The ACIT, Circle-9, Surat V. M/s. Fine Manufacturing, Surat

ITA 1736/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9220 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 30-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, A HMEDABAD , (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARA T, J.M.) ( , !'# $ , ! %& ) ITA NO. 1736/AHD/2011 (ASSESSM ENT YEAR: 2008-09) THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE 9, SURAT VS. M/S. FINE MANUFACTURING, SURYADEEP, OPP. ZENITH MILL, VASTADEVI ROAD, SURAT PAN NO. AABFF1493M (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. SONIA KUMAR, SR. D.R. RESPONDENT BY : SMT. URVASHI SODHAN, A.R. DATE OF HEARING : 10 -03-201 6 DATE OF PRONOUNCEMENT : 15-03-2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY REVENUE IS AGAINST THE ORDER O F CIT(A)-V, SURAT, DATED 28.03.2011 FOR THE ASSESSMENT YEAR 2008-09 . 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: ITA NO.1736/AHD/11 A.Y. 2008-09 (ACIT VS. M/S. FIN E MANUFACTURING ) 2 3. THE ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF POLISHING DIAMONDS ON JOB WORK BASIS. ASSESSEE FIL ED ITS RETURN OF INCOME FOR A.Y. 2008-09 ON 22.07.2008 DECLARING TOTAL INCOME A T RS. 8,36,190/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER, ASSESSMEN T WAS FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED 24.12.2010 AND THE TOTAL INCOM E WAS DETERMINED AT RS. 39,66,340/-. AGGRIEVED BY THE ORDER OF ASSESSING O FFICER, ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 2 8.03.2011 (IN APPEAL NO. CAS/V/119/10-11) ALLOWED THE APPEAL OF ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUNDS: [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE BOOKS OF ACCOUNTS OF THE ASSESS EE CANNOT BE REJECTED U/S.145(3) OF THE I.T. ACT. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFI CER OF RS.31,30,150/- BY DISALLOWING THE LABOUR EXPENSES. 4. BEFORE US, BOTH THE PARTIES SUBMITTED THAT BOTH THE GROUNDS RAISED BY THE REVENUE ARE INTERCONNECTED AND THEREFORE CAN BE CON SIDERED TOGETHER. 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A. O. NOTICED THAT ASSESSEE HAD DISCLOSED GROSS PROFIT (GP) OF 8% IN THE YEAR U NDER CONSIDERATION AS AGAINST THE GP OF 9.01% IN THE IMMEDIATE PRECEDING ASSESSME NT YEAR AND THUS THERE WAS A FALL IN GROSS PROFIT. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, ON VERIFICATION OF BOOKS OF ACCOUNTS, A.O. NOTICED THAT ASSESSEE DI D NOT HAVE PROPER LABOUR REGISTER AS THE LABOUR REGISTER PRODUCED DID NOT SH OW THE ENTIRE LABOUR AMOUNT PAID TO EACH LABOURER AND THEREFORE A.O. WAS OF THE VIEW THAT THE AUTHENTICITY OF EXPENSES ON LABOUR REMAINED UNSUBSTANTIATED. HE, T HEREFORE, CONCLUDED THAT ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT AS MAN DATED U/S.44AA OF THE ACT AND ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT. A.O . FURTHER NOTICED THAT ASSESSEE ITA NO.1736/AHD/11 A.Y. 2008-09 (ACIT VS. M/S. FIN E MANUFACTURING ) 3 HAS NOT MAINTAINED STOCK REGISTER AND THEREAFTER NO TICED THAT THERE WAS AN INCREASE IN LABOUR CHARGES PAID PER CARAT. ACCORDING TO HIM , THE LABOUR PAYMENT PER CARAT IN A.Y. 2007-08 WAS RS.206.57 AS AGAINST RS.236.77 FOR THE YEAR UNDER CONSIDERATION AND THE INCREASE IN LABOUR CHARGES WA S NOT JUSTIFIED. HE AFTER REJECTING THE BOOKS OF ACCOUNT U/S.145(3) OF THE AC T, PROCEEDED TO CONCLUDE THAT ASSESSEE HAD MADE EXCESS PAYMENT PER CARAT OF RS.30 .2. HE THEREFORE CONSIDERED LABOUR PAYMENT PER CARAT AT RS.15 TO BE EXCESSIVE A ND ACCORDINGLY WORKED OUT THE EXCESS PAYMENT FOR POLISHING OF DIAMOND AT RS.31,30 ,150/- AND DISALLOWED THE SAME. 5. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIE D THE MATTER BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF ASS ESSEE ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER: ON THE ISSUE OF REJECTION OF BOOKS OF ACCOUNT, LD. CIT(A) HELD AS UNDER: 4.3. I HAVE CAREFULLY GONE THROUGH THE REASONS MEN TIONED BY THE AO IN THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT, EXTRACT OF LABOUR REGISTER AND STOCK RECORDS AND ARGUMENTS SUBMITTED ON BEHALF OF THE AP PELLANT. FIRST AND FOREMOST THE QUESTION REMAINS TO BE DECIDED IS WHETHER THE AO WA S RIGHT IN REJECTING THE BOOKS OF ACCOUNTS ON THE BASIS OF NON MAINTENANCE OF STOCK R EGISTER AND COMPLEX MANNER OF LABOUR KEEPING SYSTEM. WHEN LOOKED INTO THE FACTS O F THE CASE ON THE BASIS OF PRODUCTION OF BOOKS OF ACCOUNTS, IT IS SEEN THAT APPELLANT HAD MAINTAINED DIFFERENT LABOUR REGISTER FOR DIFFERENT DEPARTMENTS DULY SIGNED AND STAMPED M ENTIONING THEREIN NAME OF LABOURERS, THEIR BASIC PAY AND ALLOWANCES. I DO NOT AGREE WITH THE DISCREPANCIES NOTED BY AO IN ASSESSMENT ORDER. AO WAS NOT RIGHT IN HOLD ING THAT LABOURERS PAYMENT CHART WAS UNRELIABLE IN ABSENCE OF PROPER LABOUR REGISTER AS IT WAS NOT PRODUCED BEFORE HIM. I HAVE ALSO GONE THROUGH STOCK RECORDS PRODUCED BEFOR E ME BY APPELLANT. I AM OF THE VIEW THAT APPELLANT IS A JOB WORKER FOR POLISHING OF DIA MONDS OF ITS PRINCIPAL. THE INWARD AND OUTWARD MOVEMENT OF DIAMONDS AS MAINTAINED BY A PPELLANT GIVES A RELIABLE INFORMATION AND CHECK ON THE STOCK. IT NEED NOT MAI NTAIN STOCK REGISTER. THE BILLS RAISED ARE BASED ON THE CHALLANS ISSUED AND CHALLANS GIVE PROPER REFERENCE OF INWARD JANGADS WHICH IS VERY MUCH EXPLANATORY OF WORK DONE BY APPE LLANT. I AM OF THE VIEW THAT BOOKS OF ACCOUNTS CAN NOT BE REJECTED ON THIS BASIS ALSO. HENCE THE APPEAL ON THIS GROUND IS ALLOWED. ITA NO.1736/AHD/11 A.Y. 2008-09 (ACIT VS. M/S. FIN E MANUFACTURING ) 4 ON THE ISSUE OF EXCESS LABOUR CHARGES, LD. CIT(A) H ELD AS UNDER: 5.3 I HAVE CAREFULLY GONE THROUGH THE REASONS MENTI ONED BY THE AO IN THE ASSESSMENT ORDER AS WELL AS THE LENGTHY SUBMISSION AND ARGUMENTS SUBMITTED ON BEHALF OF THE APPELLANT. THE QUESTION HERE IS WHETHER AO W AS RIGHT IN MAKING LUMPSUM DISALLOWANCE OF RS.15 PER CARAT AFTER REJECTING THE BOOKS OF ACCOUNTS. THE A.O. WAS WRONG IN REJECTING THE BOOKS OF ACCOUNTS AS DECIDED ABOVE. WHEN THE REJECTION OF BOOKS IS INVALID, THERE IS NO QUESTION OF DISALLOWANCE OF EXPENSE MORE SO WHEN ALL THE LABOUR EXPENSES ARE SUPPORTED BY PROPER LABOUR REGISTER. HENCE THE ADDITION ON ACCOUNT OF DISALLOWANCE IS HEREBY DELETED AND THE GROUND OF AP PEAL IS ALLOWED. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 6.1 BEFORE US, LD. D.R. TOOK THROUGH THE VARIOUS FI NDINGS OF A.O. AND SUBMITTED THAT IN THE PRESENT CASE A.O. WAS JUSTIFIED IN REJE CTING THE BOOKS OF ACCOUNTS IN THE ABSENCE OF PROPER RECORDS AND IN DISALLOWING THE LA BOUR EXPENSES. LD. A.R., ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEF ORE THE A.O. AND LD. CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE HAS BEEN MAINTA INING INWARD AND OUTWARD REGISTER FOR STOCK RECEIVED ON JOB WORK BASIS AND H AS ALSO MAINTAINED THE REGISTER FOR PAYMENT FOR LABOUR. SHE POINTED TO THE SUBMISS IONS MADE BEFORE THE LD. CIT(A) AND THUS, SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO RE JECTION OF BOOKS OF ACCOUNT AND DISALLOWANCE OF LABOUR EXPENSES. WE FIND THAT LD. C IT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE HAS GIVEN A FINDING THAT ASSE SSEE HAD MAINTAINED DIFFERENT LABOUR REGISTERS FOR DIFFERENT DEPARTMENTS WHICH SH OWED THE NAMES OF THE LABOURERS, THEIR BASIC PAY AND ALLOWANCES. HE HAS FURTHER NOTED THAT ASSESSEE HAS MAINTAINED REGISTER FOR INWARD AND OUTWARD MOVEMENT OF DIAMONDS WHICH GAVE A RELIABLE INFORMATION AND CHECK ON THE STOCK AND THA T ASSESSEE BEING A JOB WORKER FOR POLISHING OF DIAMOND OF ITS PRINCIPAL, HE WAS N OT REQUIRED TO MAINTAIN ANY STOCK REGISTER. WITH RESPECT TO THE DISALLOWANCE OF LABOUR EXPENSES, LD. CIT(A) ITA NO.1736/AHD/11 A.Y. 2008-09 (ACIT VS. M/S. FIN E MANUFACTURING ) 5 HAS HELD THAT ALL THE LABOUR EXPENSES WERE SUPPORTE D BY PROPER LABOUR REGISTER AND THAT WHEN ONCE REJECTION OF BOOKS ARE HELD TO BE IN VALID, THERE WAS NO QUESTION OF DISALLOWANCE OF EXPENSES ON LUMP SUM BASIS. BEFORE US, REVENUE HAS NOT PRODUCED ANY MATERIAL ON RECORD TO CONTROVERT THE F INDING OF LD. CIT(A). IN VIEW OF THE AFORESAID FACTS, WE FIND THAT NO INTERFERENC E TO THE ORDER OF LD. CIT(A) IS CALLED FOR AND THUS, THESE GROUNDS OF REVENUE ARE D ISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN OPEN COURT ON 15- 03 - 2016. SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 15/03/2016 TRUE COPY S K SINHA 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,AHMEDABAD