ITO, Ward - 35(2), Kolkata, Kolkata V. Shri Itesh Kumar Jain, Kolkata

ITA 210/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87607 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 09-02-2012
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [BEFORE & HON BLE SRI N.K.SAINI , A M & HON BLE SRI MAHAVIR SINGH, JM ] ITA NO .210/KOL/2012 ASSESSMENT YEAR : 2008 - 09 ( A PPELLANT ) (RESPONDENT) I.T.O., WA RD - 35(2), - VS - SRI ITESH KUMAR JAIN KOLKATA KOLKATA (PAN: ADRPJ 6825 G) FOR THE APPELLAN T SMT. RANU BISWAS, JCIT FOR THE RESPONDENT SHRI RIP DAS, FCA DATE OF HEARING : 22 .01.2015 DATE OF PRONOUNCEMENT : 23.01.2015. ORDER P ER SHRI N.K.SAINI , AM THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER DATED 29.11.2011 OF L D. C.I.T - (A) - XX, KOLKATA AND PERTAINS TO A.YR. 2008 - 09. 2. THE ONLY GRIEVANCE OF THE DEPARTMENT RE LATES TO THE DELETION OF ADDITION OF RS.24,57,244/ - MADE BY THE AO ON ACCOUNT OF LABOUR CHARGES. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT ASSESSEE FILED THE RETURN OF INCOME ON 14.10.2008 DECLARING TOTAL INCOME OF RS.6,44,414/ - WHICH WAS PROCESSED U/S 143(1) OF THE I.T.ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) ON 18.02.2010. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE CLAIMED DEDUCTION ON ACCOUNT OF LABOUR CHARGES AMOUNTING TO RS.24,57,244/ - WHEREAS IN THE PRECEDING YEAR NO LABOUR CHARGES WHATSOEVER HAD BEEN DEBITED TO THE MANUFACTURING & TRADING ACCOUNT. HE REQUIRED THE ASSESSEE TO EXPLAIN THE SAME. IN RESPONSE THE ASSESSEE SUBMITTED AS UNDER : - .THE LABOUR CHARGE DID NOT OCCURRED IN EARLIER YEARS, BUT, WERE INCUR RED DURING THE YEAR FOR THE REASON THAT THE SUPPLY OF RAIL WAS BENT AND TO STRAIGHTEN THE SAME, THE LABOUR CHARGES WERE IN CURRED BY THE ASSESSEE. NO FORMAL INFORMATION IS REQUIRED TO BE MADE AS ITA NO.210/KOL/2012 SRI ITESH KUMAR JAIN A.YR . 20 08 - 09 2 PER RDSO AND IN FACT, THIS WAS NOT MADE TO RAILWAY AND THERE I S NO DOCUMENTARY INFORMATION IN THIS RESPECT AND SO REIMBURSEMENT OF THE LABOUR CHARGES PAID WERE NOT MADE WITH THE RAIL . 3.1. HOWEVER, AO WAS NOT SATISFIED WITH THE EXPLANATION OFFERED BY THE ASSESSEE FOR THE FOLLOWING REASONS : A) THE FACTORY OF THE ASSESSEE IS RECO GNIZ ED BY THE RAIL AFTER NECESSARY AND LAWFUL COMPLETION OF THE PROCEDURE INCLUSIVE OF INSTALLATION OF MACHINERIES REQUIRED FOR THE PURPOSE OF MANUFACTURING OF THE ITEMS REQUIRED BY THE RAIL. THE MACHINES INCLUDES THE JINX CROW MACHINE AS PER STATEMENT FILED BY THE ASSESSEE AND THE SAME WAS LYING INSTALLED. THIS IS NOT A CASE THAT THE SAID MACHINE WAS NOT IN WORKING CONDITION AT THE FACTORY, AS IS EVIDENT FROM ASSESSEES SUBMISSION. B) THERE LIES NO EVIDENCE TO ESTABLISH THE FACT THAT TH E MATERIAL SUPPLIED BY THE RAILWAY AUTHORITY WAS AT ALL DEFECTIVE AND THE ASSESSEE WAS ASKED TO PRODUCE THE EVIDENCE WHICH HE FAILS TO PRODUCE BEFORE ME. C) THE ASSESSEE HAVING FAILED TO PRODUCE ANY EVIDENCE AS AND WHEN THE DEFECTIVE MATERIAL FROM RAIL HA S BEEN RECEIVED BY HIM AND ALSO HAVING FAILED TO QUANTIFY AND QUALIFY THE AMOUNT OF LABOUR CHARGES INCLUSIVE OF PRODUCTION OF BILLS EVEN AFTER GETTING SUFFICIENT OPPORTUNITIES PROVIDED TO HIM. D) THE ASSESSEE DID NOT PRODUCE THE COPY OF ORDER SECURED FROM RAIL WHERE THE TERMS AND CONDITIONS ARE LAID DOWN AS TO THE ABOVE CLAIM. INSTEAD, THE ASSESSEE PRODUCED THE MANUFACTURING PROCESS OR MANUAL WHICH HAS NOTHING TO DO IN HIS CASE. E) THE VALUE OF BUSINESS REMAIN THE SAME IN COMPARISON TO THE PAST YEARS AND THE NATURE OF SERVICES PROVIDED BY THE PARTY. F) IT HAS ALSO BEEN FOUND THAT THE ASSESSEE CLAIMED, ENTIRE LABOUR CHARGES WAS PAYABLE TO A FIRM UNDER THE NAME AND STYLE OF TECHMA ENGINEERING , IN WHICH SOME RELATIVES OF THE ASSESSEE ARE PARTNERS WITHIN T HE MEANING OF SEC 2(41) OF THE I.T.ACT 61. NOTHING WAS ADDUCED IN SUPPORT OF THE CLAIM THAT THE EXPENSES WERE INCURRED IN NORMAL COURSE OF BUSINESS AND WERE PAID. AO REJECTED THE EXPLANATION OF THE ASSESSEE AND MADE ADDITION OF RS.24,57,244/ - . 3.2. B EING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT AO WAS NOT JUSTIFIED IN DISALLOWING THE ENTIRE AMOUNT OF LABOUR CHARGES CLAIMED BY THE ASSESSEE AND THAT HE HAD WRONGLY HELD THAT EXPENDITURE WAS NOT INCURRED WHOLLY AND EX CLUSIVELY FOR THE PURPOSE OF ASSESSEE S BUSINESS. IT WAS STATED THAT IF THE CONTENTION OF THE AO WAS TO BE ACCEPTED THEN IT MEANS THAT A BUSINESS MAN CANNOT INCUR AND CLAIM ANY EXPENDITURE WHICH WAS NOT INCURRED IN THE EARLIER YEARS. IT WAS FURTHER STATED THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS EXPLAINED THE REASON FOR INCURRING LABOUR CHARGES IN THE YEAR UNDER CONSIDERATION AND ALL THE DETAILS ALONG WITH EVIDENCE OF INCURRING THE EXPENSES WERE FILED BEFORE THE AO, BUT HE ITA NO.210/KOL/2012 SRI ITESH KUMAR JAIN A.YR . 20 08 - 09 3 ARBITRARILY DISALLOWED THE ENTIRE AMOUNT OF EXPENDITURE. IT WAS CONTENDED THAT THE WORK OF GETTING THE RAIL STRAIGHTEN WAS GIVEN TO M/S TECHMA ENGINEERING BECAUSE THE SAID PARTY WAS HAVING SKILLED LABOUR TO DO THE JOB AND THE SAID FACILITY WAS NOT A VAILABLE WITH THE A SSESSEE ITSELF. IT WAS FURTHER CONTENDED THAT THE ENTIRE EXPENDITURE ON ACCOUNT OF LABOUR CHARGES WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEE S BUSINESS AND THE FIRM TO WHOM LABOUR CHARGES WERE PAID HAS ALSO CREDITED THE RECEIPT IN ITS PROFIT AND LOSS ACCOUNT. 3.3. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE AO HAD MADE THE DISALLOWANCE OF THE ENTIRE AMOUNT OF LABOUR CHARGES ONLY FOR THE REASON THAT THE NATURE OF BUSINESS ACTIVITIES IN THE YEAR UN DER CONSIDERATION WERE NOT THE SAME IN THE PRECEDING YEAR AND IN THAT YEAR ASSESSEE HAS NOT INCURRED ANY EXPENDITURE ON ACCOUNT OF LABOUR CHARGES. ACCORDING TO THE LD. CIT(A) IT WAS THE ONLY REASON FOR WHICH THE AO HAD HELD THAT THE LABOUR CHARGES WERE NOT PAID IN THE NORMAL COURSE OF THE BUSINESS AND NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LD. CIT(A) OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FILED EXPLANATION STATING THE REASONS FOR INCURRING LABOUR CHARGES IN THE YEAR UNDER CONSIDERATION AND PRODUC ED THE BILLS OF LABOUR CHARGES AND THE AO DID NOT FIND ANY FAULT OR ANY DISCREPANCY . THE LD. CIT(A) WAS OF THE VIEW THAT THE ONUS WA S ON THE AO TO BRING POSITIVE MATERIAL ON RECORD TO PROVE THAT THE EXPL ANATION OFFERED BY THE AS SESSEE WAS INCORRECT OR FALSE, B UT HE HAD NOT BROUGHT ANY MATERIAL ON RECORD IN SUPPORT OF HIS OBSERVATIONS AND CONCLUSION. THE LD. CIT(A) OBSERVED THAT IT WAS NOT KNOWN AS TO WHAT EVIDENCE WAS REQUIRED BY THE AO TO EXAMINE THAT TH E RAIL SUPPLIED TO THE ASSESSEE BY THE RAILWAY TO CARRY THE WORK WAS DEFECTIVE AND IN BENDED CONDITION. THE LD. CIT(A) FURTHER OBSERVED THAT THE AO HAD NOT MENTIONED AS TO WHAT SPECIFIC NATURE OF EVIDENCES WERE CALLED FOR FROM THE ASSESSEE WHICH WERE NOT PRODUCED BY HIM. HE THEREFORE DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF LABOUR CHARGES. ITA NO.210/KOL/2012 SRI ITESH KUMAR JAIN A.YR . 20 08 - 09 4 4. NOW THE DEPARTMENT IS IN APPEAL. THE SR.DR VEHEMENTLY SUPPORTED THE ORDER OF THE AO AND REITERATED THE OBSERVATIONS MADE IN PAGE 5 AND 6 OF THE ASSESSMENT ORDER DATED 30.12.2010. 5. IN HIS RIVAL SUBMISSION THE LD. COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON RECORD. IN THE PRESENT CASE IT IS NOTICED THAT THE ASSESSEE HAD INCURRED A SUM OF RS.24,57,244/ - ON ACCOUNT OF LABOUR CHARGES ON ACCOUNT OF STRAIGHTEN ING THE RAIL WHICH WAS BENT. SINCE THE ASSESSEE WAS NOT HAVING S KILLED LABOUR FOR THE SAID JOB , IT GOT IT DONE FROM AN OUTSIDE AGENCY. THE ASSESSEE HAD FURNISHED ALL THE RELEVANT DOCUMENTS WHICH WERE CALLED F OR BY THE AO AND ALSO EXPLAINED THE REASONS FOR NOT INCURRING THIS EXPENDITURE IN THE EARLIER YEAR. THE AO DID N OT FIND ANY DEFECT IN THE DOCUMENTS FURNISHED BY THE ASSESSEE FOR ITS CLAIM AND ALSO NOT BROUGHT ANY MATERIAL ON RECORD FOR REJECTING THE EXPLANATION OFFERED BY THE ASS ESSEE. IN OUR OPINION THERE IS NO BAR IN INCURRING THE EXPENSES WHICH WAS NOT EARLIER IN CURRED. THE ONLY REQUIREMENT FOR ALLOWING THIS CLAIM IS THAT THE EXPENDITURE MUST BE INCURRED FOR THE BUSINESS PURPOSES IN THE NORMAL COURSE OF BU SINESS AND MUST BE SUPPORTED BY BILLS OR VOUCHERS. IN THE PRESENT CASE THE ASSESSEE HAD INCURRED THIS EXPENDIT URE FOR THE FIRST TIME AS THE RAIL WAS BENT ONLY IN THIS YEAR AND WAS REQUIRED TO BE STRAIGHTENED . A S THE ASSESSEE WAS NOT HAVING SKILLED LABOUR FOR THAT PURPOSE , SO THE WORK OF STRAIGHTENING THE RAIL WAS DONE BY AN OUTSIDE AGENCY AND NOT BY THE ASSESSEE. IT IS NOT THE CASE OF THE AO THA T THE EXPENDITURE WAS NOT INCURRED FOR BUSINESS PURPOSES OR WAS NOT SUPPORTED BY BILLS OR VOUCHERS. HE ALSO DID NOT POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS MAINTAINED IN REGULAR COURSE OF BUSINESS AND THE SAID BOOKS W ERE NOT REJECTED. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS DO NOT SEE ANY GROUND TO INTERFERE WITH THE FINDING OF THE LD. CIT(A) AND DO NOT SEE ANY MERIT IN THE APPEAL OF THE DEPARTMENT. ITA NO.210/KOL/2012 SRI ITESH KUMAR JAIN A.YR . 20 08 - 09 5 7. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS DISMIS SED. O RDER PRONOUNCE D IN THE COURT ON 2 3.01.2015. SD/ - SD/ - [ MAHAVIR SINGH ] [ N.K.SAINI ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 23.01.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . SRI ITESH KUMAR JAIN, C/O ARVIND INDUSTRIES, ROOM NO.51C, STEPHEN HOUSE, 4, HEMANTA BASU SARANI [B BD BAG] (EAST), 3 RD FLOOR, KOLKATA - 700001. 2 I.T.O., WARD - 35(2), KOLKATA 3 . CIT(A) - XX, KOLKATA 4. CIT - KOLKATA CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY, BY ORDER, ASST. REGISTRAR , ITAT, KOLKATA BENCHES