DCIT, New Delhi V. Sh. Ashok Nagrath, Gurgaon

ITA 1807/DEL/2011

• Counselvise Citation: 180720114 RSA 2011
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 13-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PIRTHI LAL
• Assessee Lawyers: RUCHI KHURANA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH A AA A : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI A.D.JAIN A.D.JAIN A.D.JAIN A.D.JAIN, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.1807/DEL/2011 1807/DEL/2011 1807/DEL/2011 1807/DEL/2011 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2006 2006 2006 2006- -- -07 0707 07 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -12, 12, 12, 12, NEW DEL NEW DEL NEW DEL NEW DELHI. HI.HI. HI. VS. VS. VS. VS. SHRI ASHOK NAGRATH, SHRI ASHOK NAGRATH, SHRI ASHOK NAGRATH, SHRI ASHOK NAGRATH, 1485/5, WAZIR NAGAR, 1485/5, WAZIR NAGAR, 1485/5, WAZIR NAGAR, 1485/5, WAZIR NAGAR, KOTLA MUBARAKPUR, KOTLA MUBARAKPUR, KOTLA MUBARAKPUR, KOTLA MUBARAKPUR, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PRESENT ADDRESS : PRESENT ADDRESS : PRESENT ADDRESS : PRESENT ADDRESS : 246, PHASE 246, PHASE 246, PHASE 246, PHASE- -- -1, UDYOG VIHAR, 1, UDYOG VIHAR, 1, UDYOG VIHAR, 1, UDYOG VIHAR, GURGAON. GURGAON. GURGAON. GURGAON. PAN : AACPN8782C. PAN : AACPN8782C. PAN : AACPN8782C. PAN : AACPN8782C. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PIRTHI LAL, SR.DR. RESPONDENT BY : MS.RUCHI KHURANA, ADVOCATE. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XXVI, NEW DELHI DATED 20 TH DECEMBER, 2010 FOR THE AY 2006-07. 2. THE ONLY GROUND RAISED BY THE REVENUE READS AS U NDER:- IN FACTS AND CIRCUMSTANCES OF THE CASE, LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1865000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LABOUR CHARGES BY HOLDING THAT THE PREVALENT MARKET PRACTI CE OF THE MANNER IN WHICH THE UNSKILLED LABOUR OF ENGAGED CANNOT BE IGNORED. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERI VES INCOME FROM MANUFACTURE OF BEADS, NECKLACES AND OTHER HAND MADE ITEMS. THE ITA-1807/DEL/2011 2 SAME ARE BEING EXPORTED. FOR THE YEAR UNDER CONSID ERATION, THE ASSESSEE INCURRED LABOUR CHARGES OF ` 18,65,000/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE LABOUR CHARGES REGISTER. THE ASSESSEE DID NOT PRODUCE THE SAME ON THE GROUND THAT THE SAME WAS MISPLACED. TH EREFORE, THE ASSESSING OFFICER DISALLOWED THE ENTIRE LABOUR CHAR GES CLAIMED BY THE ASSESSEE. 4. ON APPEAL, LEARNED CIT(A) ACCEPTED THE ASSESSEE S CLAIM ON THE GROUND THAT THE ASSESSEES TURNOVER WAS MORE THAN ` 31 CRORES AND LABOUR CHARGES WERE ONLY ` 18.65 LAKHS. THE PERCENTAGE OF LABOUR CHARGES TO SALES WAS LESSER AS COMPARED TO THE IMME DIATELY PRECEDING YEAR. 5. THE REVENUE, AGGRIEVED WITH THE ORDER OF LEARNED CIT(A), IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL PLACED BEFORE US. WHEN THE ASSESSEE HAS NOT PRODUCED THE LABOUR CHARGES REGISTER AND OTHER EVIDENCES IN SUPPORT OF THE LABO UR CHARGES CLAIMED BY THE ASSESSEE, TECHNICALLY, THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE ASSESSEES ACCOUNTS AND IN ESTIMATING THE INCOME OF THE ASSESSEE UNDER SECTION 145(3). HOWEVER, EVEN AFTER THE REJECTION OF BOOKS OF ACCOUNT, THE REASONABLE CLAIM OF THE ASSES SEE OF THE EXPENSES HAS TO BE ALLOWED. THE COMPARATIVE POSITI ON OF THE YEAR UNDER APPEAL AND THE IMMEDIATELY PRECEDING YEAR IS AS UNDER:- A.Y. EXPORT TURNOVER NET PROFIT BEFORE TAX(%) LABOUR CHARGES 2005-06 15,67,53,324 6,95,31,502 (44-42) 24,35,000 2006-07 31,00,03,900 15,10,33,978 (48-72) 18,65,000 ITA-1807/DEL/2011 3 7. FROM THE ABOVE CHART, IT IS EVIDENT THAT IN THE IMMEDIATELY PRECEDING YEAR, ON THE EXPORT TURNOVER OF ` 15.67 CRORES, THE LABOUR CHARGES WERE ` 24.35 LAKHS. THE SAME WAS ACCEPTED BY THE REVENUE. THE PERCENTAGE OF THE LABOUR CHARGES TO THE SALES W AS 1.55%. DURING THE YEAR UNDER CONSIDERATION, THOUGH THE SALES HAVE INCREASED TO ` 31.00 CRORES, BUT, THE LABOUR CHARGES HAVE REDUCED TO ` 18.65 LAKHS. IN PERCENTAGE TERM, IT WOULD BE 0.6%. THUS, THE PE RCENTAGE OF LABOUR CHARGES TO THE EXPORT TURNOVER HAS REDUCED TO LESS THAN HALF OF THE IMMEDIATELY PRECEDING YEAR WHICH WAS ACCEPTED BY TH E REVENUE. IN THE ABOVE CIRCUMSTANCES, IN OUR OPINION, EVEN WHEN THE ASSESSEES ACCOUNTS ARE TO BE REJECTED AND INCOME HAS TO BE CO MPUTED TO THE BEST JUDGMENT OF THE ASSESSING OFFICER, THERE WOULD NOT BE ANY JUSTIFICATION FOR DISALLOWANCE OF EVEN PART OF THE LABOUR EXPENSES. IT WOULD ALSO NOT BE OUT OF PLACE TO MENTION HERE THAT ON THE EXPORT TURNOVER OF ` 31.00 CRORES, THE NET PROFIT DISCLOSED BY THE ASSES SEE IS ` 1 5.10 CRORES WHICH IS 48.72%. EVEN THE PERCENTAGE O F NET PROFIT IS BETTER AS COMPARED TO THE LAST YEAR WHICH WAS 44.42 %. WHEN THE ASSESSEE HAS DISCLOSED THE NET PROFIT PERCENTAGE OF 48.72% OF THE SALES, IN OUR OPINION, EVEN IN A BEST JUDGMENT ASSE SSMENT, THERE WOULD NOT BE ANY JUSTIFICATION FOR MAKING ANY ADDITION, E SPECIALLY WHEN THE PERCENTAGE OF NET PROFIT IS ALSO BETTER THAN THE PR ECEDING YEAR. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 5 TH OCTOBER, 2012. ( (( (A.D.JAIN A.D.JAIN A.D.JAIN A.D.JAIN) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 05.10.2012 VK. ITA-1807/DEL/2011 4 COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -12, 12, 12, 12, NEW D NEW D NEW D NEW DELHI. ELHI. ELHI. ELHI. 2. RESPONDENT : SHRI ASHOK NAGRATH, SHRI ASHOK NAGRATH, SHRI ASHOK NAGRATH, SHRI ASHOK NAGRATH, 1485/5, WAZIR NAGAR, 1485/5, WAZIR NAGAR, 1485/5, WAZIR NAGAR, 1485/5, WAZIR NAGAR, KOTLA MUBARAKPUR,NEW DELHI. KOTLA MUBARAKPUR,NEW DELHI. KOTLA MUBARAKPUR,NEW DELHI. KOTLA MUBARAKPUR,NEW DELHI. PRESENT ADDRESS : PRESENT ADDRESS : PRESENT ADDRESS : PRESENT ADDRESS : 246, PHASE 246, PHASE 246, PHASE 246, PHASE- -- -1, UDYOG VIHAR, 1, UDYOG VIHAR, 1, UDYOG VIHAR, 1, UDYOG VIHAR, GURGAON. GURGAON. GURGAON. GURGAON. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR