ZAVERCHAND DAMJI HARIA, PROP OF ZEAL APPARELL, PA, MUMBAI V. ACIT 21(3), MUMBAI

ITA 4455/MUM/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2291 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 11-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: CHHAMGUR SHRIKANT
• Keywords: Reopening of assessment; Capital asset; Depreciation; Business expenditure; TDS
• Section: 40A(3); 192; 194J; 13; 119; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , G BENCH MUMBAI BEFORE : SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHRI M.BALAGANESH, A CCOUNTANT MEMBER ITA NO. 4455 /MUM/ 2018 ( ASSESSMENT YEAR : 2009 - 10 ) & ITA NO. 4454 /MUM/ 20 18 ( ASSESSMENT YEAR : 2010 - 11 ) SHRI ZAVERCHAND DAMJI HARIA PROP. OF ZEAL APPAREL 124, ASHISH INDUSTRIAL ESTATE GOKHALE ROAD MUMBAI 400 025 VS. ACIT - 21(3) 2 ND FLOOR, PIRAMAL INCOME TAX, MUMBAI MAHARASHTRA PAN/GIR NO. AALPH7225H (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI CHHAMGUR SHRIKANT REVENUE BY SHRI PANKAJ KUMAR DATE OF HEARING 0 4 / 10 /2021 DATE OF PRONOUNCEMENT 22 / 10 /202 1 / O R D E R PER M. BALAGANESH (A.M) : THESE APPEAL S IN ITA NO S . 4454/MUM/2018 & 4455/MUM/2018 FOR A.Y RS . 2009 - 10 & 2010 - 11 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 33, MUMBAI IN APPEAL NO. CIT(A) - 33/RG.21/321/2015 - 16 & CIT(A) - 33/RG.21/320/2015 - 16 DATED 18/04/2018 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 2 U/S.143(3) R.W.S. 14 7 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 31/03/2015 BY THE LD. ASST. COMMISSIONER OF INCOME TAX - 21(3), MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). IDENTICAL ISSUES ARE INVOLVED IN BOTH THE APPEALS AND HENCE, THEY ARE TAKEN UP TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.4455/MUM/2018 (A.Y.2009 - 10) ASSESSEE APPEAL: 2. THE GROUND NOS. 1.1 . - 1.6 . RAISED BY THE ASSESSEE ARE CHALLENGING THE DISALLOWANCE MADE ON ACCOUNT OF NON - GENUINE PURCHASES AMOUNTING TO RS.36,897/ - . 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTUR ING AND SELLING OF READYMADE GAR MENTS ON WHOLESALE AND RETAIL BASIS. THE ASSESSEE, A N INDIVIDUAL HAD FILED HIS RETURN OF INCOME FOR THE A.Y.2009 - 10 ON 29/09/2009 DECLARING TOTAL INCOME OF RS.24,30,432/ - WHICH WAS DULY PROCESSED U/S.143(1) OF THE ACT. LATER INFORMATION WAS RECEIVED FROM SALES TAX AUTHORITIES, GOVERNMENT OF MAHARASHTRA THAT ASSESSEE HAD TAKEN CERTAIN BOGUS BILLS FROM M/S. MONISH ENTERPRISES AMOUNTING TO RS.36,897/ - , WHO WAS FOUND TO BE AN ENTRY OPERATOR PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL SUPPLY OF GOODS TO THE PARTIES. THIS INFORMATION APPARENTLY TRIGGERED THE REOP ENING OF ASSESSMENT IN THE CASE OF THE ASSESSEE. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT WAS DULY FURNISHED TO THE ASSESSEE AND IN THE RE - ASSESSMENT PROCEEDINGS, THE LD. AO OBSERVED THAT SINCE NO DETAILS WERE PROVIDED BY THE ASSESSEE BY CONCLUSIV ELY PROVING THE GENUINENESS OF ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 3 THE PURCHASES MADE BY THE ASSESSEE FROM MONISH ENTERPRISES, THE LD. AO DISALLOWED THE ENTIRE VALUE OF PURCHASES OF RS.36,897 AS BOGUS. THIS ACTION WAS UPHELD BY THE LD. CIT(A). 3.1. WE FIND THAT ASSESSEE HAD FURNISHED THE CO PY OF THE BILLS OF THE SUPPLIERS ALONG WITH EVIDENCE OF PAYMENT MADE TO THEM BY CHEQUE THROUGH ITS BANK ACCOUNT AND MERELY BECAUSE THE ASSESSEE HAD FAILED TO PRODUCE THE SUPPLIER FOR VERIFICATION BY THE LD. AO, THE ENTIRE PURCHASES MADE BY THE ASSESSEE COU LD NOT BE TREATED AS BOGUS. WE FIND THAT SIMILAR PURCHASES MADE FROM THE SAME PARTY IN A.Y.2011 - 12 BY THE ASSESSEE, THIS TRIBUNAL IN ITA NO.300/MUM/2017 DATED 19/09/2018 HAD RESTRICTED THE DISALLOWANCE ONLY TO 12.5% OF VALUE OF PURCHASES ON THE PREMISE THA T ONLY THE PROFIT ELEMENT EMBEDDED THEREON COULD BE BROUGHT TO TAX. WE ALSO FIND THAT FOR A.Y.2011 - 12, THE LD. CIT(A) HIMSELF RESTRICTED THE DISALLOWANCE ONLY TO 25% OF VALUE OF PURCHASES FROM MONISH ENTERPRISES BY ESTIMATI NG THE PROFIT PERCENTAGE AT 25%, WHICH WAS BROUGHT DOWN TO 12.5% BY THIS TRIBUNAL. RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y.2011 - 12 REFERRED TO SUPRA, WE DIRECT THE LD. AO TO ADOPT THE PROFIT PERCENTAGE AT 12.5% OF 36,897/ - AND BRING TO TAX THE SAID PROFIT FOR THE YEAR UNDER CONSIDERATION ALSO. ACCORDINGLY, THE GROUND NOS. 1.1 TO 1.6 ARE PARTLY ALLOWED. 4. THE GROUND NOS. 2.1 . 2.5 . RAISED BY THE ASSESSEE ARE CHALLENGING THE DISALLOWANCE OF PAYMENT MADE TO DESIGNERS WORK ING IN THE FACTORY WITHO UT DEDUCTION OF TAX AT SOURCE. 4.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE HAS MADE THE FOLLOWING ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 4 PAYMENTS TO ITS DESIGNERS WORKING IN THE FACTORY DURING THE YEAR UNDER CONSIDERATION : - (A) AN KITA JAIN - RS.1,82,454/ - (B) CHAULA D TRIVEDI - RS.1,59,467/ - (C) KHUSHBU AGRAWAL - RS.1,81,041/ - TOTAL RS.5,22,962/ - ========= 4.2. THE ASSESSEE STATED THAT THESE THREE ARE ULTIMATELY DESIGNERS WORKING IN THE ASSESSEES OWN FACTORY AS EMPL OYEES AND A MOUNTS PAID TO THEM IS ACTUALLY SALARY BUT DEBITED TO DESIGNER CHARGES IN THE BOOKS. THE AFORESAID PAYMENTS ARE A TOTAL FIGURE PAID TO THEM ON A MONTHLY BASIS. IT WAS ALSO POINTED OUT THAT ALL THE WORKERS ARE HAVING THEIR PAN AND THE TOTAL SALAR Y PAID TO THEM DOES NOT EXCEED THE BASIC EXEMPTION LIMIT AND HENCE, THERE IS NO OBLIGATION FOR THE ASSESSEE TO DEDUCT TAX AT SOURCE. IT WAS ALSO POINTED OUT THAT ALL THESE SALARY PAYMENTS, (THOUGH CATEGORISED AS DESIGNER CHARGES) ARE PAID ONLY BY CHEQUES A ND GENUINE BUSINESS EXPENDITURE. THE LD. AO HOWEVER, DISREGARDED THESE CONTENTIONS AND OBSERVED THAT THESE PAYMENTS ARE ONLY DESIGNING CHARGES WHICH WOULD FALL WITHIN THE AMBIT OF SECTION 194J OF THE ACT AND SINCE NO TAX WAS DEDUCTED AT SOURCE WHILE MAKING PAYMENTS TO THEM, THE SAME WOULD BECOME ELIGIBLE FOR DISALLOWANCE U/S.40( A )( I A) OF THE ACT. THIS ACTION OF THE LD. AO WAS UPHELD BY THE LD. CIT(A). 4.3. WE FIND THAT ASSESSEE HAD ENCLOSED THE ENTIRE SALARY REGISTER FOR ALL THE MONTHS STARTING FROM PAGES 71 TO 118 OF THE PAPER BOOK FILED BEFORE US WHICH WAS ALSO FILED BEFORE THE LD. CIT(A). THE SAID SALARY REGISTER ADMITTEDLY CONTAINS THREE NAMES I.E. ANKITA JAIN, CHAULA TRIVEDI AND KHUSHBU AGRAWAL AS EMPLOYEES OF THE ASSESSEE. THIS CONCLUSIVELY PROVES ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 5 TH AT ALL THESE THREE PEOPLE ARE SALAR IED EMPLOYEES OF THE ASSESSEE AND SINCE THESE PEOPLE ARE WORKING IN THE FACTORY, THE ASSESSEE HAS DEBITED THE SALARY PAID TO THEM AS DESIGNER CHARGES UNDER THE HEAD MANUFACTURING EXPENSES INSTEAD OF SALARY. WE HOLD T HAT THE NOMENCLATURE OF THE EXPENDITURE DOES NOT MATTER. SUBSTANCE OVER FORM OF THE TRANSACTION IS RELEVANT. APART F ROM THIS, WE ALSO FIND THAT ASSESSEE HAS ALSO ENCLOSED AN AFFIDAVIT FROM ALL THESE PARTIES IN PAGES 119 TO 127 OF THE PAPER BOOK FILED BEFO RE US. WE ALSO FIND THAT THESE AFFIDAVITS WERE ALSO PLACED BEFORE THE LD. CIT(A) AND THE FACT OF THESE AFFIDAVITS BEING PLACED ON RECORD HAS ALSO BEEN ACKNOWLEDGED BY THE LD. AO IN THE REMAND REPORT WHICH IS REPRODUCED IN PAGE 33 PARA 16 OF THE ORDER OF TH E LD. CIT(A). DESPITE THIS FACT, THE LD. CIT(A) HAD IGNORED THE SAME AND UPHELD THE ACTION OF THE LD. AO BY SIMPLY RELYING ON HIS REMAND REPORT. THE LD. AR ALSO STATED THAT SALARY PAID TO THE VERY SAME THREE FEMALE EMPLOYEES WAS NOT DISALLOWED BY THE LD. A O FOR A.Y S . 2010 - 11 AND 2011 - 12. WE FIND THAT WHAT IS PAID TO THESE FEMALE EMPLOYEES ARE ONLY SALARY AND SINCE THE SAME IS BELOW THE BASIC EXEMPTION LIMIT AVAILABLE TO THOSE INDIVIDUALS, THERE IS NO OBLIGATION FOR THE ASSESSEE TO DEDUCT TAX AT SOURCE. ACCO RDINGLY, WE CATEGORICALLY H O LD THAT WHAT IS PAID TO THESE THREE EMPLOYEES ARE ONLY IN THE NATURE OF SALARY FALLING WITHIN THE AMBIT OF SECTION 192 OF THE ACT. HENCE, THE PROVISIONS OF SECTION 40( A )( I A) OF THE ACT COULD NOT BE INVOKED AT ALL IN THE INSTANT CASE. ACCORDINGLY, THE GROUND NOS. 2.1 . 2.5 . RAISED BY THE ASSESSEE ARE ALLOWED. 5. THE GROUND NOS. 3.1 . 3.5 . RAISED BY THE ASSESSEE ARE CHALLENGING THE ADHOC DISALLOWANCE OF THE FOLLOWING EXPENSES MADE AND PARTIALLY CONFIRMED BY THE LD. CIT(A) AS UN DER: - ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 6 SR. NO. NATURE OF EXPENSES TOTAL EXPENSES DISALLOWANCE CONFIRMED BY CIT(A) A) TEA & COFFEE EXPENSES RS. 27,078/ - 20% (RS.5,416/ - ) B) SUNDRY EXPENSES RS.1,24,741/ - 20% (RS.24,948) C) TELEPHONE EXPENSES RS.26,845/ - RS. 26,845/ - D) LAPTOP EXPENSES RS.17,400/ - RS. 17,400/ - E) DEPRECIATION OF MOTOR VEHICLE AND MOTOR VEHICLE EXPENSES RS.2,17,724/ - 10% (RS.21,712) 5.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. NO SPECIFIC ARGUMENTS WERE ADVANCED BY THE LD. AR AT THE TIME OF HEARING WITH REGARD TO THIS DISALLOWANCE. HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) IN THIS REGARD. ACCORDINGLY, THE GROUND NOS. 3.1 . - 3.5 . ARE DISMISSED. 6. THE GROUND NOS. 4.1 . TO 4.4 . RAISED BY THE ASSESSEE ARE CHALLENGING THE DISALLOWA NCE OF CASH EXPENSES AMOUNTING TO RS.57,742/ - U/S.40A(3) OF THE ACT. 6.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LD. AO OBSERVED THAT ASSESSEE HAD INCURRED EXPENSES OF RS.35,021/ - BEING VEHICLE EXPE NSES AND RS. 22,721/ - BEING PAYMENT MADE TO AYESHA DRESSES IN CASH. THE LD. AO INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND DISALLOWED THE TOTAL SUM OF RS.57,742/ - IN THE ASSESSMENT. THE ASSESSEE SUBMITTED THAT RS.35,021/ - ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 7 WAS INCURRED TOWARDS R EPAIRS AND MAINTENANCE OF VEHICLES AND RS.22,721/ - WAS INCURRED ON ACCOUNT OF DAMAGE OF GOODS. SINCE, ASSESSEE DID NOT FURNISH ANY DOCUMENTARY EVIDENCE IN THIS REGARD, THE LD. CIT(A) UPHELD THE ACTION OF THE LD. AO . 6.2. A DMITTEDLY DISALLOWANCE HAS BEEN MADE BY APPLYING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. BEFORE US, THE LD. AR WAS NOT ABLE TO PROVE THAT THE SAID PAYMENTS FALL UNDER ANY OF THE EXCEPTIONS PROVIDED IN RULE 6DD OF THE INCOME TAX RULES 1962. HENCE, WE DO NOT DEEM IT FIT TO INTERFERE I N THE ORDER OF THE LD. CIT(A) IN THIS REGARD. ACCORDINGLY, THE GROUND NOS. 4.1 . 4.4 . RAISED BY THE ASSESSEE ARE DISMISSED. 7. THE GROUND NO.5 RAISED BY THE ASSESSEE IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.4455/MUM/2018 FOR A.Y.2009 - 10 IS PARTLY ALLOWED. ITA NO.4454/MUM/2018 (A.Y.2010 - 2011) ASSESSEE APPEAL 9. THE GROUND NOS. 1.1 . - 1.5 . RAISED BY THE ASSESSEE ARE CHALLENGING THE DISALLOWANCE OF INGENUINE PURCHASES OF RS.16,6 06/ - . 9.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE FOR THE A.Y.2010 - 11 HAD FILED HIS RETURN OF INCOME ON 15/10/2010 DECLARING TOTAL INCOME OF RS.41,72,132/ - WHICH WAS DULY PROCESSED U/S.143(1) OF THE ACT . LATER INFORMATION WAS RECEIVED FROM SALES TAX AUTHORITIES, GOVERNMENT OF MAHARASHTRA THAT ASSESSEE HAD TAKEN CERTAIN BOGUS BILL S FROM M/S. MONISH ENTERPRISES & TRICHIPURAM ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 8 TRADING PVT. LTD., AMOUNTING TO RS.1,20,499/ - & RS.45,562/ - RESPECTIVELY, WHO WERE FOUND TO BE ENTRY OPERATORS PROVIDING ACCOMMODATION BILLS WITHOUT ACTUAL SUPPLY OF GOODS TO THE PARTIES. THIS INFORMATION APPARENTLY TRIGGERED THE REOPENING OF ASSESSMENT IN THE CASE OF THE ASSESSEE. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT WAS D ULY FURNISHED TO THE ASSESSEE AND IN THE RE - ASSESSMENT PROCEEDINGS, THE LD. AO OBSERVED THAT SINCE NO DETAILS WERE PROVIDED BY THE ASSESSEE BY CONCLUSIVELY PROVING THE GENUINENESS OF THE PURCHASES MADE BY THE ASSESSEE FROM MONISH ENTERPRISES & TRICHIPURAM TRADING PVT. LTD., THE LD. AO DISALLOWED THE ENTIRE VALUE OF PURCHASES OF RS.1,66,061/ - (RS.1,20,499/ - + 45,562/ - ) AS BOGUS. THIS ACTION WAS UPHELD BY THE LD. CIT(A). 9.2. WE FIND THAT ASSESSEE HAD FURNISHED THE COPY OF THE BILLS OF THE SUPPLIERS ALONG WI TH EVIDENCE OF PAYMENT MADE TO THEM BY CHEQUE THROUGH ITS BANK ACCOUNT AND MERELY BECAUSE THE ASSESSEE HAD FAILED TO PRODUCE THE SUPPLIER FOR VERIFICATION BY THE LD. AO, THE ENTIRE PURCHASES MADE BY THE ASSESSEE COULD NOT BE TREATED AS BOGUS. WE FIND THAT SIMILAR PURCHASES MADE FROM THE SAME PARTY IN A.Y.2011 - 12 BY THE ASSESSEE, THIS TRIBUNAL IN ITA NO.300/MUM/2017 DATED 19/09/2018 HAD RESTRICTED THE DISALLOWANCE ONLY TO 12.5% OF VALUE OF PURCHASES ON THE PREMISE THAT ONLY THE PROFIT ELEMENT EMBEDDED THEREO N COULD BE BROUGHT TO TAX. RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y.2011 - 12 REFERRED TO SUPRA, WE DIRECT THE LD. AO TO ADOPT THE PROFIT PERCENTAGE AT 12.5% OF 1,66,061/ - AND BRING TO TAX THE SAID PROFIT FOR THE YE AR UNDER CONSIDERATION ALSO. ACCORDINGLY, THE GROUND NOS. 1.1 . TO 1.5 . ARE PARTLY ALLOWED. ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 9 10. THE GROUND NOS. 2.1 . 2.6 . RAISED BY THE ASSESSEE ARE CHALLENGING THE DISALLOWANCE OF PAYMENTS MADE IN THE SUM OF RS.5,39,247/ - BY APPLYING THE PROVISIONS OF S ECTION 40A(3) OF THE ACT. 10.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, IT WOULD BE RELEVANT TO IDENTIFY THE BREAK - UP OF RS.5,39,247/ - WHICH WAS DISALLOWED BY THE LD. AO AS UNDER: - SR. NO. PARTICULAR S AMOUNT (RS.) DATE 1. HOTEL TJS ROYAL 30,323/ - 20/06/2009 2. SOUTH INDIAN HOTEL 32,924/ - 20/06/2009 TOTAL 63,247/ - SALE OF OLD MACHINES 3. SAUDAWALE SAUKAT ALI NAZURDIN 93,000/ - 30/10/2009 4. AYESHA DRESSES 1,50,000/ - 02/06/2009 5. A TO Z GARMENT S 1,01,500/ - 02/06/2009 6. HUSSAIN GARMENTS 31,500/ - 02/06/2009 7. MANOJ GARMENTS 1,00,000/ - 02/06/2009 TOTAL 5,39,247/ - 10.2. WITH REGARD TO PAYMENTS MADE TO HOTEL TJS ROYAL AND SOUTH INDIAN HOTEL SUPRA, THE ASSESSEE SUBMITTED THAT THE SAME ARE INC URRED TOWARDS HOTEL EXPENSES IN 3 - 4 DIFFERENT BILLS WHICH ARE ACTUALLY CONSOLIDATED IN ONE BILL. WITH REGARD TO PAYMENTS MADE TO PARTIES MENTIONED IN 3 - 7 SUPRA, THE ASSESSEE POINTED OUT THAT THEY ARE LABOUR CONTRACTORS ASSOCIATED WITH THE ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 10 ASSESSEE FOR SO M ANY YEARS DOING THE BUSINESS OF STITCHING OF CLOTHES , JOB WORK ON PER PIECE RATE BASIS AND AFTER COMPLETION OF JOB, THEY USED TO RETURN THE FINISHED CLOTH ES TO ASSESSEE. FOR DOING THIS JOB, THEY WOULD RAISE L ABOU R JOB WORK BILL ON THE ASSESSEE. IT WAS ALS O POINTED OUT THAT ALL THESE LABOUR CONTRACTORS ARE REGULARLY FILING THEIR INCOME TAX RETURNS IN THEIR RESPECTIVE JURISDICTIONS. IT WAS SPECIFICALLY SUBMITTED THAT ASSESSEE SOLD ITS OLD MACHINERIES TO THE SAID LABOUR CONTRACTORS WHICH WAS DEBITED TO THEIR LEDGER ACCOUNT OF THE CONCERNED LABOUR CONTRACTORS ON THE RESPECTIVE DATE S AS DETAILED SUPRA. BUT THE SAID ENTRY WAS WRONGLY MENTIONED BY THE ACCOUNTANT OF THE ASSESSEE AS CASH PAID TO THOSE LABOUR CONTRACTORS IN THE NARRATION. THE ASSESSEE CATEGORICALLY D ENIED HAVING MADE ANY CASH PAYMENTS TO THESE LABOUR CONTRACTORS. THE ASSESSEE STATED THAT THE SAME IS EVIDENT FROM THE RUNNING ACCOUNT MAINTAINED WITH THESE LABOUR CONTRACTORS AND THAT THIS SALE OF OLD MACHINERY TO THE CONCERNED LABOUR CONTRACTOR STOOD AD JUSTED WITH THE SUBSEQUENT PAYMENTS TO BE MADE BY THE ASSESSEE FOR THE LABOUR SERVICES RENDERED BY THE CONTRACTORS. IGNORING ALL THESE CONTENTIONS AND THE ENTRIES IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY, THE LD. AO PROCEEDED TO APPLY THE PROVISION S OF SECTION 40A(3) OF THE ACT AND DISALLOW THE TOTAL OF THE SUM OF RS.5,39,247/ - IN THE ASSESSMENT. THIS ACTION OF THE LD. AO WAS UPHELD BY THE LD. CIT(A). 10.3. WE FIND FROM THE LEDGER ACCOUNT OF HOTEL TJS ROYAL ENCLOSED IN PAGES 100 OF THE PAPER BOOK T HAT A SUM OF RS.30,323/ - WAS PAID BY THE ASSESSEE IN CASH IN RESPECT OF TWO BILLS I.E. BILL NO.467 TO 468. THIS PAYMENT WAS MADE ON 20/06/2009. THE SAME IS THE CASE IN RESPECT OF SOUTH INDIAN HOTEL, WHEREIN A SUM OF RS.32,924/ - WAS PAID ON 20/06/2009 FOR T HE BILL NOS. E0696, E0697, E0662 AND E0661 DATED 01/07/2009. THOUGH WE FIND THAT INDIVIDUAL BILLS ARE BELOW RS.20,000/ - , ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 11 ALL THESE BILLS ARE DATED 01/07/2009, WHEREAS PAYMENT WAS MADE BY THE ASSESSEE ON 20/06/2009 ITSELF. HENCE, PAYMENT MADE ON 20/06/2009 COULD AT BEST BE TREATED ONLY AS AN ADVANCE PAYMENT IN CASH, ON WHICH DATE , IT IS NOT LOGICAL FOR THE ASSESSEE TO KNOW THE BILL NUMBER TOGETHER WITH THE BILL DATE WHICH IS GOING TO BE RAISED AT A LATER POINT IN TIME. IN THESE FACTS AND CIRCUMSTANCES, THE E VIDENCES ENCLOSED IN PAGES 100 101 OF THE PAPER BOOK OF THE ASSESSEE GOES AGAINST THE ASSESSEE AND HENCE, DISALLOWANCE MADE U/S.40A(3) OF THE ACT IN THE SUM OF RS.30,323/ - AND RS.32,924/ - STAND CONFIRMED. 10.4. WITH REGARD TO SALE OF OLD MACHINERY MADE BY THE ASSESSEE TO AYESHA DRESSES FOR RS.1,50,000/ - ; M/S. HUSSAIN GARMENTS FOR RS.31,500/ - ON 02/06/2009; M/S. MANOJ GARMENTS FOR RS.1,00,000/ - ; M/S. A TO Z GARMENTS FOR RS.1,01,500/ - ON 02/06/2009 AND MR. SAUDAWALA SAUKAT ALI NAZURDIN FOR RS.93,000/ - ON 30/10/2009 ARE CONCERNED, THERE IS NO DISPUTE THAT ALL THESE PARTIES ARE DOING JOB WORKS TO THE ASSESSEE AND ARE HAVING RUNNING ACCOUNT WITH THE ASSESSEE. ALL THESE PARTIES USED TO RAISE LABOUR CHARGES BILL / JOB WORK BILL ON THE ASSESSEE WHICH WILL BE CR EDITED TO THEIR LEDGER ACCOUNT IN THE BOOKS OF THE ASSESSEE. AS AND WHEN PAYMENTS ARE MADE BY THE ASSESSEE TO THESE PARTIES , THEIR RESPECTIVE LEDGER ACCOUNTS ARE DEBITED INCLUDING TDS PORTION THEREON. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE INS TEAD OF MAKING PAYMENTS TO THEM HAD CHOSEN TO S ELL ITS OLD MACHINERY TO THOSE PARTIES ON THEIR RESPECTIVE DATES AS TABULATED SUPRA AND DEBITED THE LEDGER ACCOUNTS OF THE CONCERNED LABOUR CONTRACTORS . THIS SUM HAS BEEN WRONGLY SHOWN BY THE ACCOUNTANT AS CAS H PAYMENTS MADE TO THOSE LABOUR CONTRACTORS. IN FACT ALL THESE FACTS HAVE BEEN DULY CONFIRMED BY THE CONCERNED LABOUR CONTRACTORS BY WAY OF FILING AFFIDAVITS BEFORE THE LOWER AUTHORITIES WHICH HAD BEEN COMPLETELY IGNORED BY THE LOWER AUTHORITIES . THE EVIDE NCES IN ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 12 THIS REGARD ARE ENCLOSED IN PAGES 100 - 120 OF THE PAPER BOOK. THE LAW IS VERY WELL SETTLED THAT ONCE, AN AFFIDAVIT IS PLACED ON RECORD BY THE ASSESSEE, IT IS THE DUTY OF THE LD AO TO PUT THAT AFFIDAVIT TO TEST IN ORDER TO PROVE THAT THE CONTENTS IN THE SAID AFFIDAVIT ARE FALSE. ONCE, THE LD. AO CHOOSES NOT TO EXAMINE THOSE AFFIDAVITS IN THE MANNER KNOWN TO LAW, THEN THE CONTENTS OF THE SAID AFFIDAVITS ARE TO BE ACCEPTED AS TRUE. HENCE, NO ADVERSE INFERENCE COULD BE DRAWN ON THE SAID AFFIDAVITS. RELIA NCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MEHTA PARIKH AND CO., VS. CIT REPORTED IN 30 ITR 181. 10.4. WE ALSO FIND THAT THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y.2011 - 12 IN ITA NO.300/MUM/2017 DATED 19/09/ 2018 HAD RESTORED THE ISSUE TO THE FILE OF THE LD. AO AND IN THE GIVING EFFECT PROCEEDINGS, THE LD. AO VIDE ORDER DATED 01/04/2021 WHICH IS ENCLOSED IN PAGE 143 OF THE PAPER BOOK HAD GRANTED COMPLETE RELIEF TO THE ASSESSEE. IN VIEW OF THE AFORESAID OBSERVA TIONS AND RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE DIRECT THE LD. AO TO DELETE THE DISALLOWANCE MADE U/S.40A(3) OF THE ACT IN THE SUM OF RS.4,76,000/ - (RS.93,000/ - + RS.1,50,000 + RS.1,01,500/ - + RS.31,500 + RS.1,00,000/ - ) . ACCORDINGLY, THE GROUND NOS. 2.1 . 2.6 . RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 11. THE GROUND NOS.3.1 . 3.4 . RAISED BY THE ASSESSEE ARE SIMILAR TO GROUND NOS.3.1 . - 3.5 . RAISED BY THE ASSESSEE FOR A.Y.2009 - 10. HENCE, THE DECISION RENDERED FOR A.Y.20 09 - 10 WOULD APPLY WITH EQUAL FORCE FOR THIS ASSESSMENT YEAR ALSO EXCEPT WITH VARIANCE IN FIGURES. 12. THE GROUND NO . 5 RAISED BY THE ASSESSEE IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. ITA NO . 4454 & 4455/MUM/2018 SHRI ZAVERCHAND DAMJI HARIA, PROP. OF ZEAL APPAREL 13 13. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON 22 / 1 0 /202 1 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( SAKTIJIT DEY ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 22 / 10 / 2021 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//