The ACIT, Circle-9, Surat V. Shri Kiritkumar Dhirubhai Dhameliya, Surat

ITA 3644/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6183 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 07-09-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R N VEPARI
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI D.C. AGRAWAL, A.M.) I.T.A. NO. 3143/AHD./2007 ASSESSMENT YEAR : 2004-2005 SHRI KIRITBHAI DHIRUBHAI DHAMELIYA, SURAT VS.- ASS ISTANT COMMISSIONER OF INCOME TAX, (PAN : ACJPD 4986 B) CIRCLE-9, SURAT (APPELLANT) (RESPONDENT) & I.T.A. NO. 3644/AHD./2007 ASSESSMENT YEAR : 2004-2005 ASSISTANT COMMISSIONER OF INCOME TAX, -VS.- SHRI KIRITKUMAR DHIRUBHAI DHAMELIYA, CIRCLE-9, SURAT SURAT ASSESSEE BY : SHRI R.N. VEPARI DEPARTMENT BY : SHRI SANJEEV KASHYAP , SR. D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THESE CROSS APPEALS ARE AGAINST THE ORDER DATED 13 .05.2007 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-V, SURAT FOR THE ASSESSMENT YEA R 2004-05. 2. VARIOUS GROUNDS RAISED BY THE ASSESSEE IN HIS AP PEAL READ AS UNDER :- (1) THE LD. CIT(A) ERRED IN SUSTAINING A SUM OF RS. 9,52,005/- OUT OF DISALLOWANCE OF LABOUR CHARGES MADE BY THE ASSESSING OFFICER. (2) THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS.62,000/-. (3) THE LD. CIT(A) OUGHT TO HAVE DELETED INTEREST C HARGED U/S. 234B OF THE ACT. 2.1. THE ONLY GROUND RAISED BY THE REVENUE IN ITS A PPEAL READS AS UNDER - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE IN RESPECT OF LABOUR EXPENSES TO 2 ITA NO. 3143 & 3644/AHD /2007 RS.9,52,005/- OUT OF TOTAL DISALLOWANCE OF RS.19,04 ,010/- (I.E. 10% OF TOTAL LABOUR PAYMENTS) AS PER ORDER U/S. 143(3) OF THE I.T. ACT DATED 24.11.2006. 3. THE FACTS RELATING TO CONTROVERSY INVOLVED IN GR OUND NO. 1 OF ASSESSEES APPEAL AS WELL AS THE ONLY GROUND IN REVENUES APPEAL ARE THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.19,04,010/- OUT OF LABOU R EXPENSES CLAIMED BY THE ASSESSEE. THIS DISALLOWANCE WAS MADE ON THE GROUND THAT SAME WERE NOT INCURRED FOR THE BUSINESS PURPOSE. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER NOTED V ARIOUS DISCREPANCIES SUCH AS SIGNATURE OF A PARTICULAR LABOURER WAS ENTIRELY DIFFERENT, FROM ON E MONTH TO ANOTHER. IT WAS ALSO NOTICED BY THE A.O. THAT THERE WAS CHANGE IN THE LANGUAGE OF SIGNA TURE OF A PERSON FROM SIGNATURE TO SIGNATURE, I.E. GUJARATI, HINDI AND ENGLISH. IT WAS ALSO OBSER VED BY THE A.O. THAT AT MANY PAGES OF LABOUR REGISTER, THE SAME HANDWRITING WAS USED FOR SIGNATU RE OF SEVERAL PERSONS AND SOMETIMES, THE SAME NAME WAS APPEARING TWICE OR THRICE IN THE SAME MONTH WHICH WAS HIGHLY IMPROBABLE AS PER THE AO. BESIDES, ABOVE DEFECTS, THE AO HAD ALSO POI NTED OUT THAT NAMES OF SOME OF THE LABOURERS WERE FOUND COMMON FOR ALL THE SUB-CONTRACTORS, (WHO CARRIED OUT THE JOB WORK ON BEHALF OF THE ASSESSEE) AND THEY HAD RECEIVED LABOUR WAGES FROM A LL THE THREE CONCERNS IN THE PARTICULAR MONTH. AFTER NOTICING THE AFORESAID DEFECTS, THE AO ISSUED SHOW-CAUSE NOTICE TO THE ASSESSEE ASKING HIM TO PRODUCE THE LABOURERS ON 09.10.2006. BEFORE THE A.O., NO LABOURER WAS PRODUCED. THE A.O., THEREFORE, DISALLOWED RS.19,04,010/- BEING 10% OUT OF LABOUR EXPENSES. 4. ON APPEAL BEFORE THE LD. CIT(A) RELYING UPON THE FINDING OF THE DECISION DATED 06.01.2005 IN ITA NO. 2223/AHD/2004 FOR THE ASSESS MENT YEAR 2001-02 IN THE CASE OF ANISH B. SHAH, HUF, THE ASSESSEE CONTENDED THAT THE FACTS OF HIS CASE ARE IDENTICAL, THEREFORE, THE ADDITION MADE BY THE A.O. BE DELETED. BEFORE THE LD. CIT(A), IT WAS ALSO CONTENDED THAT THE DEFECTS POINTED OUT BY THE AO ARE GENERAL IN NATURE. THE LA BOURERS ENGAGED BY THE ASSESSEE WERE MOSTLY UNEDUCATED AND THEY COULD HARDLY MANAGE TO PUT THEI R SIGNATURES ON THE LABOUR REGISTERS AND HENCE, THE VARIATION IN THEIR SIGNATURES WAS BOUND TO BE THERE. 5. AFTER CONSIDERING THE VARIOUS SUBMISSIONS, IN TH E IMPUGNED ORDER, THE LD. CIT(A) RESTRICTED THE ADDITION TO RS.9,52,005/- FOR THE DE TAILED REASONS GIVEN IN PARA 9, WHICH READS AS UNDER :- 3 ITA NO. 3143 & 3644/AHD /2007 9. AS DISCUSSED BY THE A.O. AND ALSO CAREFULLY WEN T THROUGH THE SUBMISSION AS MADE BY THE A.R. AND THE JUDICIAL FINDINGS OF HO NBLE ITAT, AHMEDABAD RELIED UPON BY HIM. AFTER ANALYZING THE FACTS AS DISCUSSED BY THE HONBLE TRIBUNAL IN THE CASE OF ANISH B. SHAH, HUF (SUPRA) IT IS FOUND THAT IN THE SAID CASE, THE APPELLANT HAD PROVED BEYOND DOUBT BY GIVING THE COMPLETE DETA ILS OF WORK DONE BY EACH AND EVERY LABOURER AND FOR EACH CONSIGNMENT OF DIAMOND, RECEIVED BY IT, FROM ITS PRINCIPAL, WHATEVER LABOUR CHARGES WERE PAID BY THE ASSESSEE, HAS BEEN FOUND DEBITED TO THE PRINCIPALS ACCOUNT ALONGWITH THE CO MMISSION AT THER ATE OF 2% AND THE PRINCIPALS HAVE REIMBURSED THE ASSESSEE THE LAB OUR CHARGES AND ALSO PAID THE COMMISSION. IN THIS WAY, BASED ON ABOVE FACTS, THE HONBLE ITAT, HAS OBSERVED THAT THE ASSESSEE HAS EFFECTIVELY NOT CLAIMED ANY E XPENDITURE FOR THE LABOUR CHARGES, THEREFORE, THE QUESTION OF ANY DISALLOWANC E OUT OF LABOUR CHARGES IN THE HANDS OF THE ASSESSEE DOES NOT ARISE. HOWEVER, ON T HE CONTRARY, IN THE CASE OF THE APPELLANT, AS DISCUSSED ABOVE, NOT ONLY THAT THE AP PELLANT DID NOT PRODUCE SINGLE LABOURER FOR BEING CROSS EXAMINED THAT THE LABOUR W ORK CARRIED OUT BY HIM AND THE LABOUR CHARGES RECEIVED BY HIM WERE GENUINE BUT AT THE SAME TIME, THERE WERE VARIOUS DISCREPANCIES NOTICED IN THE LABOUR VOUCHER S FOR WHICH, THE APPELLANT COULD NOT FILE ANY SATISFACTORY REPLY. I, THEREFORE , IN VIEW OF THE FACTS HOLD THAT THE FINDINGS OF THE HONBLE ITAT IN THE CASE OF THE ANI SH B. SHAH, HUF (SUPRA) DO NOT COVER THE FACTS OF THE CASE OF THE APPELLANT ENTIRE LY AS THE DISCREPANCIES FOUND IN THE LABOUR VOUCHERS REMAINED TO BE SATISFACTORILY E XPLAINED. ACCORDINGLY, I HOLD THAT THE BASIS OF AS ADOPTED BY THE AO WAS JUSTIFIE D IN THE EYES OF LAW BUT THE QUANTUM OF PERCENTAGE APPEARS TO BE ON THE HIGHER S IDE. ACCORDINGLY, KEEPING THE ENTIRE FACTS IN VIEW, I RESTRICT THE ADDITION MADE BY THE AO AT 5% OF THE TOTAL LABOUR EXPENSES CLAIMED BY IT BY TREATING THE SAME AS REASONABLE AND IN THIS WAY UNDER THIS HEAD THE ADDITION AS MADE BY THE AO IS R ESTRICTED AT RS.9,52,005/- AND ACCORDINGLY THE APPELLANT ALSO GETS RELIEF OF AN EQ UIVALENT AMOUNT OF RS.9,52,005/- . HENCE, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), BOTH THE S IDES ARE IN APPEALS BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING BEFORE US, SHRI R.N. VEPA RI APPEARING ON BEHALF OF THE ASSESSEE CONTENDED THAT THE FACTS OF THE ASSESSEES CASE ARE IDENTICAL WITH THAT OF THE CASE OF SHRI SHAILESHBHAI RAVIJIBHAI DHAMELIYA IN THAT CASE ALS O, FOR IDENTICAL REASONS, THE ASSESSING OFFICER DISALLOWED RS.19,75,243/-. ON APPEAL, THE LD. CIT(A ) REDUCED THE ADDITION TO 5%. ON FURTHER APPEAL BY BOTH THE SIDES, ITAT, AHMEDABAD BENCH (CA MP AT SURAT) VIDE ORDER DATED 15.01.2010 IN ITA NO. 2844/AHD/2007 FOR THE ASSESSMENT YEAR 20 04-05 DELETED THE ADDITION TO THE EXTENT OF 5% SUSTAINED BY THE LD. CIT(A). RELIANCE WAS ALSO P LACED BY THE FOLLOWING DECISIONS OF ITAT, AHMEDABAD [CAMP AT SURAT] :- (I) SHRI BHARATKUMAR RAMNIKLAL MEHTA VS.- ITO [ITA NO. 1296/AHD/2004 ORDER DATED 3.1.2005]; 4 ITA NO. 3143 & 3644/AHD /2007 (II) SHRI ANISH B. SHAH (HUF) & VICE-VERSA [ITA NO. 2223/AHD/2004 & ITA NO. 2492/AHD/2004 ORDER DATED 06.01.2005 THE LD. COUNSEL OF THE ASSESSEE, THEREFORE, CONTEND ED THAT FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF SHAILESHBHAI RAVIJIBHAI DHAMELIYA (S UPRA), THE ADDITION MADE IN THE CASE OF THE ASSESEE BE ALSO DELETED. 8. ON THE OTHER HAND SHRI SANJEEV KASHYAP, SR. D.R. APPEARING ON BEHALF OF THE REVENUE RELIED ON THE ORDER OF A.O. . THE LD. D.R. CONTENDE D THAT EVEN THE ADDITION TO THE EXTENT OF 5% OF THE LABOUR CHARGES, HE POINTED OUT THAT THE AO HAS POINTED OUT SO MANY DISCREPANCIES. NEITHER BEFORE THE AO NOR BEFORE THE CIT(A), THE ASSESSEE H AS PLACED ANY MATERIAL OR EXPLAIN THE DISCREPANCY, THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.9,52,005/-. 9. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND PERUSED THE MATERIAL PLACED BEFORE US. IT IS PERTINENT TO NOTE THAT THE FACTS OF THE CASE OF ASSESSEE ARE IDENTICAL WITH THAT IN THE CASE OF SHAILESHBHAI RAVIJIBHAI DHAMELIYA (SUPRA), IN THAT CASE ALSO, FOR IDENTICAL REASON, THE ASSESSING OFFICER DISALLOWED RS.19,75,243/- BEING 10% OF LABOUR CHARGES PAID. ON FURTHER APPEAL, THE LD. CIT(A) RESTRICTED THE SAME TO 5%. ON FURTHER APPEAL BY THE REVENUE, EVEN ADDITION TO THE EXTENT OF 5% SUSTAINED BY THE LD. CIT(A) WAS DELETED BY THE TRIBUNAL VIDE ORDER DATED 15.01.2010 (SUPRA). THE REASONING GIVEN BY THE TRIBUNAL IS CONTAINED IN PARA 5 IN ITA NO. 2844/AHD/2007 & 3 328/AHD/2007 FOR THE ASSESSMENT YEAR 2004-05 IN THE CASE OF SHAILESHBHAI RAVIJIBHAI DHAM ELIYA (SUPRA), WHICH READS AS UNDER :- 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES AT LE NGTH. WE FIND THAT IN THE BUSINESS IN WHICH THE ASSESSEE IS ENGAGED, IT IS PU RELY LABOUR ORIENTED WORK. FOR DOING THE JOB WORK OF DIAMOND POLISH ON JOB WORK BA SIS, THE ASSESSEE IS REQUIRED TO ENGAGE VARIOUS LABOURS. THE ASSESSEE HAS FILED D ETAILS AS TO HOW MANY NUMBER OF PIECES OF DIAMONDS WERE POLISHED EVERY MONTH AND WHAT NATURE OF WORK WAS CARRIED OUT LIKE GAHT, TABLE, TALIA, PEL AND MATHAL A. IF COMPLETE DETAILS ARE NOT AVAILABLE, THE AO IS COMPETENT TO DRAW THE ADVERSE INFERENCE BUT THE ESTIMATE CANNOT BE ARBITRARY OR UNREASONABLE AND SHOU,D BE T HE SAME CONSIDERING THE PAST HISTRY AS WELL AS THE PROFIT OF OTHER COMPARABLE UN ITS. FOR IMMEDIATELY PRECEDING TWO YEARS, THE GP DECLARED BY THE ASSESSEE WERE 3.2 2 AND 3.05%. THIS HAS BEEN ACCEPTED BY THE REVENUE. IN OTHER CASES OF SIMILAR NATURE IN THE CASE OF ANISH B. SHAH (HUF) IN ITA NO. 2223/AHD/2004 (AY 2001-02) OR DER DATED 6..1.2005 THE TRIBUNAL DELETED THE ADDITION WHEN THE ASSESSEE DEC LARED 2% GROSS INCOME OUT OF LABOUR CHARGES. SIMILARLY IN THE CASE OF SHRI PRAVI NBHAI R. SHAH, HUF IN ITA NO. 2336/AHD/2004 (AY 2001-02) ORDER DATED 25.4.2007, T HE TRIBUNAL DELETED THE 10% DISALLOWANCE OF LABOUR CHARGES. THUS LOOKING TH E NATURE OF BUSINESS AND THE 5 ITA NO. 3143 & 3644/AHD /2007 PROFIT DECLARED BY IT, SINCE THERE IS COMPLETE TALL Y OF NUMBER OF PIECES OF DIAMOND POLISHED BY THE ASSESSEE, ONLY BECAUSE SOME OF LABO URS CANNOT BE PRODUCED, THE DISALLOWANCE IS NOT CALLED FOR. WE, THEREFORE, DELE TE THE DISALLOWANCE AS SUSTAINED BY CIT(A) AND DO NOT FIND ANY REASON TO SUSTAIN THE ADDITION MADE BY THE AO. 9.1. THE FACTS OF THE CASE IS IDENTICAL WITH THAT O F THE CASE OF SHAILESHBHAI RAVIJIBHAI DHAMELIYA (SUPRA). WE, THEREFORE, FOLLOWING THE DEC ISION DATED 15.01.2010 OF THE TRIBUNAL DELETE THE ADDITION TO THE EXTENT OF RS.9,52,005/- SUSTAINED BY THE LD. CIT(A). RESULTANTLY, GROUND NO. 1 OF THE ASSESSEES APPEAL IS ALLOWED AN D THE ONLY GROUND RAISED BY THE REVENUE IS REJECTED. 10. THE FACTS RELATING TO CONTROVERSY INVOLVED IN G ROUND NO. 2 OF ASSESSEES APPEAL IS THAT THE A.O. MADE THE ADDITION OF RS.62,000/- ON ACCOUNT O F INADEQUATE WITHDRAWALS UNDER THE HEAD HOUSEHOLD EXPENSES. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT WITHDRAWAL MADE BY THE ASSESSEE AND HIS FAMILY MEMBERS WAS SHO WN AT RS.1,16,500/- AND OUT OF WHICH THE ASSESSEES CONTRIBUTION WAS ONLY RS.38,000/-. THE A O FURTHER OBSERVED THAT AFTER CONSIDERING THE COST OF LIVING IN THE SURAT CITY AND THE STANDARD O F LIVING OF THE ASSESSEE, WITHDRAWAL MADE BY THE ASSESSEE WAS QUITE INADEQUATE. HE ACCORDINGLY MADE THE ADDITION OF RS.62,000/-. 11. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE FURNI SHED A FAMILY CHART AND ALSO PROVIDED THE BREAK UP OF WITHDRAWAL MADE BY EACH FAMILY MEMBERS AND ON THAT BASIS TRIED TO EXPLAIN THAT FOR A FAMILY OF FOUR PERSONS, THE WITHDRAWALS CLAIMED WER E SUFFICIENT, THEREFORE, THE ADDITION MADE BE DELETED. 12. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S MADE BY THE ASSESSEE BEFORE HIM CONFIRMED THE ADDITION OF RS.62,000/-. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESEE IS IN APPEAL BEFORE THE TRIBUNAL. 13. AT THE TIME OF HEARING BEFORE, THE LD COUNSEL O F THE ASSESSEE POINTED OUT THAT THERE ARE ONLY FIVE MEMBERS IN THE FAMILY AND THAT FAMILY MAI NTAINED ONLY ONE KITCHEN. IN A FAMILY OF FIVE PERSONS, TOTAL WITHDRAWAL OF RS.1,16,500/- SHOULD B E REGARDED AS SUFFICIENT. SHRI DHIRUBHAI, FATHER OF THE ASSESSEE HAS AGRICULTURAL LANDS OF 6. 04 ACRES AND 2.47 ACRES AS PER 7/12. GROUNDNUT GROWN (ON BOON ACRES) IS SOLD ON WHICH NET INCOME O F RS.69,072/- IS SHOWN. IN OTHER LAND 2.47 6 ITA NO. 3143 & 3644/AHD /2007 ACRES, VEGETABLES ;PULSES, ETC. ARE GROWN AND CONSU MED FOR HOUSEHOLD. APART FROM HIGH ESTIMATE OF HOUSEHOLD MADE ABOVE AGRICULTURAL INCOME AND PRO DUCE IS REQUIRED TO BE CONSIDERED AND ADDITION MADE BE DELETED. 14. ON THE OTHER HAND, THE LD. D.R. VEHEMENTLY SUPP ORTED THE ORDER OF AUTHORITIES BELOW. HE POINTED OUT THAT BEFORE THE AO, THE ASSESSEE HAS NO T FURNISHED THE EXPLANATION REGARDING HOLDING OF AGRICULTURAL LAND AND INCOME BY FATHER OF THE AS SESSEE. THIS PLEA WAS TAKEN ONLY BEFORE THE LD. CIT(A). THEREFORE, THE LD. CIT(A) IS FULLY JUSTIFIE D IN NOT CONSIDERING THE SAID PLEA AND UPHELD THE ACTION OF A.O. 15. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. FROM THE RECORD, WE FIND THAT THERE ARE ONLY FIVE MEMBERS IN ASSESSEES FAMILY AND MAINTAINS ONLY ONE KITCHEN. IF WE CONSIDER THE INCO ME AND POSSIBILITY OF CONSUMPTION OF VEGETABLES AND PULSES, ETC. WHICH ARE GROWN ON AGRI CULTURAL LAND, IN OUR OPINION, THE WITHDRAWAL OF RS.1,16,500/- MADE BY THE ASSESSEE AND HIS FAMIL Y ARE ADEQUATE. WE, THEREFORE, DELETE THE ADDITION OF RS.69,072/- MADE BY THE AO ON ACCOUNT O F LOW HOUSEHOLD WITHDRAWAL. THIS GROUND OF APPEAL IS ALLOWED. 16. THE LAST GROUND OF ASSESSEES APPEAL IS WITH RE GARD TO LEVY OF INTEREST UNDER SECTION 234B OF THE ACT. THE A.O. WILL ALLOW CONSEQUENTIAL RELIE F IN LEVY OF INTEREST UNDER SECTION 234B OF THE INCOME TAX ACT. 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 21.05.2010 . SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21 / 05 /2010 7 ITA NO. 3143 & 3644/AHD /2007 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.