M/s S.D Traders, Kanpur V. Income Tax Officer-2(4), Kanpur

ITA 460/LKW/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4707 (ITAT-LUCKNOW)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 13-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 03-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Corroborative evidences

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.460/LKW/2015 ASSESSMENT YEAR 2006-07 INCOME TAX OFFICER 2(4) KANPUR VS M/S S.D. TRADERS, 115/241-A, MASWANPUR, KANPUR PAN ABHFS 5237 M (RESPONDENT) (APPELLANT) SHRI ABHINAV MEHROTRA, ADVOCATE APPELLANT BY SHRI A.K. SINGH, CIT DR RESPONDENT BY 14/01/2016 DATE OF HEARING 24 /0 2 /2016 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE O RDER OF LD. CIT (A)-I, KANPUR DATED 31.03.2015 FOR THE AY 2006-07. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. BECAUSE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN RE-CONFIRMING THE EARLIER ORDER OF HER PREDECESSORS THAT HAS BEEN SET-ASIDE BY THE HON 'BLE HIGH COURT, EVEN THOUGH, THERE IS CENT PERCENT COMP LIANCE OF THE DIRECTIVES OF THE HON'BLE HIGH COURT AND REL EVANT MATERIAL/EVIDENCE HAS BEEN SUPPLIED TO THE AUTHORIT Y AND HENCE THERE IS NO SCOPE FOR ANY ADDITION ON THE BAS IS OF ESTIMATION. 2. BECAUSE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN CAUSING ENHANCEMENT TO THE ASSESSED INCOME OF THE ASSESSEE, PARTICULARLY AS 2 (A) THE NOTICE OF ENHANCEMENT DT. 13.09.2015 IS BA RRED BY LIMITATION AND IS ISSUED IN EXCESS OF JURISDICTI ON; AND (B) IN THE SET-ASIDE PROCEEDINGS, THERE WAS NO FR ESH NOTICE OF ENHANCEMENT, AS IN ANY CIRCUMSTANCES, BEING TIME BARRED, THE SAME COULD NOT HAVE BEEN; ISSUED; AND (C) THERE IS NO LAWFUL JUSTIFICATION FOR THE PROPO SED ENHANCEMENT, ONCE BOOKS/EVIDENCE HAVE BEEN PRODUCED, THAT ARE REGULARLY MAINTAINED BY THE ASSESSEE, THE SCOPE FOR ADDITION, VANISHES. 3.1 BECAUSE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) ERRED IN NOT FOLLOWING THE RATIO OF THE APEX COURT TO THE EFFECT, THAT POWER OF ENHANCEMENT IS R ESTRICTED TO ONLY THOSE ISSUES WHICH WERE CONSIDERED BY ASSES SING OFFICER AT ASSESSMENT STAGE AND NO ENHANCEMENT CAN BE MADE TO TAX A NEW SOURCE OF INCOME. 3.2 BECAUSE THE LD. CIT (A) ERRED IN PLACING RELIA NCE UPON THE JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF KASHI NATH CHANDIWALA 280 ITR 318, WHEREAS, THE SAM E DECISION IS DISTINGUISHABLE ON FACTS AND THE JUDGME NT OF THE HON BLE DELHI COURT, BEING APPLICABLE TO THE CASE, HAS BEEN IGNORED. 4. BECAUSE THE LD. CIT (A) ERRED TO APPRECIATE T HAT IN RELATION TO WAGE PAYMENT, PROPER EVIDENCE IN THE SHAPE OF LA BOUR REGISTER & LEDGER ACCOUNT OF WAGE PAYMENT IN THE BO OKS, WAS PRODUCED AND NO SPECIFIC DEFECTS WERE IDENTIFIE D AND THAT DAILY WAGERS BELONG TO AN UNORGANIZED SECTOR A ND HENCE SUCH EVIDENCE IS HENCE ACCEPTABLE. 5. BECAUSE THE LD. CIT (A) ERRED IN FAILING TO A PPRECIATE THAT NO ADDITION ON ACCOUNT OF SUNDRY CREDITORS, THERE A RE ON ACCOUNT OF TRADE, CAN BE ADDED AND EVEN OTHERWISE P ROPER EVIDENCE WAS FURNISHED, TO CONFIRM SUCH CREDITORS. 6. THAT THE LD. COMMISSIONER OF INCOME TAX, APPEA LS HAS FURTHER ERRED IN LAW AS WELL AS ON FACTS IN DISALLO WING 50% OUT OF LABOUR EXPENSES I.E. 11,50,000/- AND 15 LAC TOWARDS 3 CREDITORS WITHOUT APPRECIATING REAL FACTS OF THE CA SE AND WITHOUT EVALUATING THE EVIDENCE PUT ON RECORD FOR VERIFICATION. THE LD. COMMISSIONER WHILE DISALLOWIN G THE LABOUR CHARGES CREDITORS RELIED ON THE ORDER DT. 14 /11/2013, OF THE LD CIT (AJ. THE LD. CIT(A) FAILED TO POINT O UT ANY EXPENDITURE WHICH WAS EXCESSIVE AND NON FOR BUSINES S. 7. THAT THE LD. COMMISSIONER OF INCOME TAX, APPEA LS HAS FURTHER ERRED IN LAW AS WELL AS ON FACTS IN NOT APP RECIATING THAT THE GROSS PROFIT RATE WAS BETTER AS COMPARED W ITH THE PREVIOUS YEAR FROM 3.71% TO 4% AND THUS THERE WAS N O ROOM FOR ANY DISALLOWANCE OUT OF LABOUR EXPENSES. 8. THAT THE LD. COMMISSIONER OF INCOME TAX, APPEA LS HAS FURTHER ERRED IN LAW AS WELL AS ON FACTS IN NOT APP RECIATING THAT ONCE THE G. P. RATE HAS BEEN ACCEPTED IN THE ASSESSMENT ORDER, THE DISALLOWANCE OUT OF WAGES WOU LD DISTURB THE ACCEPTED GROSS PROFIT RATE AND WILL LEA D TO ABSURD RESULTS. 9. THAT THE LD. COMMISSIONER OF INCOME TAX, APPEA LS HAS FURTHER ERRED IN LAW AS WELL AS ON FACTS IN DEVIATI NG FROM THE BASIC PRINCIPLES OF LAW THAT IF THE GROSS PROFIT HA S BEEN ACCEPTED THEN CORRESPONDING LIABILITY SHOULD HAVE A LSO BEEN ACCEPTED UNLESS ANY CONTRARY IS PROVED ON THE FACTS OF THE CASE. 10. THAT IN ANY CASE ADDITION AND DISALLOWANCE IS ARBITRARY AND BAD IN LAW AND THE ORDER OF THE LD. CIT APPEALS IS LIABLE TO BE QUASHED. 11. BECAUSE THE ORDER PASSED BY LD. CIT (A), ON TH IS COUNT IS BAD IN JAW. 12. THE APPELLANT CRAVES FOR LEAVE TO ADD/AMEND TH E GROUNDS OF APPEAL, WITH THE PERMISSION, OF THE HONBLE BENCH . 3. IT WAS SUBMITTED BY LD. AR OF THE ASSESSEE THAT THIS IS SECOND ROUND OF APPEAL. HE ALSO SUBMITTED THAT DURING THE FIRST ROUND, THE TRIBUNAL HAS DISMISSED THE APPEAL OF THE ASSESSEE AS PER ORDER D ATED 11.04.2014 IN THE ASSESSEES APPEAL NO. 54/LKW/2014. COPY OF THIS TRI BUNALS ORDER IS 4 AVAILABLE ON PAGES 38 TO 47 OF THE PAPER BOOK. HE F URTHER SUBMITTED THAT AGAINST THIS TRIBUNALS ORDER, ASSESSEE FILED AN AP PEAL BEFORE THE HONBLE ALLAHABAD HIGH COURT AND IN THE JUDGMENT DATED 10.1 2.2014 IN INCOME TAX APPEAL NO. 145 OF 2014, HONBLE ALLAHABAD HIGH COURT HAS SET ASIDE THE ORDER OF THE TRIBUNAL AS WELL AS THE ORDER OF T HE LD. CIT(A) DATED 14.11.2014 AND RESTORED THE MATTER BACK TO THE FILE OF THE LD. CIT(A) FOR A FRESH DECISION. HE SUBMITTED THAT THIS JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT IS AVAILABLE ON PAGES 53 TO 55 OF THE PA PER BOOK. HE RAISED A CONTENTION THAT LD. CIT(A) WAS NOT JUSTIFIED IN MAK ING ENHANCEMENT OF INCOME IN THE FACTS OF THE PRESENT CASE AND IN SUPP ORT OF THIS CONTENTION, HE PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOU NCEMENTS: A) CIT VS. KASHI NATH CANDIWALA REPORTED IN 144 TAX MAN 840 (ALL.) B) CIT VS. NIRBHERAM DALURAM 5 TAXMAN 84 (MP) C) JUTE CORPN. OF INDIA LTD. VS. CIT REPORTED IN 53 TAXMAN 85 (SC) D) CIT VS. S.G. EXPORTS REPORTED IN 12 TAXMAN.COM 7 7 (P&H). E) CIT VS. MRS. RATANBAI N.K. DUBHASH REPORTED IN 1 00 TAXMAN 458 (BOM) F) SURESH KUMAR T. JAIN VS. ITO 128 ITD 74 (BANG) G) ELEL HOTELS & INVESTMENT LTD. VS. JCIT, 2005 2 S OT 659 MUM H) CIT VS. SARDARI LAL & CO. 251 ITR 864 4. ON MERIT OF THE ADDITION MADE BY THE LD. CIT(A) BY WAY OF ENHANCEMENT, HE REITERATED THE SAME CONTENTIONS WHI CH WERE RAISED BEFORE LD. CIT(A). 5. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF CIT (A). HE ALSO SUBMITTED THAT THE ISSUE REGARDING THE POWER OF LD. CIT(A) FOR MAKING 5 ENHANCEMENT IS COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. KASHI NATH CANDIWALA (SUPRA) , COPY AVAILABLE ON PAGES 82 TO 84 OF THE ASSESSEES PAPER BOOK AND IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PARA 7 OF THIS JUDGMENT WHER E HONBLE ALLAHABAD HIGH COURT HAS DULY CONSIDERED THE JUDGMENT OF THE HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. NIRBHERAM DALURAM ( SUPRA), AND ALSO ANOTHER JUDGMENT OF THE HONBLE APEX COURT RENDERED IN THE CASE OF JUTE CORPN. OF INDIA LTD. VS. CIT (SUPRA) AND AFTER CON SIDERING THESE TWO JUDGMENTS OF THE HONBLE APEX COURT, IT WAS HELD TH AT THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IS COTERMINOUS WIT H THAT OF THE INCOME TAX OFFICER AND HE CAN DO WHAT THE INCOME TAX OFFIC ER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN THE PRESENT CASE, WE HAVE TO DECIDE TWO ASPECTS OF THE MATTER. FIRST ASP ECT IS THIS THAT WHETHER THE ENHANCEMENT MADE BY THE LD. CIT(A) IS PROPER AN D VALID IN THE EYES OF LAW AND THE SECOND ASPECT IS THE MERIT OF THE EN HANCEMENT MADE BY THE LD. CIT(A). REGARDING THE FIRST ASPECT, WE FIND THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. KASHI NA TH CANDIWALA (SUPRA), WHEREIN HONBLE ALLAHABAD HIGH COURT HAS DULY CONSI DERED TWO JUDGMENTS OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT V S. NIRBHERAM DAULARAM (SUPRA) AND JUTE CORPN. OF INDIA LTD. VS. CIT (SUPR A). WHEN AN ISSUE IS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT AFTER CONSIDERING THE JUDGMENT OF THE HONBLE APEX COURT CITED BY LD. AR OF THE ASSESSEE HAVING BEEN RENDERED IN THE CASE OF JUTE CORPN. OF INDIA LTD. VS. CIT (SUPRA), OTHER JUDGMENTS OF DIFF ERENT HIGH COURTS OR OF THE TRIBUNAL ARE OF NO RELEVANCE. IN THE CASE OF CI T VS. KASHI NATH CANDIWALA (SUPRA), IT WAS HELD BY HONBLE ALLAHABAD HIGH COURT THAT THE 6 TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT THE CIT HAS NO POWER OF ENHANCEMENT IN RESPECT OF AN ISSUE WHICH WAS NOT TE SUBJECT MATTER OF THE APPEAL. RESPECTFULLY FOLLOWING THIS JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT, WE HOLD THAT THERE IS NO MERIT IN THIS CONTE NTION OF LD. AR OF THE ASSESSEE THAT THE ENHANCEMENT MADE BY LD. CIT(A) IS NOT PROPER AND VALID. THIS ASPECT IS DECIDED AGAINST THE ASSESSEE. REGARDING THE MERIT OF THE ENHANCEMENT MADE BY LD. CIT(A), WE FIND THAT TH E DECISION OF LD. CIT(A) ON MERIT IS CONTAINED IN PARA 4.3.1 TO 4.5 O F HIS ORDER AND THESE PARAS ARE REPRODUCED HEREIN BELOW FOR THE SAKE OF R EADY REFERENCE:- 4.3,1 THE APPELLANT HAS PROVIDED COMPARATIVE CHART OF GROSS PROFIT FOR EXPENSES, BUT SUNDRY CREDITORS IS NOT RE FLECTED THEREIN. LABOUR CHARGES HAVE GONE UP FROM RS.22.S2 LAKHS TO RS.23.82 LAKHS WHILE JOB WORK RECEIPTS HAVE GONE DOWN FROM R S.1.01 CRORES TO RS.90.35 LAKHS. EVEN MATERIAL PURCHASED H AS GONE DOWN FROM RS.62.93 LAKHS TO RS.49.64 LAKHS WHILE TH ERE HAD HARDLY BEEN ANY VARIATION IN FREIGHT & CARTAGE. THE APPELLANT HAS NOT JUSTIFIED THE INCREASE IN THE LABOUR CHARGES DU RING THE YEAR. AS REGARDS, THE BUSINESS EXIGENCY OF THE SAID CLAIM , I HAVE CAREFULLY PERUSED THE SUBMISSION AND MATERIAL ON RE CORD, IT IS PERTINENT THAT THE CIT(APPEAL) VIDE ORDER DATED 14. 11.2013 FOR THE INITIAL APPEAL OF THE INSTANT YEAR, HAD DISALLO WED RS. 11.50 LACS OUT OF THE TOTAL CLAIM OF LABOUR WAGES OF RS.2 3,81,620/- FOR BEING EXCESSIVE AND NON -FOR-BUSINESS EXPENDITURE. ADEQUATE OPPORTUNITY WAS PROVIDED IN THE PRESENT PROCEEDINGS TO THE APPELLANT SUBSTANTIATE THE SAID CLAIM. 4.3.2 UPON CAREFUL PERUSAL OF THE SUBMISSIONS, I FI ND THAT THE ONUS HAS NOT BEEN DISCHARGED BY THE APPELLANT FULLY TO ESTABLISH THE IDENTITY OF PARTIES/LABOURERS ALONG WITH EVIDEN CE OF PAYMENT OF LABOUR CHARGES AS HELD IN THE CASE OF CIT VS S.G . EXPORTS (P&H) 336 ITR 2. IN THE INSTANT CASE, THE APPELLANT HAS MERELY SUBMITTED PHOTOCOPIES OF LEDGER ACCOUNT, WHICH ARE MADE ON 'TALLY' SOFTWARE ALONGWITH COPY OF HAND WRITTEN MON TH WISE ATTENDANCE REGISTER OF LABOURERS. THE PERUSAL OF TH E SAME, INDICATES SOME THUMB IMPRESSIONS AGAINST THE CASH P AYMENTS, BUT THE IDENTITY OF THESE PERSONS STATED TO BE LABO URERS, HAS NOT BEEN ESTABLISHED WITH ANY SUPPORTING EVIDENCE. IT H AS BEEN MERELY SUBMITTED THAT PAYMENTS FOR RATE CONTRACTS O F CIVIL WORKS 7 OF MILITARY, FACTORIES & OIL FACTORIES, & PUBLIC SE CTOR ARE DULY APPROVED BY RESPECTIVE DEPARTMENTS. NO CONFIRMATION HAS BEEN FURNISHED IN THIS REGARD. THE CASH PAYMENTS FURTHER CAST DOUBT ON THE VERACITY OF THE ENTIRE CLAIM OF LABOUR CHARG ES. 4,3.2 AS PER SECTION 37(1),, ONLY THE EXPENSES WHI CH ARE EXPENDED WHOLLY AND EXCLUSIVELY FOR BUSINESS, ARE A LLOWABLE AS DEDUCTION FROM THE PROFITS OF THE BUSINESS OF THE A PPELLANT. THE ONUS WAS ON THE APPELLANT TO PROVE THE SAME, WHICH HAS NOT BEEN FULLY DISCHARGED. RELIANCE IS PLACED ON LANDMA RK JUDGMENTS IN THIS REGARD VIZ. CIT VS CALCUTTA AGENCY LTD (SC) 19 ITR 191 AND LAKSHIMARATAN COTTON MILLS CO. LTD. VS CIT (SC) 73 ITR 634, WHEREIN HON'BLE APEX COURT HAS HELD THAT 'IN ORDER TO CLAIM THAT AN EXPENDITURE FALLS U/S 37(1), THE BURDEN OF PROVI NG THE NECESSARY FACTS IN THAT CONNECTION, IS ON THE ASSES SEE'. IN THE INSTANT CASE, THE VERACITY AND BUSINESS EXIGENCY OF THE ENTIRE CLAIM OF LABOUR EXPENSES IS NOT FOUND TO BE PROVED. IN THE PRESENT PROCEEDINGS, THEREFORE, LOOKING AT THE FACT S AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, THE E STIMATED DISALLOWANCE OF THE LABOUR EXPENSES AT 50% IS FOUND REASONABLE, DURING THE YEAR AND IS SUSTAINED. 4.4 THE APPELLANT WAS FURTHER REQUIRED TO SUBSTANT IATE THE IDENTITY, CAPACITY & GENUINENESS OF SUNDRY CREDITOR S. IT IS PERTINENT THAT THE LD. CIT(A)-II, KANPUR VIDE ORDER DATED 14.11.2013 IN THE APPEAL FOR INSTANT YEAR AND IN AB SENCE OF BILLS AND VOUCHERS HAD DISALLOWED RS. 15.0 LACS OUT OF TO TAL CLAIM OF PAYABLE SUNDRY CREDITORS INCLUDED IN SUNDRY CREDITO RS LIABILITY SHOWN AT RS.27,76,180/-. IN THE PRESENT PROCEEDINGS TOO, THE EXISTENCE, OF SUNDRY CREDITORS AS PER THE BALANCE S HEET OF THE APPELLANT AS ON 31.03.2006/- IS NOT-PROVED FULLY AN D THE LIABILITY OF PAYABLE AMOUNTS HAS CONTINUED TO EXIST, FOR APPA RENTLY LONG DURATION. OUT OF THE SAID TOTAL PAYABLE SUNDRY CRED ITORS, THE APPELLANT HAS SUBMITTED ONLY FIVE CONFIRMATIONS ALO NGWITH AADHAR CARD AND STATED THAT TWO MORE PARTIES HAVE B EEN CONTACTED TO GIVE THEIR CONFIRMATIONS. TILL DATE, N O RESPONSE HAS BEEN RECEIVED WHICH CASTS DOUBT ON THE GENUINENESS OF THE SAID CREDITORS IN APPELLANT'S BOOKS. FURTHER, OUT OF THE FIVE CONFIRMATIONS FILED ONLY T WO HAVE PERMANENT ACCOUNT NUMBER, AND FOR THE THREE OTHERS, THE COPY OF LEDGER ACCOUNT IS SUBMITTED. HOWEVER, IN CASE OF MR. NAEEM KHAN, THE LEDGER ACCOUNT DOES 'HOT MATCH AS IT IS I N THE NAME OF MR. NAEEM AHMAD. EVEN IN THESE FIVE CASES WHERE IDE NTITY IS 8 SHOWN, THE CREDITWORTHINESS OF THE SAID PERSONS IS NOT EVIDENT FROM THE DOCUMENTS FURNISHED. THE APPELLANT WAS AWA RE OF HIS ONUS REGARDING THE REQUIREMENT OF DETAILS OF SUNDRY CREDITORS SINCE THE FIRST APPEAL PROCEEDINGS STARTED IN SEPTE MBER 2013, HOWEVER THE COMPLETE EVIDENCE IS NOT AVAILABLE TILL DATE IN SPITE OF ADEQUATE OPPORTUNITIES PROVIDED FOR SAME. THEREF ORE, THE SUBMISSION, THAT LETTER HAS BEEN WRITTEN TO PARTIES TO CONFIRM THE CREDIT BALANCE IS NOT JUSTIFIABLE. CLEARLY, EXCEPT A FEW SHRI NARAIN SEWA! DIXIT FOR AMOUNT OF RS. 63,400/-AND MAHESH PR ATAP SINGH FOR AMOUNT OF RS. 92,250/-, THERE IS NO COGENT EVID ENCE WITH THE APPELLANT TO SUBSTANTIATE THE GENUINENESS OF ALL SU NDRY CREDITORS PAYABLE THE APPELLANT HAS ADMITTED TO THE SAME, AS IS ALSO EVIDENT FROM THE SUBMISSION VIDE LETTER DATED 24.03 .2015 AS REPRODUCED BELOW: 'FURTHER, TO THIS WE STATE THAT IT IS NOT POSSIBLE FOR US TO TRACE ALL THE SUNDRY CREDITORS SINCE A PERIOD OF NINE YEARS H AVE ELAPSED AND MANY OF THEM HAVE EITHER CLOSED THEIR BUSINESS AND OTHERS HAVE DISPOSED OFF THEIR RECORD. 4.4.1 IN VIEW OF THE ABOVE FACTS OF THE CASE, IT IS CLEAR THAT THE APPELLANT HAS NOT DISCHARGED HIS ONUS OF PROVING TH E GENUINENESS, IDENTITY AND CREDITWORTHINESS OF ALL T HE SUNDRY CREDITORS PAYABLE EXCEPT THE TWO AMOUNTS OF RS. 92, 250/- AND RS. 63,400/- OUT OF TOTAL PAYABLE AT RS. 16,63,692/ -. THUS LUMP SUM ADDITION OF RS. 15,00,000/- TO THE INCOME OF TH E APPELLANT DURING THE YEAR, IS FOUND TO BE REASONABLE. RELIANC E IS PLACED ON THE CASE OF SURESH KUMAR T. JAIN VS. ITO (ITAT, BAN GLORE ) 128 ITD 74 WHERE THE ADDITIONS OF SUNDRY CREDITORS HAVE BEEN UPHELD DUE TO FAILURE OF ASSESSEE TO PROVE GENUINEN ESS OF THE BROUGHT FORWARD TRADE CREDITORS. THEREFORE, LOOKING AT THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, I N ABSENCE OF SUBSTANTIVE EVIDENCE, THE ADDITION OF RS. 15,00,000 /- IS SUSTAINED DURING THE YEAR. 4.5 THEREFORE, AS DISCUSSED ABOVE, THE INCOME OF TH E APPELLANT IS ENHANCED DURING THE YEAR BY RS.11.50 LACS AND RS . 15.00 LACS RESPECTIVELY. THE ID. AO IS HEREBY DIRECTED TO GIVE EFFECT TO THIS APPEAL ORDER AND ISSUE NOTICE OF DEMAND WITH PROPER CALCULATION OF INTEREST WITH COPY OF THE SAME TO THIS OFFICE. 7. FROM THE ABOVE PARAS, IT IS SEEN THAT AS PER CIT (A), THE LABOUR CHARGES HAS INCREASED FROM RS. 22.92 LACS IN THE PR ECEDING YEAR TO RS. 9 23.82 LACS IN THE PRESENT YEAR ALTHOUGH JOB WORK RE CEIPTS HAS GONE DOWN TO RS. 90.35 LACS FROM RS. 101 LACS IN THE PRECEDIN G YEAR. FURTHER THIS IS NOT THE CASE OF THE ASSESSEE THAT THE JOB WORK OF T HE PRESENT YEAR IS MORE LABOUR ORIENTED AS COMPARED TO THE PRECEDING YEAR. WE ALSO FIND THAT AS PER THE BALANCE SHEET, THERE IS EXPENSES PAYABLE RS . 16.64 LACS WHICH INCLUDE LABOUR CHARGES PAYABLE RS. 16.25 LACS OUT O F TOTAL LABOUR CHARGES CLAIMED RS. 23.82 LACS. IT MEANS THAT LABOUR CHARGE S FOR MORE THAN 8 MONTHS IS CLAIMED TO BE OUTSTANDING AT THE YEAR END AND IT IS NOT A CASE OF THE ASSESSEE THAT SUCH LABOUR CHARGES PAYABLE IS PA YABLE TO ONE OR MORE LABOUR CONTRACTOR WHO CAN AFFORD TO GRANT THIS HUGE CREDIT OF MORE THAN 8 MONTHS. REGARDING THIS CONTENTION THAT G.P. RATE AN D N. P. RATE OF THE PRESENT YEAR ARE BETTER IN THE PRESENT YEAR AS COMP ARED TO THE PRECEDING OR SUCCEEDING YEAR, WE FIND THAT THIS IS NOT A CASE OF THE ASSESSEE THAT ANY ASSESSMENT OF SUCH PRECEDING OR SUCCEEDING YEAR WAS COMPLETED U/S 143 (3) AND IN THE ABSENCE OF THAT, SUCH PRECEDING OR S UCCEEDING YEAR CANNOT BE A GUIDING FACTOR. CONSIDERING THE FACTS IN ITS T OTALITY PARTICULARLY THE CLAIM THAT LABOUR CHARGES FOR MORE THAN 8 MONTHS AR E OUTSTANDING AT THE YEAR END AND THE PAYMENT ALREADY MADE IN THE PRESEN T YEAR IS BY WAY OF CASH, WE FEEL THAT SOME DISALLOWANCE OUT OF LABOUR CHARGES IS JUSTIFIED. NOW THE QUESTION IS ABOUT THE QUANTUM OF DISALLOWAN CE. WE FEEL THAT IF THE PRECEDING YEAR IS CONSIDERED AS A GUIDING FACTOR, T HE LABOUR CHARGES SHOULD BE 22.69% OF RECEIPTS OF RS. 90.35 LACS AS IN THAT YEAR AND AS A RESULT, THE LABOUR CHARGES FOR THE PRESENT YEAR COMES TO RS . 20.50 AS AGAINST CLAIMED BY TE ASSESSEE OF RS. 23.82 LACS. WE HAVE A LREADY NOTED THAT SINCE THIS IS NOT A CASE OF THE ASSESSEE THAT ANY A SSESSMENT OF SUCH PRECEDING OR SUCCEEDING YEAR WAS COMPLETED U/S 143 (3) AND IN THE ABSENCE OF THAT, SUCH PRECEDING OR SUCCEEDING YEAR CANNOT BE A GUIDING FACTOR. CONSIDERING TE FACTS IN TOTALITY, WE FEEL T HAT IN THE FACTS OF THE 10 PRESENT CASE, DISALLOWANCE OF RS. 5.95 LACS BEING 2 5% OUT OF LABOUR CHARGES WILL MEET THE ENDS OF JUSTICE. WE HOLD ACCO RDINGLY. 8. NOW WE DECIDE THE ISSUE REGARDING ADDITION MADE BY THE LD. CIT(A) OF RS.15.00 LAKH OUT OF SUNDRY CREDITORS. IN THIS R EGARD, WE FIND THAT THE AMOUNT OF SUNDRY CREDITORS APPEARING IN THE BALANCE SHEET OF RS.27.76 LAKH IS WITHOUT INCLUDING UNPAID EXPENSES RS.16.64 LAKH. PARTY WISE LIST OF SUCH SUNDRY CREDITORS OF RS.27.76 LAKH IS AVAILABLE ALONG WITH THE AUDITED ACCOUNTS AT PAGE 64 OF THE PAPER BOOK AND THIS LIST INCLUDES 34 PARTIES. THE ASSESSEE SUBMITTED A LIST OF CONFIRMATION OF SU NDRY CREDITORS AND AS PER THE SAME, THE LIST IS ONLY OF FIVE PARTIES WITH A BALANCE OF RS.3,70,20/- AND IN THIS LIST ALSO, PAN IS MENTIONED FOR TWO PAR TIES ONLY. IT IS ALSO SUBMITTED IN THE SAME PAGE OF THE PAPER BOOK THAT T HE ASSESSEE HAS WRITTEN TO TWO PARTIES FOR CONFIRMATION I.E. M/S J. P. ASSOCIATES LTD., ALLAHABAD AND M/S IWL INDIA LTD., LUCKNOW. THE BALA NCE OF J.P. ASSOCIATES LTD., ALLAHABAD AS PER LIST OF CREDITORS IS RS.1,36 ,800/- AND IN THE NAME OF IWL INDIA PVT. LTD., LUCKNOW, THERE IS NO OUTSTANDI NG AMOUNT AS PER THE LIST OF CREDITORS AND IN THE NAME OF IWL INDIA LTD. AND IN THIS LIST, THE ADDRESS IS DIFFERENT I.E. OF CHENNAI. THUS CONFIRMA TION IS AVAILABLE OF ONLY 5 PARTIES HAVING OUTSTANDING OF RS.3,70,20/- AND ABOU T THE REMAINING PARTIES, IT IS STATED BY THE ASSESSEE THAT IT IS NO T POSSIBLE FOR THE ASSESSEE TO TRACE THESE CREDITORS SINCE PERIOD OF NINE YEARS HAS ELAPSED AND MANY OF THEM HAVE CLOSED THEIR BUSINESS AND OTHERS HAVE DIS POSED OF THEIR RECORDS. BUT THE ASSESSEE HAS NOT BROUGHT EVEN THIS EVIDENCE ON RECORD THAT WHEN AND HOW THE AMOUNT WAS PAID BY THE ASSESSEE TO THES E CREDITORS AS PER THE RECORDS OF THE ASSESSEE AND WHAT IS THE LAST AV AILABLE ADDRESS OF THESE CREDITORS ALONG WITH PAN SO THAT THE DEPARTMENT COU LD HAVE LOCATED THESE CREDITORS. REGARDING THE FIVE PARTIES FOR WHOM CONF IRMATION HAVE BEEN SUBMITTED BY THE ASSESSEE ALSO, THE LD. CIT(A) HAS NOTED THAT CREDITWORTHINESS OF THESE CREDITORS WAS NOT ESTABLI SHED. STILL, THE CIT (A) 11 HAS MADE AN ADDITION OF ONLY RS. 15 LACS AND NOT OF THE ENTIRE AMOUNT OF CREDITORS. 9. CONSIDERING ALL THESE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) ON THIS ISSUE REGARDING ADDITION OUT OF SUNDRY CREDITORS TO THE EXTENT OF RS.15.00 LAKHS. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED ON THE CAPTION PAGE) SD/- SD/- (SUNIL KUMAR YADAV) (A.K. GAROD IA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24/02/2016 AKS COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR