Shri Bhikhabhai J Raval, Surat V. The Income Tax Officer, Ward-9(1), Surat

ITA 2960/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5968 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 1997-1998
• Appeal Filed On: 10-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KAILASH RATNOO
• Assessee Lawyers: RASESH SHAH
• Section: 143(3); 194C; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CAMP AT SURAT BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER BHIKHABHAI J. RAVAL, B - 81, RAMKRISHNA SOCIETY, LAMBE HANUMAN ROAD, SURAT PAN: AAUPR7971F (APPELLANT) VS THE ITO , WARD - 9(1), SURAT (RESPONDENT) REVENUE BY : S H RI KAILASH RATNOO , SR. D . R. ASSESSEE BY: SHRI RASESH SHAH , A.R. DATE OF HEARING : 24 - 04 - 2 017 DATE OF PRONOUNCEMENT : 04 - 05 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THE ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL AGAINST THE ORDER OF LD. CIT(A) - V, SURAT DATED 18 - 09 - 2014 PASSED FOR 1997 - 98. I T A NO . 2960 / A HD/20 14 A SSESSM ENT YEAR 1 9 97 - 98 I.T.A NO. 2960 /AHD/20 14 A.Y. 19 9 7 - 98 PAGE NO BHIKHABHAI J. RAVAL VS. ITO 2 2. THE ASSESSE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 'ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HA S ERRED IN PARTLY CONFIRMING THE DISALLOWING OF RS. 3,68,702/ - OUT OF RS. 27,65, 277/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LABOUR EXPENSE.' 3. IN THIS CASE, RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 44,360/ - FILED ON 19 TH SEPTEMBER, 1997. S UBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY U/S. 143(2) OF THE ACT. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF DIAMOND POLISH JOB WORK. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT ASSESSEE HAS RECEIVED LABOUR CHARGES FROM A NU MBER OF PARTIES TO THE AMOUNT OF RS. 37,43,653/ - . HE FURTHER NO TICED THAT HE HAS ALSO MADE PAYMENT OF LABOUR CHARGES OF THE AMOUNT OF RS. 36,87,029/ - . T O VERIFY THE GENUINENESS OF THE CHARGES PAYMENT MADE BY THE ASSESSEE, T HE ASSESSING OFFICER ISSUED LETT ERS TO ALL THE PARTIES FOR GETTING CONFIRMATION OF THE JOB WORK DONE BY THEM AND THE AMOUNT OF LABOUR CHARGES RECEIVED FROM THE ASSESSEE. HOWEVER, THE LETTERS ISSUED TO THOSE PARTIES WERE RETURNED UN - SERVED WITH THE REMARKS OF THE POSTAL AUTHORITY THAT PER SONS WERE NOT KNOWN. THEREAFTER, THE ASSESSING OFFICER ISSUED LETTERS TO THOSE PARTIES THROUGH THE DIFFERENT INCOME TAX OFFICERS UNDER WHOSE JURISDICTION THE 33 PERSONS TO WHOM THE LABOUR CHARGES PAYMENTS WERE MADE BY THE ASSESSEE WERE ASSESSABLE. THE ASSE SSING OFFICE R GOT THE REPORT FROM THE INCOME TAX OFFICERS THAT AFTER MAKING NECESSARY INQUIRY IT WAS FOUND THAT NO PERSONS WERE STAYING AT THE ADDRESSES SHOWN BY THE ASSESSEE TO WHOM THE LABOUR CHARGES WERE PAID. THEREAFTE R, THE ASSESSING OFFICER BROUGHT T O THE I.T.A NO. 2960 /AHD/20 14 A.Y. 19 9 7 - 98 PAGE NO BHIKHABHAI J. RAVAL VS. ITO 3 NOTICE OF THE ASSESSEE THAT NO PERSONS WERE AVAILABLE AT THE GIVEN ADDRESSES TO WHOM HE HAS CLAIMED THAT LABOUR CHARGES WERE PAID. THE ASSESSEE HAS NOT MADE ANY COMPLIANCE TO THE SHOW CAUSE NOTICE OF THE ASSESSING OFFICER THAT NONE OF THE PERSON WAS AVAILABLE AT THE GIVEN ADDRESSES . THEREAFTER, THE ASSESSING OFFICER HAD ISSUED SUMMON U/S. 131 OF THE ACT TO THE ASSESSEE TO EXPLAIN WHY THE LABOUR PAYMENT OF RS. 36,87,029/ - SHOULD NOT BE DISALLOWED AND ALSO PROVIDED HIM AN OPPORTUNITY TO PRODUCE T HE PE RSONS TO WHOM THE JOB WOR K CHARGES PAID FO R NECESSARY EXAMINATIONS. THE ASSESSEE FAILED TO MAKE ANY COMPLIANCE TO PROVE THE GENUINENESS OF THE TRANSACTION , THEREAFTER THE ASSESSING OFFICER HAD REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE U/S. 143(3) OF THE ACT AND CONSIDERED 25% OF THE LABOUR CHARGES INCURRED FOR THE PURCHASES OF THE BUSINESS AND THE REST W ERE DISALLOWED. 4. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS R ESTRICTED THE DISALLOWANCE OF LABOUR CHARGES TO THE 10% OF THE TOTAL EXPENSES OF RS. 36,87,029/ - WHICH COMES TO RS. 3,68,702/ - BY OBSERVING AS UNDER: - 6.2.1 THE PERUSAL OF THE DETAILS SHOW THAT THE APPELLANT DERIVED INCOME FROM DIAMOND POLISHING JOB WORK ON COMMISSION BASIS. DURING THE YEAR THE APPELLANT HAS RECEIVED TOTAL JOT) CHARGES OF RS. 37,43,653/ - FROM 8 DIFFERENT PARTIES AND HE HAD PAID LA BOUR CHARGES OF RS. 36,87,029/ - . THE PAYMENT WAS RECEIVED FROM THESE 8 PARTIES THR OUGH ACCOUNT PAYEE CHEQUE AND TD S HAS BEEN DULY DEDUCTED ON THE PAYMENTS. THE LABOUR PAYMENTS HAVE BEEN MADE BY CASH TO 33 WORKERS FOR PROCESSING OF THE DIAMONDS ON SUB - CONTRACT BASIS. THE APPELLANT HAD RECEIVED TOTAL ROUGH DIAMONDS 16990.46 CARATS FROM I.T.A NO. 2960 /AHD/20 14 A.Y. 19 9 7 - 98 PAGE NO BHIKHABHAI J. RAVAL VS. ITO 4 EIGHT DIFFERENT PARTIES FOR JOB WORK OF POLISHING AND AFTER REJECTION OF 2834.44 CARATS NET 14156.02 CARATS OF ROUGH DIAMONDS WERE PROCESSED FOR POLISHING. THE APPELLANT EXPRESSED HIS INABILITY TO PRODUCE CONFIRMATIONS DURING THE REMAND REPORT PROCEEDINGS FROM THE VARIOUS PAR TIES TO WHOM THE JOB WORK CHARGES HAVE BEEN PAID AS THE MATTER IS NOW ALMOST 17 YEARS OLD. THE APPELLANT HAS FURNISHED THE CONFIRMATIONS AND THE COPY OF ACCOUNTS FROM THE 8 PARTIES WHO HAD PROVIDED THE APPELLANT ROUGH DIAMONDS FOR CUTTING AND POLISHING JOB WORK. THE BILLS/VOUCHERS, CONFIRMATIONS, STATEMENT ON ACCOUNTS BY THESE 8 PARTIES SHOW THAT THE PAYMENT HAS BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES A ND TDS HAS BEEN DEDUCTED AND THESE PARTIES ARE ASSESSED TO TAX. THE AO HAS NOT GIVEN ANY FINDING REGARDING THE JOB RECEIPTS OF RS. 37,43,653/ - BEING NON GENUINE. NO ENQUIRY HAS BEEN MADE FROM THESE 8 PARTIES TO FIND WHETHER THE TRANSFER OF ROUGH DIAMONDS HAD BEEN ACTUALLY MADE OR NOT. THE APPELLANT HAD PRODUCED THE STOCK REGISTER OF THE ROUGH DIAMONDS RECEIVED FROM THESE PARTIES BEFORE THE AO. THE AO IN THE ASSESSMENT ORDER IN PARA 2 HAS HIMSELF GIVEN A FINDING THAT THE APPELLANT DID NOT OWN MACHINERY FOR THE BUSINESS ACTIVITY AND THE PAYMENT HAS BEEN RECEIVED BY ACCOUNT PAYEE CHEQUE ON WHICH TDS HAS BEEN DEDUC TED U/S 194C OF THE ACT. THE AO HAS ON ONE HAND ACCEPTED THE BUSINESS OF JOB WORK AS GENUINE WHILE ON THE OTHER HAND IT HAS DISALLOWED. 75% OF THE LABOUR CHARGES EXPENSE S WHICH IS 74.19% OF THE NET PRO FIT RATIO. IT IS NO DOUBT THAT THE AO MADE ALL EFFORTS FOR VERIFICATION O F THE LABOUR PAYMENTS AND THE AP PELLANT WAS GIVEN OPPORTUNITY AT THE TIME ORIGINAL ASSESSMENT A S WELL AS REMAND REPORT PROCEEDINGS TO VERIFY THE GENUINENESS OF THE PAYMENTS MADE. BUT THE APPELLANT FAILED TO PROVIDE THE CONFIRMATION S AND GET THE EXPENSES VERIFIED INSPITE OF SEVERAL OPPORTUNITIES. THE REJECTION OF THE BOOKS OF ACCOUNT U/S 145(3) BY THE AO IS UPHELD. ONCE THE BOOK RESULTS ARE REJECTED THEN THE ISSUE OF ESTIMATION COMES. THE ESTIMATION HAS TO BE BASED ON CERTAIN COMPARA BLE CASES IF AVAILABLE OTHERWISE THE APPELLANTS OWN HISTORY IS THE BEST GUIDE FOR ARRIVING AT AN ESTIMATED PROFIT. THE NET PROFIT RATE OF 74.19% ESTIMATED BY THE AO IS WITHOUT ANY BASIS AND NDICATES AN ABSURDITY AND ILLOGICAL ESTIMATION. NO DOUBT THE APPEL LANT HAS FAILED TO JUSTIFY THE EXTENT OF LABOUR EXPENSES BEING GENUINE DURING THE ASSESSMENT PROCEEDINGS. KEEPING IN VIEW THE APPELLANT PREVIOUS YEAR'S TURNOVERS, GROSS PROFIT, NET PROFIT, ETC, DISALLOWANCE OF 10% OF LABOUR EXPENSES OUT OF TOTAL EXPENSES O F RS.36,87,029/ WILL BE CONSIDERED A FAIR ESTIMATE. HENCE THE ADDITION OF RS.3,68,702/ - IS I.T.A NO. 2960 /AHD/20 14 A.Y. 19 9 7 - 98 PAGE NO BHIKHABHAI J. RAVAL VS. ITO 5 UPHELD OUT OF THE TOTAL ADDITION OF RS.27,65,271/ - . THE GROUND OF APPEAL IS PARTLY ALLOWED. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE NOTICED THAT THE ASSESSEE WAS PROVIDED AMPLE OPPORTUNITY AT THE ORIGINAL ASSESSMENT PROCEEDINGS AND AT THE TIME OF REMAND PROCEEDINGS TO FURNISH THE CONFIRMATIONS AND OTHER SUPPORTING MATERIALS FOR VERIFICATION OF LABOUR PAYMENT EXPENSES AS ELABO RATED ABOVE IN HIS ORDER. WE HAVE FURTHER NOTICED THAT IN SPITE OF PROVIDING OPPORTUNITIES , THE ASSESEE FAILED TO MAKE ANY COMPLIANCE TO PROVE THE CORRECTNESS OF THE LABOUR PAYMENT TRANSACTION S . WE FIND THAT AFTER TAKING INTO CONSIDERATION ALL THESE ASPE CT , THE LD. CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF R S. 3,68,702/ - ONLY OUT OF TOTAL ADDITION OF RS. 27,65,271/ - . AFTER CONSIDERING THE ABOVE STATED FACTS AND FINDINGS, WE FIND THAT THE DECISION OF THE LD. CIT(A) IS JUSTIFIED WHICH DOES NOT RE QUIRE ANY INTERFERENCE . 6. IN THE RESULT, THE APPEAL OF THE ASSESSSEE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 04 - 05 - 201 7 SD/ - SD ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD : DATED 04 /05 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE I.T.A NO. 2960 /AHD/20 14 A.Y. 19 9 7 - 98 PAGE NO BHIKHABHAI J. RAVAL VS. ITO 6 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,