K.K. TEX ENTERPRISES, BHIWANDI V. ITO CEN THANE, THANE

ITA 4688/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9378 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-11-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 10-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNDERJIT SINGH
• Assessee Lawyers: A K GHOSH
• Keywords: Income from undisclosed sources; Search and seizure; Document seized; Peak credit; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI SANJAY ARORA (ACCOUNTANT MEMBER) ITA NOS.4688 & 4690/MUM/2011 ASSESSMENT YEARS: 2004-05 & 2005-06 K.K.TEX ENTERPRISES, FLAT NO.24/2, PALS COMPOUND, KALYAN ROAD, BIWANDI. PA NO.AAGFK 8890C ITO, CENTRAL, 2 ND FLOOR, PAWAR INDL. ESTATE, EDULJI ROAD, CHARAI, THANE (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI A.K.GHOSH RESPONDENT BY: SHRI SUNDERJIT SINGH DATE OF HEARING: 12.11.2012 DATE OF PRONOUNCEMENT: 21 .11.2012 ORDER PER B.R.MITTAL, JM: THE ASSESSEE HAS FILED THESE TWO APPEALS FOR ASSESS MENT YEARS 2004-05 AND 2005-06 AGAINST ORDERS DATED 15.3.2011 AND 28.3.201 1, RESPECTIVELY OF LD CIT(A)-1, THANE. 2. IN BOTH THE APPEALS, FACTS AND GROUNDS ARE IDENT ICAL EXCEPT THE AMOUNT OF ADDITIONS MADE AND, THEREFORE, WE HEARD THESE APPEA LS TOGETHER AND DISPOSED OF THEM BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. IN GROUND NOS.1 TO 4 OF APPEALS, ASSESSEE HAS DI SPUTED THE ORDERS OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.1,83,750 FOR ASSE SSMENT YEAR 2004-05 AND RS.9,64,185 FOR ASSESSMENT YEAR 2005-06 ON ACCOUNT OF UNDISCLOS ED SALES. 4. THE RELEVANT FACTS GIVING RISE TO THESE APPEALS ARE THAT ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND SALE OF GREY CLOTH. THERE WAS ITA NOS.4688 & 4690/MUM/2011 ASSESSMENT YEARS: 2004-05 & 2005-06 2 A SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT ON 1 2.7.2007. DURING THE COURSE OF SEARCH & SEIZURE OPERATION, CERTAIN DOCUMENTS THROW ING LIGHT ON UNACCOUNTED SALES WERE FOUND AND SEIZED. IN THE STATEMENT RECORDED OF SHR I KALPESH GADA, ONE OF THE PARTNERS OF THE ASSESSEE, IT WAS CATEGORICALLY ADMITTED THAT SEIZED DOCUMENTS CONTAINED DETAILS OF UNACCOUNTED SALES AND FURTHER STATED THAT SUCH UNAC COUNTED SALES WERE RECORDED IN THE SEIZED BOOKS/REGISTERS UNDER THE HEAD P V J A ND SAIBABA. IN A SEPARATE STATEMENT RECORDED ON 16.8.2007 U/S.131 OF THE ACT, IT WAS AD MITTED BY SHRI BHAGWANJI GADA, ANOTHER MAIN PERSON OF THE GROUP THAT THE ENTRIES F OUND IN SEIZED DOCUMENTS PERTAINED TO UNACCOUNTED TRADING ACTIVITY. IT IS RELEVANT TO STATE THAT SHRI VIPUL GADA IS THE SON OF BHAGWANJI GADA AND IS ONE OF THE MAIN PERSON ALSO I N THE GROUP. NO INCOME FROM THIS UNACCOUNTED TRADING ACTIVITY RECORDED IN THE SEIZED DOCUMENTS WAS FOUND TO BE ADMITTED IN THE RETURN OF ASSESSEE AND WHEREAS SHRI KALPESH K GADA AND SHRI VIPUL GADA IN THEIR RESPECTIVE RETURNS, ADMITTED ADDITION AL INCOME ON ACCOUNT OF SAME UNACCOUNTED TRADING ACTIVITY. HOWEVER, AO ISSUED A SHOW CAUSE NOTICE ASKING THE ASSESSEE TO EXPLAIN AS TO WHY THE UNACCOUNTED SALES COULD NOT BE TREATED AS UNACCOUNTED INCOME, INTER ALIA, IN THE HANDS OF THE ASSESSEE. IT IS OBSERVED THAT ASSESSEE FILED ITS REPLY ON 21.12.2009 AND THE RELE VANT PORTION OF WHICH IS STATED BY THE AO IN PARA 5.7 OF THE ASSESSMENT ORDERS FOR BOTH TH E ASSESSMENT YEARS UNDER CONSIDERATION, WHICH IS AS UNDER: IN THE CASE OF UNACCOUNTED BUSINESS, WE HAVE KEPT ON SAYING RIGHT FROM BEGINNING THAT THIS IS SEPARATE ACTIVITIES CONDUCTE D BY SHRI KALPESH K. GADA AND SHRI VIPUL B. GADA. THERE ARE VALID REASON AS UNDER TO PROVE THIS IS A SEPARATE ENTITY. WE POINT OUT FOLLOWING THINGS WHICH ARE L YING IN SEIZED MATERIAL; 1. SEPARATE BANK A/C IS MAINTAINED. 2. CERTAIN CHEQUES ARE ISSUED FROM SAME BANK A/C FOR T HE PURCHASE OF YARNS/CLOTHES AND TO SOME EXPENSES. 3. CERTAIN PAPERS ARE THERE IN SEIZED MATERIALS. JUST LIKE PAYMENT FOR UNACCOUNTED YARN PURCHASE. YARN/FABRICS BILLS WHICH ARE NOT TAKEN IN OUR REGULAR BOOKS OF ACCOUNTS. 4. COPIES OF UNACCOUNTED YARN/FABRICS PURCHASE. ITA NOS.4688 & 4690/MUM/2011 ASSESSMENT YEARS: 2004-05 & 2005-06 3 5. WE ENCLOSED SOME ENTRY OF YARN/FABRICS BILLS, WHICH ARE NOT IN SEIZED MATERIALS. 5. ASSESSEE STATED BEFORE THE AO THAT THERE WAS NO MANUFACTURING ACTIVITY CARRIED OUT OUTSIDE THE BOOKS OF ACCOUNT AND WHATEVER EVIDE NCES WERE FOUND, THEY PERTAINED TO THE TRADING ACTIVITIES OF SHRI KALPESH GADA AND SHR I VIPUL GADA. AO STATED THAT THE SEIZED DOCUMENTS HAD BEEN SHOWN IN PURCHASES MADE O UTSIDE THE BOOKS AND FEW BILLS FURNISHED DURING ASSESSMENT PROCEEDINGS FOR ALLEGED PURCHASES MADE OUTSIDE THE BOOKS, WERE REJECTED BY HIM. AO CAME TO THE CONCLUSION TH AT THE SALES WERE MADE OUTSIDE THE BOOKS REPRESENTED THE UNACCOUNTED INCOME. AO STATED THAT THE CLAIM OF THE ASSESSEE THAT KAILASH GADA AND VIPUL GADA HAVE DONE TRADING OUTSIDE THE BOOKS OF THE ASSESSEE WAS NOT ESTABLISHED. AO WORKED OUT THE TOTAL UNACC OUNTED SALES FROM THE SEIZED DOCUMENTS AT RS.1,83,750 FOR ASSESSMENT YEAR 2004-0 5 AND RS.9,64,185 FOR ASSESSMENT YEAR 2005-06. BEING AGGRIEVED, ASSESSEE FILED APPEA LS BEFORE LD CIT(A). LD CIT(A) CONFIRMED THE ACTION OF AO. HENCE, THESE APPEALS B Y THE ASSESSEE. 6. DURING THE COURSE OF HEARING, LD A.R. SUBMITTED THAT SIMILAR ISSUE ON IDENTICAL FACTS HAD BEEN CONSIDERED BY THE TRIBUNAL IN THE CA SE OF ASSESSEE IN I.T.A. NO.893,894,895,896 & 1487/M/2011 FOR ASSESSMENT YEA RS 2003-04,2004-05,2005-06, 2006-07, 2008-09 AND 2007-08 VIDE ORDER DATED 25.1. 2011 ALONGWITH CASE OF ANOTHER ASSESSEE IN I.T.A. NOS.897,898,1489/M/2011 FOR A.YS . 2006-07, 2008-09, 2007-08 AND THE TRIBUNAL AFTER CONSIDERING THE SEIZED DOCUMENTS HAS HELD, INTER ALIA, THAT THERE IS NO IOTA OF EVIDENCE THAT THERE IS SUPPRESSION OF PRODU CTION. NO DEFECTS HAVE BEEN FOUND IN THE PRODUCTION REGISTER MAINTAINED. NO QUANTITATIV E ANALYSIS IS RELIED UPON BY THE AO. THE ARGUMENTS OF LD D.R. THAT TRADING TRANSACTIONS ARE SAME AS MANUFACTURING TRANSACTION IS DEVOID OF MERITS. THE BOOKS OF ACCO UNT, QUANTITATIVE DETAILS, STOCK REGISTERS, ETC, OF MANUFACTURING AND PRODUCTION WER E SEPARATELY MAINTAINED AND NO DEFECTS HAVE BEEN POINTED OUT ON THE SAME. THE ADD ITION IS MADE ON A SURMISE THAT PRODUCTION IS SUPPRESSED. NO INVESTIGATION IS DONE BY THE AO ON THE PRODUCTION REGISTERS, ETC. THUS, ON THIS FACTUAL MATRIX, THE TRIBUNAL HAS HELD THAT TRADING TRANSACTION IN QUESTION DO NOT BELONG TO EITHER THE ASSESSEE MR ALPESH G. GADA OR M/S. K.K. ENTERPRISES(ASSESSEE HEREIN). THE TRIBUNAL HA S HELD THAT THESE UNACCOUNTED ITA NOS.4688 & 4690/MUM/2011 ASSESSMENT YEARS: 2004-05 & 2005-06 4 TRADING TRANSACTIONS BELONG TO MR KALPESH G GADA AN D MR VIPUL GADA. THE TRIBUNAL HAS HELD THAT THE ADDITION MADE BY AO AND SUSTAINED BY LD CIT(A) ON ACCOUNT OF UNACCOUNTED SALES IS DELETED. THE TRIBUNAL HAS FUR THER OBSERVED IN PARA 27 THAT EVEN OTHERWISE THE TURNOVER COULD NOT HAVE BEEN BROUGHT TO TAX. AT BEST, ONLY PROFITS ARISING OUT OF AN ACTIVITY CAN BE BROUGHT TO TAX. THE ADDI TIONS ARE SOUGHT TO BE MADE ON THE BASIS OF GROSS RECEIPTS IN A BANK ACCOUNT. AT BEST , THE PEAK CREDIT COULD HAVE BEEN ADDED. ONLY SURPLUS OF THE TRANSACTION COULD BE TA XED. THE TRIBUNAL IN PARA 28 WHILE ALLOWING THE SAID GROUND OF APPEAL HAS HELD THAT TH E ADDITIONS IN THE CASE OF MR ALPESH G GADA AND M/S. K.K.TEX ENTERPRISES, ARE MADE ON A 50 :50 ADHOC BASIS ON THE BASIS OF SEIZED DOCUMENTS IS BAD IN LAW FOR THE REASON THAT THE TRANSACTIONS DO NOT PERTAIN TO THESE ENTERPRISES. HENCE, GROUND TAKEN BY ASSESSEE FOR THE ABOVE ASSESSMENT YEARS WAS ALLOWED. 7. LD A.R. FURNISHED A COPY OF THE SAID ORDER OF TH E TRIBUNAL AND SUBMITTED THAT THE ADDITIONS AS SUSTAINED BY LD CIT(A) FOR BOTH THE AS SESSMENT YEARS UNDER CONSIDERATION VIZ; 2004-05 AND 2005-06 ON ACCOUNT OF ALLEGED UNAC COUNTED SALES IN THE HANDS OF THE ASSESSEE BE DELETED AS SAME WERE DECLARED IN THE RE TURN OF INCOME IN THE HANDS OF KALPESH G GADA. 7. LD D.R. RELIED ON ORDERS OF AUTHORITIES BELOW. 8. WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTAT IVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW FOR BOTH THE ASSESSMENT YEARS UND ER CONSIDERATION AND THE ORDER OF THE TRIBUNAL DATED 25.11.2011 (SUPRA). WE OBSERVE THAT THE BASIS FOR MAKING THE SAID ADDITION IN THE HANDS OF ASSESSEE FOR ASSESSMENT YE ARS UNDER CONSIDERATION IS IDENTICAL TO ASSESSMENT YEARS, INTER ALIA, IN THE CASE OF ASS ESSEE FOR ASSESSMENT YEARS 2006-07 TO 2008-09. RESPECTFULLY FOLLOWING THE REASONS GIVEN BY THE TRIBUNAL IN ITS ORDER DATED 25.11.2011(SUPRA), WE DELETE THE ADDITION SUSTAINED BY LD CIT(A) ON ACCOUNT OF UNACCOUNTED SALES OF RS.1,83,750 FOR ASSESSMENT YEA R 2004-05 AND RS.9,64,185 FOR ASSESSMENT YEAR 2005-06. HENCE, GROUNDS NOS.1 TO 4 FOR BOTH THE ASSESSMENT YEARS ARE ALLOWED. ITA NOS.4688 & 4690/MUM/2011 ASSESSMENT YEARS: 2004-05 & 2005-06 5 9. IN GROUND NOS.5 TO 6 OF BOTH APPEALS, ASSESSEE H AS DISPUTED THE ORDERS OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.3,16,047 FO R ASSESSMENT YEAR 2004-05 AND RS.63,510 FOR ASSESSMENT YEARS 2005-06 MADE ON ACCO UNT OF INFLATED LABOUR CHARGES. 10. FACTS RELATING TO ABOVE GROUNDS ARE THAT DURIN G THE SEARCH & SEIZURE ACTION AT THE RESIDENCE OF SHRI KALPESH GADA, CERTAIN DOCUMEN TS LIKE CHEQUE BOOKS, PAY-IN-SLIPS AND BANK PASS BOOKS HELD IN THE NAME OF VARIOUS OTH ER PERSONS WERE FOUND. SHRI KALPESH GADA IN A STATEMENT RECORDED U/S.132(4) ON 12.7.2007, ADMITTED THE DOCUMENTS TO REPRESENT BANK ACCOUNTS MAINTAINED IN THE NAME OF LABOURERS FOR THE PURPOSE OF INFLATING EXPENSES IN THE CASE OF APPU T EXTILES AND M/S. K.K.ENTERPRISES. IT IS RELEVANT TO STATE THAT LD CIT(A) HAS STATED THE REL EVANT FACTS IN THE IMPUGNED ORDERS FOR ASSESSMENT YEAR 2004-05 IN PARA 5.2 AS UNDER: 5.2 SHR KALPESH GADA , FURTHER STATED THAT , HE HI MSELF WAS SHOWING RECEIPT OF LABOURS CHARGES FROM SHRI ALPESH GADA , PROPRIETOR M/S APPU TEXTILES WHICH ACTUALLY WAS DONE TO INFLATE THE EXPENSES. HE FURTH ER ADMITTED THAT , THE EXPENDITURE ON ACCOUNT OF LABOUR CHARGES WAS INFLAT ED BY SHOWING PAYMENTS TO OTHER MEMBERS OF THE FAMILY AS WELL. WITH REGARD TO THE FINDING OF BANK PASS BOOKS IN THE NAME OF VARIOUS OTHER PERSONS , IT WAS ADMITTED BY HIM THAT , THOUGH SALARIES WERE PAID TO THE WORKERS , THEY WER E SHOWN TO BE DOING JOB WORK ON CONTRACT BASIS ON RECORD. A FEW SUCH EMPLOYEES A DMITTED IN STATEMENT THAT , THOUGH THEY WERE PAID SALARIES , THEY WERE SHOWN AS CONTRACT LABOURS. PAYMENTS MADE TO THEM BY CHEQUES WERE DEPOSITED IN THE BANK ACCOUNTS MAINTAINED IN THEIR NAME AND CASH WITHDRAWN BY THE APPELLANT HIMS ELF. RETURNS OF INCOME WERE ALSO FILED IN THE NAME OF THESE PERSONS. THESE PERS ONS HAD AFFIXED THEIR SIGNATURES ON BLANK CHEQUES. THE BANK ACCOUNTS WERE FOUND TO BE OPENED AND OPERATED BY NONE OTHER THAN EMPLOYER. NONE OF THE E MPLOYEES WAS HAVING ANY IDEA ABOUT THE TRANSACTIONS IN BANK ACCOUNTS. ONE S HRI DILIP PRAJAPATI , IN A STATEMENT RECORDED DURING SEARCH IN THE FACTORY PRE MISES AT PARK COMPOUND ADMITTED THAT , HE HAD NOT DONE ANY JOB WORK FOR TH E APPELLANT. IN REPLY TO A SPECIFIC QUESTION , SHRI KALPESH GADA ADMITTED THAT , KARIGAR WAGES ARE PAID ON METER BASIS @ RS 1.25 PER METER. FURTHER FINDING OF THE AC WAS THAT , THE TOTAL LABOUR CHARGES CLAIMED BY THE GROUP OVER A PERIOD O F 4 YEARS FROM 2002 TO 2003 TO 2008-09 WAS OF THE ORDER OF RS 14.09 CRORE. THE AC WORKED OUT AND FOUND THAT , WHILE THE APPELLANT WAS CLAIMING IN BOOKS RS 6.50 PER METER, THE ACTUAL EXPENDITURE WAS OF THE ORDER OF RS 1.5 TO RS 2 PER METER. IN THIS CONNECTION A SHOW CAUSE NOTICE WAS ISSUED CALLING UPON THE APPEL LANT TO SHOW CAUSE AS TO WHY LABOUR CHARGES SHOULD NOT BE RESTRICTED. THE RE PLAY THAT CAME FROM THE APPELLANT IS THAT , THE STATEMENT OF SHRI KALPESH G ADA ADMITTING INFLATION OF LABOUR EXPENSES WAS WRONG, SHRI BHAGWAJI GADA , THE MAIN PERSON HAS STRONGLY OBJECTED TO IT. ONLY A FEW PERSONS OUT OF 80 LABOUR ERS HAD GIVEN ADVERSE STATEMENTS AND FURTHER REPLY WAS THAT , IN ORDER TO BUY PEACE OF MIND , THE APPELLANT HAS DISCLOSED RS 50.50 LACS AS ADDITIONAL INCORNE. THROUGH ANOTHER ITA NOS.4688 & 4690/MUM/2011 ASSESSMENT YEARS: 2004-05 & 2005-06 6 SHOW CAUSE NOTICE , THE APPELLANT WAS ASKED TO EXPL AIN WHY LABOUR CHARGES CLAIMED BEYOND RS 1.50 PER METER SHOULD ROT BE DISA LLOWED. THE APPELLANT REPLIED THAT , RS 4 TO RS 4.5 PER METER WAS PAID DU RING THE AY 04-05 AND 05-06 AND RS 4 AND RS 6 WERE PAID DURING THE YEARS RELEVA NT TO THE AY 07-08 AND 08- 09. CONSIDERING THE ARGUMENT OF THE APPELLANT THAT , HE HAD INCURRED CERTAIN EXPENSES OTHER THAN THE EXPENSES RECORDED IN BOOKS , THE AC CHOSE TO ALLOW RS 3 PER METER AS LABOUR CHARGES , WHICH WORKED OUT TO RS 25,38,684/- AND BALANCE AMOUNT OF RS 3,16,047/- WAS DISALLOWED AND ADDED. T HE FOLLOWING IS THE OBSERVATION OF THE AC IN THE ASSESSMENT ORDER. THE ASSESSEES SUBMISSIONS HAVE BEEN DULY CONSIDERE D. IT IS A SETTLED LAW THAT, DOCUMENTS / EVIDENCES / RECORDINGS ON LOOSE P APERS , BOOKS OF ACCOUNTS ETC FOUND DURING THE COURSE OF SEARCH REPR ESENT THE TRUE STATE OF AFFAIRS OF THE ASSESSEES BUSINESS EXISTING ON D ATE OF SEARCH. IT IS AN ADMITTED FACT THAT INSTANCES OF LARGE SCALE INFLATI ON OF EXPENSES WERE FOUND DURING THE COURSE OF SEARCH AND THE ASSESSEE GROUP HAD DECLARED AN INCOME OF RS 50.50 LACS ON ACCOUNT OF SUCH UNVER IFIABLE EXPENSES. WHAT REMAINS TO BE SEEN NOW IS WHETHER THE SAID DIS CLOSURE WAS COMMENSURATE WITH THE DISCREPANCIES FOUND OR IS JUS T AN EYE WASH. IT IS PERTINENT TO POINT OUT AT THIS STAGE THAT, THE FAMI LY MEMBERS IN WHOSE NAMES LABOUR CHARGES WERE BOOKED WERE MERE CONDUIT FOR SIPHONING OFF OF FUNDS AND HAD NOT RENDERED ANY SERVICES TO THE S AID BUSINESS CONCERN IN QUESTION BY WAY OF JOB WORK TO THAT EXTENT LABOU R CHARGES PAID WERE NOT EVEN REMOTELY CONNECTED WITH THE BUSINESS, THE LABOUR EXPENSES IN ORDER TO QUALIFY FOR ALLOWANCE HAD TO BE INCURRED W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THIS IS A TYPICAL CASE WHERE THE MANUFACTURING WAS DONE BY THE CONCERN USING ITS OWN WORKFORCE BUT LABOUR CHARGES WERE PAID TO PERSONS SPECIFIED U/S 4 0A(2)(B) AND OR ITS EMPLOYEES WHO FACILITATED THE ASSESSEES DESIGN. TH US, THE EXPENDITURE WAS DONE TO INFLATE THE EXPENSES AND BRING DOWN THE PROFIT MARGIN. THE NET PROFIT PERCENTAGE FOR VARIOUS ASSESSMENT YEARS VARIES IN A NARROW RANGE OF 0.5 % TO 2 %. THUS, IT IS INEVITABLE TO IN FER THAT THERE WAS INDEED INFLATION OF EXPENSES. TO ASCERTAIN THE QUAN TUM OF SUCH INFLATION , IT IS PERTINENT TO TAKE INTO ACCOUNT THE ACTUAL WAG E RATE PAID TO THE WORKERS AND THE LABOUR CHARGES SHOWN IN THE BOOKS O F ACCOUNTS. IT IS AGAIN AN ADMITTED POSITION THAT THE LABOUR CHARGES PAID PER METER OF GREY CLOTH WERE RS 1.5 TO 2 WHEREAS THE AMOUNT DEBITED I N THE BOOKS WAS RS 6.5. THE ASSESSEE ALSO ARGUED THAT DURING ASSESSMEN T THAT IT HAD BOOKED ALL OTHER RELATED MANUFACTURING EXPENSES UNDER LABO UR CHARGES AND THE SAME SHOULD BE CONSIDERED. IN VIEW OF THIS , A FURT HER ALLOWANCE OF RS 1.5 PER METER IS GRANTED. THE ASSESSEE , DURING THE COU RSE OF ASSESSMENT PROCEEDINGS FAILED TO FURNISH STOCK REGISTER FOR VE RIFICATION. IN VIEW OF THIS, THE QUANTITATIVE DETAILS AVAILABLE IN THE TAX AUDIT REPORT HAVE TO BE COMPULSORILY RELIED UPON. THUS FROM THE QUANTITATIV E DETAILS, THE TOTAL QUANTITY MANUFACTURED DURING THE YEAR IS DETERMINED AND THE QUANTUM OF INFLATED EXPENSES RECORDED IN THE BOOKS OF ACCOUNTS AFTER ALLOWING A MARGIN OF RS 3 PER METER (RS 1. 5 FOR LABOR + RS 1. 5 FOR OTHER INCIDENTAL ITA NOS.4688 & 4690/MUM/2011 ASSESSMENT YEARS: 2004-05 & 2005-06 7 EXPENSES LIKE TRANSPORT, POWER, BEAM DRAWING ETC) I S WORKED OUT AS BELOW: QUANTITY OF GREY CLOTH MANUFACTURED IS 846228 METER S. LABOUR CHARGES CLAIMED RS 2854 731/- LABOUR CHARGES ALLOWABLE @ RS 3 PR METR 846228 METE RS X 3 = RS 2538684 DISALLOWANCE RS 2854731 RS 2538684 = 3,16,047/-. 11. SIMILARLY FOR ASSESSMENT YEAR 2005-06, LD CIT(A ) HAS STATED RELEVANT FACTS IN PARA 5.2 OF THE IMPUGNED ORDER FOR MAKING THE ADDIT ION OF RS.63,150 ON ACCOUNT OF INFLATED LABOUR EXPENSES. 12. DURING THE COURSE OF HEARING BEFORE US, LD A.R. SUBMITTED THAT SIMILAR ISSUE ON IDENTICAL FACTS HAS BEEN CONSIDERED BY THE TRIBUNAL IN ITS ORDER DATED 25.11.2011 (SUPRA) AND THE TRIBUNAL HAS RESTORED THIS ISSUE TO THE FIL E OF AO WITH A DIRECTION TO DECIDE THE SAME AFRESH ON THE LINES OF DIRECTION GIVEN BY THE TRIBUNAL IN THE CASE OF B.K. TEX CORPN AND MR BHAGWAN G. GADA (SUPRA) AS WELL AS MATERIAL FOUND DURING THE COURSE OF SEARCH AND CONSIDERING THE INFLATION FACTOUR CLAIMED BY AS SESSEE. LD D.R. SUBMITTED THAT HE HAS NO OBJECTION IN RESTORING THE ISSUE TO THE FILE OF AO FOR HIS FRESH CONSIDERATION AS PER EARLIER ORDERS OF THE TRIBUNAL DATED 25.11.2011 (SU PRA). 13. WE HAVE CONSIDERED ORDERS OF AUTHORITIES BELOW AND THE ORDER OF TRIBUNAL DATED 25.11.2011(SUPRA). WE OBSERVE THAT THE FACTS AS ST ATED BY AUTHORITIES BELOW IN THE APPEALS BEFORE US AND THE APPEALS CONSIDERED BY THE TRIBUNAL FOR ASSESSMENT YEAR 2006- 07 TO 2008-09 VIDE ORDER DATED 25.11.2011 (SUPRA) A RE IDENTICAL AND RESPECTFULLY FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW FOR BOTH ASSESSMENT YEARS UNDER CONSIDERATION TO TH E FILE OF AO TO DECIDE THE ISSUE AFRESH IN RESPECT OF INFLATION OF LABOUR CHARGES AF RESH ON THE BASIS OF PROPOSITION LAID DOWN BY THE TRIBUNAL IN THE CASE OF B.K.TEX CORPN A ND MR BHAGWAN G GADA AS WELL AS THE MATERIAL FOUND DURING THE COURSE OF SEARCH AND SUCH OTHER FACTS AS MAY BE BROUGHT TO THE NOTICE OF AO. WE MAY STATE THAT AO WILL PAS S A SPEAKING ORDER AFTER GIVING ITA NOS.4688 & 4690/MUM/2011 ASSESSMENT YEARS: 2004-05 & 2005-06 8 OPPORTUNITY OF HEARD TO THE ASSESSEE. GROUND NOS.5 & 6 ARE ALLOWED FOR STATISTICAL PURPOSES FOR ASSESSMENT YEARS 2004-05 AND 2005-06. 14. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED IN PART. PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2012 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 21 ST NOVEMBER, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),1, THANE 4. COMMISSIONER OF INCOME TAX, CENTRAL, PUNE 5. DEPARTMENTAL REPRESENTATIVE, BENCH A MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI