M/s. Associated Clearing Corporation, Kolkata V. ACIT, Circle - 28, Kolkata, Kolkata

ITA 1756/KOL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83030 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 21-12-2011
• Court: TRIBUNAL
• Department Lawyers: IMLIMEREN JAMIR JCITSR
• Assessee Lawyers: S BAGCHI
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [BEFORE HONBLE SRI SHAMIM YAHYA, AM & HONBLE SR I GEORGE MATHAN, JM] ITA NO.1756/KOL/2011 ASSESSMENT YEAR : 2007-08 ( APPELLANT ) (RESPONDENT) M/S.ASSOCIATED CLEARING .. -VS- A.C.I.T., CIRLE-2 8, CORPORATION, KOLKATA KOLKATA (PAN:AAIFA 4004 G) FOR THE APPELLANT SHRI S.BAGCHI, ADVOCATE FOR THE RESPONDENT SHRI IMLIMEREN JAMIR, JCIT,SR.DR DATE OF HEARING : 07.08.2014 DATE OF PRONOUNCEMENT : 07. 08.2014. ORDER PER SHRI SHAMIM YAHYA, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST OR DER OF LD. C.I.T.(A)- XIV, KOLKATA DT. 31.10.2011 AND PERTAINS TO ASSESSMENT Y EAR 2007-08. 2. THE GROUND OF APPEAL READS AS UNDER :- 1.THAT THE LD. CIT(A) ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE ERRED IN RETAINING THE ADDITION ON ACCOUNT OF LABOUR CHARGES TO THE EXTENT OF RS.9,61,329.00 3. IN THIS CASE THE ASSESSEE FILED RETURN DISCLOSIN G TOTAL INCOME OF RS.9,86,510/-. THE SAID RETURN WAS PROCESSED U/S 143(1) OF THE ACT . THEREAFTER THE RETURN WAS SELECTED FOR SCRUTINY ON THE IMPUGNED ISSUE. THE AO OBSERVED THAT AS PER ASSESSEES STATEMENT UNDER OATH U/S 133A ON THE DATE OF SURVEY, ON PAGE NO.4 IN RESPONSE TO QUESTION NO.8 THE ASSESSEE HAS ADMITTED ON THE DATE OF SURVE Y THAT HE HAS INCURRED THE EXPENSES AMOUNTING TO RS.13,00,853/- UNDER THE HEAD LABOUR CHARGES TILL THE DATE OF SURVEY FOR THE F.Y. 2006-07 (FOR SEVEN MONTHS). WHEREAS AS PER HIS FINAL P&L A/C FOR THE ENTIRE PERIOD FINANCIAL YEAR 2006-07 (FOR 12 MONTHS ) HE HAD INCURRED RS.43,59,314/- AS LABOUR CHARGES I.E. HE WAS INCURRING ABOUT RS. 13 L AKHS IN THE FIRST SEVEN MONTHS AND RS.30,58,461/- FOR NEXT FIVE MONTHS. THE AO NOTED T HAT THE ASSESSEE HAS NOT POINTED ITA.NO.1756/KOL/2011 M/S.ASSOCIATED CLEARING CORPORATION,.KOLKATA A.YR.2007-08 2 OUT ANY UNUSUAL DEVELOPMENTS IN THE BUSINESS AFTER THE DATE OF SURVEY (03.11.2006). ALSO THE EXPENDITURE UNDER THE SAME HEAD DURING THE F.Y.2005-06, CONFIRMS THE TREND FOLLOWED DURING THE FIRST SEVEN MONTHS OF THE F.Y.2 006-07, I.E. IN THE F.Y.2005-06 THE ASSESSEE HAS INCURRED AN EXPENDITURE OF RS.26,91,23 4/-. HE FURTHER OBSERVED THAT IT IS TO BE NOTED THAT THE ENTIRE PAYMENT IS MADE IN CASH . 3.1. IN ABSENCE OF ASSESSEES RESPONSE IN THE ABOVE CASE THE AO PROCEEDED TO COMPUTE THE AVERAGE MONTHLY LABOUR CHARGES OF RS.1, 85,836 ON THE BASIS OF THE STATEMENT OBTAINED AT THE TIME OF SURVEY. ON THE BA SIS OF TOTAL 12 MONTHS HE ESTIMATED LABOUR CHARGES OF RS.22,30,033/- AND AFTER GRANTING ALLOWANCE OF 10% TO MITIGATE THE RIGOUR OF ARITHMETIC CALCULATION HE ESTIMATED RS.24 ,53,036/- AS LABOUR CHARGES WHICH WAS HELD TO BE ALLOWABLE BY HIM. AS THE ASSESSEE HA D CLAIMED LABOUR CHARGES OF RS.43,59,314/- THE AO ALLOWED ONLY RS.24,53,036/- A S ESTIMATED AFORESAID AND DISALLOWED THE BALANCE AMOUNT OF RS.19,06,275/-. 4. AGAINST THE ABOVE ORDER THE ASSESSEE WENT IN APP EAL BEFORE THE LD. CIT(A). THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT NO AD DITION CAN BE MADE ON THE BASIS OF STATEMENT OF PERSONS AT THE TIME OF SURVEY DE-HORS ANY CORROBORATING EVIDENCE. IT WAS SUBMITTED THAT THE ASSESSEE HAS MAINTAINED ALL PROP ER REGISTERS AND DOCUMENTS AND NO DEFECT WHATSOEVER WAS FOUND IN THEM. CONSIDERING TH E ASSESSEES SUBMISSION IN THIS REGARD THE LD. CIT(A) CONCLUDED AS UNDER :- I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND COMMENTS OF THE ASSESSING OFFICER IN THE REMAND REPORT AND FACTS AN D CIRCUMSTANCES OF THE CASE. I FIND THAT OUT OF TOTAL LABOUR CHARGES OF RS.43,59,314/- THE ASSESSING OFFICER HAS DISALLOWED RS.19,06,275/- ON AN ESTIMATE BASIS. THE APPELLANT HAS CONTENDED THAT LABOUR CHARGES ARE SUPPORTED BY THE VOUCHERS AND THE LABOUR PAYMENT RE GISTER. THE APPELLANT HAS ALSO CONTENDED THAT IN THE INSTANT ASSESSMENT ORDER THE LABOUR CHARGES ARE ONLY 25% AS COMPARED TO THE GROSS RECEIPT WHEREAS IT IS 30% IN F.Y. 2005-06. HOWEVER IT IS FOUND THAT THE ASSESSEE HAD CLAIMED DURING THE SURVEY THA T FOR THE FIRST 7 MONTHS THE LABOUR CHARGES IF INCURRED ONLY OF RS.13,00,853/- WHEREAS UPTO OCTOBER, 2006 THE APPELLANT AHS CLAIMED LABOUR CHARGES RS.22,62,182/- INSTEAD OF RS .13,00,853/-. IN LIGHT OF THE FACTS I AM OF THE VIEW THAT SO FAR AS THE LABOUR CHARGES CL AIMED UPTO THE DATE OF SURVEY IS CONCERNED IT IS EXCESSIVE BY AN AMOUNT OF (RS.22,62 ,182 RS.13,00,853) = RS.9,61,329/-. HOWEVER, AS REGARDS THE PERIOD AFTER THE DATE OF SURVEY IT IS FULLY SUPPORTED BY THE PAYMENT VOUCHERS AND LABOUR REGIST ER. FURTHER, AS COMPARED TO THE ITA.NO.1756/KOL/2011 M/S.ASSOCIATED CLEARING CORPORATION,.KOLKATA A.YR.2007-08 3 EARLIER YEAR THE LABOUR CHARGES HAS GONE DOWN. FURT HER, THERE IS MERIT IN THE CONTENTION OF THE APPELLANT THAT MONTH TO MONTH THE LABOUR CHA RGES MAY VARY DEPENDING ON THE MONTH TO MONTH VARIATION IN VOLUME OF BUSINESS. FUR THER, AS THE LABOUR CHARGES HAVE DECREASED IN THE CURRENT PREVIOUS YEAR AS COMPARED TO THE EARLIER YEAR, THE DISALLOWANCE MADE BY THE A.O. APPEARS TO BE EXCESSIVE. IN LIGHT OF THESE FACTS I AM OF THE VIEW THAT ENDS OF JUSTICE WILL MEET IF THE DISALLOWANCE IS RE STRICTED TO RS.9,61,329/- (RS.22,62,182 13,00,853). HENCE DISALLOWANCE OF RS.9,61,329/ IS CONFIRMED AND THE APPELLANT GETS RELIEF OF (RS.19,06,275 - 9,61,329) = RS.9,44,946/- . AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL B EFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT THIS ADDITIO N AS SUSTAINED BY THE LD. CIT(A) HAS NO BASIS WHATSOEVER. NO DEFECT HAS BEEN POINTED OUT IN THE BOOKS OF ACCOUNT, VOUCHERS, PAY REGISTER ETC. BY THE AO. THE LD. COUN SEL OF THE ASSESSEE ALSO POINTED OUT THAT IT IS ALSO NOT A CASE THAT INCRIMINATING DOCUM ENTS WERE FOUND BY THE SURVEY TEAM. IN SUCH CIRCUMSTANCES HE CLAIMED THAT ASKING A QUES TION REGARDING THE LABOUR EXPENSES INCURRED ON A PARTICULAR DAY IN THE MIDDLE OF THE Y EAR CANNOT BE THE BASIS FOR MAKING AN ASSESSMENT OF THE LIKELY LABOUR EXPENDITURE DURI NG THE WHOLE YEAR. IN THIS REGARD THE LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE UPO N THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF S.KADIR KHAN THAT DE-HORS ANY CORROBORATING MATERIAL, ADDITION CANNOT BE MADE SOLELY ON THE BAS IS OF STATEMENT OBTAINED DURING SURVEY. THE LD. DR IS HEARD. 5.1. UPON CAREFUL CONSIDERATION WE NOTE THAT THE AB OVE ADDITION HAS BEEN MADE SOLELY ON THE BASIS OF A STATEMENT REGARDING THE EX PENDITURE ON LABOUR CHARGES OBTAINED DURING THE COURSE OF SURVEY IN THE MIDDLE OF THE YEAR ORALLY. NO CORROBORATING EVIDENCES HAVE BEEN FOUND. NO DEFECT WHATSOEVER HAS BEEN NOTICED IN THE BOOKS OF ACCOUNT OR VOUCHERS OF THE ASSESSEE. IN THESE CIRCU MSTANCES, MAKING CONJECTURE ON THE BASIS OF THE SAID STATEMENTS SO OBTAINED IS TOTALLY UNSUSTAINABLE AND THE SAME IS ALSO SUPPORTED BY THE RATIO EMANATING FROM THE DECISION OF THE HONBLE MADRAS HIGH COURT CITED ABOVE. IN THESE CIRCUMSTANCES IN THE AFORESAI D BACKGROUND AND PRECEDENTS WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY A LLOW THE APPEAL OF THE ASSESSEE. ITA.NO.1756/KOL/2011 M/S.ASSOCIATED CLEARING CORPORATION,.KOLKATA A.YR.2007-08 4 6. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.08.2014. SD/- SD/- [ GEORGE MATHAN ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 07.08.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S.ASSOCIATED CLEARING CORPORATION, 82, TOLLYGUNJE CIRCULAR ROAD, KOLKATA- 700053. 2 A.C.I.T., CIRCLE-28, KOLKATA. 3 . CIT(A)-XIV, KOLKATA 4. CIT KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY, BY ORDER, ASST. REGISTRAR , ITAT, KOLKATA BENCHES