUE THAT THE ASSESSING OFFICER HAS NOT DISPUT ED THAT THE CREDITS IN THE ACCOUNTS OF THE PARTNERS WERE NOT DEPOSITS FROM THE PARTNERS. IN OUR UNDERSTANDING OF THE LAW, THE ADDITION CANNOT BE MA DE IN THE HANDS OF THE ITA NO. 1723 /AHD/2011 . A.Y. 2008-09 8 FIRM AND IF ANYTHING REMAINS UNEXPLAINED THE ADDITI ON CAN ONLY BE MADE IN THE HANDS OF THE PARTNERS. WE FIND THAT THE RELIANC E PLACED BY THE LD. CIT(A) ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF PANKAJ DYESTUFF INDUSTRIES (SUPRA) IS WELL FOUNDED AND, THEREFORE, NO INTERFERENCE IS CALLED FOR. THE SECOND GRIEVANCE IS ALSO DISMISSED. 22. THE THIRD GRIEVANCE RELATES TO THE DELETION OF THE ADDITION MADE BY THE A.O. ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. 23. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S, THE A.O. NOTICED THAT MR. SAPIN SHAH AND MS. PRIYANKA SHAH HAVE UNDE RTAKEN FOREIGN TRAVEL. THE ASSESSEE WAS ASKED TO EXPLAIN THE EXPENSES INCU RRED BY THEM AND WHY THE SAME SHOULD NOT BE DISALLOWED AS THESE TWO PERS ONS ARE NOT THE PARTNERS OF THE FIRM. THE ASSESSEE WAS FURTHER ASKE D TO EXPLAIN THAT IT HAS ACTUALLY DONE BUSINESS AT HONG KONG AND DUBAI IN JU STIFICATION OF THE FOREIGN TRAVEL. 24. ASSESSEE FILED A DETAILED REPLY WHICH DID NOT FIND ANY FAVOUR WITH THE A.O. WHO DISALLOWED RS. 7,43,852/-. 25. BEFORE THE LD. CIT(A), THE ASSESSEE ONCE AGAIN FILE D THE DETAILS RELATING TO PARTY WISE SALES MADE AT DUBAI AND HONG KONG. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) OBSERVED THAT R S. 2,43,852/- HAS BEEN DISALLOWED BY THE A.O. ONLY ON THE GROUND THAT SAPI N SHAH AND PRIYANKA SHAH ARE NOT THE PARTNERS OF THE FIRM. THE LD. CIT( A) FURTHER OBSERVED THAT ITA NO. 1723 /AHD/2011 . A.Y. 2008-09 9 THERE WAS NO JUSTIFICATION IN MAKING THE LUMP SUM D ISALLOWANCE OF RS. 5 LAKHS. THE LD. CIT(A) DELETED THE ADDITION OF RS. 7 ,42,852/-. 26. BEFORE US, THE LD. D.R. SIMPLY RELIED UPON THE FIND INGS OF THE A.O. AND THE LD. COUNSEL REITERATED WHAT HAS BEEN STATED BEFORE THE LD. CIT(A). 27. IT IS TRUE THAT MR. SAPIN SHAH AND MS. PRIYANKA SHA H ARE NOT PARTNERS OF THE ASSESSEE FIRM. IT IS ALSO TRUE THAT THEY ARE EMPLOY EES OF THE FIRM WHO TRAVELLED ABROAD FOR THE PURPOSES OF THE BUSINESS O F THE ASSESSEE. WE FIND THAT THE ASSESSEE HAS FILED THE DETAILS OF SALES MA DE AT HONG KONG AND DUBAI IN SUPPORT OF ITS FOREIGN TRAVEL EXPENDITURE. MERELY, BECAUSE THE TWO PERSONS WHO WENT ABROAD WERE NOT PARTNERS OF THE AS SESSEE FIRM WOULD NOT JUSTIFY THE DISALLOWANCE MADE BY THE A.O. WE AL SO FIND THAT THE LUMP SUM DISALLOWANCE OF RS. 5 LAKHS IS WITHOUT ANY BASI S AS THE ASSESSEE HAS SUCCESSFULLY PROVED THE SALES MADE AT DUBAI AND HON G KONG. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDIN GS OF THE LD. CIT(A). 28. THE NEXT GRIEVANCE OF THE REVENUE RELATES TO THE DE LETION OF THE ADDITION OF RS. 2,51,91,060/- MADE U/S. 40(A)(IA) OF THE ACT. 29. THE A.O. NOTICED THAT AS PER THE TDS RETURNS, THE A SSESSEE HAS DEDUCTED RS. 5,19,047/- ON TOTAL RECEIPTS OF RS. 4,74,71,878/-. THE A.O. FURTHER NOTICED THAT THE ASSESSEE HAS MADE PAYMENT OF TAX AT RS. 2, 45,089/-. THE A.O. ASSUMED THAT THE ASSESSEE HAS DEDUCTED TAX @ 1.1% O NLY ON THE PAYMENTS ITA NO. 1723 /AHD/2011 . A.Y. 2008-09 10 OF LABOUR CONTRACT CHARGES AND, THEREFORE, MADE A D ISALLOWANCE OF RS. 2,51,91,060/-. 30. ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD . CIT(A) AND VEHEMENTLY CONTENDED THAT THE A.O. HAS MISUNDERSTOOD THE FACTS RELATING TO THE QUANTUM ON WHICH THE TAX HAS BEEN DEDUCTED AT SOURC E. IT WAS EXPLAINED THAT THE TDS OF RS. 2,73,958/- WAS MADE FROM RENT A MOUNT OF RS. 12,27,600/-. IT WAS FURTHER EXPLAINED THAT THE DIFF ERENCE PERTAINS TO TDS ON RENT EXPENSES. 31. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS MADE TOTAL TDS OF RS. 5,19,04 7/- ON TOTAL AMOUNT OF RS. 4,74,71,878/- AND HAS DEPOSITED THE SAME. THE L D. CIT(A) FURTHER OBSERVED THAT THE TDS HAS BEEN MADE UNDER VARIOUS S ECTIONS I.E. 194C, 194H, 194J AND 194I. THE FIRST APPELLATE AUTHORITY FOUND THAT TDS OF RS. 2,45,091/- WAS MADE U/S. 194C, 194H AND 194J OF THE ACT WHEREAS TDS OF RS. 2,73,958/- WAS MADE U/S. 194I OF THE ACT ON REN T EXPENSES. THE LD. CIT(A) WAS CONVINCED THAT THERE WAS NO DISCREPANCY FOUND AND ACCORDINGLY DELETED THE ADDITION OF RS. 2,51,91,060/-. 32. BEFORE US, THE LD. D.R. COULD NOT POINT OUT ANY FAC TUAL ERROR IN THE OBSERVATIONS MADE BY THE LD. CIT(A) AS MENTIONED HE REINABOVE. WE FIND THAT THE ASSESSEE HAS SUCCESSFULLY RECONCILED THE T DS AMOUNT WITH THE QUANTUM INVOLVED AND THERE REMAINS NO REASON WHY TH E ADDITION SHOULD BE SUSTAINED. THE FIRST APPELLATE AUTHORITY HAS RIGHT LY DELETED THE ITA NO. 1723 /AHD/2011 . A.Y. 2008-09 11 DISALLOWANCE AFTER RECONCILING THE TDS AMOUNT WITH THE QUANTUM ON WHICH THE TAX HAS BEEN DEDUCTED AT SOURCE. THEREFORE, NO INTERFERENCE IS CALLED FOR. THIS GRIEVANCE IS ACCORDINGLY DISMISSED. 33. THE LAST GRIEVANCE OF THE REVENUE RELATES TO THE DE LETION OF THE ADDITION MADE BY THE A.O. ON ACCOUNT OF LABOUR CHARGES. 34. THE A.O. DISALLOWED A SUM OF RS. 1.16 CRORES ONLY O N THE GROUND THAT INSPITE OF FALL IN TURNOVER, THE LABOUR CHARGES HAVE BEEN F OUND TO BE HIGHER THAN THE PREVIOUS YEAR. THIS WAS THE ONLY REASON FOR MAK ING DISALLOWANCE OF 5% OF TOTAL LABOUR CHARGES CLAIMED BY THE ASSESSEE. 35. THE LD. CIT(A) DELETED THE DISALLOWANCE AS HE WAS O F THE OPINION THAT THE REASONS GIVEN BY THE A.O. DO NOT JUSTIFY THE ADDITI ON. 36. WE FIND THAT THE ASSESSEE HAS DEBITED LABOUR CHARGE S OF RS. 23.22 CRORES DURING THE YEAR UNDER CONSIDERATION AS COMPARED TO 22.75 CRORES INCURRED IN THE IMMEDIATELY PRECEDING YEAR. THE RISE IN THE LABOUR EXPENSES IS ONLY TO THE TUNE OF RS. 47 LAKHS WHICH IS HIGHER BY 2% F ROM THE EXPENSES INCURRED IN THE IMMEDIATELY PRECEDING ASSESSMENT YE AR. IN OUR CONSIDERED OPINION, THIS CANNOT BE A REASON FOR MAKING THE IMP UGNED DISALLOWANCES AS THE A.O. HAS FAILED TO JUSTIFY THE ADDITION MADE BY HIM. THE FIRST APPELLATE AUTHORITY HAS RIGHTLY DELETED THE SAME WHICH CALLS FOR NO INTERFERENCE. THIS GRIEVANCE IS ALSO DISMISSED. ITA NO. 1723 /AHD/2011 . A.Y. 2008-09 12 37. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 25 - 04- 201 7 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 25 /04/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD