M/s. Bhadiyadra Brothers, Surat V. The Income tax Officer, Ward-9(1), Surat

ITA 2743/AHD/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9180 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 02-12-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 15-06-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Income from undisclosed sources; Source of fund; Onus to prove
• Section: 143(3); 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.2743/AHD/2007 (ASSESSMENT YEAR:-2004-05) M/S BHADIYADRA BROTHERS, 9-10, SAVANI DIAMOND ESTATE, BEHIND GEETANJALI CINEMA, VARACHHA ROAD, SURAT V/S INCOME-TAX OFFICER, WARD- 9(1),ROOM NO. 422,AAYAKAR BHAVAN, MAJURA GATE,SURAT PAN: AAGFM 2845 R [APPELLANT] [RESPONDENT] ITA NO.2789/AHD/2007 (ASSESSMENT YEAR:-2004-05) INCOME-TAX OFFICER, WARD- 9(1),SURAT V/S M/S BHADIYADRA BROTHERS, 9- 10, SAVANI DIAMOND ESTATE, BEHIND GEETANJALI CINEMA, VARACHHA ROAD, SURAT [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI J P SHAH, AR REVENUE BY:- SHRI ROHIT MEHRA, DR O R D E R A N PAHUJA: THESE CROSS APPEALS AGAINST AN ORDER DATED 28-03- 2007 OF THE LD. CIT(APPEALS)-V, SURAT, RAISE THE FO LLOWING GROUNDS:- ITA NO.2743/AHD/2007[ASSESSEE] 1 THE CIT(A) ERRED IN UPHOLDING RS.80,00,000/- FRO M THE ADDITION OF RS.96,41,849/- MADE BY THE ASSESSING OFFICER AS THE PAYMENT OF WAGES FROM UNDISCLOSED SOURCES NOT SHOWN AS PAID IN THE BOOKS OF ACCOUNTS INSTEAD OF DELETING THE SAME IN TOTO. 2 THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 16,69,505/- MADE BY THE ASSESSING OFFICER AS EXCESS PAYMENT OF WAGES INSTEAD OF DELETING IT IN TOTO. 3 THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 10,00,000/- FROM THE ADDITION OF RS.14,10,390/- MADE BY THE ASSESSIN G OFFICER AS SUPPRESSION OF LABOUR RECEIPTS INSTEAD OF DELETING THE SAME IN TOTO. ITA NOS .2743 & 2789/AHD/2007 2 ITA NO.2789/AHD/2007[REVENUE] 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN REDUCING OF RS.16,73,23 3/- OUT OF ADDITION OF RS.96,41,849/- MADE BY THE ASSESSING OF FICER IN RESPECT OF UNEXPLAINED UNPAID WAGES, AS PER ASSESSMENT ORDE R U/S 143(3) READ WITH SECTION 145(3) OF THE I.T. ACT, 1961 DATE D 26-12-2006. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN REDUCING OF RS. 410390/ - MADE BY THE ASSESSING OFFICER OUT OF ADDITION OF RS.1410390/- I N RESPECT OF SUPPRESSION OF LABOUR RECEIPTS MADE BY THE AO AS PE R ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 145(3) OF THE I. T. ACT, 1961 DATED 26-12-2006. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ADDITION MA DE BY THE ASSESSING OFFICER ON THE BASIS OF FACTS BROUGHT ON RECORD. IT IS, THEREFORE, PRAYED THAT THE APPEAL ORDER PASS ED BY THE LEARNED CIT(A) BE SET ASIDE AND THAT THE ASSESSMENT ORDER P ASSED BY THE ASSESSING OFFICER U/S 143(3) READ WITH SECTION 145( 3) DATED 26-12- 2006 BE RESTORED. 2 ADVERTING FIRST TO GROUND NO.1 IN THESE CROSS APP EALS, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECL ARING NIL INCOME FILED ON 13-09-2004 BY THE ASSESSEE, ENGAGED IN DIA MOND MANUFACTURING ON JOB WORK BASIS, AFTER BEING PROCES SED ON 12-10- 2004 U/S 143(1) OF THE INCOME-TAX ACT, 1961 [HEREIN AFTER REFERRED TO AS THE ACT], WAS SELECTED FOR SCRUTINY WITH THE S ERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 13-08-2005.DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE DID JOB WORK OF POLISHING DIAMONDS FOR THREE PARTIES VIZ. M/S REWASHANKAR GEMS LTD., M/S SHARP GEMS AND A SISTER CONCERN M/S BHADIYADRA GEMS. FOR THIS PURPOSE, THE ASSESSEE, INTER ALIA, MAINTAINED LABOUR REGISTER FOR ACTIVITIES OF GHAT, TABLE, ATHPHEL, MATHADA, TALIA ETC. . HOWEVER, THE SAID REGISTER DI D NOT INDICATE DETAILS OF WORK DONE BY A PARTICULAR WORKER NOR EVE N THE NUMBER OF DAYS HE WORKED. ONLY A SINGLE ENTRY , REVEALING NAM E OF THE WORKER AND AMOUNT PAID IN THE MONTH WAS SHOWN. THE RECORDS OF WAGES ITA NOS .2743 & 2789/AHD/2007 3 PAID ON THE BASIS OF NUMBER OF PIECES POLISHED BY E ACH WORKER WERE NOT PRODUCED BEFORE THE AO, EVEN WHEN WAGES WERE BE ING PAID ON THE BASIS OF NUMBER OF PIECES POLISHED AND THE BILL S RAISED ALSO INDICATED NUMBER OF PIECES. THE AO FURTHER NOTICED THAT THOUGH THE WORKERS PUT THEIR SIGNATURES, THESE WERE NOT DATED AT ALL IN APRIL 2003 AND MARCH,2004. THE P & L ACCOUNT AND BALANCE SHEET ENCLOSED WITH THE RETURN REVEALED THAT THE ASSESSEE CLAIMED TOTAL WAGES OF RS.2,49,63,901/- FOR THE YEAR UNDER CONSI DERATION, OUT OF WHICH AN AMOUNT OF RS.1,13,15,082/- WAS CLAIMED UNP AID AND SHOWN AS LIABILITY IN ITS BALANCE SHEET. ON THE OTHER HAN D, CASH BOOK REVEALED SUFFICIENT CASH IN HAND OF ABOUT RS. 8 TO 9 LACS. THE AO OBSERVED THAT SINCE THE ASSESSEE FIRM HAD SHOWN LIA BILITY AT THE END OF THE YEAR, THE ONUS WAS ON IT TO PROVE AND ESTABL ISH THE CORRECTNESS AND GENUINENESS OF LIABILITY. THE AO DO UBTED AS TO HOW COULD THE ASSESSEE FIRM CARRY OUT ITS BUSINESS ACTI VITIES WITHOUT PAYING WAGES TO THE WORKERS SINCE ALMOST 50% OF THE TOTAL WAGES DURING THE YEAR UNDER CONSIDERATION WERE OUTSTANDIN G. THE ASSESSEE FIRM DID NOT PAY WAGES ALMOST MORE THAN SIX MONTHS WHICH WAS NEITHER PRIMA FACIE NOR PRACTICALLY POSSIBLE IN SUC H TYPE OF BUSINESS WHEN WORKERS WERE OFTEN SHIFTING THEIR EMPLOYER AND THE WAGES WERE BEING PAID EITHER ON WEEKLY BASIS OR ON FORTNI GHTLY BASIS IN THE INDUSTRY. THE AO OBSERVED THAT IT WAS AN ADMITTED F ACT THAT WORKERS WERE BEING PAID ON THE BASIS OF NUMBER OF PIECES OF DIAMONDS POLISHED BY THEM AND DESPITE THAT THE ASSESSEE FIRM DID NOT PRODUCE PIECE-WISE RECORDS IN RESPECT OF WAGE PAYME NT. TO A QUERY BY THE AO, SEEKING COPY OF UNPAID WAGES ACCOUNT AND LIST OF PERSONS ALONG WITH ADDRESSES AS ALSO DETAILS OF PAY MENT MADE SUBSEQUENTLY, THE ASSESSEE FILED ONLY A COPY OF W AGES PAYABLE ACCOUNT, MENTIONING SINGLE ENTRY OF MONTHLY WAGES P AYABLE AND WAGES PAID ONLY. HOWEVER, DETAILED LIST OF PERSONS TO WHOM WAGES WERE PAYABLE WAS NOT SUBMITTED. THE AO WAS OF THE O PINION THAT THE BOOKS OF ACCOUNTS HAVING BEEN AUDITED, THE ASSESSE E WAS DELIBERATELY DELAYING THE DETAILS SOUGHT BY HIM. DE SPITE A ITA NOS .2743 & 2789/AHD/2007 4 SHOWCAUSE NOTICE DATED 17-11-2006, THE ASSESSEE DI D NOT FURNISH LIST OF PERSONS WITH ADDRESSES OR DESIRED COPY OF A CCOUNT AND EVIDENCE OF PAYMENT OF WAGES WITHIN THE STIPULATED TIME. THE L IST ENCLOSED WITH THE LETTER DATED 11-12-2006 DID NOT DISCLOSE ADDRESSES NOR DETAILS OF SUBSEQUENT PAYMENT OF UNPAID WAGES. BESIDES, IN THE SAID LIST UNPAID WAGES WERE REFLECTED AT RS.1,08,88,528/- AS AGAINST CLAIM OF RS.1,13,15,082/-. MONTHWISE DETAILS OF UNP AID WAGES IN THE FOLLOWING TABLE EXTRACTED FROM THE ASSESSMENT ORDE R REVEALED AS UNDER: MONTH TOTAL WAGES UNPAID WAGES NUMBER OF PERSONS PERCENTAGE OF UNPAID WAGES APR-03 3916385 -- MAY-03 1513537 -- JUNE-03 3675423 -- JULY-03 2691618 -- AUG-03 2069015 -- SEPT-03 1941297 1731902 462 89.2% OCT-03 2327567 2327567 522 100% NOV-03 .. -- -- DEC-03 2842718 2842718 611 100% JAN-04 1094749 1094749 192 100% FEB-04 1218359 1218359 216 100% MAR-04 1673233 1673233 299 100% TOTAL 24963901 10888528 2.1 APPARENTLY, THE ASSESSEE DID NOT MAKE PAYMENT T O THE WORKERS DURING THE MONTH OF OCTOBER, 2003 TO MARCH,2004 WHI LE EVEN IN SEPTEMBER, 2003, WAGE PAYMENT HAD BEEN SHOWN UNPAID BY ALMOST 90%. ACCORDING TO THE AO IT WAS UNACCEPTABLE THAT NONE OF THE WORKER INSISTED ON PAYMENT OF WAGES AND THAT THE W AGES MUST HAVE PAID IN REGULAR COURSE OUT OF ITS UNDISCLOSED SOURC E OF INCOME. IT WAS ITA NOS .2743 & 2789/AHD/2007 5 NOT THE CASE OF THE ASSESSEE THAT IT COULD NOT MAKE PAYMENT BECAUSE OF SCARCITY OF FUNDS OR ANY OTHER EXCEPTION AL REASONS SINCE HUGE CASH IN HAND WAS AVAILABLE AS PER THE CASH BOO K. IN VIEW OF THE FOREGOING AND IN THE ABSENCE OF ANY COGENT EXPLANAT ION FOR KEEPING HUGE CASH BALANCE AND THEREBEING NO EVIDENCE OF SOU RCE OF PAYMENT OF WAGES OUTSTANDING AS AT THE END OF THE YEAR, T HE AO REJECTED BOOK RESULTS ,HAVING RECOURSE TO PROVISIONS OF SEC . 145(3) OF THE ACT ,RELYING INTER ALIA, ON THE DECISION IN THE CASE OF SAMIR DIAMONDS EXPORTS P LTD.,71 ITD 75(MUM). SINCE THE ASSESSEE FAILED TO DISCHARGE ITS ONUS TO PROVE THE GENUINENESS AND CORRECTNESS OF THE UNPAID WAGES CLAIMED BY IT, THE AO FURTHER CONCLUDED THAT THE AS SESSEE FIRM MUST HAVE MADE PAYMENT TO ITS WORKERS OUT OF ITS UNDISCLOSED INCOME. ACCORDINGLY, THE AO ADDED AN AMOUNT OF RS.96,41,849/- ON ACCOUNT OF U NEXPLAINED PAYMENT OF UNPAID WAGES OUT OF TOTAL UNPAID WAGES RS.1,13,15,0 82/- ,TREATING THE SAME HAVING BEEN PAID OUT OF UNDISCLOSED SOURCES OF INCO ME OF THE ASSESSEE FIRM DUE TO FAILURE ON THE PART OF THE ASSESSEE IN SUBMITTIN G THE LIST OF UNPAID WAGES OF RS.4,26,554/- WHILE THE REMAINING LIST OF PERSO NS DID NOT CONTAIN EVEN THE ADDRESS OF THE WORKERS NOR THE DATE ON WHICH UNPAID WAGES WERE ACTUALLY PAID IN FUTURE, EVEN WHEN SUFFICIENT OPPORTUNITY WAS ALLOW ED TO THE ASSESSEE . 3. ON APPEAL, THE LEARNED CIT(A) SUSTAINED THE ADD ITION OF RS.80,00,000/- AND ALLOWED A RELIEF OF RS.16,41,849 /- TO THE ASSESSEE IN THE FOLLOWING TERMS: 4.7 I HAVE PERUSED THE FACTS OF THE CASE AS DISCUS SED BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER AND ALSO CAREFULLY WENT THROUGH THE SUBMISSION AS MADE BY THE AR. AFTER ANALYZING THE FACTS, IT IS SEEN THAT THE ASSESSING OFFICER HAD DISCUSSED IN GREAT DETAIL ABOUT THE CIRCUMSTANCES UNDER WHICH THE ACCUMULATION OF UNPAI D WAGES BY THE APPELLANT HAS BEEN TREATED BY HIM AS UNCALLED FOR. ACCORDING TO THE ASSESSING OFFICER, THE CLAIM OF RS.2,49,63,901/- AS WAGES OUT OF ITS TOTAL RECEIPTS OF RS.3,28,46,279/- ITSELF SEEMED TO BE O N THE HIGHER SIDE AS IT WAS TAKING CARE OF VERY MAJOR PORTION OF THE TOTAL CONTRACT RECEIPT OF THE APPELLANT DURING THE YEAR. FURTHER, ACCORDING THE A SSESSING OFFICER, THE APPELLANT DID NOT MAINTAIN THE DETAILS OF PAYMENTS OF WAGES TO LABOURERS ON THE BASIS OF NUMBER OF PIECES OF DIAMONDS CUT AN D POLISHED BY THEM AND RATHER IT WAS MAINTAINED IN A VERY CASUAL WAY I .E. SHOWING THE AMOUNT OF THE PAYMENT TO LABOURER OR PARTICULAR DATE BUT T HERE WAS NO DETAILS WITH ITA NOS .2743 & 2789/AHD/2007 6 REGARD TO THE QUANTITY OF ROUGH DIAMONDS GIVEN TO H IM FOR MANUFACTURING AND POLISHING OF DIAMONDS AND THE NUMBER OF CUT AND POLISHED DIAMONDS MANUFACTURED BY HIM. ACCORDING TO HIM, THE JOB OF C UTTING AND POLISHING OF DIAMONDS WAS VERY SENSITIVE IN THE SENSE THAT IT BE ING VERY COSTLY ITEM, DAILY MONITORING WAS REQUIRED TO FIND OUT AS TO HOW MUCH OF ROUGH DIAMOND WAS GIVEN FOR CUTTING AND POLISHING AND OUT OF THAT HOW MANY PIECES OF DIAMONDS WERE MANUFACTURED. FURTHER, ACCOR DING TO HIM, THIS WAS THE PREVALENT PRACTICE IN THE DIAMOND MARKET TO MAK E PAYMENT TO THE LABOURERS ON THE BASIS OF NUMBER OF CUT AND POLISHE D DIAMONDS MANUFACTURED BY A LABOURER ON DAILY 'BASIS AND BY N OT FOLLOWING THE SAME, THE LABOUR CHARGES DETAILS MAINTAINED BY IT WERE NO T FREE FROM SERIOUS DOUBTS. IT IS SEEN THAT THE ASSESSING OFFICER HAD A LSO ELABORATED THE FACTS AND THE CIRCUMSTANCES IN WHICH THE DIAMOND LABO URERS WERE WORKING IN THE DIAMOND INDUSTRY. IN HIS OPINION, A DIAMOND LA BOURER COULD NOT AFFORD TO LEAVE HUGE CHUNK OF MONEY WITH THE APPELLANT ESP ECIALLY IN THE AGE OF INFLATIONARY MARKET CONDITIONS WHERE THE EARNINGS W ERE REQUIRED TO MEET OUT THE REQUIREMENT ON DAILY BASIS. IN HIS VIEW, I T WAS A FACT THAT THE DIAMOND LABOURERS HAD TO SUPPORT A NUMBER OF FAMILY MEMBERS AND FOR THAT HE WOULD HAVE REQUIRED THE PAYMENT OF WAGES ON DAILY BASIS AND IF IT WAS NOT POSSIBLE ON DAILY BASIS, THEN DEFINITELY ON WEEKLY BASIS IS FOUND TO HAVE MERIT IN IT. ON THE OTHER HAND, THE REPLY OF T HE APPELLANT THAT THE LABOURERS HAD THE TENDENCY TO SAVE MONEY/WAGES AND, THEREFORE, THEY KEPT A LARGE CHUNK OF MONEY WITH THE EMPLOYER AND H ENCE THE SAID BALANCE WAS CARRIED FORWARD BY IT (THE APPELLANT-FI RM) MONTH AFTER MONTH WHICH CUMULATIVELY RESULTED INTO A FIGURE OF RS.96, 41,849/- DOES NOT APPEAR TO BE SOUND ENOUGH AND HENCE THE SAME CANNOT BE ACC EPTED IN TOTALITY. 4.8 IT IS SEEN THAT TO FIND OUT THE GENUINENESS OF THE ABOVE REFERRED STATEMENT, THE ASSESSING OFFICER HAD ASKED THE APPE LLANT TO SUBMIT THE NAME AND COMPLETE ADDRESS OF SUCH LABOURERS DURING THE COURSE OF HEARING ON 04-10-2006 AND IN RESPONSE TO THAT NOTHI NG WAS SUBMITTED BY THE APPELLANT IN SUBSEQUENT DATES OF ASSESSMENT PRO CEEDINGS. IT IS FURTHER SEEN THAT A LIST OF 24 NAMES ALONG WITH THE ADDRESS ES WERE PROVIDED TO THE ASSESSING OFFICER ON 26-12-2006 WHEN HARDLY 8-9 DAY S WERE LEFT TO COMPLETE THE ASSESSMENT PROCEEDINGS AS IT WAS GETTI NG BARRED BY LIMITATION ON 31-12-2006 AND ACCORDINGLY, IT IS SEE N THAT THE APPELLANT HAD DELIBERATELY AVOIDED TO SUBMIT SUCH DETAILS PERHAPS WITH THE FEAR IN ITS MIND THAT IF SUCH PERSONS WERE TO BE EXAMINED, THE TRUTH WOULD PREVAIL AND ITS THEORY OF ACCUMULATED UNPAID WAGES WOULD GET DE MOLISHED. 4.9 DURING THE APPELLATE PROCEEDINGS, IT IS SEEN TH AT THE APPELLANT HAD FILED (AS REFERRED TO ABOVE) XEROX COPIES OF VARIOU S AFFIDAVITS ON BEHALF OF SEVENTEEN LABOURERS AS EVIDENCE IN SUPPORT OF HIS C ONTENTION. BUT, HOWEVER, THE SAME CANNOT BE ADMITTED AS AN ADDITION AL EVIDENCE AT THIS JUNCTURE IN VIEW OF THE PROVISIONS OF RULE 46A OF T HE I.T. RULES, 1962 BECAUSE SUCH AFFIDAVITS WERE NOT FILED EARLIER BEFO RE THE ASSESSING OFFICER NOR ANY REASON HAS BEEN GIVEN TO PROVE THAT IT WAS PREVENTED BY SUFFICIENT CAUSE FROM FURNISHING THE SAME BEFORE THE ASSESSING OFFICER. I, THEREFORE, ITA NOS .2743 & 2789/AHD/2007 7 IN VIEW OF THESE FACTS, DECLINE TO ADMIT THESE AFFI DAVITS AS AN EVIDENCE REGARDING ITS CLAIM OF GENUINENESS OF UNPAID WAGES. IT IS SEEN THAT THE APPELLANT HAS ALSO NOT FILED DETAILS / EVIDENCES TO SHOW THAT WHEN IN SUBSEQUENT YEARS SUCH UNCLAIMED WAGES WERE PAID TO THE LABOURERS ON WHOSE BEHALF THIS AMOUNT IS SHOWN TO HAVE BEEN ACCU MULATED DURING THE YEAR. 4.10 THUS, IN VIEW OF THE ABOVE DISCUSSED FACTS, I HOLD THAT THE FINDINGS OF THE ASSESSING OFFICER THAT UNPAID WAGES WERE NOT HING BUT MUST HAVE BEEN PAID BY IT OUT OF ITS UNDISCLOSED SOURCES OF I NCOME IS FOUND JUSTIFIED IN THE EYES OF LAW. BUT, HOWEVER, IT IS SEEN THAT THE DISALLOWANCE AS MADE BY THE ASSESSING OFFICER APPEARS TO BE ON HIGHER SIDE AS IT CANNOT BE ACCEPTED THAT THE ENTIRE UNPAID WAGES WERE PAID OUT OF THE UNDISCLOSED SOURCES OF INCOME OR THE CLAIM OF WAGES MADE BY IT (THE APPELLANT-FIRM) IN ITS BOOKS OF ACCOUNTS CANNOT BE HELD AS COMPLETELY BOGUS. I, THEREFORE, IN VIEW OF THE TOTALITY OF FACTS AS DISCUSSED ABOVE AN D IN THE FAIRNESS OF JUSTICE, ESTIMATE THE SAME AT RS.80,00,000/- AND IN THIS WAY, THE APPELLANT GETS A RELIEF OF RS.16,73,233/-. ACCORDINGLY, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 4. THE ASSESSEE AS WELL AS REVENUE ARE NOW IN APPE AL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A ). THE ASSESSEE HAS CHALLENGED CONFIRMATION OF THE ADDITION OF RS.8 0,00,000/- WHILE THE REVENUE HAVE DISPUTED THE REDUCTION OF ADDITION BY AN AMOUNT OF RS.16,41,849/-. THE LEARNED AR ON BEHALF OF THE ASSESSEE WHILE RELYING UPON DECISION IN THE CASE OF INDELL CONSTRU CTIONS VS. CIT,232 ITR 776(AP) CONTENDED THAT NO ADDITION CAN BE MADE AFTER REJECTION OF BOOKS OF ACCOUNT WHEN TRADING RESULTS ARE BETTER VIS--VIS PRECEDING YEARS. TO A QUERY BY THE BENCH, THE LD. A R SUBMITTED THAT FINDINGS OF THE AO REGARDING REJECTION OF BOOK RESU LTS WERE NEVER DISPUTED BEFORE THE LD. CIT(A).ON THE OTHER HAND, T HE LD. DR WHILE REFERRING TO IMPUGNED ORDERS CONTENDED THAT NEITHER BEFORE THE AO NOR BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED T HE DETAILS REQUIRED BY THE AO. EVEN THE DETAILS REGARDING PAYM ENT OF OUTSTANDING WAGES IN SUBSEQUENT YEARS WAS NOT SUB MITTED .WHILE REFERRING TO PAGE 11 OF THE ASSESSMENT ORDER, THE L D. DR CONTENDED THAT IT IS NOT ACCEPTABLE THAT NONE OF THE WORKERS ASKED FOR PAYMENT OF WAGE IN THE MONTHS OF OCTOBER,2003 TO MARCH,2004 . HE ADDED THAT EVEN AFTER REJECTION OF BOOKS, ADDITION U/S 68 CAN BE MADE. ITA NOS .2743 & 2789/AHD/2007 8 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE FINDINGS OF THE AO, REJ ECTING THE BOOK RESULTS, INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT, WERE NOT CHALLENGED BEFORE THE LD. CIT(A) NOR EVEN BEFORE US . AS IS APPARENT FROM THE ASSESSMENT ORDER, EVEN THOUGH THE AO REJEC TED BOOK RESULTS, HE PROCEEDED TO DETERMINE INCOME ON THE BA SIS OF NET PROFIT AS PER RETURN BEFORE SET OFF OF UNABSORBED DEPRECI ATION AND CONFINED TO ADDITIONS ON THE BASIS OF SPECIFIC DEF ECTS OR NON- GENUINE ENTRIES PIN POINTED BY HIM. WHETHER SPECIFI C ITEMS SHOULD BE ADDED IN ADDITION TO ESTIMATE OF GROSS RECEIPTS/PRO FITS OR ONLY ONE OF THE ADDITIONS BE MADE, DEPENDS UPON FACTS OF EACH C ASE. IN THE INSTANT CASE, ON FINDING THAT TRADING RESULTS WERE BETTER VIS--VIS PRECEDING YEARS, ONLY SPECIFIC ITEMS HAVE BEEN ADDE D BY THE AO. IN THESE CIRCUMSTANCES, THE ONLY DISPUTE BEFORE US IS IN RESPECT OF SPECIFIC ITEMS OF ADDITIONS. THE FIRST SUCH ADDITIO N IS OF RS.96,41,849/-. THE AO MADE THE ADDITION SINCE TH E LABOUR REGISTER MAINTAINED BY THE ASSESSEE DID NOT INDICATE DETAIL S OF WORK DONE BY A PARTICULAR WORKER NOR EVEN THE NUMBER OF DAYS HE WORKED NOR RECORDS OF WAGES PAID ON THE BASIS OF NUMBER OF PIE CES POLISHED BY EACH WORKER, WERE PRODUCED BEFORE THE AO, EVEN WHEN ,INDISPUTABLY, WAGES WERE BEING PAID ON THE BASIS OF NUMBER OF PIE CES POLISHED WHILE WAGES FOR THE MONTHS OF OCTOBER,2003 TO MARCH ,2004 HAD NOT BEEN PAID. DESPITE REPEATED OPPORTUNITIES THE ASSES SEE DID NOT INDICATE THE DATE AND SOURCES OF PAYMENT OF WAGES O UTSTANDING AT END OF THE YEAR NOR EVEN FURNISHED ADDRESS OF THE W ORKERS TO WHOM THESE WAGES WERE TO BE PAID. EVEN A LIST OF 24 NAMES ALONG WITH THE ADDRESSES WERE PROVIDED TO THE ASSESSING OFFICER ON LY ON 26-12-2006 WHEN HARDLY 5 DAYS WERE LEFT TO COMPLETE THE ASSESSMENT PROCEEDINGS AS IT WAS GETTING BARRED BY LIMITATION ON 31-12-2006. IN THIS SITUATI ON, CONSIDERING THE PRACTICES IN THE INDUSTRY, THE AO ADDED AN AMOUNT O F RS.96,41,849/- OUT OF OUTSTANDING WAGE AMOUNT OF RS. 1,13,15,082/- . THE SITUATION ITA NOS .2743 & 2789/AHD/2007 9 BEFORE THE LD. CIT(A) WAS NO BETTER. THE LD. CIT(A) PARTLY REDUCED THE ADDITION SINCE THE ASSESSEE DID NOT FURNISH THE RELEVANT DETAILS EVEN BEFORE HIM WHILE THE AFFIDAVITS OF SEVENTEEN W ORKERS SUBMITTED BEFORE HIM WERE NOT ADMITTED IN EVIDENCE. THE LD. AR WHILE SUBMITTING RELEVANT DATES OF PAYMENT OF WAGES OUTST ANDING AS ON 31.3.2004 BEFORE US CONTENDED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION WHEN GP WAS BETTER VIS-- VIS PRECEDING YEARS AND THE ASSESSEE DID NOT DISPUTE REJECTION OF BOOK RESULTS. WE ARE NOT IMPRESSED BY THIS CONTENTION OF THE LD. AR SINCE AFTER REJECTING BOOK RESULTS, HAVING RECOURSE TO PROVISIO NS OF SEC. 145 OF THE ACT, THE AO DID NOT ADD ANY AMOUNT DEBITED IN THE TRADING ACCOUNT. SINCE THE ASSESSEE DID NOT FURNISH THE DET AILS OF PAYMENT OF OUTSTANDING WAGES , THE AO CONCLUDED THAT THE A MOUNT WAS PAID OUT OF UNDISCLOSED SOURCES. EVEN AFTER REJECTION OF BOOK RESULTS, ADDITION U/S 68 CAN BE MADE AS HELD BY THE HONBL E APEX COURT IN CIT VS. DEVI PRASAD VISHWANATH PRASAD,72 ITR 194(SC ).IN THE CASE OF INDWELL CONSTRUCTIONS(SUPRA) RELIED UPON ON BEHA LF OF THE ASSESSEE, THE ISSUE WAS OF A SEPARATE ADDITION OF RS. 63,859 REPRESENTING THE INTEREST AND REMUNERATION PAID TO PARTNERS, TO THE INCOME ALREADY ESTIMATED AND ASSESSED FROM CONTRACTS . HONBLE HIGH COURT HE LD THAT WHEN ALL THE DEDUCTIONS WHICH ARE REFERRED TO UNDER S. 29 ARE DE EMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING AN ESTIMATE, DISALLOWANCE U/S 40(B) COULD NOT BE MADE. BUT IN THE INSTANT CASE, SUCH A DISALLOWANCE IS NOT BEING MADE. APPARENTLY, THE DECISION RELIED UPON IS NOT APPLICABLE TO THE FACTS OF CASE BEFORE US. WHOLESALE DISCARD OF BOOKS IS NOT A CONSEQUENCE OF REJECTION OF BOOK RESULTS. THE FACT THAT THE AO CONSIDERED IT NECESSARY TO MAK E AN ASSESSMENT ON HIS OWN BASIS OR TO THE BEST OF HIS JUDGMENT, DO ES NOT NECESSARILY MEAN THAT BOOKS OF ACCOUNTS ARE TO BE IGNORED OR RE JECTED ALTOGETHER. IN THE INSTANT CASE AFTER RECORDING FIN DINGS IN SUPPORT OF REJECTION OF BOOK RESULTS, WHICH FINDINGS HAVE NOT BEEN DISPUTED BY THE ASSESSEE BEFORE THE LD. CIT(A) OR EVEN BEFORE U S, THE AO DETERMINED INCOME ON THE BASIS OF NET PROFIT AS PER PROFIT AND LOSS ACCOUNT. AS ALREADY MENTIONED, DESPITE REPEATED OP PORTUNITIES, THE ITA NOS .2743 & 2789/AHD/2007 10 ASSESSEE DID NOT SUBMIT ANY COGENT REASONS FOR NON PAYMENT OF WAGES FOR THE MONTHS OF OCTOBER,2003 TO MARCH,2004 NOR EVEN FURNISHED EVIDENCE OF PAYMENT OF OUTSTANDING WAGES EITHER BEFORE THE AO OR THE LD. CIT(A),RESULTING IN ADDITION ON T HE GROUND THAT THE AMOUNT HAD BEEN PAID OUT OF UNDISCLOSED SOURCES OF THE ASSESSEE. FOR THE SAID ADDITION IT IS THE ASSESSEE HIMSELF W HO IS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS AND DETAILS DESIRED BY THE A O/LD. CIT(A). IT IS ONLY AFTER A SPECIFIC QUERY BY THE BENCH THAT THE LD. AR SUBMITTED DATES OF PAYMENT OF OUTSTANDING WAGES. SINCE THE SAID DE TAILS WERE NOT BEFORE THE AO OR LD. CIT(A) AND CONSEQUENTLY THEY DID NOT HAVE ANY OCCASION TO VERIFY THESE DETAILS WHILE EVEN A LIST OF 24 NAMES ALONG WITH THE ADDRESSES WAS PROVIDED TO THE ASSESSING OFFICER ONL Y ON 26-12-2006 I.E THE DATE WHEN ASSESSMENT WAS COMPLETED , IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE CONSIDER IT FAIR AND APPROPRIATE TO RESTORE THE ISSUE RELATING TO THE AFORESAID ADDITION TO THE FILE OF THE AO WITH THE DIRECTIONS TO RE- EXAMINE THE MATTER, INTER ALIA, AFTER VERIFYING TH E GENUINENESS OF CLAIM MADE BY THE ASSESSEE IN RESPECT PAYMENT OF OU TSTANDING WAGES AND OF COURSE WITH SUFFICIENT OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO PLACE THE RELEVANT DETA ILS AND EVIDENCE IN SUPPORT OF ITS CLAIM OF PAYMENT OF OUTSTANDING W AGES BEFORE THE AO BESIDES FURNISHING THE ADDRESSES OF WORKERS AVA ILABLE WITH IT. THE AO IS FREE TO UNDERTAKE ANY INDEPENDENT ENQUIRE S TO ASCERTAIN THE GENUINENESS OF THE AFORESAID CLAIM , IF FOUND NECE SSARY AND THEREAFTER, MAY PASS SUCH ORDER AS HE DEEMS PROPER, IN ACCORDANCE WITH L AW . WITH THESE DIRECTIONS, GROUND NO.1 IN THESE TWO APPEALS IS DI SPOSED OF. 6. GROUND NO.2 IN THE APPEAL OF THE ASSESSEE RELATE S TO ADDITION ON ACCOUNT OF EXCESS PAYMENT OF WAGES. THE AO NOTIC ED THAT THE ASSESSEE REFLECTED JOB RECEIPTS OF RS.3,28,46,279/ - AND CLAIMED LABOUR PAYMENT OF RS.2,49,63,901/- FOR IN HOUSE JOB WORK CARRIED OUT UNDER DIRECT CONTROL OF THE ASSESSEE FIRM WHICH COM PARABLY CARRIED LESS COST OF WAGES. TO A QUERY BY THE AO, SEEKING D ETAILS OF NUMBER OF PIECES POLISHED BY THE ASSESSEE AND AND WAGES PA ID FOR THE ITA NOS .2743 & 2789/AHD/2007 11 SAME, THE ASSESSEE DENIED HAVING KEPT SUCH DETAILS . IT WAS EXPLAINED THAT THEY WERE MAINTAINING ONLY CARAT WIS E RECORDS AND THAT IT WAS VERY DIFFICULT TO MAINTAIN PIECEWISE R ECORDS. BESIDES, THEY MAINTAINED COMPLETE RECORD OF LABOUR PAYMENTS, THE ASSESSEE PL EADED. IN THE LIGHT OF THIS REPLY, THE AO OBSERVED THAT ADMITTEDLY THE ASSESSE E FIRM DID NOT KEEP WAGE RECORD ON THE BASIS OF PIECES POLISHED BY A PARTICULAR WORKER WHILE THE PAYMENT TO THE WORKERS WAS INDISPU TABLY MADE ON THE BASIS OF NUMBER OF PIECES OF DIAMONDS POLISHED BY THEM, AS WAS APPARENT FROM THE FOLLOWING DETAILS IN THE BILL DAT ED 24-04-2003 :- ROUGH CARATS ROUGH RETURNED REJECTS NET WEIGHT POLISHED PIECES POLISHED CARATS LABOUR AMOUNT. 868.46 12.96 4 46 851.04 4535 286.08 2,50,049 868.46 12.96 4,46 851.04 4535 286.08 2,50,049 6.1 SINCE THE ASSESSEE DID NOT PRODUCE PIECE-WISE RECORDS, THE AO ANALYSED THE DATA OF MAKEABLE DIAMONDS FOR POLISHIN G VIS--VIS WAGES PAID TO WORKERS IN DIFFERENT MONTHS AND CONFR ONTED A CHART PREPARED BY HIM TO THE ASSESSEE, SEEKING EXPLANATI ON FOR THE VARIATION IN WAGES PAID PER CARAT IN DIFFERENT MONT HS, ESPECIALLY WHEN IN SEPTEMBER,2003 ,WAGES WERE PAID @RS.307.09 PER CARAT WHILE IN FEBRUARY ONLY @RS.253.80 PER CARAT. LIKEWI SE, THE AO POINTED OUT THAT ELECTRICITY EXPENSES IN THE MONTH OF JUNE , OCT. AND DEC.-2003 WERE RS.124.29, RS.121.01 AND RS.108.55 P ER CARAT RESPECTIVELY WHEREAS IN THE MONTH OF SEPT. -2003, J AN.-04 AND MARCH-04 THESE WERE CLAIMED AT THE RATE OF RS.244.1 3, RS.488.29 AND RS.220.29 RESPECTIVELY. IN RESPONSE, THE AR ON BEHALF OF THE ASSESSEE SUBMITTED THAT SINCE ALL THE POLISHED DIAM ONDS WERE NOT HAVING SAME QUALITY, TYPE, SIZE, WEIGHT, NATURE, HA RDNESS, SOFTNESS, BRIGHTNESS, COLOR, SHAPE AND DYES, ACCORDINGLY, IT COULD NOT BE COMPARED WITH EACH OTHER. HOWEVER, THE LD. AR DID N OT SUPPORT THIS ITA NOS .2743 & 2789/AHD/2007 12 ARGUMENT WITH ANY EVIDENCE WHATSOEVER. THE PRIME RE QUIREMENT IN THIS CASE WHICH WAS PIECE-WISE WAGES RECORD HAD NOT BEEN PRODUCED BY THE ASSESSEE FIRM. SINCE THE ASSESSEE DID NOT PR ODUCE ANY COGENT EXPLANATION AND EVIDENCE IN RESPECT OF AFORE SAID VARIATION IN PER CARAT WAGE EXPENSE , THE AO WHILE REJECTING BOO K RESULTS ADOPTED RATE OF RS. 280 PER CARAT AND WORKED OUT PA YMENT FOR WAGES AS UNDER:- TOTAL MEKEABLE CARATS = 83194.27 REASONABLE NITE PER CARAT WAGES AS DISCUSSED ABOVE. RS.280/- PER CARAT. TOTAL WAGES COMES TO = RS.2,32,94,396/- (83194.27 X RS.280) SINCE THE ASSESSEE CLAIMED TOTAL LABOUR PAYMENT O F RS.2,49,63,901/- , THE AO DISALLOWED THE EXCESS PAYMENT OF RS.16,69,505/- 7. ON APPEAL, THE LEARNED CIT(A) UPHELD THE DISALL OWANCE IN THE FOLLOWING TERMS:- 5.3 I HAVE PERUSED THE FACTS OF THE CASE AS DISCUSS ED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND ALSO CAREFULLY WENT THROUGH THE SUBMISSION AS MADE BY THE AR. AFTER ANALYZING THE F ACTS, IT IS SEEN THAT THE ASSESSING OFFICER HAD ANALYZED THE PAYMENT MADE BY THE APPELLANT ON PER CARAT BASIS WITH REGARD TO THE MANUFACTURE OF POLIS HED DIAMONDS FOR ALL THE MONTHS DURING THE YEAR AND NOTICED THAT THE RATES K EPT ON VARYING IN EACH AND EVERY MONTH. IT IS ALSO SEEN THAT WHEN THE ASSE SSING OFFICER HAD ASKED THE APPELLANT TO GIVE REASONS FOR VARIATIONS IN PAYMENTS OF MANUFACTURED/POLISHED DIAMONDS ON PER CARAT BASIS, NO PROPER REPLY WAS FILED BY IT. IN THIS REGARD, THE REPLY FILED BY THE A. R. THAT THE NUMBER OF PIECES WERE ONLY RECORDED ON LABOUR BIL LS WHILE SENDING THE MANUFACTURED / POLISHED DIAMONDS TO THE CONTRACTOR AND NOT FOR THE PURPOSE OF MAKING THE LABOUR PAYMENTS TO THE WORKER S IS FOUND BASELESS AND NOT ACCEPTABLE. IT IS SEEN THAT IN THE DIAMOND MARKET, THE PAYMENTS TO THE LABOURERS HAVE ALWAYS BEEN MADE ON THE BASIS OF NUMBER OF PIECES MANUFACTURED BY THE LABOURER AND IN VIEW OF SUCH FA CTS, THE PLEA OF THE APPELLANT THAT THE WAGES WERE PAID IN TERMS OF CARA T WITH REGARD TO THE MANUFACTURED / POLISHED DIAMONDS APPEARS TO BE HIGHLY UNACCEPTABLE. IT IS FURTHER SEEN THAT IN THE ABSENCE OF ANY REPLY AN D PLAUSIBLE REASONS FROM THE SIDE OF THE APPELLANT WITH REGARD TO THE PAYMEN T AT DIFFERENT RATES PAID BY IT, THE ASSESSING OFFICER WAS JUSTIFIED IN ARRIV ING AT A RATE WHICH WAS IN ITA NOS .2743 & 2789/AHD/2007 13 THE MIDDLE RANGE I.E. RS.280/- PER CARAT KEEPING IN VIEW THE HIGHEST RATE OF PAYMENT OF RS.323.89 IN THE MONTH OF DECEMBER,2003 AND THE LOWEST RATE OF PAYMENT OF RS.253/- PER CARAT IN THE MONTH OF FEBRUARY, 2004 AND ACCORDINGLY, THE EXCESS CLAIM OF PAYMENT OF WAG ES OF RS.16,69,505/- ADDED BY HIM TO ITS TOTAL INCOME IS FOUND JUSTIFIED IN THE EYES OF LAW AND HENCE THE SAME IS CONFIRMED. ACCORDINGLY, THIS GROU ND OF APPEAL IS DISMISSED. 8. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED AR ON BEHAL F OF THE ASSESSEE REITERATED THEIR SUBMISSIONS BEFORE THE LEARNED CI T(A) WHILE CONTENDING THAT 80% OF THE WORK WAS GOT DONE FROM O NE PARTY. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE IMPUGN ED ORDER OF THE LEARNED CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE ASSESSEE DID NOT FURNIS H DETAILS OF PIECES POLISHED BY THE WORKERS AND WAGES PAID THE REON, DESPITE SPECIFIC REQUEST MADE BY THE AO, EVEN WHEN IN THE BILLS RAISED BY THE ASSESSEE, NUMBER OF PIECES WERE MENTIONED. THE ASSESSEE CONTENDED THAT CARAT WISE DETAILS WERE MAINTAINED. ON THE BASIS OF CARAT WISE DETAILS, THE AO FOUND WIDE VARIATION IN WAGES PER CARAT IN DIFFERENT MONTHS. FOR EXAMPLE, IN SEPTEMBER,2003 , WAGES WERE PAID @RS.307.09 PER CARAT WHILE IN FEBRUARY ONLY @R S.253.80 PER CARAT KEPT. THE ANALYSIS MADE BY THE AO AS REFLECT ED IN THE CHART EXTRACTED FROM THE AOS ORDER REVEALED AS UNDER: MONTH ROUGH DIAMOND ROUGH RETURNED REJECT DIAMOND WEIGHT MAKEABLE DIAMOND POLISHED DIAMOND WAGES PAID CONSUMED (AMOUNT) PER CARAT: ELE. EXP. PER CARAT LABOUR PAID APR-03 14521.00 1182.04 580.32 12758.64 3455.60 391 6385 332080 96.09 306.960 MAY-03 5488.17 379.84 227.88 4880.45 1331.64 151353 7 273395 205.30 310.13 JUNE-03 14300.35 894.53 419.68 12986.14 3337.69 367 5423 414834 124.29 283.02 JULY-03 9616.60 622.19 251.4 8743.01 2435.85 269161 8 499619 205.11 307.092 AUG-03 8712.16 559.95 657.28 7494.93 2104.92 206901 5 431914 205.19 276.052 SEPT-03 - 572.17 550.28 6282.94 1693.62 194129 4134 66 244.13 309.97 OCT-03 7873.23 618.11 311.33 4943.79 1823.12 232756 7 220616 121.01 335.20 NOV-03 - 73586 DEC-03 12116.46 176.36 3163.42 8776.68 2697.21 2842 718 292776 108.55 323.89 JAN-04 5321.65 229.23 1503.02 589.40 996.03 1097474 9 286340 488.29 304.99 FEB-04 6044.28 152.82 1091.1 800.35 1394.46 1218359 287984 206.52 253.80 MAR-04 7230.49 282.9 1018.65 937.94 1715.03 1673233 377796 220.29 281.78 TOTAL 98638.78 5670.14 9774.37 3194.27 22985.17 249 63901 3904406 169.87 300.06 ITA NOS .2743 & 2789/AHD/2007 14 9.1 SINCE THE ASSESSEE DID NOT EXPLAIN THE AFORES AID WIDE VARIATION IN WAGES PAID PER CARAT FOR POLISHING WITH ANY COGE NT EVIDENCE, CONSIDERING THE FACT THAT THE ASSESSEE PAID EVEN W AGES @RS. 253 PER CARAT, THE AO ADOPTED RATE OF RS. 280 PER CARA T AND DISALLOWED EXCESSIVE PAYMENT OF RS.16,69,505/-. EVEN BEFORE TH E LD. CIT(A) THE ASSESSEE DID NOT FURNISH ANY EVIDENCE NOR COULD SUB STANTIATE THE WIDE VARIATION IN WAGES PER CARAT PAID TO THE WORKERS IN DIFFERENT MONTHS, ESPECIALLY WHEN EVEN HUGE AMOUNT OF WAGES PAYABLE WERE OUTSTANDING AT THE END OF THE YEAR. THE LD. AR ON B EHALF OF THE ASSESSEE DID NOT PLACE ANY MATERIAL BEFORE US SO AS TO IMPROVE UPON THE CASE OF THE ASSESSEE. AS REGARDS ESTIMATION O F RATE PER CARAT, NO DOUBT THE AO/CIT(A) SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT AND SHOULD NOT ACT TOTAL LY ARBITRARILY, BUT THERE IS NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGMENT ASSESSMENT, AND IT IS THE ASSESSEE HIMSELF WHO IS TO BLAME AS H E DID NOT SUBMIT PROPER ACCOUNTS AND DETAILS.[ KACHWALA GEMS VS JCIT, 288 I TR 10 (2007)(SC).IN THE INSTANT CASE, AS ALREADY MENTIONED ,EVEN BEFORE US, THE LD. AR DID NOT REFER TO ANY MATERIAL, CONTROVERING THE AFORESAID F INDINGS OF FACTS RECORDED BY THE LD. CIT(A) SO AS TO ENABLE US TO TA KE A DIFFERENT VIEW IN THE MATTER. IN THE ABSENCE OF ANY BASIS, ESPECI ALLY WHEN NOT AN IOTA OF EVIDENCE, EXPLAINING WIDE VARIATION IN WAGE S PER CARAT PAID TO WORKERS IN DIFFERENT MONTHS HAS BEEN PLACED BEFORE US, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A).THEREFORE, GROUND NO.2 IN THE APPEAL OF THE ASSESSEE IS DISMIS SED. 10 GROUND NO.3 IN THE APPEAL OF THE ASSESSEE AND G ROUND NO.2 IN THE APPEAL OF THE REVENUE RELATE TO DISALLOWANCE O F RS.14,10,390/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE REFLECTED JOB WORK RECEIPTS OF RS.47, 28,448/- FROM ITS SISTER CONCERN AND RS. 61,340/- FROM SHARP GEMS, SU RAT BESIDES THAT FROM THE MAIN CONTRACTOR I.E. M/S. REVASHANKER GEMS LTD., MUMBAI. THE AO AS OF THE OPINION THAT THE JOB WORK ACTIVITY OF POLISHING DIAMONDS WAS DIRECTLY RELATED TO THE CONS UMPTION OF ITA NOS .2743 & 2789/AHD/2007 15 ELECTRICITY, FOR WHICH THE ASSESSEE HAD TAKEN A SEP ARATE CONNECTION AT THEIR FACTORY PREMISES IN M/S. SAVANI ESTATE AN D SIDDHKUTIR BUILDING. ON PERUSAL OF FOLLOWING DETAILS OF CONSUM PTION OF ELECTRICITY VIS--VIS DIAMONDS POLISHED , THE AO FOUND THAT PE R CARAT ELECTRIC EXPENSES VARIED IN DIFFERENT MONTHS. IN THE MONTH OF APRIL, 2003, THE ASSESSEE INCURRED EXPENDITURE OF RS.96.09 PER CAR AT WHEREAS JAN.,2004 IT WAS RS. 488.29 PER CARAT. MONTH MAKEABLE DIAMOND ELECTRICITY CON SUMED (IN RS.) PER CARAT ELECTRIC. EXP. APR-03 12758.54 3320.30 96.09 MAY-03 4880. 45 273395 205.30 JUNE-03 12936.14 414634 124.29 JULY-03 8743.01 499.519 205.11 AUG-03 7494. 93 431914 205.19 SEPT-03 6282.94 413466 244.13 OCT-03 6943.79 220516 121.01 NOV-03 73586 - DEC-03 8776 68 292776 108.55 JAN-04 3589.40 286340 488.29 FED-04 4800.35 287984 206.52 MAR-04 5937.94 377796 220.29 TOTAL 83194.27 3904406 169.87 10.1 TO A QUERY BY THE AO, THE ASSESSEE EXPLAINED IN HIS LETTER DATED 11-12-2006 THAT IN FACT, MAKEABLE DIAMONDS ARE REQUIRED TO BE POLISHED & NOT THE POLISHED DIAMONDS. IT WAS POI NTED OUT THAT POWER CONSUMPTION IN DIAMOND INDUSTRY DID NOT DEPEN D UPON NUMBER OF WORKERS. FOR EXAMPLE, THERE MAY BE ONE DIAMOND W ORKER ON ONE ITA NOS .2743 & 2789/AHD/2007 16 GHANTI AND MAY BE 2 TO 4 DIAMOND WORKERS PER CHANT. THE POWER CONSUMPTION PER GHANTY WILL REMAIN ALMOST SAME IRRE SPECTIVE OF NO. OF WORKERS WORKING ON THAT GHANTY DUE TO RUNNING OF ELECTRIC MOTOR. MOREOVER, CONSUMPTION OF POWER DEPENDED UPON HARDNE SS & SIZE OF DIAMOND BESIDES THAT ON NATURE OF REPAIR. IT WAS S UBMITTED THAT DUE TO VACATION IN NOVEMBER, 2003, THERE WAS NO PRODUCT ION. THE POWER WAS CONSUMED IN THE OFFICE OR IN THE FACTORY FOR W ORKERS STAYING BACK. MOREOVER, ELECTRICITY COMPANY WOULD RAISE MIN IMUM POWER BILL IRRESPECTIVE OF CONSUMPTION. IN JANUARY 2004, POWE R CONSUMPTION INCREASED DUE TO HARDNESS OF DIAMONDS AND REPAIR WO RK. HOWEVER, THE AO WHILE ACCEPTING THE PLEA ON BEHALF OF THE A SSESSEE THAT POWER WAS CONSUMED IN RELATION TO MAKEABLE DIAMONDS AND NOT POLISHED ONE, FOUND THAT THE ASSESSEE INCURRED E LECTRIC EXPENSES OF RS.26.02 PER CARAT IN THE MONTH OF APRIL, 2003 AS AGAINST RS.79.77 IN JANUARY,2004. SINCE THE ASSESSEE DID NOT SUBMIT ANY EVIDENCE OF EITHER DEPLOYMENT OF WORKERS PER GHANTY NOR EVEN OF THE HA RDNESS OR SOFTNESS OF DIAMONDS AND THE SIZE OF DIAMONDS OR OF REPAIRS , THE AO WORKED OUT PRODUCTION OF MAKEABLE DIAMONDS ,ADOPTING ELECTRICITY EXPEND ITURE OF RS. 45 PER CARAT ,AS UNDER TOTAL ELECTRIC EXPENSES CLAIMED = RS. 39,04,406 /- PER CARAT REASONABLE EXPENSES OF ELECTRIC AS DISCUSSED ABOVE = RS.45 PER CARAT TOTAL PRODUCTION OF MAKEABLE DIAMONDS = 39,04,406/45 = 86764.58 CARATS. 10.2 SINCE THE ASSESSEE HAD SHOWN TOTAL PRODUCTIO N OF MAKEABLE CARATS OF 83194.27 THE AO CONCLUDED THAT THE ASSESSEE MUST HA VE POLISHED THE DIFFERENCE: I.E. 3570.61 CARETS BUT THE CORRESPONDING RECEIPTS HAD NOT BEEN SHOWN. APPLYING THE AVERAGE PER CARAT RECEIPT OF RS. 395(32846279 / 83194.27), THE AO ADDED AN AMOUNT OF RS.14,10,390/- TOWARDS SUPPRESSION OF JOB RECEIPTS. 11. ON APPEAL, THE LEARNED CIT(A) UPHELD AN A DHOC ADDITION OF RS.10,00,000/- IN THE FOLLOWING TERMS:- ITA NOS .2743 & 2789/AHD/2007 17 6.4 I HAVE PERUSED THE FACTS OF THE CASE AS DISCUS SED BY THE ASSESSING OFFICER AND ALSO CAREFULLY WENT THROUGH THE SUBMISS ION AS MADE BY THE A. R. AFTER ANALYZING THE FACTS AS DISCUSSED BY THE A. R., IT IS SEEN THAT HE HAS MADE STRONG ARGUMENTS IN SUPPORT OF VARIATION I N POWER CONSUMPTION WHILE MANUFACTURING AND POLISHING OF DIAMONDS CARRI ED OUT BY IT. ON THE CONTRARY, IT IS SEEN THAT WHILE TAKING THE ELECTRIC ITY CONSUMPTION WORTH RS.45 PER CARAT, THE ASSESSING OFFICER HAD NOT PROV IDED ANY BASIS FOR THAT EXCEPT SAYING THAT IT WAS ON THE HIGHER SIDE THAN T HE RATES PER CARAT CLAIMED BY THE APPELLANT IN THE MONTHS OF APRIL, JU NE, OCTOBER AND DECEMBER, 2003. IT WOULD HAVE BEEN ACCEPTABLE AND R EASONABLE IF THE RATE WOULD HAVE BEEN ARRIVED AT BY THE ASSESSING OFFICER BY TAKING THE, AVERAGE OF ALL THE MONTHS BUT THE SAME WAS NOT DONE . I, THEREFORE, IN VIEW OF THE ABOVE DISCUSSED FACTS, HOLD THAT IT WOULD BE REASONABLE TO RESTRICT THE ADDITION UNDER THE HEAD AT RS.10,00,000/- ON FA IR ESTIMATE BASIS BY HOLDING THAT IT WOULD TAKE CARE OF THE POSSIBLE SUP PRESSION UNDER THE HEAD JOB RECEIPTS AS CLAIMED BY THE APPELLANT. IN THIS W AY, THE APPELLANT GETS A RELIEF OF RS.4,10,390/- AND THE ADDITION TO THE EXT ENT OF RS.10,00,000/- IS CONFIRMED. ACCORDINGLY, THIS GROUND OF APPEAL IS CO NFIRMED. 12. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID ADHOC ADDITION UPHELD BY THE LD. CIT(A) WHILE THE REVENUE AGINST THE REMAINING ADDITION DELETED BY THE LD. CIT(A). T HE LD. AR ON BEHALF OF THE ASSESSEE WHILE RELYING UPON DECISIONS IN ST. TERESA'S OIL MILLS V. STATE OF KERALA [1970] 76 ITR 365(KERALA), N. RAJA PULLAIAH V. DY. CIT [1969] 73 ITR 224(AP) AND ACIT VS. KHAMBHATA FAMILY TRUST,62 TTJ685(AHD.) CONTENDED THAT NO ADDITION COULD BE MADE ON THE BAS IS OF VARYING CONSUMPTION OF ELECTRICITY IN DIFFERENT MONTHS. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AO. 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS REGARDS ADDITION OF RS. 14,10,390/- , WE FIND THAT THE AO ADDED THE AMOUNT TOWARDS SUPPRESSED RECEIPTS ON ACC OUNT OF JOB WORK MERELY ON THE BASIS OF INCOMMENSURATE CONSUMPT ION OF ELECTRICITY IN DIFFERENT MONTHS, WITHOUT PROBING TH E MATTER FURTHER. NOT EVEN A WHISPER HAS BEEN MADE BY THE AO IN HIS ORDER REGARDING ANY OTHER FACTOR LEADING TO SUPPRESSION OF RECEIPTS. TH E LD. CIT(A) ALSO SUSTAINED AN ADHOC ADDITION WITHOUT ANY COGENT EVID ENCE IN THIS REGARD. THE LD. DR DID NOT PLACE ANY EVIDENCE BEFOR E US THAT THE INCOMMENSURATE CONSUMPTION OF ELECTRICITY IN DIFFE RENT MONTHS ACTUALLY RESULTED ITA NOS .2743 & 2789/AHD/2007 18 IN UNACCOUNTED RECEIPTS . MERELY BECAUSE OF INCOMMENSURATE CONSUMPTION OF ELECTRICITY WITHOUT ANY SUPPORTING MATERIAL, WOULD NOT JUSTIFY THE ADDITION, AS HELD IN THE JUDGMENT OF HONBLE KERALA HIGH COURT IN TH E CASE OF ST. TERESA'S OIL MILLS V. STATE OF KERALA [1970] 76 ITR 365 AND THE JUDGME NT OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF N. RAJA PULLAIAH V. DY. CIT [1969] 73 ITR 224. IN SHYAM RICE MILLS V. CST [1988] UPTC 375 (ALL.) IT WAS HELD THUS: 'CONSUMPTION OF ELECTRICITY DISPROPORTIONATE TO PRODUCTION - BY ITSELF NO GROU ND FOR REJECTING ACCOUNT BOOKS.' 13.1 A SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF CST V. V.B.M. MALVIYA INDUSTRIES [1988] UPTC 372 (ALL). 13.2 IN VIEW OF THE FOREGOING, ESPECIALLY WH EN NOT AN IOTA OF EVIDENCE IS AVAILABLE ON RECORDS IN RESPECT OF SUPP RESSION OF LABOUR RECEIPTS, THERE IS NO BASIS ENABLING US TO SUSTAIN THE ADDITION. THEREFORE, GROUND NO.3 IN THE APPEAL OF THE ASSESSE E IS ALLOWED WHILE GROUND NO. 2 IN THE APPEAL OF THE REVENUE IS DISMISSED 14. GROUND NO.3 IN THE APPEAL OF THE REVENUE, BEI NG MERE PRAYER, DOES NOT REQUIRE ANY SEPARATE ADJUDICATION AND IS , THEREFORE, DISMISSED. 15. IN THE RESULT, BOTH THESE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 10 -12-2010 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 10-12-2010 MRVALERA COPY OF THE ORDER FORWARDED TO: ITA NOS .2743 & 2789/AHD/2007 19 1. M/S BHADIYADRA BROTHERS, 9-10, SAVANI DIAMOND ES TATE, BEHIND GEETANJALI CINEMA, VARACHHA ROAD, SURAT 2. INCOME-TAX OFFICER, WARD-9(1), SURAT 3. CIT CONCERNED 4. CIT(A)-V, SURAT 5. DR, ITAT BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD