The ACIT, Circle-8, Surat V. M/s. Three Star Gems, Surat

ITA 2142/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89356 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 30-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Rejection of books of accounts; Permanent establishment
• Section: 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NO. 2142/AHD/2011 / ASSESSMENT YEAR: 2005-06 ACIT, CIRCLE-8, SURAT .. APPELLANT VS M/S. THREE STAR GEMS, 77/78, PATEL FALIYA, OPP. HARIOM BUNGLOW, KATARGAM ROAD, SURAT .. RESPONDENT PAN : AADFT 5628 G REVENUE BY : SMT SONIAKUMAR, SR.DR ASSESSEE(S) BY : NONE / DATE OF HEARING 27/04/2015 !' /DATE OF PRONOUNCEMENT 30/04/2015 $% $% $% $% / O R D E R PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-V, SURAT DATED 23.05.2011 FOR ASSESSMENT YEAR 2005-06, ON THE FOLLOWING GROUNDS:- ITA NO. 2142/AHD/2011 ACIT V. THREE STAR GEMS AY 2005-06 - 2 - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN PENALTY LEVIED U/S 271(1)(C) BY THE A.O. OF RS.17,42,370/- IN RESPECT OF ENHANCE MENT OF NET PROFIT ON ACCOUNT OF UNPROVED LABOUR PAYMENT. [ 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER ESPECIALLY SO SINCE THE ORDER WAS PASSED ON ADDITION CONFIRMED IN 2ND APPEAL AND ASSESSEE HAD F AILED TO OFFER ANY EXPLANATION TO THE SHOW CAUSE NOTICE ISSU ED PRIOR TO LEVY OF PENALTY. 3. IT IS, THEREFORE, PRAYED THAT THE APPELLATE ORDER O F THE LD. CIT(A) BE SET-ASIDE AND THAT OF THE A.O. RESTORED B ACK. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DIAMOND S CUTTING AND POLISHING ON JOB LABOUR BASIS. DURING THE YEAR THE ASSESSEE HAD SHOWN GROSS PROFIT OF 1.74% ON JOB LAB OUR RECEIPT OF RS.19,45,65,313/-. THE ASSESSING OFFICER ISSUED LETTERS U/S 133(6) OF THE ACT ON 7 PERSONS FOR CONFIRMING THE L ABOUR PAYMENT MADE BY THE ASSESSEE. SOME LETTERS WERE NOT SERVED ON THE ADDRESS GIVEN BY THE ASSESSEE. THE ASSESSEE FILED CERTAIN DETAILS BUT DID NOT FILE THE DETAILS OF STA GE-WISE PROCESSING OF DIAMOND, CONTRACT AGREEMENT AND BANK STATEMENT OF JOB WORKERS. IN THE ABSENCE OF DETAILS OF IDENTITY OF CONTRACTORS, STAGE-WISE DETAILS OF WORK DONE AND IN SPECTION BY LABOUR DEPARTMENT, RECONCILIATION OF LABOUR REGISTE RS, ATTENDANCE REGISTERS AND BILLS OF JOB WORK, THE ASS ESSING OFFICER HAD REJECTED THE BOOKS OF ACCOUNTS AND APPLIED THE NET PROFIT RATE OF 5%OF TOTAL LABOUR RECEIPTS. ON APPEAL, THE CIT(A) ITA NO. 2142/AHD/2011 ACIT V. THREE STAR GEMS AY 2005-06 - 3 - CONFIRMED THE FINDING OF THE ASSESSING OFFICER BUT APPLIED THE GROSS PROFIT RATE OF 2% AND ACCORDINGLY REDUCED THE ADDITION CONFIRMED BY THE ASSESSING OFFICER. IN SECOND APPE AL, THE ITAT HELD THAT SINCE IT IS A CASE OF PAYMENT OF JOB WORK , IT WOULD BE PROPER TO APPLY NET PROFIT RATE AS THIS IS A CASE O F SERVICES RENDERED FOR LABOUR WORK OF DIAMOND CUTTING AND MANUFACTURING. ACCORDINGLY, THE ITAT CONFIRMED THE ADDITION TO THE EXTENT OF 3% OF NET PROFIT. THE ASSESSING OFFI CER LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE ADDITION HAS BEEN CONFIRMED BY THE ITAT AND THAT THE ASSESSE E FAILED TO OFFER ANY PLAUSIBLE EXPLANATION. THE ASSESSING OFFI CER LEVIED THE PENALTY OF RS.17,42,370/- FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 2.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE AND THE SAME HAS BEEN OPPOSED BEFORE U S BY THE REVENUE INTER ALIA STATING THAT THE CIT(A) ERRED IN DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S 271(1)( C) OF RS.17,42,370/- IN RESPECT OF ENHANCEMENT OF NET PRO FIT ON ACCOUNT OF UNPROVED LABOUR PAYMENTS. THE LD. DEPAR TMENTAL REPRESENTATIVE ALSO SUBMITTED THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER, ESPECIALLY SO SINCE THE ORDER WAS PASSED ON ADDITION CONFIRMED IN SECOND APPEAL AND T HE ASSESSEE HAD FAILED TO OFFER ANY EXPLANATION TO THE SHOW-CAUSE ITA NO. 2142/AHD/2011 ACIT V. THREE STAR GEMS AY 2005-06 - 4 - NOTICE ISSUE PRIOR TO LEVY OF PENALTY. THEREFORE, H E SUBMITTED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, NONE APPEARED ON BEHALF OF THE ASSESSEE, SO WE ARE PROCE EDING THE CASE EX-PARTE QUA THE ASSESSEE AND DISPOSING THE MA TTER ON THE BASIS OF ARGUMENTS OF LD. DEPARTMENTAL REPRESENTATI VE AND MATERIAL AVAILABLE ON RECORD. 2.2 AFTER GOING THROUGH THE SUBMISSIONS OF THE LD. DEPARTMENTAL REPRESENTATIVE AND THE MATERIAL AVAILA BLE ON RECORD, WE FIND THAT AS THE NOTICE U/S 271(1)(C) OF THE ACT WAS NOT SERVED ON THE ASSESSEE, THE ASSESSEE COULD NOT BE EXPECTED TO OFFER ANY PLAUSIBLE EXPLANATION BEFORE THE ASSES SING OFFICER. WHEN HE STARTED INVESTIGATION, IT WAS NOTED BY HIM THAT LETTERS U/S 133(6) OF THE ACT COULD NOT BE SERVED ON THE LA BOURERS. HOWEVER, NO DISALLOWANCE OF LABOUR EXPENSES CLAIMED WAS MADE BY THE ASSESSING OFFICER DESPITE THE NON-VERIF ICATION OF LABOUR EXPENSES. INSTEAD OF DISALLOWING LABOUR EXPE NSES, THE ASSESSING OFFICER PREFERRED TO ESTIMATE NET PROFIT RATE OF 5%. APART FROM THE DISCUSSION ON LABOUR EXPENSES IN THE ASSESSMENT ORDER, THERE IS NO REFERENCE TO DETECTIO N OF ANY CONCEALMENT OF FACTS OR INCOME. IN APPEAL, THE CIT( A) REDUCED THE ADDITION MADE BY THE ASSESSING OFFICER. IN SECO ND APPEAL, ITAT ALSO REDUCED THE NET PROFIT RATE TO 3%. REDUC TION IN THE RATE OF PROFIT ITSELF SHOWS THE FACT THAT NOTHING C OULD BE CERTAIN WITH REGARD TO PROFIT WHICH IPSOFACTO COULD NOT TAN TAMOUNT TO CONCEALMENT OF INCOME. THE ASSESSEE CANNOT BE SAID TO HAVE ITA NO. 2142/AHD/2011 ACIT V. THREE STAR GEMS AY 2005-06 - 5 - CONCEALED THE PARTICULARS OF INCOME MERELY BECAUSE THE BOOKS OF ACCOUNTS WERE REJECTED BY THE ASSESSING OFFICER AND SUBSEQUENTLY, THE ASSESSING OFFICER AND CIT(A) APPL IED DIFFERENT NET PROFIT RATE TO ESTIMATE THE INCOME. IN DIAMOND JOB WORK, LABOURERS KEEP ON MIGRATING ONE PLACE TO ANOTHER AN D IN MOST CASES, THEY ARE NOT TRACEABLE AS THEY NORMALLY DO N OT HAVE PERMANENT ESTABLISHMENT. IN ABSENCE OF DETAILS OF LABOURERS, IT CANNOT BE INFERRED THAT HOW MUCH SERVICES HAVE BEEN RENDERED BY THEM TO THE ASSESSEE. IN THE CASE BEFORE US, TH E ASSESSEE HAD SUBMITTED A PARTY-WISE LIST OF SUB-CONTRACTORS WITH DETAILS OF TDS. SO, THE EXPENSES INCURRED CANNOT BE SAID TO BE BOGUS; HOWEVER, HERE IN THE CASE BEFORE US, THE RECOURSE O F ESTIMATION OF NET PROFIT WAS MADE BECAUSE THE ASSESSEE COULD N OT PROVIDE CERTAIN FACTS/DETAILS ABOUT LABOURERS WHICH CANNOT BE A SOUND BASIS FOR LEVYING PENALTY U/S 271(1)(C) OF THE ACT. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A). 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 30TH OF APRIL, 201 5 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 30/04/2015 *BT ITA NO. 2142/AHD/2011 ACIT V. THREE STAR GEMS AY 2005-06 - 6 - $% $% $% $% &' &' &' &' ($' ($' ($' ($' / COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT 2. &+)* / THE RESPONDENT. 3. , / CONCERNED CIT 4. , ( ) / THE CIT(A), 5. '-. & , , / DR, ITAT, AHMEDABAD 6. . / / GUARD FILE. $% $% $% $% / BY ORDER, //TRUE COPY// 0 00 0 / 1 1 1 1 (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD