The ITO, Ward-2(3), Ahmedabad V. Shri Yogesh Babulal Kanodia,HUF, Ahmedabad

ITA 396/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85541 (ITAT-AHMEDABAD)
• 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: 24-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 14-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B L YADAV
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI , A.M.) I. T. A. NO S . 378 & 392/ AHD/ 20 1 1 (A SSESSMENT YEAR: 2007 - 08 ) DINESH BABULAL KANODIA 201, SARAP, OPP. NAVJIVAN PRESS ASHRAM ROAD, AHMEDABAD PAN NO. ADBPK 7141A I.T.O., WARD 2(1), AHMEDABAD V/S V/S I.T.O., WARD 2(1), AHMEDABAD DINESH BABULAL KANODIA 201, SARAP, OPP. NAVJIVAN PRESS ASHRAM ROAD, AHMEDABAD (APPELLANT) (RESPONDENT) I.T. A. NO S . 379 & 396 /AHD/201 1 (ASSESSMENT YEAR: 2007 - 08 ) YOGESH BABULAL KANODIA HUF 201, SARAP, OPP. NAVJIVAN PRESS ASHRAM ROAD, AHMEDABAD PAN NO.AAAHY 3050Q I.T.O., WARD 2 (3), AHMEDABAD V/S V/S I.T.O., WARD 2 (3), AHMEDABAD YOGESH BABULAL KANODIA HUF 201, SARAP, OPP. NAVJIVAN PRESS ASHRAM ROAD, A HMEDABAD PAN NO.AAAHY 3050Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINIT MOONDRA, A.R. RESPONDENT BY : SHRI B.L. YADAV, SR. D.R. ( )/ ORDER ITA NO S. 378, 379, 392 & 396/A/2011 . A.Y. 2007 - 08 2 DATE OF HEARING : 24 - 12 - 2014 DATE OF PRONOUNCEMENT : 09 - 01 - 2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE 4 APPEALS OF WHICH TWO ARE FILED BY THE REVENUE AND OTHER 2 ARE FILED BY THE ASSESSEE OF 2 DIFFERENT ASSESSEES ARE AGAINST THE ORDER OF CIT(A) - XVI, AHMEDABAD DATED 10.12.2010 . 2. BEFORE US, BOTH T HE PARTIES SUBMITTED THAT THOUGH THE APPEALS ARE OF 2 DIFFERENT ASSESSEES BUT FACTS AND CIRCUMSTANCES OF ALL THE CASES ARE SIMILAR EXCEPT FOR THE FOR THE ASSESSEE AND AMOUNTS AND THE SUBMISSIONS ARE ALSO COMMON FOR ALL THE APPEALS AND THEREFORE ALL THE APPEALS CAN BE HEARD TOGETHER. WE THEREFORE PROCEED TO DISPOSE OF ALL THE APPEALS TOGETHER FOR THE SAKE OF CONVENIENCE AND THUS PROCEED WITH THE FACTS IN THE CASE OF DINESH BABULAL KANODIA ITA NOS. 378 & 392/AHD/2011. 3. THE RELEVANT FACTS AS CULLE D OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM MANUFACTURING AND TRADING OF GREY CLOTH AND TRADING OF ELECTRONICS. ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y. 07 - 08 ON 31.10.2007 DECLARING TOTAL INCOME OF RS. 1,51,740/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 2.09.2012 AND THE TOTAL INCOME WAS DETERMINED AT RS. 11,92,204/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 10.12.2010 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A) , ASSESSEE AND REVENUE BOTH ARE NOW IN APPEAL BEFORE US. 5. THE GROUNDS RAISED BY THE ASSESSEE READS AS UNDER: - 1. IN HIS ORDER D ATED 1 0/12/2010, THE LD. CIT [APPEALS] HAS GROSSLY ERRED BY CONFIRMING A DISALLOWANCE OF 2.5 % OF THE JOBWORK CHARGES CLAIMED BY THE ASSESSEE. IN THE ORIGINAL ORDER OF THE ID. AO DATED ITA NO S. 378, 379, 392 & 396/A/2011 . A.Y. 2007 - 08 3 29/12/2009, THE ID. AO HAD DISALLOWED 25 % OF THE JOBWORK CHARGES CLAIM ED BY THE ASSESSEE OF RS. 58,95,540/ - , DUE TO WHICH THE DISALLOWANCE AMOUNTED TO RS. 14,73,985 / - . DURING THE APPEAL PROCEEDINGS, THE LD. CIT [APPEALS] VERIFIED THE VARIOUS SUBMISSIONS GIVEN TO HIM, BUT ONLY REDUCED THE DISALLOWANCE TO 2.5 % OF THE JOBWORK CHARGES FROM THE ORIGINAL 25% INSTEAD OF DELETING THE ENTIRE DISALLOWANCE. 6. ON THE OTHER HAND THE GROUNDS RAISED BY THE REVENUE READS AS UNDER: - 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 13,26,587/ - ON ACCOUNT OF DISALLOWANCE OF JOB WORK CHARGES. 7. SINCE THE GROUNDS RAISED BY THE ASSESSEE AND REVENUE ARE INTERCONNECTED AND ALL THE GROUNDS ARE CONSIDERED TOGETHER. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSING THE TRADING ACCOUNT, A.O NOTICED THAT ASSESSEE HAS DE BITED RS. 41,61,857/ - AS JOB WORK CHARGES. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF THE EXPENSE ALONG WITH NECESSARY CONFIRMATIONS FROM EACH PARTY. A.O NOTICED THAT ASSESSEE DID NOT PRODUCE CONFIRMATION FROM ANY PARTY NOR PRODUCE D THE COPY OF THE C HE Q U ES ISSUED TO THE PARTIES TO WHOM THE PAYMENTS WERE MADE. A.O ALSO NOTED THAT THE ADDRESSES OF THE PARTIES GIVEN WERE INCOMPLETE AND THEREFORE THE INFORMATION COULD NOT BE COLLECTED FROM THE PARTIES NOR THE PARTIES COULD BE EXAMINED. A.O WAS OF THE VIEW THAT THE ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS OF EXPENSES WHICH THE ASSESSEE HAS FAILED TO DISCHARGE. HE FURTHER NOTED THAT ASSESSEE ALSO COULD NOT PROVE THAT THE PAYMENTS THAT HAVE BEEN MADE TO THE PARTIES WERE THROUGH ACCOUNT PAYEE CHEQUES. HE WAS THEREFORE OF THE VIEW THAT THE INFLATION OF THE EXPENSES DEBITED UNDER THE JOB WORK CHARGES CANNOT BE RULED OUT. HE ACCORDINGLY CONSIDERED 25% OF THE EXPENSES DEBITED UNDER JOB WORK CHARGES TO BE BOGUS/INGENUINE AND ACCORDINGLY DISALLOWED RS. 10,40 ,464/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: - 4.3 IN VIEW OF THE ABOVE THE AO ALSO WRONGLY M ADE DISALLOWANCE AT ADHOC FIGURE OF 25%. IT IS WELL ACCEPTED PRINCIPLES THAT EVERY SALE SHOULD BE SUPPORTED BY PURCHASES AND MANUFACTURING EXPENSES IF ITA NO S. 378, 379, 392 & 396/A/2011 . A.Y. 2007 - 08 4 MANUFACTURING IS INVOLVED AND THE SALES MADE BY THE APPELLANT WERE NOT QUESTIONED ANY TIME DURING THE ASS ESSMENT PROCEEDINGS. THEREFORE, IT CAN BE SUMMARIZED THAT THE A.O. BEING QUASI JUDICIAL AUTHORITIES HAS ACTED IN AN ARBITRARY MANNER AND WITHOUT APPLYING THE RATIO OF JUSTICE, EQUITY HAS DISALLOWED 25% OF WEAVING CHARGES WITHOUT ANY BASIS. THE AO HAS NOT G IVEN ANY REASON WHY HE HAS ADOPTED THE FIGURE OF 25% AND WHY NOT ANY OTHER FIGURE. THE A.O. CANNOT ACCEPT THE SALES OF FINISHED CLOTH AND PURCHASE OF YARN AND REJECT THE WEAVING CHARGES SIMULTANEOUSLY WHEN THE QUANTITATIVE DETAILS OF GOODS IS GIVEN TO HIM AND HE DOES NOT FIND ANY ADVERSE THING IN THAT. THE AO HAS MADE NO INQUIRY AT ALL AS CAN BE SEEN FROM THE ASSESSMENT ORDER. IF THE QUANTITY OF SALES OF CLOTH AND PURCHASE OF YARN IS ACCEPTED BY THE A.O. AS HE HAS DONE IN THIS CASE THEN HE CANNOT DISALLOW T HE WEAVING CHARGES @ 25% WITHOUT BRINGING SOME MATERIAL ON RECORD TO SHOW THAT THE INFLATION IS SUCH HUGE. IN VIEW OF THE ABOVE, THE ARGUMENT OF THE APPELLANT THAT THE DISALLOWANCE MADE BY THE AO IS AD HOC AND BASED ON CONJECTURES AND SURMISES AND IS WITHO UT ANY BASIS. FROM THE ABOVE, IT IS CLEAR THAT THERE IS NO BASIS FOR THE DISALLOWANCE MADE BY THE AO OF 25% OF JOB CHARGES. THE APPELLANT HAD DISCHARGED ITS ONUS AND FILING COPIES OF BILLS OF JOB CHARGES, WHICH CONTAINED NAME AND ADDRESS OF THE PARTIES, AN D THE PAYMENTS WERE MADE BY CHEQUES. I HAVE GONE THROUGH THE COPIES OF BILLS OF JOB CHARGES AND IT IS CLEAR THAT ALL THE BILLS HAVE COMPLETE NAME AND ADDRESS OF THE PARTIES. IT IS NOT THE ONUS OF THE APPELLANT TO PRODUCE COPIES OF CHEQUES WHICH ARE KEPT IN THE CUSTODY OF THE BANKS. THE AO HAS BROUGHT NO MATERIAL ON RECORD TO PROVE THAT EITHER THE PARTIES WERE BOGUS OR THE JOB CHARGES WERE INFLATED TO THE EXTENT OF 25%. IN THE ABSENCE OF THE SAME, THE DISALLOWANCE MADE BY THE AO IS NOT CORRECT. HOWEVER, CONS IDERING THE FACT THAT ON A TURNOVER OF RS. 4.00 CRORE, THE GROSS PROFIT OF RS. 111124/ - IS EXTREMELY LOW. SOME INFLATION OF EXPENSES IN RESPECT OF JOB CHARGES CANNOT BE DENIED. THEREFORE, THE DISALLOWANCE MADE BY THE AO AT 25% IS RESTRICTED TO DISALLOWANCE AT 2.5% OF THE JOB CHARGES. THIS DISALLOWANCE, THEREFORE, IS RESTRICTED TO RS. 147398/ - . THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. 9. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. 10. BEFORE US, LD. A.R. REITE RATED THE SUBMISSIONS MADE BEFORE CIT(A) AND THEREFORE SUBMITTED THAT IN THE PRESENT CASE, NO ADDITION ON ACCOUNT OF JOB WORK CHARGES WAS CALLED FOR. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS NOTED THAT ASSESSEE HAD DISCHARGED HIS ONUS AND FILED COPIES OF BI LLS OF JOB CHARGES WHICH CONTAINED NAME AND ADDRESSES OF THE PARTIES AND THE PAYMENTS WER E MADE BY CHEQUES. HE HAS FURTHER GIVEN A FINDING THAT MOST OF THE BILLS HAVE COMPLETE NAME AND ADDRESS OF THE PARTIES. HE HAS FURTHER NOTED THAT WHEN THE QUANTITATIVE DETAILS OF FINISHED GOODS AND PURCHASE OF YARN HAVE BEEN SUBMITTED TO THE A.O AND THE S AME HAS BEEN ACCEPTED AND IN THE ABSENCE OF ANY ADVERSE FINDING WEAVING CHARGES COULD NOT BE DISALLOWED. HOWEVER, CONSIDERING THE TURNOVER OF RS. 3.82 CRORE THE GROSS PROFIT SHOWN BY THE ASSESSEE AT RS. 1.96 LACS WAS ITA NO S. 378, 379, 392 & 396/A/2011 . A.Y. 2007 - 08 5 CONSIDERED TO BE EXTREMELY LOW AND THER EFORE HE RESTRICTED THE DISALLOWANCE AT 2 . 5% OF THE JOB CHARGES IN STEAD OF 25% MADE BY A.O . BEFORE US NEITHER REVENUE NOR ASSESSEE HAS BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH HIS OR DER ON THIS GROUND AND THER EFORE THIS GROUND OF ASSESSEE & REVENUE ARE DISMISSED. 12. IN THE RESULT, THE APPEALS OF ASSESSEE AS WELL AS REVENUE ARE DISMISSED. ITA NOS. 379 & 396/AHD/2011 IN CASE OF YOGESH BABULAL KANODIA HUF. 13. IN THE PRESENT CASES, SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL TO THAT IN CASE OF DINESH BABULAL KANODIA IN ITA NOS. 378 & 392/AHD/2011, WE FOR THE REASONS STATED HEREINABOVE WHILE DECIDING THE CASE IN CASE OF DINESH BABULAL KANODIA (SUPRA) AND FOR SIMILAR REASONS D ISMISS THE GROUNDS OF ASSESSEE AND REVENUE IN THE PRESENT APPEALS . 14. IN THE RESULT, ALL THE 4 APPEALS OF REVENUE AND ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 09 - 01 - 201 5 . SD/ - SD/ - (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT C ONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD