Shri Kamleshkumar Jayantilal Doshi, Surat V. The Income tax Officer,Ward-2(4), Surat

ITA 178/AHD/2010

• Counselvise Citation: 17820514 RSA 2010
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-10-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 19-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: DIVYAKANT PARIKH
• Keywords: Business income; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.178/ AHD/2010 (ASSESSMENT YEAR 2002-03) KAMLESHKUMAR JAYANTILAL DOSHI, 401, AKSHARDHAM APARTMENT, NEAR CHILDREN HOSPITAL, MAJURAGATE, SURAT VS. ITO, WARD 2(4), SURAT PAN/GIR NO. : AATPD0760B (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI DIVYAKANT PARIKH, AR RESPONDENT BY: SHRI D. K. SINGH, SR. DR DATE OF HEARING: 26.10.2012 DATE OF PRONOUNCEMENT: 30.11.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A) II, SURAT DATED 16.10.2009 FOR THE ASSESSMENT YEAR 2002-03. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT THE CIT (A) ERRED IN CONFIRMING THE DISAL LOWANCE OF GENUINE LABOUR PAYMENTS OF RS.6,63,142/-. 2. THAT THE CIT (A) ERRED IN CONFIRMING THE ADDIT ION OF RS.6,631/- BEING ALLEGED COMMISSION INCOME EARNED BY ASSESSEE ON LABOUR PAYMENTS OF RS.6,63,142/- @ 1%. 3. THAT THE CIT (A) ERRED IN NOT CONSIDERING THE J UDGEMENT IN CASE OF JITENDRA DOSHI VIDE IT A N0.1876/AHD/2005 DTD: 2 9-5-2009. 4. ( THAT THE CIT (A) ERRED CONFIRMING THAT SHRI JITEND RA DOSHI WAS ONE OF THE BUYER OF THE ASSESSEE, 5. THAT THE DISALLOWANCE & ADDITION CONFIRMED OF RS.6,63,142/- & RS.6,631/- MAY KINDLY B DELETED. I.T.A.NO. 178 /AHD/2010 2 6. THE APPELLANT LEAVE TO ADD, ALTER MODIFY AMEND ANY OTHER GROUNDS AT THE TIME OF HEARING OF THE APPEAL. 2. BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NOTED BY LD. CIT(A) IN PARA 3 AND 3.1 OF HIS ORDER WHICH ARE REPRODUCED BELOW: 3. THE ASSESSEE IS ENGAGED IN THE ACTIVITY OF DIAM OND CUTTING AND POLISHING ON JOB-WORK BASIS. THE ASSESSEE CLAIM ED TO HAVE PAID JOB-WORK CHARGES TO ONE JITENDRA A DOSHI. HOW EVER, IN THE CASE (ASSESSMENT) OF SHRI JITENDRA DOSHI, IT WAS FO UND THAT HE HAD RAISED BOGUS LABOUR BILLS ON THE ASSESSEE. HE EARN ED ONLY COMMISSION AND THERE WAS NO OTHER BUSINESS ACTIVITY . THE A.O. THEREFORE ISSUED A SHOW-CAUSE NOTICE TO THE ASSESSE E ASKING HIM TO EXPLAIN WHY THE ALLEGED PAYMENT OF RS.6,63,142 TO S HRI JITENDRA DOSHI SHOULD NOT BE TREATED AS BOGUS AND DISALLOWED ALONG WITH THE 1% COMMISSION O PS.6,63I CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE TO SHRI DOSHI FPARA-6, PAGES 3-4 OF THE AS ST. ORDER). THE ASSESSEE FURNISHED A DETAILED REPLY WHICH THE AO HA S REPRODUCED IN THE BODY OF THE ASST. ORDER (PARA-6.1, PAGES - 3 -5). IT WAS CONTENDED BY THE ASSESSEE THAT THE STATEMENT OF SHR I JITENDRA DOSHI RECORDED U/S.131 OF THE IT ACT WAS UNTRUE, UN BELIEVABLE AND UNRELIABLE. THE ASSESSEE PRODUCED A VOUCHER ISSUE D BY SHRI JITENDRA DOSHI TO SHOW THAT HE HAD GENUINELY DONE JOB-WORK FOR THE ASSESSEE AND HAD EARNED THE SUM OF RS.6,63, 142 WHICH WAS PAID BY THE ASSESSEE. IF WAS CONT ENDED THAT SHRI DOSHI DID NOT PRODUCE ANY VOUCHER OR ANY OTHER DOCU MENTARY EVIDENCE IN SUPPORT OF HIS CLAIM. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF DOING JOB-WORK OF CUTTING AND POLISHING OF DIAMOND FOR SEVERAL YEARS. IT WAS POINTED OUT THAT SHRI JITENDR A DOSHI HAD MADE CONTRADICTORY STATEMENTS. HE HAD WRONGLY STATED TH AT HE HAD PURCHASED DIAMONDS FROM THE ASSESSES AND HAD PAID T HE PURCHASE PRICE IN CASH, AND THAT HE HAD NOT DONE ANY JOB-WOR K FOR THE ASSESSEE. IT WAS FURTHER ARGUED THAT IF THE SUM OF RS.6,53,142. WAS TO BE TAXED IN THE HANDS OF SHRI JITENDRA DOSHI AS HIS BUSINESS INCOME, THE SAME OUGHT TO BE ALLOWED AS A DEDUCTION IN THE HANDS .OF THE ASSESSES, OR ELSE IT WOULD AMOUNT TO DOUBLE TAXATION OF THE SAME AMOUNT. 3.1 THE AO REJECTED THE ASSESSEE'S CONTENTIONS: HE OBSERVED THAT THE ISSUE WAS NOT THE NATURE OF BUSINESS ACTIVITY O F THE ASSESSEE, BUT WHETHER OR NOT THE LABOUR CHARGES ALLEGEDLY PAI D BY THE ASSESSES TO SHRI JITENDRA DOSHI WAS GENUINE. SHRI D OSHI HAD I.T.A.NO. 178 /AHD/2010 3 CLEARLY STATED THAT HE HAD ONLY ISSUED BOGUS BILLS OF LABOUR CHARGES FOR WHICH HE WAS PAID COMMISSION @ 1%. IN HIS STATE MENT RECORDED IN COURSE OF THE ASST, PROCEEDINGS OF SHRI JITENDRA DOSHI THE ASSESSEE HAD CLEARLY STATED THAT HE DID NOT MAI NTAIN ANY PURCHASE OR SALE REGISTER NOR DID HE MAINTAIN CASH VOUCHERS. HE DID NOT KNOW THE OFFICE OR FACTORY ADDRESS OF SHRI JITE NDRA DOSHI. EVEN THOUGH HE HAD CLAIMED TO HAVE PAID JOB-WORK CHARGES TO HIM, THE ASSESSEE HAD NO IDEA ABOUT THE QUANTITY AND VALUE O F THE ROUGH DIAMONDS RECEIVED FROM MEMBER OR THE DETAILS OF FIN ISHED GOODS SENT BACK TO MUMBAI. HE DID NOT HAVE ANY DETAIL OF RAW MATERIAL ALLEGEDLY GIVEN TO SHRI JITENDRA DOSHI. THE AO ALS O SPECIFICALLY POINTED OUT THAT EVEN THOUGH THE ASSESSEE WAS RECEI VING JOB WORK CHARGES FROM MUMBAI THROUGH CHEQUES/DRAFTS YET, HE WAS PLAYING LAKHS OF RUPEES IN CASH AS JOB WORK CHARGES, WHICH WERE ALL BOGUS SINCE THE BILLS AGAINST WHICH SUCH PAYMENTS WERE MA DE WERE PROVED TO BE BOGUS AS WELL. N THE BASIS OF SUCH FI NDINGS AND OBSERVATIONS, THE A.O. DISALLOWED THE LABOUR CHARGE S ALLEGEDLY PAID TO SHRI JITENDRA DOSHI OF RS.6,63,142/- AND AD DED THE SAME TO THE ASSESSEES TOTAL INCOME. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A). BEFORE LD. CIT(A), RELIANCE WAS PLACED BY THE ASSESSEE ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF JITEN DRA A. DOSHI IN I.T.A.NO. 1876/AHD/2005 DATED 29.05.2009. LD. CIT( A) DECIDED THE ISSUE AGAINST THE ASSESSEE EVEN AFTER CONSIDERING T HIS TRIBUNAL DECISION ON THIS BASIS THAT THE ADDITION WAS BASED ENTIRELY ON THE STATEMENT OF THE ASSESSEE WHICH WAS QUITE CONTRARY TO THE FACTS AVAI LABLE IN THE ACCOUNTS AND THEREFORE, THIS TRIBUNAL DECISION IS NOT RELEVA NT IN THE PRESENT CASE. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. LD. A.R. PLACED RELIANCE ON THE SAME TRIBUNAL DE CISION RENDERED IN THE CASE OF J.A. DOSHI (SUPRA). HE FURTHER SUBMITT ED A COPY OF THIS TRIBUNAL DECISION WHICH IS AVAILABLE ON PAGES 156-1 61 OF THE PAPER BOOK AND IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PAGE 158 OF THE PAPER BOOK. AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDERS OF A UTHORITIES BELOW. HE I.T.A.NO. 178 /AHD/2010 4 ALSO SUBMITTED THAT ON PAGE 6 OF THE ASSESSMENT ORD ER, THE A.O. HAS NOTED THE CONTENTS OF THE STATEMENT OF THE ASSESSEE DATED 06.10.2004 RECORDED ON OATH AND, THEREFORE, THE ORDER OF LD. CIT(A) SH OULD BE CONFIRMED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE TRIBUNAL DECISION CITED BY THE LD. A.R. WE FIND THAT ON PAGE 6 OF THE ASSESSMENT ORDER, IT IS OBSERVED BY T HE A.O. THAT THE STATEMENT OF THE ASSESSEE WAS RECORDED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF JITENDRA A DOSHI (SUPRA) . IN THAT CASE, IT IS NOTED BY THE TRIBUNAL THAT AS PER THE MATERIAL AVAI LABLE ON RECORD, THAT ASSESSEE I.E. J A DOSHI HAD RECEIVED LABOUR CHARGES OF RS.6,63,142/- FROM SHRI KAMLESH J DOSHI I.E. THE PRESENT ASSESSEE AND ALSO PAID LABOUR CHARGES TO DIFFERENT 4 PARTIES. IN THAT CASE, THE ENTIRE AMOUNT RECEIVED BY THAT PERSON FROM THE PRESENT ASSESSEE WAS TAXED BY THE A.O. AS INCOME WITHOUT ALLOWING ANY DEDUCTION IN RESPECT OF LABOUR CHARGES PAID BY THIS PERSON AND UNDER THESE FACTS, IT WAS HELD BY THE TR IBUNAL THAT THE ENTIRE AMOUNT RECEIVED FROM THE PRESENT ASSESSEE I.E. KAML ESH J DOSHI CANNOT BE ASSESSED AS INCOME OF THAT ASSESSEE I.E. J A DOS HI. THE TRIBUNAL HAS ALREADY HELD IN THE CASE OF J A DOSHI THAT TRANSACT ION OF THAT PERSON WITH SHRI KAMLESH J DOSHI I.E. THE PRESENT ASSESSEE, IS NOT BOGUS AND THE ADDITION IN THE PRESENT CASE IS MADE ON THE BASIS T HAT SHRI J A DOSHI HAS MERELY ISSUED BOGUS BILLS AND RECEIVED 1% COMMISSIO N AND THERE WAS NO ACTUAL LABOUR JOB WORK CARRIED OUT BY SHRI J A DOSH I. AS PER THE TRIBUNAL DECISION IN THAT CASE OF SHRI J A DOSHI, IT IS SEEN THAT IT IS HELD BY THE TRIBUNAL IN THAT CASE THAT THE INCOME HAS TO BE ASS ESSED ON THE BASIS OF RECEIPT OF RS.6,63,142/- BY HIM FROM SHRI KAMLESH J DOSHI I.E. THE PRESENT ASSESSEE AFTER DEDUCTION OF LABOUR CHARGES PAID TO DIFFERENT FOUR PARTIES. SINCE IT IS HELD BY THE TRIBUNAL IN THAT CASE OF THE RECIPIENT THAT IT I.T.A.NO. 178 /AHD/2010 5 WAS ON ACCOUNT OF GENUINE BILLS, IT CANNOT BE ACCEP TED IN THE HANDS OF PAYER THAT IT WAS NOT THE BUSINESS EXPENDITURE. HE NCE, IN THE FACTS OF THE PRESENT CASE, IN OUR CONSIDERED OPINION, THE ADDITI ON MADE BY THE A.O. OF THIS AMOUNT OF RS.6,63,142/- REGARDING LABOUR CHARG ES AND ALLEGED PAYMENT OF RS.6,631/- BEING ALLEGED COMMISSION ON T HE SAME LABOUR PAYMENT OF RS.6,63,142/-, IS NOT SUSTAINABLE AND HE NCE, WE DELETE BOTH THESE ADDITIONS. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (G. C. GUPTA) (A. K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 21/11/2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23/11/2012.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 30/11/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.30/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30/1 1/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .