The ITO, Ward-8(1), Surat V. Shri Dipakbhai Bhagwanbhai Narola, Surat

ITA 1927/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80566 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 03-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. ITA.NO.1927/AHD/2011 (ASSESSMENT YEAR:2006-07) THE INCOME TAX OFFICER, WARD-8(1), SURAT APPELLANT VS. SHRI DIPAKBHAI BHAGWANBHAI NAROLA 1093, PAJAVA FALIA, KATARGAM ROAD, SURAT RESPONDENT PAN: ABBPN9312L /BY APPELLANT : SHRI V. K. SINGH, SR.D.R. /BY RESPONDENT : NONE !' /DATE OF HEARING : 08.12.2014 #$% !' /DATE OF PRONOUNCEMENT : 22.12.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE O RDER OF COMMISSIONER OF INCOME TAX (APPEALS)-V, SURAT, DATE D 17.04.2011 FOR A.Y. 2006-07 ON THE FOLLOWING GROUND : I.T.A. NO. 1927/AHD/2011 A.Y. 06-07 (ITO VS. SHRI DIPAKBHAI BHAGWANBHAI NAROLA) PAGE 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADD ITION OF RS.28,35,855/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE 20% OUT OF LABOUR EXPENSES, STAFF SALA RY AND MISC. EXPENSES. 2. ASSESSEE IS INDIVIDUAL ENGAGED IN BUSINESS OF DI AMONDS CUTTING AND POLISHING ON JOB LABOUR BASIS. 3. ASSESSING OFFICER MADE ADDITION OF RS. 28,35,855 /- ON ACCOUNT OF DISALLOWANCE OF 20% OUT OF LABOUR EXPENS ES, STAFF SALARY EXPENSES AND MISCELLANEOUS EXPENSES. DURING THE YEAR ASSESSEE HAD SHOWN GROSS PROFIT OF RS. 12,37,269/- WHICH IS 8.18% ON JOB LABOUR RECEIPT OF RS.1,51,23,737/-. T HE GROSS PROFIT OF IMMEDIATELY PRECEDING A.Y. 2005-06 WAS 6. 81%. AGAINST THE LABOUR RECEIPT OF RS.1,51,23,737/- ASSE SSEE INCURRED LABOUR EXPENSES OF RS.1,33,01,842/-, STAFF SALARY OF RS.6,19,080/- AND MISCELLANEOUS EXPENSES OF RS.2,58 ,351/-. ASSESSING OFFICER ISSUED SUMMONS U/S. 131 OF THE AC T REQUIRING ASSESSEE TO SUBMIT THE DETAILS WITH EVIDE NCES FOR EXPENSES CLAIMED WITH REGISTERS, VOUCHERS AND BILLS . ASSESSEE SUBMITTED DETAILS ON 05.12.2008. A SHOW CAUSE NOTIC E WAS ISSUED TO ASSESSEE FOR EXPLANATION FOR PAYMENT OF L ABOUR CHARGES WITH COMPLETE ADDRESSES, PAN OF PERSONS TO WHOM LABOUR CHARGES AND SALARY WERE PAID ALONGWITH THE D ETAILS OF MISCELLANEOUS EXPENDITURE, WHICH WAS RESPONDED BY A SSESSEE. ASSESSING OFFICER NOTICED THAT ASSESSEE DERIVES INC OME FROM DIAMOND CUTTING AND POLISHING FROM ONLY ONE CONCERN ED AND I.T.A. NO. 1927/AHD/2011 A.Y. 06-07 (ITO VS. SHRI DIPAKBHAI BHAGWANBHAI NAROLA) PAGE 3 THE SAME IS DONE THROUGH SEVERAL EMPLOYEES. THE EX PENSES SHOWN WERE FOUND TO BE VERY EXCESSIVE AND ASSESSEE WAS REQUIRED TO SHOW CAUSE WHY THAT SHOULD NOT BE DISAL LOWED. ACCORDING TO ASSESSING OFFICER ASSESSEE DID NOT PRO DUCE LABOUR ATTENDANCE REGISTER, DETAILS OF NAME & ADDRESS OF WORKERS, NATURE/STAGE OF DIAMOND CUTTING WORK CARRIED OUT BY WORKERS, DIFFERENT PROCESS OF DIAMONDS CUTTING, STAGE WISE W ORK DONE, COPIES OF BILLS RAISED FOR LABOUR INCOME, AGREEMENT WITH PRINCIPAL, DETAILS OF PIECE WISE RECEIPTS, BILLS OF ELECTRICITY IN HIS NAME, DETAILS OF MACHINERY AND OTHER DETAILS. THER EFORE, ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT U/S . 145(3) OF THE ACT AND MADE DISALLOWANCE OF LABOUR EXPENSES OF RS. 28,35,855/- BEING 20% OF LABOUR EXPENSES, STAFF SAL ARY AND MISCELLANEOUS EXPENSES. 4. IN APPEAL, VARIOUS CONTENTIONS WERE RAISED ON BE HALF OF ASSESSEE AND HAVING CALLING REMAND REPORT CIT(A) GR ANTED RELIEF TO ASSESSEE. 5. SAME HAS BEEN OPPOSED ON BEHALF OF REVENUE, WHO HAS SUPPORTED THE ORDER OF ASSESSING OFFICER AND SUBMIT TED THAT SINCE ASSESSEE WAS NOT PROPER MAINTAINING BOOKS OF ACCOUNT, SO, ASSESSING OFFICER WAS JUSTIFIED IN REJECTING BO OKS OF ACCOUNT AND MAKING ESTIMATED ADDITION IN QUESTION. SAME SH OULD BE UPHELD. ON OTHER HAND, NONE ON BEHALF OF ASSESSEE. SO, MATTER IS BEING DECIDED ON THE BASIS OF SUBMISSION OF LD. DEPARTMENTAL REPRESENTATIVE AND MATERIAL ON RECORD. I.T.A. NO. 1927/AHD/2011 A.Y. 06-07 (ITO VS. SHRI DIPAKBHAI BHAGWANBHAI NAROLA) PAGE 4 6. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT ASSESSEE IS ENGAGED IN THE BUS INESS OF DIAMOND CUTTING AND LABOUR ON JOB WORK BASIS. ASSES SEE IS AN INDIVIDUAL FIRM AND HAD EMPLOYED THE DIAMOND WORKER S TO WHOM WAGES WERE PAID. ASSESSEE HAD PAID THE WAGES T O WORKERS, SALARY TO STAFF AND MISCELLANEOUS EXPENSES AS UNDER: - SR. NO. EXPENDITURE SHIV DIAMOND DIPAK DIAMOND 1 LABOUR EXPENSES 10120226 3181616 2 STAFF SALARY 450860 168220 3 MISCELLANEOUS EXPENSES 212559 45792 TOTAL 10783645 3395628 THE ASSESSING OFFICER DISALLOWED 20% OF RS. 1,07,83 ,645/-AND RS. 33,95,628/- = RS. 1,41,79,27S/- = RS. 28,35,855 /- ON THE GROUND THAT ASSESSEE HAS NOT PRODUCED REGISTER OF W ORKERS- WAGES AND OTHER DETAILS. CIT(A) FOUND THAT ASSESS EE HAD BEEN MAINTAINING RECORDS OF RECEIPT OF DIAMONDS FROM PRI NCIPAL AND HAS ALSO MAINTAINED STAGE WISE SALARY REGISTER SHOW ING THE NAME OF PERSON AND THE STAGE OF DIAMOND CUTTING WOR K CARRIED OUT BY HIM. SINCE, HIS WORKERS HAD ALREADY LEFT TH E ASSESSEE BECAUSE ASSESSEE HAS CLOSED ITS BUSINESS, ASSESSEE COULD NOT PRODUCE THE DETAILED ADDRESS OF WORKERS. CIT(A) F OUND THAT ASSESSEE HAD MAINTAINED COMPLETE DETAILS WITH REGAR D TO LABOUR PAYMENT. ASSESSEE HAS PRODUCED BEFORE CIT( A) PHOTO COPY OF WAGE REGISTER IN WHICH NAMES OF LABOURERS, NUMBER OF DIAMOND PROCESSING, RATE AND AMOUNT OF LABOUR CHARG ES ARE MENTIONED. EACH PAYMENT WAS SIGNED BY THE RECIPIENT . THUS, I.T.A. NO. 1927/AHD/2011 A.Y. 06-07 (ITO VS. SHRI DIPAKBHAI BHAGWANBHAI NAROLA) PAGE 5 CIT(A) OBSERVED THAT ASSESSEE HAS MAINTAINED COMPLE TE DETAILS WITH REGARD TO WORK DONE BY LABOURER AND THE RATE A T WHICH THE LABOUR CHARGE WAS PAID. THE RECEIPT FOR PAYMENT MA DE WAS ALSO THERE. THE ONLY DEFICIENCY WAS FOUND THAT COM PLETE PARTICULARS OF LABOURERS WERE NOT AVAILABLE. ONCE WORK HAS BEEN DONE, IT CANNOT BE SAID THAT THE LABOUR PAYMEN T IS NOT GENUINE AT ALL. ASSESSEE IS DOING WORK OF M/S. G. S TAR. ANOTHER FIRM M/S. GHANSHYAM DIAMOND WAS ALSO DOING THE WORK OF M/S. G. STAR. IN THAT CASE, ASSESSING OFFICER HAD DISALLOWED 2% OF LABOUR EXPENSES ON AD-HOC BASIS WHICH WERE DE LETED IN ITA NO. 3205/AHD/2009, DATED 31.08.2010. SIMILARLY, IN CASE OF SHRI VANMALIBHAI BHAGWANBHAI PATEL IN ITA NO. 26 68 AND 2669/AHD/2002 DATED 01.06.2007, DISALLOWANCE OF 10% OF LABOUR CHARGES WERE DELETED BY ITAT ON THE GROUND T HAT BY ALLOWING 90% OF LABOUR CHARGES ASSESSING OFFICER HA D ACCEPTED THAT PAYMENTS ARE GENUINE AND FOR DISALLOWANCE OF 1 0% NOT SPECIFIC LABOUR CHARGE PAYMENT WHICH IS NOT GENUINE COULD BE POINTED OUT BY ASSESSING OFFICER. IN CASE OF ASSES SEE, ASSESSING OFFICER COULD NOT POINT OUT THE BASIS OF 20% DISALLOWANCE OR COULD NOT POINT OUT ANY SPECIFIC DE FECTIVE PAYMENT FROM SALARY REGISTER AND WAGE REGISTER PROD UCED BY ASSESSEE. IN DIAMOND BUSINESS, THERE ARE LARGE NUM BERS OF WORKERS ENGAGED IN CUTTING AND POLISHING OF DIAMOND S. ONCE, WORK WITH ONE EMPLOYER IS OVER, THEY SWITCH OVER TO ANOTHER EMPLOYER OR ANOTHER PLACE. SINCE, THEY ARE MIGRATI NG, SO, THERE ARE NOT ANY PERMANENT DETAILS OF ADDRESS ARE PRACTI CALLY POSSIBLE TO BE MAINTAINED. IN THESE CIRCUMSTANCES, ASSESSEE I.T.A. NO. 1927/AHD/2011 A.Y. 06-07 (ITO VS. SHRI DIPAKBHAI BHAGWANBHAI NAROLA) PAGE 6 WAS UNABLE TO LOCATE THOSE WORKERS DURING ASSESSMEN T PROCEEDINGS WHICH TOOK PLACE AFTER MORE THAN 2 YEAR S AFTER ACCOUNTING YEAR. ASSESSEE HAS GIVEN COMPLETE DETAI LS OF WORK DONE BY EACH AND EVERY WORKER, SERVICES RENDERED BY WORKERS AND OFFICE STAFF. IN SUCH SITUATION, ASSESSING OFFI CER WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS UNDER THE PROVISION OF SECTION 145(3), THE BEST OPTION TO DETERMINE THE INCOME OF ASSESSEE BY ESTIMATING GROSS PROFIT RATIO BY COMPAR ING EITHER WITH THE ASSESSEES OWN CASE IN PREVIOUS YEAR OR WI TH OTHER CASES. IN ASSESSEES CASE THE GROSS PROFIT SHOWN I S 7.99% WHICH IS MUCH HIGHER THAN 6% WHICH IS GENERALLY SHO WN BY OTHER ASSESSES IN DIAMONDS BUSINESS. IN THIS SITUAT ION, CIT(A) WAS NOT COMFORTABLE WITH THE ADDITIONS MADE ON ACCO UNT OF ESTIMATION OF GROSS PROFIT. IN VIEW OF ABOVE, THE DISALLOWANCE OF WAGES EXPENSES AND SALARY EXPENSES WERE DELETED. SIMILARLY, FOR MISCELLANEOUS EXPENSES, ASSESSEE HAD PRODUCED B OOKS OF ACCOUNT AND SUBMITTED THE COPIES OF ACCOUNTS TO ASS ESSING OFFICER. MISCELLANEOUS EXPENSES MOSTLY CONSIST OF B ANK CHARGES, ELECTRICITY EXPENSES, PROFESSION TAX, STAT IONERY EXPENSES, AND MACHINERY REPAIRS WHICH ARE ESSENTIAL FOR CARRYING ON THE BUSINESS OF ASSESSEE. THE ASSESSING OFFICER HAS FAILED TO BRING ON RECORDS THE PARTICULAR PAYMENT B EING NOT SUPPORTED BY THE REQUISITE EVIDENCE. CONSIDERING T HESE FACTS AND CIRCUMSTANCES, CIT(A) DID NOT APPROVE THE DISAL LOWANCE ON ACCOUNT OF MISCELLANEOUS EXPENSES. ACCORDINGLY, IN FACTS AND CIRCUMSTANCES, CIT(A) RIGHTLY DELETED ADDITION OF RS.28,35,855/- MADE BY ASSESSING OFFICER BY DISALLO WING I.T.A. NO. 1927/AHD/2011 A.Y. 06-07 (ITO VS. SHRI DIPAKBHAI BHAGWANBHAI NAROLA) PAGE 7 SALARY, WAGES AND MISCELLANEOUS EXPENSES. THIS REA SONED FINDING OF CIT(A), NEEDS NO INTERFERENCE FROM OUR S IDE, WE UPHOLD THE SAME. 5. AS A RESULT, APPEAL FILED BY REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF DECEMBER, 2014. SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR Y ADAV) ACCOUNTANT MEMBER JUDICIAL MEM BER TRUE COPY S.K.SINHA & & & & ' ' ' ' ('% ('% ('% ('% / COPY OF ORDER FORWARDED TO:- 1. +, / REVENUE 2. / ASSESSEE 3. // 0 / CONCERNED CIT 4. 0- / CIT (A) 5. '45 , , / DR, ITAT, AHMEDABAD 6. 589 :; / GUARD FILE. BY ORDER / & ,