The ITO, Ward-2(1), Ahmedabad V. Shri Kailashchandra M.Kanodia, Ahmedabad

ITA 395/AHD/2011

• Counselvise Citation: 39520514 RSA 2011
• Duration Of Justice: 3 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 14-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: VINIT MOONDRA
• Keywords: Gross profit estimation

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ # ## #. .. .# ## #. . . . % % % %, , , , &' ( & ' &' ( & ' &' ( & ' &' ( & ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND N.S. SAINI, ACCOUNTANT MEMBER) ITA NO. & ASSTT.YEAR APPELLANT RESPONDENT 345/AHD/2011 ASSTT.YEAR 2007-08 KAILASHCHANDRA MALIRAM KANODIA C/O. VINIT MOONDA, 201, SARAP OPP: NAVJIVAN PRESS, ASHRAM ROAD, AHMEDABAD. PAN : ACXPK 8182 E ITO, WARD-2(1) AHMEDABAD. 395/AHD/2011 ASSTT.YEAR 2007-08 ITO, WARD-2(1) AHMEDABAD. KAILASHCHANDRA KANODIA KRISHNA MANSION KALUPUR GHEE BASAR KALUPUR, AHMEDABAD 380 001. 346 /AHD/2011 ASSTT.YEAR 2007-08 AJAY KAILASHCHANDRA KANODIA, HUF C/O. VINIT MOONDA, 201, SARAP OPP: NAVJIVAN PRESS, ASHRAM ROAD, AHMEDABAD. PAN : AADHA 9630 F ITO, WARD - 2(1) AHMEDABAD. 393/AHD/2011 ASSTT.YEAR 2007-08 ITO, WARD-2(1) AHMEDABAD. AJAY KAILASHCHANDRA KANODIA, HUF MANSION, KALUPUR GHEE BASAR KALUPUR, AHMEDABAD 380 001. 347/AHD/2011 ASSTT.YEAR 2007-08 AJAY KAILASHCHANDRA KANODIA C/O. VINIT MOONDA, 201, SARAP OPP: NAVJIVAN PRESS, ASHRAM ROAD, AHMEDABAD. PAN : ACWPK 4700 F ITO, WARD-2(1) AHMEDABAD. 39 4 /AHD/2011 ASSTT.YEAR 2007-08 ITO, WARD - 2(1) AHMEDABAD. AJAY KAILASHCHANDRA KANODIA, MANSION, KALUPUR GHEE BASAR KALUPUR, AHMEDABAD 380 001. ( (( ( *+ *+ *+ *+ / APPELLANT) ( (( ( ,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ./ 0 1 & / ASSESSEE BY : SHRI VINIT MOONDRA ( 0 1 & / REVENUE BY : SMT.SONIA KUMAR, SR.DR 3 0 /4' / DATE OF HEARING : 2 ND DECEMBER, 2014 ITA NO.345/AHD/2011 &5 OTHERS -2- 567 0 /4' / DATE OF PRONOUNCEMENT : 09-01-2015 &8 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE CROSS-APPEALS BY THE ASSESSEES AND THE REVENUE FOR THE ASSTT.YEAR 2007-0 8 ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A). THESE ARE BEING DISPOSED WITH THIS CONSOLIDATED ORDER. ITA NO.345/AHD/2011 (ASSESSEES APPEAL KAILASHCHA NDRA MALIRAM KANODIA) 2. THE ONLY GROUND OF THE ASSESSEES APPEAL IS AS U NDER: 1. IN HIS ORDER DATED 10/12/2010, THE LD.CIT(A) HA S GROSSLY ERRED BY CONFIRMING A DISALLOWANCE OF 2.5% OF THE JOBWORK CH ARGES CLAIMED BY THE ASSESSEE. IN THE ORIGINAL ORDER OF THE LD.AO DATED 29/12/2009, THE LD.AO HAD DISALLOWED 25% OF THE JOBWORK CHARGES CLAIMED B Y THE ASSESSEE OF RS.3,85,42,779/-, DUE TO WHICH THE DISALLOWANCE AMO UNTED TO RS.96,35,694/-. DURING THE APPEAL PROCEEDINGS, THE LD.CIT(A) VERIFIED THE VARIOUS SUBMISSIONS GIVEN TO HIM, BUT ONLY REDU CED THE DISALLOWANCE TO 2.5% OF THE JOBWORK CHARGES FROM THE ORIGINAL 25 % INSTEAD OF DELETING THE ENTIRE DISALLOWANCE. 3. CORRESPONDING APPEAL OF THE REVENUE IS ITA NO.39 5/AHD/2011, IN WHICH ONLY GROUND OF THE APPEAL OF THE REVENUE IS AS UNDE R: 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.86,72,125/- ON ACCOUNT OF DISALLOWANCE OUT OF JO B WORK CHARGES. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ONLY DISPUTE IN THIS CROSS-APPEAL OF THE ASSESSEE AND THE REVENUE I S REGARDING DISALLOWANCE OUT OF JOB WORK CHARGES MADE BY THE AO AT 25% OF THE T OTAL JOB WORK CHARGES AND RESTRICTED TO 2.5% IN APPEAL BY THE CIT(A). HE SUB MITTED THAT THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF THE CIT(A) SUSTAINING T HE DISALLOWANCE AT 2.5% OUT OF THE JOB WORK CHARGES AND THE REVENUE IS IN APPEA L AGAINST REDUCTION OF THE DISALLOWANCE FROM 25% TO 2.5% OF THE JOB WORK CHARG ES CLAIMED BY THE ITA NO.345/AHD/2011 &5 OTHERS -3- ASSESSEE. HE SUBMITTED THAT THERE IS NO BASIS FOR DISALLOWANCE TO BE SUSTAINED AT 2.5% AND THE ASSESSEE HAS MET EACH AND EVERY SO CAL LED DEFECT IN THE ACCOUNT BOOKS POINTED OUT BY THE AO. HE SUBMITTED THAT THE ASSESSEE HAS CITED A NUMBER OF DECISIONS BEFORE THE CIT(A) IN SUPPORT OF ITS CASE THAT NO DISALLOWANCE WHATSOEVER OUT OF THE JOB WORK CHARGES WAS CALLED FOR. HE SUBMITTED THAT IN THE SCRUTINY ASSESSMENT, THE DISA LLOWANCE MADE BY THE AO IN THE SUBSEQUENT ASSESSMENT YEARS WERE EVEN LESS THAN 2.5%, SUSTAINED BY THE CIT(A) FOR THE RELEVANT ASSESSMENT IN APPEAL BEFORE THE TRIBUNAL, AND THEREFORE, THE DISALLOWANCE SUSTAINED AT 2.5% OF JOB WORK CHAR GES SHOULD BE DELETED IN FULL. 5. THE LEARNED DR HAS OPPOSED SUBMISSIONS OF THE LE ARNED COUNSEL FOR THE ASSESSEE. SHE SUBMITTED THAT THE AO HAS POINTED OU T NUMBER OF DEFECTS IN THE ACCOUNT DETAILS SUBMITTED BY THE ASSESSEE, AND REFE RRED TO RELEVANT PORTIONS OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVENUE. SHE HAS RELIED O THE ORDER OF THE AO. 6. WE HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS A ND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE CIT(A) HAS PASSED A WELL REASONED SPEAKING ORDER IN THIS CASE, WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE. HE HAS DEALT WITH EACH AND EVERY DEFECT POINTED OUT BY THE AO IN DETAIL. HE HAS GIVEN A FINDING THAT THE PLEA OF THE AO THAT THE AS SESSEE COULD NOT GIVE A COMPLETE ADDRESS TO WHOM THE PAYMENT FOR JOB WORK C HARGES WERE MADE, WAS NOT CORRECT. THE ASSESSEE HAS FILED ALL THE RELEV ANT DETAILS WITH FULL ADDRESSES OF THE VENDORS AND COPIES OF THEIR BILLS. THE ASSESSE E HAS PLEADED BEFORE THE CIT(A) THAT ALL THE VENDORS WERE FROM BHIWANDI, MAH ARASHTRA AND IT WAS NOT PRACTICALLY POSSIBLE TO OBTAIN CONFIRMATORY LETTERS FROM EACH OF THEM AFTER THE PASSAGE OF SUCH A LONG TIME SINCE THE TRANSACTIONS WERE MADE. WE FIND THAT THE AO HAD DEMANDED COPIES OF CHEQUES ISSUED TO SUPPLIE RS, BUT IT WAS PRACTICALLY NOT POSSIBLE TO OBTAIN COPIES OF EACH AND EVERY CHE QUE ISSUED TO THE VENDORS. WE FIND THAT THE AO COULD NOT RECORD ANY JUSTIFIABL E REASON FOR MAKING ITA NO.345/AHD/2011 &5 OTHERS -4- DISALLOWANCE AT A HIGHER RATE OF 25% OF THE TOTAL W EAVING CHARGES ON AN ESTIMATE BASIS. WE FIND THAT CIT(A) HAS DISCUSSED A NUMBER OF DECISIONS CITED AT THE BAR WHILE DECIDING THE APPEAL OF THE ASSESSEE. WE FIND THAT IN THE LINE OF BUSINESS OF THE ASSESSEE OF MANUFACTURING OF GREY CLOTH, FINISH ED CLOTH COULD NOT BE SOLD UNLESS IT IS WEAVED AND PROCESSED AND THE COST OF W EAVING AND PROCESSING IS THE DIRECT COST WHICH HAS TO BE INCURRED BY THE ASSESSE E. PURCHASE OF YARN CLOTH AND SALE OF GREY CLOTH COULD NOT BE DISPUTED BY THE REV ENUE. THE CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE HAS GIVEN COPY OF LIST OF PARTIES TO WHOM WEAVING CHARGES WERE PAID IN WHICH COMPLETE ADDRESS HAVE BE EN GIVEN AND HAS ALSO FILED COPIES OF BILLS OF JOB WORK EXPENSES CONTAINING NAM ES AND ADDRESS OF SUCH PARTIES. THE CIT(A) HAS ALSO RECORDED THAT THE AO HAS NOT POINTED ANY DEFECT IN THE PURCHASE BILLS OR SALES BILLS OR JOB WORK CHARG ES BILLS EXCEPT SAYING THAT COMPLETE ADDRESS OF THE PARTIES WERE NOT GIVEN IN R ESPECT OF WHOM THE JOB WORK CHARGES WERE PAID. THE CIT(A) HAS RECORDED IN HIS APPELLATE ORDER THAT THE AO HAS NOT MADE ANY INQUIRY AT ALL AS CAN BE SEEN FROM THE ASSESSMENT ORDER, AND WHEN THE QUANTITY OF SALES OF CLOTH AND PURCHASE OF YARN IS ACCEPTED BY THE AO, AS HE HAS DONE IN THIS CASE HE COULD NOT DISALLOW T HE WEAVING CHARGES AT THE RATE OF 25% WITHOUT BRINGING SOME MATERIAL ON RECORD TO SHOW THAT THE INFLATION WAS SO HUGE. THE CIT(A) HAS FURTHER RECORDED THAT THE AO HAS BROUGHT NO MATERIAL ON RECORD TO PROVE THAT EITHER THE PARTIES WERE BOG US OR THE JOB CHARGES WERE INFLATED TO THE EXTENT OF 25% AND IN THE ABSENCE OF THE SAME, DISALLOWANCE MADE BY THE AO WAS NOT CORRECT. HOWEVER, THE CIT(A) HA S CONSIDERED THAT THE TURNOVER OF THE ASSESSEE WAS RS.30.37 CRORES AND TH E GP OF THE ASSESSEE WAS EXTREMELY LOW AT RS.4,72,252/- AND SOME INFLATION O F EXPENSES IN RESPECT OF JOB CHARGES COULD NOT BE DENIED IN THIS CASE. IN THESE FACTS, HE HAS RESTRICTED THE DISALLOWANCE OUT OF JOB WORK CHARGES TO 2.5% AS AGA INST 25% DISALLOWED BY THE AO. WE ARE OF THE CONSIDERED VIEW THAT CONSIDERING HIGH TURNOVER OF THE ASSESSEE AND A VERY LOW GP SHOWN BY HIM, THE POSSIB ILITY OF SOME INFLATION IN JOB WORK CHARGES COULD NOT BE RULED OUT. ACCORDING LY, THE ACTION OF THE CIT(A) IN RESTRICTING THE DISALLOWANCE OUT OF JOB WORK CHA RGES TO 2.5% OUT OF TOTAL JOB ITA NO.345/AHD/2011 &5 OTHERS -5- WORK CHARGES PAID BY THE ASSESSEE BY WAY OF ESTIMAT E AS AGAINST 25% DISALLOWANCE MADE BY THE AO SEEMS TO JUST AND FAIR, AND IS ACCORDINGLY CONFIRMED. IN THIS VIEW OF THE MATTER, WE SEE NO M ERIT IN THE GROUNDS OF THE APPEALS OF THE ASSESSEE AND THE REVENUE, AND THEY A RE ACCORDINGLY DISMISSED. ITA NO.346/AHD/2011 (ASSESSEES APPEAL AJAY KAILA SHCHANDRA KANODIA, HUF) 7. THE ONLY GROUND OF THE APPEAL OF THE ASSESSEE IS AS UNDER: 1. IN HIS ORDER DATED 10/12/2010, THE LD.CIT(A) HA S GROSSLY ERRED BY CONFIRMING A DISALLOWANCE OF 2.5% OF THE JOBWORK CH ARGES CLAIMED BY THE ASSESSEE. IN THE ORIGINAL ORDER OF THE LD.AO DATED 29/12/2009, THE LD.AO HAD DISALLOWED 25% OF THE JOBWORK CHARGES CLAIMED B Y THE ASSESSEE OF RS.3,94,07,116/-, DUE TO WHICH THE DISALLOWANCE AMO UNTED TO RS.98,51,779/-. DURING THE APPEAL PROCEEDINGS, THE LD.CIT(A) VERIFIED THE VARIOUS SUBMISSIONS GIVEN TO HIM, BUT ONLY REDU CED THE DISALLOWANCE TO 2.5% OF THE JOBWORK CHARGES FROM THE ORIGINAL 25 % INSTEAD OF DELETING THE ENTIRE DISALLOWANCE. 8. CORRESPONDING APPEAL OF THE REVENUE IS ITA NO.39 3/AHD/2011, IN WHICH ONLY GROUND OF THE APPEAL OF THE REVENUE IS AS UNDE R: 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.88,66,601/- ON ACCOUNT OF DISALLOWANCE OUT OF JO B WORK CHARGES. 9. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE IS SUE AND FACTS OF THE CASE IN THIS CROSS-APPEAL OF THE ASSESSEE AND THE REVENUE A RE IDENTICAL WITH THE ISSUE AND FACTS OF THE CASE IN THE CASE OF KAILASHCHANDRA MALIRAM KANODIA FOR THE SAME ASSTT.YEAR 2007-08 IN ITA NO.345/AHD/2011 AND 395/AHD/2011. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION IN THE FOREGOING PARAS OF THIS ORDER WHILE DISPOSING OF THE APPEAL O F THE ASSESSEE AND THE REVENUE IN THE CASE OF SHRI KAILASHCHANDRA MALIRAM KANODIA FOR THE SAME ASSTT.YEAR 2007-08, WE HOLD THAT THERE IS NO MERIT IN THE GROUNDS OF THE ASSESSEE AND THE REVENUE, AND ACCORDINGLY, BOTH ARE DISMISSE D. ITA NO.347/AHD/2011 (ASSESSEES APPEAL AJAY KAILA SHCHANDRA KANODIA) ITA NO.345/AHD/2011 &5 OTHERS -6- 10. THE ONLY GROUND OF THE APPEAL OF THE ASSESSEE I S AS UNDER: 1. IN HIS ORDER DATED 10/12/2010, THE LD.CIT(A) HA S GROSSLY ERRED BY CONFIRMING A DISALLOWANCE OF 2.5% OF THE JOBWORK CH ARGES CLAIMED BY THE ASSESSEE. IN THE ORIGINAL ORDER OF THE LD.AO DATED 29/12/2009, THE LD.AO HAD DISALLOWED 25% OF THE JOBWORK CHARGES CLAIMED B Y THE ASSESSEE OF RS.3,81,84,332/-, DUE TO WHICH THE DISALLOWANCE AMO UNTED TO RS.95,46,083/-. DURING THE APPEAL PROCEEDINGS, THE LD.CIT(A) VERIFIED THE VARIOUS SUBMISSIONS GIVEN TO HIM, BUT ONLY REDU CED THE DISALLOWANCE TO 2.5% OF THE JOBWORK CHARGES FROM THE ORIGINAL 25 % INSTEAD OF DELETING THE ENTIRE DISALLOWANCE. 11. CORRESPONDING APPEAL OF THE REVENUE IS ITA NO.3 94/AHD/2011, IN WHICH ONLY GROUND OF THE APPEAL OF THE REVENUE IS AS UNDE R: 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.85,01,475/- ON ACCOUNT OF DISALLOWANCE OUT OF JO B WORK CHARGES. 12. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE AND FACTS OF THE CASE IN THIS CROSS-APPEAL OF THE ASSESSEE AND THE REVENUE A RE IDENTICAL WITH THE ISSUE AND FACTS OF THE CASE IN THE CASE OF KAILASHCHANDRA MALIRAM KANODIA FOR THE SAME ASSTT.YEAR 2007-08 IN ITA NO.345/AHD/2011 AND 395/AHD/2011. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION IN THE FOREGOING PARAS OF THIS ORDER WHILE DISPOSING OF THE APPEAL O F THE ASSESSEE AND THE REVENUE IN THE CASE OF SHRI KAILASHCHANDRA MALIRAM KANODIA FOR THE SAME ASSTT.YEAR 2007-08, WE HOLD THAT THERE IS NO MERIT IN THE GROUNDS OF THE ASSESSEE AND THE REVENUE, AND ACCORDINGLY, BOTH ARE DISMISSE D. 13. IN THE RESULT, THE APPEALS OF THE ASSESSEES AS WELL AS REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( # ## # . .. . # ## # . . . . % % % % /N.S.SAINI) &' ( &' ( &' ( &' ( /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT