Shri Tushar N.Sheth(HUF)., Navsari V. The Income tax Officer,Ward-4, Navsari

ITA 2148/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80286 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 31-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 23-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 143(3); 131; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 2148/AHD/2010 (ASSESSMENT YEAR: 2006-07) TUSHAR N. SHETH (HUF), THROUGH: HIS KARTA SHRI TUSHAR N. SHETH, 410, RUBY COMPLES, M.S. ROAD, NAVSARI. V/S THE I.T.O., WARD-4, NAVSARI (APPELLANT) (RESPONDENT) PAN: AABHT 7037 H APPELLANT BY : SHRI MITESH. S. MODI, A.R, RESPONDENT BY : SMT. SONIA KUMAR SR, D.R. ( )/ ORDER DATE OF HEARING : 31-07-201 4 DATE OF PRONOUNCEMENT : 27-08-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A), VALSAD, DATED 17.03.2010 FOR A.Y. 2006-07. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN HUF STATED TO BE ENGAGED IN THE BUSI NESS OF MANUFACTURING POLISHING OF ROUGH DIAMONDS ON JOB WORK BASIS. ASSESSEE FILED ITS RETU RN OF INCOME FOR A.Y. 06-07 ON 11.05.2006 DECLARING TOTAL INCOME OF RS. 1,47,475/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT ITA NO 2148/AHD/2010 . A.Y. 2006- 07 2 WAS FRAMED U/S. 143(3) ORDER DATED 26.12.2008 AND T HE TOTAL INCOME WAS DETERMINED AT RS. 14,66,160/-. AGGRIEVED BY THE ORD ER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) DI SMISSED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 17.03.2010. AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LEARNED CIT (APPEALS), VALSAD HAS ERRED IN CON FIRMING THE ORDER OF THE ITO, WARD 4, NAVSARI IN MAKING ADDITION TO THE EXTENT OF RS. 13,18,985/- ON ACCOUNT OF ALLEGED BOGUS LABOUR CHARGES, ON MISLEADING, BASELESS, ARBITRARY AND PERVERSE OBSERV ATIONS, IS CONTRARY TO LAW AND FACTS OF THE CASE AN D HENCE, LIABLE TO BE QUASHED. 2. ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE, BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE IN THE RIGHT PERSPECTIVES THE DETAILED EXPLANATIONS OFFERED BY THE APPELLANT THROUGH VARIOUS SUBMISSIO N FILED, SUBSTANTIATED BY COGENT AND AUTHENTIC EVIDEN CES VIZ. CONFIRMATION LETTERS WITH COMPLETE NAMES A ND POSTAL ADDRESSES, PAN, BOOKS OF ACCOUNTS, BANK STAT EMENTS, INCOME TAX RECORDS, ETC. OF ALL THE JOB WORKERS/LABOURERS AND THUS, DISCHARGED THE BURDEN L IES UPON THE APPELLANT FULLY TO PROVE THE IDENTITY AND THE GENUINENESS OF THE LABOUR CHARGES ACTUALLY PAID TO THE LABOURERS AND HENCE, SUCH ADDITION MADE PUR ELY ON PRESUMPTION, GUESSWORK AND ALLEGATION OF UNEXPLA INED/BOGUS LABOUR CHARGES IS OTHERWISE, BAD IN LAW, UNWARRANTED OF FACTS AND AGAINST UNREBUTTED EXPLANA TIONS, AUTHENTIC, BELIEVABLE AND ACCEPTABLE EVIDENC ES ADDUCED BY THE APPELLANT AND HENCE, UNJUSTIFIED. 4. BEFORE US LD. AR SUBMITTED THAT THOUGH THE ASSESSEE HAS RAISED TWO GROUNDS BUT THE ONLY EFFECTIVE GROUND IS WITH RESPECT TO DI SALLOWANCE OF LABOUR CHARGES AND THEREFORE BOTH CAN BE CONSIDERED TOGETH ER. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD PAID TOTAL LABOUR CHARGES OF RS. 42,39,246/- TO DIF FERENT PERSONS WHICH ALSO INCLUDED PAYMENT MADE TO 10 PERSONS, AGGREGATING TO RS. 13,18,685/-. SR. NO. NAME OF THE LABOUR CONTRACTOR LABOUR CHAR GES PAID 1 MAGANBHAI P. NAI RS. 2,11,000/- 2 CHATRABHUJ R. SONI RS. 3,40,089/- 3 TULSIBHAI K. DODA RS. 0,79,996/- 4 SHRI HANJARIBHAI KOLI RS. 1,79,300/- 5 NATVARBHAI THAKOR RS. 2,06,700/- 6 PIRABHAI PATEL RS. 1,81,600/- 7. BHUTABHAI J. PATEL RS. 0,48,000/- 8. PRAGJIBHAI R. BHIMANI RS. 0,24,000/- 9 SHRI V.G. SHAH (CASH PAYMENT) RS. 0,24,000/- 10. SHRI B.J. PATEL (CASHPAYMENT) RS. 0,24,000/- TOTAL RS. 13,18,685/- ITA NO 2148/AHD/2010 . A.Y. 2006- 07 3 ON VERIFICATION OF THE BANK STATEMENT OF THE PARTIE S TO WHOM THE PAYMENTS WERE MADE, A.O NOTICED THAT IN MAJORITY OF THE ACCO UNTS THE MONEY WHICH WAS RECEIVED BY THEM FROM ASSESSEE ON ACCOUNT OF LA BOUR PAYMENTS WERE TRANSFERRED TO ACCOUNT OF FEW DIFFERENT PERSONS INS TEAD OF BEING WITHDRAWN OF CASH FOR PAYMENT TO LABOURERS. IT WAS ALSO NOTICED BY THE A.O THAT THE MONEY WHICH WAS TRANSFERRED BY THE SO CALLED LABOUR CONTR ACTORS TO THE ACCOUNT OF THIRD PARTIES WERE ULTIMATELY TRANSFERRED EITHER TO THE BANK ACCOUNT OF MR. TUSHAR SHETH OR WAS WITHDRAWN IN CASH BY ONE SHRI S ATISH RATHOD. TO VERIFY THE GENUINENESS OF LABOUR PAYMENTS SUMMONS U/S. 131 OF THE ACT WERE ISSUED TO THE PARTIES. A.O NOTED THAT ASSESSEE DID NOT PRODUCE THE FIRST 3 PARTIES LISTED SERIAL NO. 1 TO 3 FOR VERIFYING THE GENUINENESS AND CREDITWORTHINESS OF THE LABOUR CHARGES BUT ASSESSEE HOWEVER SUBMITTED THE ACCOUNTS OF ALL THE THREE PARTIES AS APPEARING IN I TS BOOKS OF ACCOUNTS. PARTIES LISTED AT SERIAL NO. 4 TO 6 STATED THAT THE CHEQUE ISSUED BY THE ASSESSEE COULD NOT BE DEPOSITED BY THEM IN THEIR OWN BANK ACCOUNT BECAUSE THEY DID NOT HAVE ANY BANK ACCOUNT AND THEREFORE THEY ENCASHED T HE BEARER CHEQUES THROUGH THE BANK ACCOUNT OF SHRI LILA RAM DEVASI IN WHOSE FACTORY THEY WERE WORKING. PARTIES LISTED AT SERIAL NO. 7 & 8 SU BMITTED THEIR ACCOUNTS AND PARTIES AT SERIAL NO. 9 & 10 WERE NOT MAINTAINING T HE BOOKS OF ACCOUNT AND WERE ALSO NOT HAVING BANK ACCOUNTS. A.O THEREFORE C ONCLUDED THAT THE LABOUR PAYMENTS MADE BY THE ASSESSEE TO THE ABOVE PARTIES WERE BOGUS AND WERE ULTIMATELY BEING SIPHONED OF BY THE ASSESSEE. HE TH EREFORE DISALLOWED LABOUR CHARGES OF RS. 13,18,685/- AND ADDED TO THE INCOME. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE LD . CIT(A). LD. CITA) DISMISSED THE APPEAL OF THE ASSESSEE AND UPHELD THE DISALLOWANCE MADE BY THE A.O BY HOLDING AS UNDER:- ITA NO 2148/AHD/2010 . A.Y. 2006- 07 4 2. DECISION : THE ASSESSING OFFICER DISALLOWED RS. 13,18,685;- BEING LABOUR CHARGES PAID TO TEN LABOURERS ON THE GROUND THAT OUT OF TEN PARTIES , THREE PARTIES WERE NOT AVAILABLE FOR CROSS VERIFICATION TO WHOM MAJOR AMOUNTS WERE PAID. ALTHO UGH ADEQUATE OPPORTUNITY WAS AFFORDED THE APPELLANT FAILED TO PRODUCE THE PARTIES TO WHOM LABOUR CHARGES WERE PAID. ASSESSING OFFICER ALSO VERIFIED THE BANK ACCOUNTS OF THE ENTI RE LABOUR CONTRACTORS. IN MAJORITY OF CASES, CHEQUE FROM APPELLANT WAS DEPOSITED INTO THE BANK A CCOUNT AND NO CASH WAS WITHDRAWN TO MAKE THE PAYMENT TO ACTUAL WORKER. FROM LABOUR CO NTRACTOR MONEY WERE TRANSFERRED TO THIRD PARTIES AND FINALLY EITHER TRANSFERRED TO ACCOUNT O F M/S. TUSHAR N. SHETH OR WAS WITHDRAWN IN CASH BY ONE SHRI. SATISH RATHOD AS IS EVIDENT FROM THE INSTRUMENTS PROVIDED BY THE BANK. IT WAS ALSO ESTABLISHED BY THE AO THAT SHRI. SATISH RA THOD IS DIRECTLY CONNECTED WITH THE APPELLANTK CONSIDERING THE ABOVE FACTS THESE EXPENS ES CAN NOT BE ALLOWED AS GENUINE BUSINESS EXPENDITURE OF THE APPELLANT. THIS GROUND OF APPEAL IS DISMISSED. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 7. BEFORE US. LD A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A). HE FURTHER SUBMITTED THAT THE A.O ASKED THE ASSESSEE TO PRODUCE 14 PARTIES OUT OF WHICH 11 PARTIES APPEARED BEFORE A.O AND 3 PARTIES AT SERIAL NO. 1,2 & 3 COULD NOT APPEAR BECAUSE THEY HAD SHIFT ED TO THEIR NATIVE PLACE DUE TO THE CRISIS PREVAILING IN THE DIAMOND INDUSTR Y. HE FURTHER SUBMITTED THAT THE PAYMENT OF LABOUR CHARGES HAVE BEEN MADE B Y CHEQUES AND THE LABOUR INCOME EARNED BY THE ASSESSEE HAS NOT BEEN D OUBTED BY THE A.O AND FURTHER THE FINDINGS OF LD CIT(A) ARE CONTRARY TO T HE FACTS. HE FURTHER SUBMITTED THAT THE A.O HAS MADE DISALLOWANCE ON THE BASIS OF PRESUMPTION. HE THEREFORE SUBMITTED THAT THE ADDITION MADE BY TH E A.O BE DELETED. THE LD D.R. ON THE OTHER HAND TOOK US THROUGH THE ORDER OF A.O AND POINTED TO THE VARIOUS OBSERVATIONS MADE BY HIM AND THUS SUPPORTED HIS ORDER. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS ENGAGED IN T HE BUSINESS OF POLISHING OF DIAMONDS ON JOB WORK BASIS AND THE ASSESSEE RECEIVE S THE PAYMENT WHICH IS CREDITED AS ITS INCOME. IT IS ALSO A FACT THAT MAK ES THE PAYMENT FOR LABOUR WHICH IS TREATED AS AN EXPENSE. IT IS ALSO A FACT T HAT DURING THE COURSE ITA NO 2148/AHD/2010 . A.Y. 2006- 07 5 ASSESSMENT PROCEEDINGS, A.O ASKED THE ASSESSEE TO P RODUCE THE LABOURERS TO PROVE THE GENUINENESS OF PAYMENTS AND IT IS THE ASS ESSEES SUBMISSION THAT 3 PARTIES COULD NOT BE PRODUCED SINCE THEY HAD SHIFTE D TO THE NATIVE PLACE BUT HAD FURNISHED THE ADDRESSES OF TWO OF THE 3 PARTIES TO THE A.O. THE AFORESAID SUBMISSIONS OF THE ASSESSEE HAS NOT BEEN CONTROVERT ED THE REVENUE. WE ALSO FIND THAT A.O IN THE ASSESSMENT ORDER HAS NOTED THA T SHRI LILA RAM DEVASI HAS STATED TO HAVE RECEIVED THE BEARER CHEQUE IN HI S BANK ACCOUNT AND THEREAFTER THE CASH WAS WITHDRAWN AND PAID TO THE L ABOURERS. IN THE PRESENT FACTS WE FIND THAT THOUGH THE ASSESSEE HAS SUBMITTE D THE EXPLANATION BUT HAS ALSO NOT FULLY PROVED THE EXPENSES AND AT THE SAME TIME THE REVENUE HAS ALSO PROCEEDED TO MAKE THE DISALLOWANCE ON AN ESTIMATED BASIS. WE FURTHER FIND THAT THE ASSESSING OFFICER HAD MADE NO ENQUIRY IN T HE CASE OF 2 PARTIES WHOSE ADDRESSES WERE FURNISHED TO HIM. IN SUCH CIRC UMSTANCES WE ARE OF THE VIEW THAT DISALLOWANCE WAS RIGHTLY MADE BUT HOWEVER CONSIDERING THE FACTS STATED HEREINABOVE WE ARE OF THE VIEW THAT THE DISA LLOWANCE MADE BY THE ASSESSING OFFICER IS ON A HIGHER SIDE. CONSIDERING THE TOTALITY OF THE FACTS, WE ARE OF THE VIEW THAT A DISALLOWANCE OF RS. 4 LAC S WOULD MEET THE ENDS OF JUSTICE AND THEREFORE WE ACCORDINGLY DIRECT THE DIS ALLOWANCE BE RESTRICTED TO RS. 4 LACS. THUS THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 27 - 08 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - ITA NO 2148/AHD/2010 . A.Y. 2006- 07 6 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD