DCIT, New Delhi V. Smt. Roshini Devi, New Delhi

ITA 3712/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6794 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 20-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 10-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR SHARMA SENIOR
• Keywords: Business expenditure
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2889/DEL./2011 (ASSESSMENT YEAR : 2007-08) DCIT, CIRCLE 22 (1), VS. SMT. ROSHNI DEVI, NEW DELHI. B 63, OKHLA INDL. AREA PHASE I, NEW DELHI 110 020. (PAN : AIQPD6664F) ITA NO.5427/DEL./2011 (ASSESSMENT YEAR : 2008-09) DCIT, CIRCLE 22 (1), VS. SMT. ROSHNI DEVI, NEW DELHI. B 63, OKHLA INDL. AREA PHASE I, NEW DELHI 110 020. (PAN : AIQPD6664F) ITA NO.3712/DEL./2013 (ASSESSMENT YEAR : 2009-10) DCIT, CIRCLE 22 (1), VS. SMT. ROSHNI DEVI, NEW DELHI. B 63, OKHLA INDL. AREA PHASE I, NEW DELHI 110 020. (PAN : AIQPD6664F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SATISH AGGARWAL, CA REVENUE BY : SHRI ANIL KUMAR SHARMA, SENIOR DR DATE OF HEARING : 20.07.2016 DATE OF ORDER : 26.07.2016 O R D E R ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 2 PER KULDIP SINGH, JUDICIAL MEMBER : SINCE IDENTICAL QUESTION OF FACT AND LAW HAS BEEN R AISED IN THE AFORESAID APPEALS, THE SAME ARE BEING DISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DISCUSSIO N. 2. THE APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX , CIRCLE 22 (1), NEW DELHI, BY FILING THE AFORESAID APPEALS, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 11.03.2011, 07.09.20 11 AND 14.03.2013 PASSED BY LD. COMMISSIONER OF INCOME-TAX (APPEALS)- XXIII, NEW DELHI QUA THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10 RESPECTIVELY ON THE GROUNDS INTER ALIA THAT :- AY 2007-08 1. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CA SE THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.6,77,07,368/- MADE BY AO ON ACCOUNT OF WAGES PAI D BY THE ASSESSEE. 2. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) HAS ERRED IN RESTRICTED THE 10% OF EXPENSES OF RS.3,26,33,960/- INSTEAD OF 10% DISALLOWANCE OF EXPENSES OF RS.98,29,185/- MADE BY AO. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE C OURSE OF HEARING OF THE APPEAL. AY 2008-09 1. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CA SE THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.5,46,99,265/-. ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 3 2. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF 10% OF EXPENSES MADE BY THE AO UNDER THE HEAD STAFF WELFARE, CONVEYANCE & TRAVELLING, PRINTING & STATIONERY, OFFICE REPAIR & MAINTENANCE AND POSTAGE . 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE C OURSE OF HEARING OF THE APPEAL. AY 2009-10 1. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CA SE THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.6,17,95,105/- MADE BY THE AO ON ACCOUNT OF SALAR Y AND WAGES. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE C OURSE OF HEARING OF THE APPEAL. 2. BRIEFLY STATED THE FACTS OF THIS CASE ARE : ASSE SSEE IS INTO THE BUSINESS OF FABRICATION WORK BEING PROVIDED TO VARI OUS GARMENT MANUFACTURING UNITS. SCRUTINY PROCEEDINGS WERE INI TIATED DURING WHICH ASSESSEE PUT INTO APPEARANCE THROUGH SHRI BRI JESH SRIVASTAVA, ACCOUNTANT OF THE ASSESSEE WHO HAS FILE D DETAILS AND EXPLANATIONS FROM TIME TO TIME. MANUFACTURING UNIT S WERE PAYING THE AMOUNT BY WAY OF CHEQUES TO THE ASSESSEE WHICH WERE DEPOSITED IN VARIOUS BANK ACCOUNTS OF THE ASSESSEE WHICH WAS WITHDRAWN IN CASH AND PAID THE SALARY AND WAGES TO THE WORKERS. ASSESSEE HAS GROSS RECEIPTS OF RS.76.53 CRORES AND SHOWN THE ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 4 PAYMENT TO THE TUNE OF RS.68.59 CRORES AS SALARY AN D WAGES HAVING NET PROFIT OF RS.27,94,728/- WHICH IS ABOUT 0.36% O F THE TOTAL RECEIPTS. IN THE BALANCE SHEET, ASSESSEE HAS SHOWN CLOSING BALANCE IN HER CAPITAL ACCOUNT AT RS.21,13,000/- AND HAS S HOWN FIXED ASSETS AT RS.11,52,000/- AND ANOTHER NON-BUSINESS INVESTME NTS AT RS.38,80,000/- AND THE MAJOR PART OF THE BALANCE SH EET PERTAINS TO SUNDRY DEBTORS AND WAGES PAYABLE. ASSESSEE FURNISH ED THE EXPLANATION TO EXPLAIN THE AFORESAID QUERIES. MAJO R ISSUES COME UP FOR SCRUTINY BEFORE AO IS A CASH PAYMENT OF WAGES T O THE TUNE OF RS.68.59 CRORES DURING THE YEAR UNDER ASSESSMENT. AO NOTICED THAT THOUGH THE ASSESSEE CLAIMED THAT HER WORKERS WERE K EEP CHANGING AND WAS NOT IN A POSITION TO PRODUCE SUCH LARGE NUM BER OF WORKERS FOR VERIFICATION BUT ASSESSEE HAD SHOWN PAYMENT OF ESIC AND PF IN CASE OF SOME WORKERS BUT MAJOR PORTION OF PAYMENT O F WAGES IS SHOWN TO HAVE BEEN PAID TO THE WORKERS WHERE ESIC A ND PF WERE NOT DEDUCTED. AO ALSO NOTICED THAT THE SALARY REGI STER MAINTAINED BY THE ASSESSEE IS NOT BEARING THUMP IMPRESSION OF THE PAYEE AND THEREBY REJECTED RESULTS OF TRADING AND PROFIT & LO SS ACCOUNT. AS AGAINST THE TURNOVER OF RS.76.53 CRORES, ASSESSEE S HOWN NEGLIGIBLE NET PROFIT AT 0.36%. ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 5 3. FROM THE FACTS BROUGHT ON RECORD BY THE ASSESSEE , AO GATHERED THAT ASSESSEE IS NOT DOING THE BUSINESS WH ICH SHE HAS TRIED TO PROJECT THROUGH HER BOOKS OF ACCOUNT AND CONSEQU ENTLY REJECTED THE SAME U/S 145(3) OF THE ACT. AO ALSO CAME TO TH E CONCLUSION THAT SINCE THE FABRICATION IS DONE BY THE MANUFACTU RER FROM THEIR OWN LABOUR BUT SHOWN IN THE NAME OF ASSESSEE AND AS SUCH, THE NON-PAYMENT OF WAGES TO THE WORKERS CANNOT BE RULED OUT. ASSESSEE IN CONNIVANCE WITH MANUFACTURERS MANIPULAT ED THE EXPENDITURE ON ACCOUNT OF FABRICATION FOR SUCH MANU FACTURING UNITS AND OWN PROFITS BY ADJUSTING THE CASH FIGURES ARBIT RARILY. AO CONSIDERED THE CASH PAYMENT MADE TO THE NON-ESIC DE DUCTED WORKERS DOUBTFUL AND CONSEQUENTLY DISALLOWED THE RE ASONABLE AND PROPORTIONATE AMOUNT AS UNDER :- TOTAL WAGES PAYABLE AS PER BALANCE SHEET RS.68,69,92,456 TOTAL WAGES PAYABLE TO THE PERSONS WHERE ESI WAS DEDUCTED RS.34,74,55,612/- TOTAL WAGES SHOWN PAID TO WORKERS WHERE ESIC HAS NOT BEEN DEDUCTED RS.33,85,36,843/- ON FAILURE OF THE ASSESSEE TO SUBSTANTIATE HIS CASH PAYMENT ON ACCOUNT OF WAGES BY EVIDENCE AND JUSTIFICATION, AO WORKED OUT AN AD HOC AMOUNT TO THE TUNE OF 20% OF THE WAGES PAID ON ACCOUNT OF ESIC AND PF WORKERS TO THE FOLLOWING EFFECT :- ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 6 TOTAL CASH WAGES PAID TO NON-ESI WORKERS RS.33,85 ,36,843/- 20% OF RS.33,85,36,843/- COMES TO RS.6,77,07,368/- IS DISALLOWED AND ADDED BACK TO THE NET INCOME OF THE ASSESSEE FO R THE RELEVANT ASSESSMENT YEAR. AND THEREBY MADE AN ADDITION OF RS.6,77,07,368/- QU A AY 2007-08 & AY 2009-10 AND RS.5,46,99,265/- QUA AY 2008-09. 4. DURING THE ASSESSMENT YEAR 2007-08, ASSESSEE CLA IMED EXPENSES IN HER P&L ACCOUNT TO THE TUNE OF RS.98,29 ,185/- ON ACCOUNT OF PURCHASE OF CONSUMABLES, STAFF / LABOUR WELFARE, GODDOWN, RENT, ETC.. FINDING THE EXPLANATION FURNI SHED BY THE ASSESSEE NOT TENABLE, AO HAS MADE AN AD HOC DISALLO WANCE OF 10% ON THE TOTAL AMOUNT OF RS.98,29,180/- I.E. RS.9,82, 918/- AND MADE AN ADDITION THEREOF TO THE TOTAL INCOME OF THE ASSE SSEE. 5. DURING THE AY 2008-09, ASSESSEE CLAIMED CASH EXP ENSES IN HER P&L ACCOUNT TO THE TUNE OF RS.76,53,732/- ON AC COUNT OF STAFF/ LABOUR WELFARE, CONVEYANCE AND TRAVELLING, FESTIVAL EXPENSES, ETC.. AO DISALLOWED 10% OF THESE EXPENSES FOR LACK OF COM PLETE BOOKS, VOUCHERS AND BOOKS AND THEREBY MADE AN ADDITION OF RS.7,65,373/-. 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY FILING THE APPEALS WHICH HAVE BEEN PARTLY ALLOWED. FEELIN G AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE AFORESAID APPEALS. ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 7 7. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) RELIED UPON THE ORDER PAS SED BY THE AO. HOWEVER, ON THE OTHER HAND, LD. AR FOR THE ASSESSEE WHILE SUPPORTING THE IMPUGNED ORDER PASSED BY LD. CIT (A) CONTENDED INTER ALIA THAT THE ASSESSEE IS MERELY A SUPPLIER O F LABOUR TO THE GARMENT MANUFACTURING INDUSTRIES ON SEASONAL BASIS AND THEY BEING MIGRANT LABOURER COULD NOT BE PRODUCED BEFORE THE A O; THAT THE ENTIRE ADDITION HAS BEEN MADE BY THE AO ON THE BASI S OF SUSPICION WHICH HAS BEEN RIGHTLY DELETED BY THE LD. CIT (A); THAT IN THE AY 2010-11 NO SUCH ADDITION HAS BEEN MADE BY THE AO AS PER ORDER DATED 26.03.2014; THAT ASSESSEE BEING A CONTRACTOR COMPLETES MOST OF THE JOBWORK IN THE PREMISES OF THE MANUFACTURER AND SUPPLIES NECESSARY INFRASTRUCTURE EXCEPT CONSUMABLE ITEMS WH ICH ACCOUNTS FOR LESS THAN 0.5% TO THE TOTAL RECEIPT AND ALL THE RELATED ACTIVITIES ARE COMPLETED UNDER THE SUPERVISION OF CLIENTS; THA T THE EMPLOYER IS NOT UNDER OBLIGATION TO DEDUCT ESIC IF GROSS WAGE O F WORKER IS MORE THAN RS.7,500/-; THAT TOTAL NUMBER OF WORKERS DRAWINGS MORE ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 8 THAN THE EXEMPTED LIMIT WERE 4950 W.E.F. APRIL, 200 7 TO OCTOBER, 2007 AND IN THE LAST THREE MONTHS, IT WAS 5887,6380 AND 8940 WORKERS AND THIS INFORMATION WAS DULY SUPPLIED TO T HE AO WHO HAS ARBITRARILY MISINTERPRETED THE SAME; THAT EMPLOYER IS NOT UNDER OBLIGATION TO DEDUCT ESIC AND PF IF THE GROSS AMOUN T AND THE BASIC WAGE DOES NOT EXCEED RS.10,000/- AND RS.6,5000/- RE SPECTIVELY. GROUND NO.1 OF ITA NO.2889/DEL/2011 (AY 2007-08) GROUND NO.1 OF ITA NO.5427/DEL/2011 (AY 2008-09) GROUND NO.1 OF ITA NO.3712/DEL/2013 (AY 2009-10) 9. THE SOLE QUESTION ARISES FOR DETERMINATION RAISE D VIDE GROUND NO.1 IN ALL THE THREE APPEALS IS :- AS TO WHETHER CIT (A) HAS ERRED IN DELETING THE ADDITIONS MADE BY THE AO ON ACCOUNT OF WAGES PAID B Y THE ASSESSEE BY REJECTING BOOKS OF ACCOUNT U/S 145 OF THE ACT? 10. WHEN THE AFORESAID QUESTION IS EXAMINED IN THE LIGHT OF TAX AUDIT REPORT, BALANCE SHEET AND P&L ACCOUNT OF ASSE SSEE, COPY OF COMPLIANCE REPORT ISSUED BY PROVIDENT FUND AND ESI AUTHORITIES, WE REACH AT THE CONCLUSION THAT THE AO HAS MERELY R EJECTED THE BOOKS OF ACCOUNT ON THE BASIS OF SUSPICION AND GUES SWORK AND THERE IS NO ILLEGALITY OR PERVERSITY IN THE FINDINGS RETU RNED BY THE LD. CIT (A) VIDE IMPUGNED ORDER FOR THE FOLLOWING REASONS : - ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 9 (I) THAT WHEN UNDISPUTEDLY THE ASSESSEE HAS SUPPLIE D LABOUR TO THE GARMENT MANUFACTURING UNITS HAVING TURNOVER EXCEEDING RS.100 CRORES WHO HAVE RECORDED THE DIRECT EXPENSES IN THEIR MANUFACTURING ACCOUNTS , THERE WAS NO MATERIAL WHATSOEVER WITH THE AO TO REACH AT THE CONCLUSION THAT THE ASSESSEE HAS INFLA TED HER WAGES AND BOGUS EXPENSES; (II) THAT WHEN THE AO HAS DULY CARRIED OUT THE CROS S VERIFICATION OF THE EXPENSES SHOWN IN THE BOOKS OF ACCOUNT BY THE ASSESSEE WITH THE EXPORT HOUSES TO WHOM, THE ASSESSEE WAS SUPPLYING LABOUR, THE AO WAS REQUIRED TO BRING ON RECORD THE EVIDENCE TO PROVE T HAT THE PAYMENT MADE BY THE ASSESSEE FOR PROVIDING LABOUR TO THE EXPORT HOUSES HAS BEEN BOGUS AND INFLATED. THE AO RATHER RECORDED IN PARA 3.2 OF TH E ASSESSMENT ORDER THAT :- THE NATURE OF BUSINESS OF THE ASSESSEE HAS SHOWN BY HER AND PREPARATION OF BOOKS OF ACCOUNTS AND BALANCE SHEET IT IS RATHER DIFFICULT TO RELY UPON THE BOOK RESULTS OR TO ENTIRE REJECT SUCH RESULTS OF THE TRADING AND PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAS SHOWN HUGE TURNOVER AT RS.76.53 CRORE (ROUNDLY) BUT SHOWN NET PROFIT AT 0.36% WHICH IS VERY NEGLIGIBLE AND CANNOT BE RELIED KEEPING IN VIEW OF PRUDENT BUSINESS PRACTICES. IN CASE, 1% OF ASSESSEE'S RECEIPTS-ARE ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 10 RESULTS IN BAD DEBT THEN ASSESSEE MAY IMMEDIATELY PLUNGED INTO NET LOSSES. ASSESSEE IS RECEIVING PAYMENT FROM LARGE INDUSTRIAL UNITS SUCH AS ORIENT CRAFT LTD., PAREALS GLOBAL LTD. VISHAL MEGAMART AND OTHER BIG NAMES OF READYMADE MANUFACTURING INDUSTRY. SUCH LARGE HOUSES CANNOT RELY UPON ASSESSEE TO DO THE WORK OF FABRICATION FOR THEM WHO ARE MAINLY EXPORTERS. AS ASSESSEE HAS LITTLE FINANCIAL WORTH, IT IS NOT UNDERSTANDABLE EASILY THAT SHE IS DOING BUSINESS FOR SUCH LARGE INDUSTRIAL HOUSES. ALL SUCH FACTORS WERE KEPT IN MIND TO DRAW CONCLUSION FROM THE BUSINESS ACTIVITIES AS SHOWN BY THE ASSESSEE. HOWEVER CERTAIN ISSUES WERE TRIED TO SOLVE THE MYSTERY OF BUSINESS OF THE ASSESSEE. AND PROCEEDED TO DECLARE THE BALANCE PAYMENT AS DOUBTFUL AND DISALLOWED THE AD HOC AMOUNT TO THE TU NE OF 20% OF THE WAGES PAID ON ACCOUNT OF NON-ESI AND PF WORKERS ON THE BASIS OF ESTIMATION; (III) THAT WHEN THE AO HAS HIMSELF ADMITTED THE PAY MENT SHOWN IN THE ESIC AND PF RETURN AND HAS CROSS VERIFIED THE ENTIRE PAYMENT ON ACCOUNT OF WAGES MAD E BY THE EXPORT HOUSES, HE HAS ILLEGALITY DISALLOWED AN AD HOC AMOUNT TO THE TUNE OF 20% OF THE WAGES PAID ON ACCOUNT OF NON-ESIC AND PF WORKERS; (IV) THAT WHEN THE LD. CIT (A) DURING THE APPELLATE PROCEEDINGS HAVE SOUGHT THE REPORT FROM THE AO ON THE INSPECTION REPORT ISSUED BY ESI / PF AUTHORITIE S, ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 11 THE AO WAS REQUIRED TO FILE HIS COMMENT THEREON BUT HE HAS NOT PREFERRED TO DO SO; (V) THAT THE LD. CIT (A) HAVING CO-TERMINUS POWERS EXAMINED INSPECTION REPORTS ISSUED BY ESI / PF AUTHORITIES REGARDING THE WORKERS / LABOURERS SUPPL IED TO THE EXPORT HOUSES BY THE ASSESSEE AND HAS NOT FO UND ANY ILLEGALLY OR PERVERSITY IN THE SAME AND HAVE RI GHTLY DELETED THE ADDITION; (VI) THAT HAD THERE BEEN ANY VIOLATION OF LABOUR LA W I.E. ESI / PF ACT, THE SAME WOULD HAVE BEEN BROUGHT ON RECOR D BY ESI / PF AUTHORITIES BY INITIATING PENAL ACTION AGAINST THE ASSESSEE / EXPORT HOUSES; (VII) THAT THE AO DISBELIEVED THE NET PROFIT SHOWN AT 0.36% OF THE RECEIPT AS CLAIMED BY THE ASSESSEE ON THE GR OUND THAT THE SAME IS NEGLIGIBLE WHICH IS NOT BASED UPON ANY COMPARATIVE STUDY BROUGHT ON RECORD BY THE ASSESSEE; (VIII) THAT PROFIT OF ANY BUSINESS HOUSE CANNOT BE DISPUTED ON THE BASIS OF CONJECTURES AND SURMISES UNLESS SUSTAINABLE EVIDENCE IS NOT BROUGHT ON RECORD THAT ACTUAL PROFIT IS MORE THAN CLAIMED BY THE ASSESSEE; ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 12 (IX) THAT MERELY BECAUSE OF THE FACT THAT THE CASH IS IMMEDIATELY WITHDRAWN FROM THE BANK AFTER CLEARANCE OF CHEQUE, THE WAGE BILL CANNOT BE DECLARED AS INFL ATED OR BOGUS ONE BECAUSE THIS PRACTICE OF MAKING PAYMEN T IS AN ACCEPTED FEATURE. MOREOVER, IN CASE OF CONTR ACT LABOURER, PAYMENT INVARIABLY MADE IMMEDIATELY AFTER COMPLETION OF THE JOBWORK; (X) THAT WHEN THE ASSESSEE HAS DULY EXPLAINED THE DEDUCTION ON ACCOUNT OF ESI AND PF WHICH WAS NOT TO BE DEDUCTED IN CASE OF EACH AND EVERY WORKER REGARDING WHICH INSPECTION REPORT IN THE FORM OF ANNEXURE E IS AVAILABLE AT PAGES 46 TO 49 OF THE PAPER BOOK FILED BY THE ASSESSEE, THE GENERAL FINDI NGS RETURNED BY THE AO THAT THE ASSESSEE HAS INFLATED T HE WAGE BILL OF THE WORKERS WHOSE ESI AND PF WAS NOT DEDUCTED, ARE NOT SUSTAINABLE; (XI) THAT THE AO, IN SUCH CIRCUMSTANCES, WAS REQUIR ED TO POINT OUT SPECIFICALLY BY DISCUSSING EACH AND EVERY CASE OF THE WORKER IN THE LIGHT OF THE REPORT GIVEN BY THE ESI AND PF AUTHORITIES TO DECLARE THE WAGE BILL AS INFLATED AND BOGUS; ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 13 (XII) THAT AO EVEN AFTER CROSS VERIFYING THE BOOKS OF ACCOUNT, BALANCE SHEET, P&L ACCOUNT WITH THE ACCOUNTS BOOKS OF EXPORT HOUSES TO WHOM LABOUR WAS BEING SUPPLIED BY THE ASSESSEE HAS PROCEEDED ON THE BASIS OF SUSPICION AND ESTIMATION TO DISALLOW THE 2 0% OF THE WAGES PAID ON ACCOUNT OF NON-ESI AND PF WORKERS AS BOGUS EXPENDITURE WHICH IS NOT PERMISSIB LE UNDER LAW. BECAUSE SUSPICION CANNOT TAKE THE PLACE OF PROOF; (XIII) THAT THERE IS NOT AN IOTA OF MATERIAL ON THE FILE IF ESI AND PF DEPARTMENT HAVE EVER RECORDED ANY FINDINGS FOR NON-PAYMENT OF ESI AND PF TO ANY OF THE ELIGIBL E WORKER; (XIV) THAT WHEN UNDISPUTEDLY THE ASSESSEE HAS MADE PAYMENT IN CASH TO THE WORKERS BECAUSE MOST OF THEM WERE CONTRACT LABOURERS AND IT WAS NOT PLAUSIBLE TO MAINTAIN THEIR BANK ACCOUNTS AND THE ASSESSEE HAS A LSO PAID ESI AND PF IN RESPECT OF ITS ELIGIBLE WORKER COVERED UNDER THE ACT, THE QUESTION OF INFLATED / B OGUS WAGE BILL DOES NOT ARISE; ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 14 (XV) THAT THE AO AFTER LOSING SIGHT OF THE FACT THA T ESI AND PF DEDUCTION IS NOT APPLICABLE TO EACH AND EVERY WORKER UNILATERALLY CAME TO THE CONCLUSION THAT IN CASE OF SOME OF THE WORKERS SINCE ESI AND PF WAS NOT DEDUCTED, THE ASSESSEE HAS RAISED BOGUS WAGE BILLS; (XVI) THAT THE AO HAS NOT SEPARATELY EXAMINED BOTH ESI AND PF WAGE BILL AND NON-ESI AND PF WAGE BILL TO WORK OUT THE WAGES PAID TO NON-SKILLED WORKER WHICH WERE OUTSIDE THE PURVIEW OF ESI AND PF ACT, RATHER ARBITRARILY DECLARED THE SAME AS INFLATED AND BOGUS ONE. (XVII) THAT IN THE SUBSEQUENT ASSESSMENT YEAR 2010- 11, NO SUCH EXPENSES ON ACCOUNT OF WAGES PAID BY THE ASSESSEE HAVE BEEN DISALLOWED BY THE AO AS IS EVIDE NT FROM THE ASSESSMENT ORDER DATED 26.03.2014 MADE AVAILABLE ON THE RECORD BY THE ASSESSEE. 11. SO, IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, W E HEREBY AFFIRMED THE FINDINGS RETURNED BY THE LD. CIT (A) Q UA DELETION OF AMOUNT OF RS.6,77,07,368/- FOR AY 2007-08, RS.5,46, 99,265 FOR AY 2008-09 AND RS.6,17,95,105/- FOR AY 2009-10 AND THEREBY DETERMINED GROUND NO.1 OF ALL THE APPEALS AGAINST T HE REVENUE. ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 15 GROUND NO.2 OF ITA NO.2889/DEL/2011 (AY 2007-08) 12. THIS GROUND PERTAINS TO THE ADDITION OF RS.9,82 ,918/- BEING 10% OF THE EXPENSES CLAIMED BY THE ASSESSEE MADE BY THE AO ON THE GROUND THAT SINCE THE ASSESSEE IS NOT INTO ANY PRODUCTION / MANUFACTURING, SUCH EXPENSES ARE NOT INCURRED BY IT AND ON THE GROUND THAT TO VERIFY THE CLAIM OF TRAVELLING EXPEN SES IN RESPECT OF SHRI K.B. RAO THE SAID PERSON WAS NOT PRODUCED BEFO RE THE AO AND DISALLOWED 10% OF THE EXPENSES ON AD HOC BASIS. 13. LD. CIT (A) DELETED THE AD HOC ADDITION MADE BY THE AO BY RETURNING THE FOLLOWING FINDINGS :- 13. THE SUBMISSIONS MADE BY THE APPELLANT VIS-A-VI S THE BASIS OF DISALLOWANCE MADE BY THE ASSESSING OFF ICER HAVE BEEN CONSIDERED. IT IS APPARENT THAT THE ASSES SING OFFICER HAS MADE THE DISALLOWANCE ON PURELY AD HOC BASIS WITHOUT GOING INTO THE FACTS PERTAINING TO EACH ITE M OF EXPENDITURE CLAIMED BY THE APPELLANT. THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE UNDER THE PRESUMP TION THAT NO INPUT OF CONSEQUENCE HAS BEEN MADE BY THE APPELLANT APART FROM ACTING AS A MEDIATOR. HOWEVER, THE PERUSAL OF DETAILS SUBMITTED BY THE APPELLANT IN RE SPECT OF VARIOUS EXPENSES SHOWS THAT THE APPELLANT HAS BEEN ACTIVELY ENGAGED IN THE SOURCING OF LABOUR OF VARIO US TYPES ON BEHALF OF DIFFERENT EXPORT HOUSES. THE TEL EPHONE EXPENSES DETAILS SUBMITTED SHOWS THAT ALMOST ALL TH E PAYMENTS HAVE BEEN MADE BY CHEQUE FOR OPERATING 126 CELL PHONES BY EMPLOYEES OF THE ASSESSEE, WHICH BY ITSELF IS EVIDENCE ENOUGH OF ACTUAL WORK BEING CARRIED OUT BY THE APPELLANT. THEREFORE, THERE CAN BE NO BASIS FOR DISALLOWANCE OF ANY EXPENSES UNDER THIS HEAD. FURTH ER, ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 16 THE DETAILS SUBMITTED IN RESPECT OF PRINTING & STAT IONERY REVEAL THAT VARIOUS FORMS HAVE BEEN PRINTED BY THE APPELLANT WHICH ARE USED ON A REGULAR BASIS TO FACI LITATE VARIOUS ASPECTS OF HUMAN RESOURCE MANAGEMENT BEING CARRIED OUT BY THE ASSESSEE ON BEHALF OF HIS CLIENT S. SUBSTANTIAL PART OF THESE PAYMENT HAVE ALSO BEEN MA DE BY CHEQUE. IN THE FACE OF EVIDENCE SUBMITTED BY THE APPELLANT, ADHOC DISALLOWANCE TO THE EXTENT OF 10% BY THE ASSESSING OFFICER IS DELETED. FURTHER, THE GODOWN R ENT HAS BEEN PAID TO ACCOMMODATE WORKERS AT THE TIME OF THEIR ARRIVAL AND THE ASSESSING OFFICER HAS ALSO NO T POINTED OUT ANYTHING WITH REGARD TO THIS EXPENSE TO MERIT DISALLOWANCE OF 10%. HOWEVER, IT IS SEEN THAT THERE IS NO DETAILED EXPLANATION WITH RESPECT TO CLAIM OF EXPEN SES DEBITED UNDER THE HEAD PURCHASE OF CONSUMABLES TO T HE TUNE OF RS.36,33,960/-. ALL THESE EXPENSES HAVE BEE N MET IN CASH, THEREFORE, DISALLOWANCE BY THE ASSESSING O FFICER TO THE TUNE OF 10% OF THESE EXPENSES IS JUSTIFIED A ND THEREFORE, UPHELD. AS SUCH, ADDITION TO THE TUNE OF RS.3,63,396/- IS UPHELD. 14. KEEPING IN VIEW THE COMPLETE DETAILS OF EXPENSE S PLACED BEFORE THE AO BY THE ASSESSEE DURING ASSESSMENT PRO CEEDINGS QUA THE EXPENDITURE INCURRED DURING THE YEAR UNDER ASSE SSMENT AND THE FACT THAT LD. CIT (A) HELD THAT ALMOST ALL THE PAYM ENTS HAVE BEEN MADE BY CHEQUE FOR OPERATING 126 CELL PHONES BY THE EMPLOYEES OF THE ASSESSEE, AD HOC DISALLOWANCE TO THE EXTENT OF 10% AS MADE BY THE AO IS NOT SUSTAINABLE. HOWEVER, EXPENSES DEBIT ED UNDER THE HEAD PURCHASE OF CONSUMABLES TO THE TUNE OF RS.36,3 3,960/- AND DISALLOWANCE ON THE SAME TO THE EXTENT OF 10% AMOUN TING TO RS.3,63,396/- HAS BEEN UPHELD BY THE LD. CIT (A) WH ICH IS ACCEPTED ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 17 BY THE ASSESSEE BEING NOT PRESSED. SO, GROUND NO.2 IS DETERMINED AGAINST THE REVENUE. GROUND NO.2 OF ITA NO.5427/DEL/2011 (AY 2008-09) 15. THIS GROUND PERTAINS TO THE ADDITION OF 10% OF THE OTHER EXPENSES VIZ. STAFF WELFARE, CONVEYANCE, FESTIVAL E XPENSES, PRINTING & STATIONERY, OFFICE REPAIR & MAINTENANCE, POSTAGE & TELEGRAM AND TELEPHONE MADE BY THE AO ON THE GROUND THAT THE ASS ESSEE IS NOT INTO ANY PRODUCTION / MANUFACTURING AND ALL THE WOR KERS ARE WORKING IN THE PREMISES OF ITS CLIENTS, THERE IS NO JUSTIFICATION FOR SUCH EXPENSES. HOWEVER, LD. CIT (A) HAS DELETED AL L THE ADDITIONS EXCEPT DISALLOWANCE OF 10% OF VEHICLE MAINTENANCE A MOUNTING TO RS.1,18,571/- AND TELEPHONE EXPENSES OF RS.10,95,12 2/- WHICH HAS NOT BEEN DISPUTED BY THE ASSESSEE. 16. BARE PERUSAL OF THE IMPUGNED ORDER PASSED BY TH E LD. CIT (A) GOES TO PROVE THAT WHEN THE ASSESSEE IS ENGAGED IN SOURCING OF LABOUR BOTH SKILLED AND UNSKILLED TO THE MANUFACTUR ING UNITS AND ASSESSEE HAS MAINTAINED THE ENTIRE DETAILS OF THE E XPENSES IN WHICH NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT, THE DISA LLOWANCE MADE BY THE AO IS NOT SUSTAINABLE. SO FAR AS TRAVELLING AND CONVEYANCE EXPENSES ARE CONCERNED WHEN THE SAME ARE INCURRED B Y WAY OF CHEQUE AND NO SPECIFIC FINDINGS HAVE BEEN RETURNED BY THE AO THAT ITA NO.2889/DEL./2011 ITA NO.5427/DEL./2011 ITA NO.3712/DEL./2013 18 SUCH EXPENSES ARE NOT BUSINESS EXPENSES, DISALLOWAN CE IS NOT SUSTAINABLE. SO, FINDING NO ILLEGALITY AND PERVERS ITY IN THE ORDER PASSED BY THE LD. CIT (A), THIS GROUND IS ALSO DETE RMINED AGAINST THE REVENUE. 17. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, ALL T HE THREE APPEALS FILED BY THE REVENUE ARE HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 26 TH DAY OF JULY, 2016. SD/- SD/- (J.S. REDDY) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 26 TH DAY OF JULY, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.