Shri Bhagwanbhai Khimjibhai Kajawadra, Surat V. The Income tax Officer,Ward-9(1), Surat

ITA 3977/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0052 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-08-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 29-10-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R N VEPARI
• Keywords: Principle of natural justice; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MAHAVIR SINGH, JUDICIAL MEMBER) ITA.NO.3977/AHD/2007 [ASSTT.YEAR : 2004-2005] BHAGWANBHAI KHIMJIBHAI KAJAVADRA 60, PANCHDEV SOCIETY NR.SHIRDI DHAM SOCIETY, NR. LAXMI HOTEL VARACHHA ROAD, SURAT 395 006. VS. ITO, WARD-9(1) SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.N.VEPARI REVENUE BY : SHRI K.MADHU SUDAN O R D E R PER G.D. AGRAWAL, VICE-PRESIDENT: THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, SURAT DATED 14-8-2007 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE FIRST GROUND OF THE ASSESSEE IS AGAINST THE ADDITION OF RS.1,48,878/- ON ACCOUNT OF UNEXPLAINED UNPAID LABOUR CHARGES. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. THE AO DISALLOWED UNPAID LABOUR CHARGES WITH T HE FOLLOWING FINDINGS: 4............. THIS ISSUE WAS ONCE AGAIN RAISED VI DE PARA-2 OF THIS OFFICE LETTER DATED 6.102.006 AND REQUESTED THE ASSESSEE T O GIVE THE NAME AND ADDRESS OF THE PERSONS WHO HAVE BEEN CLAIMED UNDER UNPAID SALARY/WAGES. HE WAS FURTHER REQUESTED TO GIVE THE DATE AND AMOUNT ON WHICH UNPAID WAGES WERE PAID IN FUTURE. IN RESPON SE THE ASSESSEE SUBMITTED VIDE PARA-6 OF HIS LETTER DATED 13.11.200 6 THAT THE STATEMENT ITA.NO.3977/AHD/2007 -2- OF UNPAID LABOUR CHARGES IS SUBMITTED FOR YOUR KIND PERUSAL ALONG WITH THE DATE OF PAYMENT OF WAGES BUT NO SUCH STATEMENT HAS BEEN EITHER SUBMITTED FOR VERIFICATION OR ENCLOSED WITH THE LET TER DATED 13.11.2006. IT IS NOT UNDERSTOOD WHY THE LIST OF PERSON WITH AD DRESS HAS NOT BEEN FURNISHED EVEN IT WAS SPECIFICALLY REQUIRED AND CAL LED FOR DURING THE COURSE OF HEARING DATED 20.07.2006. IN THE CIRCUMS TANCES, THE CLAIM OF OUTSTANDING WAGES (UNPAID WAGES) IS NOT FOUND GENUI NE. THE ENTIRE CLAIM OF RS.2,30,000/- IS REQUIRED TO BE DISALLOWED . HOWEVER, UNDER THE CONCEPT OF NATURAL JUSTICE AND UNDER THE PREVAILING PRACTICE OF LABOUR PAYMENT IN DIAMOND INDUSTRY IN MOST OF CASES MIGHT HAVE BEEN KEPT PENDING AT LEAST ONE MONTH SALARY, THE LABOUR PAYME NT CLAIMED IN THE MONTH OF MARCH, 2004 AMOUNTING TO RS.81,122/- IS AL LOWED AS OUTSTANDING LABOUR AND REMAINING RS.1,48,878/- IS T REATED UNEXPLAINED LIABILITY SHOWN BY THE ASSESSEE. THE SAID AMOUNT I S ADDED TO THE TOTAL INCOME OF THE ASSESSEE. SINCE THE ASSESSEE HAS FIL ED INACCURATE PARTICULARS OF HIS INCOME, THE PENALTY U/S.271(1)(C ) R.W.S EXPLANATION-1 THERETO IS INITIATED. FROM THE ABOVE, IT IS EVIDENT THAT THOUGH THE ASSES SEE CLAIMED TO HAVE SUBMITTED THAT THE STATEMENT OF UNPAID LABOUR CHARG ES, BUT AS PER THE AO NO SUCH STATEMENT WAS SUBMITTED. AT THE TIME OF HEARI NG BEFORE US, THE ASSESSEES COUNSEL REITERATED THAT THE STATEMENT OF LABOUR CHA RGES ALONG WITH DATES OF PAYMENTS OF THE WAGES TO THEM WAS SUBMITTED BEFORE THE AO. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 4. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDE S AND THE FACTS OF THE CASE, IN OUR OPINION, IT WOULD MEET ENDS OF JUSTICE , IF THE ORDER OF THE LOWER AUTHORITIES ON THIS POINT IS SET ASIDE AND THE MATT ER IS RESTORED BACK TO THE FILE OF THE AO. WE ORDER ACCORDINGLY AND DIRECT THE ASSESS EE TO FURNISH STATEMENT OF UNPAID LABOUR CHARGES ALONG WITH THE DATE OF PAYMEN T OF OUTSTANDING WAGES ETC. ITA.NO.3977/AHD/2007 -3- BEFORE THE AO. THEREAFTER, THE AO IS DIRECTED TO R E-ADJUDICATE THE MATTER IN ACCORDANCE WITH LAW. 5. THE SECOND GROUND OF THE ASSESSEES APPEAL IS AG AINST THE ADDITION OF RS.1,20,034/- TOWARDS INFLATION OF LABOUR EXPENSES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT I S EVIDENT THAT THE AO FOUND THAT THERE IS A VARIATION IN THE PAYMENT OF LABOUR CHARGES MONTH-WISE. IN THE MONTH OF APRIL, THE LABOUR CHARGES WERE PAID AT THE AVERAGE RATE OF RS.217.65 PER CARAT. WHILE IN THE MONTH OF MARCH, IT WAS PAI D AT THE RATE OF RS.271.80 PER CARAT. HE THEREFORE WORKED OUT THE LABOUR CHARGES AT THE RATE OF RS.230/- PER CARAT AND DISALLOWED THE EXCESS. IT WAS EXPLAINED BY THE LEARNED COUNSEL THAT THE LABOUR CHARGES PAID TO THE WORKERS DEPENDS UPON SO MANY FACTORS LIKE SIZE AND QUALITY OF ROUGH DIAMONDS AND THE QUALITY OF TH E FINISHED DIAMONDS TO BE PRODUCED. THEREFORE, THE DISALLOWANCE OF THE LABOU R CHARGES BY THE AO BY APPLYING THE RATE OF RS.230/- PER CARAT IS WITHOUT ANY BASIS. HE ALSO POINTED OUT THAT THE ENTIRE PAYMENT OF LABOUR CHARGES IS VOUCHE D AND VERIFIABLE. 7. THE LEARNED DR, ON THE OTHER HAND RELIED UPON TH E ORDERS OF THE LOWER AUTHORITIES. 8. AFTER CONSIDERING THE ABOVE ARGUMENTS OF THE BOT H THE PARTIES AND THE FACTS OF THE CASE, WE DO NOT FIND ANY JUSTIFICATION FOR REJECTING THE LABOUR CHARGES PAID BY THE ASSESSEE ON THE MERE GROUND THA T THERE IS A VARIATION BETWEEN THE RATE OF LABOUR CHARGES FROM ONE MONTH T O OTHER MONTHS. SIMILARLY, THERE IS NO BASIS FOR ADOPTING THE LABOUR CHARGES A T THE RATE OF RS.230 PER CARAT. THE CONTENTIONS OF THE ASSESSEE THAT THE ENTIRE LAB OUR CHARGES IS VOUCHED AND VERIFIABLE HAS NOT BEEN CONTROVERTED. CONSIDERING THE FACTS OF THE CASE AND THE ARGUMENTS OF BOTH THE SIDES, WE DO NOT FIND ANY JUS TIFICATION FOR SUSTAINING THE ADDITION OF RS.1,20,034/- TOWARDS INFLATION OF LABO UR CHARGES. ACCORDINGLY, GROUND NO.2 OF THE ASSESSEES APPEAL IS ALLOWED. ITA.NO.3977/AHD/2007 -4- 9. GROUND NO.3 OF THE ASSESSEES APPEAL IS AGAINST THE ADDITION OF RS.2,87,214/- IN RESPECT OF SUPPRESSION OF LABOUR C HARGES. 10. FROM THE PERUSAL OF THE ASSESSMENT ORDER, WE FI ND THAT THE AO HAS NOTED THAT THE TOTAL UNITS OF ELECTRICITY CONSUMPTION WAS 79449. IN THE MONTH OF MAY, 2003, THE ASSESSEE HAS CONSUMED EIGHT UNITS OF ELECTRICITY FOR PROCESSING OF ONE CARAT OF DIAMOND. APPLYING THE ABOVE RATIO, THE AO WORKED OUT THAT THE ASSESSEE HAD PROCESSED 9931.13 CARATS OF DIAMOND (7 9449/8). THE ACTUAL PRODUCTION OF DIAMOND SHOWN BY THE ASSESSEE WAS 908 4.52. THEREFORE, THE AO PRESUMED THAT THE ASSESSEE SUPPRESSED THE JOB WORK RECEIPT OF RS.846.61 CARAT OF DIAMOND. TAKING THE AVERAGE RATE OF JOB WORK CH ARGES RECEIVED BY THE ASSESSEE AT RS.339.25 PER CARAT, HE WORKED OUT THE SUPPRESSION OF JOB WORK RECEIPT AMOUNTING TO RS.2,87,212/-. IT WAS EXPLAIN ED BY THE LEARNED COUNSEL THAT THE CONSUMPTION OF THE ELECTRICITY PER CARAT O F THE DIAMOND VARIES CONSIDERING SO MANY FACTORS I.E. SIZE OF THE ROUGH DIAMOND AND THE QUALITY OF THE FINISHED DIAMONDS TO BE PRODUCED. THEREFORE, TH E PRESUMPTION THAT ALWAYS ONE CARAT OF THE DIAMOND WOULD BE PROCESSED BY CONS UMING EIGHT UNITS OF THE ELECTRICITY WAS WITHOUT ANY BASIS. HE ALSO POINTED OUT THAT THE ASSESSEE HAS MAINTAINED REGULAR BOOK OF ACCOUNTS, THERE IS COMPL ETE DAY-TO-DAY DETAILS FOR THE PROCESSING OF DIAMOND AS WELL AS LABOUR CHARGES PAID AND JOB WORK CHARGES RECEIVED. WITHOUT FINDING ANY EVIDENCE OF SUPPRESS ION OF RECEIPTS, THE ADDITION MADE BY THE AO ON PRESUMPTION MAY BE DELETED. 11. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE AO AND STATED THAT THE AO HAS GIVEN THE PROPER BASIS FOR R EJECTION OF THE BOOKS OF ACCOUNTS AS WELL AS THE ESTIMATION OF THE LABOUR CH ARGES. 12. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SID ES AND FACTS OF THE CASE, WE FIND NO JUSTIFICATION FOR REJECTION OF THE BOOKS OF ACCOUNTS SO FAR AS THE RECEIPT OF JOB WORK CHARGE IS CONCERNED. THE ASSES SEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS. THE ASSESSEE HAS ALSO MAINTAINE D DAY-TO-DAY RECORD FOR THE ITA.NO.3977/AHD/2007 -5- PROCESSING OF DIAMONDS. THE AO HAS NOT POINTED OUT ANY SINGLE INSTANCE WHERE THE RECEIPT OF JOB CHARGES WAS SUPPRESSED. THEREFO RE, THE WORKING OF THE JOB WORK CHARGES ON A PRESUMPTIVE BASIS WAS WITHOUT ANY BASIS. THE CONSUMPTION OF ELECTRICITY OF DIAMOND FOR PROCESSING PER CARAT MAY VARY FOR DIFFERENT REASONS. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY JUSTIFICATION FOR SUSTAINING THE ADDITION OF RS.2,87,214/-, THE SAME IS DELETED. 13. IN THE RESULT, THE ASSESSEES APPEAL IS DEEMED TO BE ALLOWED AS ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 20 TH AUGUST, 2010. SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 20-08-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD