The ITO, Ward-9(1), Surat V. M/s. Chirag Gems, Surat

ITA 532/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63244 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 16-10-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 19-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A TINKEY
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Corroborative evidences
• Section: 143(3)

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ %&'( %&'( %&'( %&'(, , , , )* + ) )* + ) )* + ) )* + ) ' ' ' ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.532/AHD/2009 [ASSTT.YEAR : 2005-2006] ITO, WARD-9(1) SURAT. /VS. M/S.CHIRAG GEMS 115, SAHYOG CHAMBERS MINI BAZAR, VARACHHA ROAD SURAT 395 006. PAN : AACFC 1075 H ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 )/ REVENUE BY : SHRI A. TINKEY 4& 1 2 )/ ASSESSEE BY : SHRI SAPNESH SHETH 5 1 &(*/ DATE OF HEARING : 16 TH OCTOBER, 2012 678 1 &(*/ DATE OF PRONOUNCEMENT : 14-12-2012 )9 / O R D E R PER ANIL CHATURVEDI, ACCOUNTANT MEMBER: THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, SURAT FOR T HE ASSESSMENT YEAR 2005-2006. ITA NO.532/AHD/2009 -2- 2. ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF IM PORT OF ROUGH DIAMOND, MANUFACTURING AND EXPORTING OF CUT AND POL ISHED DIAMONDS. ASSESSEE FILED ITS RETURN OF INCOME ON 19.10.2005 F OR AY 2005-06 DECLARING TOTAL INCOME OF RS.4,86,028/-. THE CASE W AS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U /S 143(3) VIDE ORDER DATED 30.11.2007 AND THE INCOME WAS DETERMINE D AT RS.17,81,850/- AFTER MAKING VARIOUS ADDITIONS. AGGR IEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). THE CIT(A) VIDE ORDER DATED 27.11.2008 GRANTED PARTIAL RELIEF TO AS SESSEE. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFOR E US. 3. THE GROUND NO.1 & 2 BEING INTERCONNECTED ARE CON SIDERED TOGETHER AND READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.C.I.T.(A) HAS ERRED IN DELETING THE ADD ITION OF RS.6,11,589/- MADE BY THE A.O., UNDER VALUATION OF CLOSING STOCK OF POLISHED DIAMOND, WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.C.I.T.(A) HAS ERRED IN DELETING THE ADD ITION OF RS.85,065/- MADE BY THE A.O., UNDER VALUATION OF CL OSING STOCK OF REJECTION DIAMOND, WITHOUT APPRECIATING THE FACT S OF THE CASE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAD NOT SEPARATELY IDENTIFIED POLISHED DIA MOND STOCK IN THE CLOSING STOCK. ASSESSEE ALSO DID NOT SUBMIT BREAKUP OF VARIOUS QUALITIES OF POLISHED DIAMONDS AND THEIR VALUATION FOR OPENING AND CLOSING STOCK. HE ALSO OBSERVED THAT ASSESSEE HAD V ALUED ITS STOCK OF POLISHED DIAMONDS AT RS.4,053 PER CARAT WHEREAS THE OPENING STOCK WAS VALUED AT RS.8,323 PER CARAT. UNDER THESE CIRCU MSTANCES, ITA NO.532/AHD/2009 -3- ACCORDING TO AO, IT WAS NOT POSSIBLE TO ASCERTAIN T HE CORRECTNESS OF THE VALUATION OF OPENING AS WELL AS CLOSING STOCK OF PO LISHED DIAMONDS. HE WAS OF THE VIEW THAT BOOKS OF ACCOUNTS OF ASSESS EE WAS NOT COMPLETE AND ACCORDINGLY REJECTED THE BOOK RESULTS U/S 145(3) AND THEREAFTER VALUED THE CLOSING STOCK OF POLISHED DIA MONDS BY APPLYING THE RATE OF RS.10,873 PER CARAT AND ACCORDINGLY VAL UED THE CLOSING STOCK AT RS.10,52,180/-. SINCE THE ASSESSEE HAD ALR EADY VALUED THE STOCK AT RS.4,40,591/- HE MADE ADDITION OF THE DIFF ERENCE OF RS.6,11,589/- TO THE CLOSING STOCK FURTHER HE ALSO VALUED THE STOCK OF REJECTED DIAMONDS AT THE RATE OF RS.20 PER CARAT AN D ACCORDINGLY MADE ADDITION OF RS.85,065/- TO THE STOCK OF REJECTED DI AMONDS. BEING AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION MADE BY AO BY HOLDING AS UNDER : I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE A0. IT IS NOT IN DISPUTE THAT THE APPEL LANT HAS MAINTAINED STOCK RECORDS ON CARAT WISE BASIS & DETA ILS RELATING TO THE SAME ARE ALSO GIVEN IN THE TAX AUDIT REPORT. IT IS THE AO'S CONTENTION THAT ASSESSEE HAS NOT MAINTAINED QUALITY WISE DETAILS. IN THIS REGARD, IT HAS BEEN CONTENDED THAT THE SAME ARE NOT POSSIBLE TO BE MAINTAINED IN THIS LINE OF INDUS TRY. THE ASSESSEE HAS DONE VALUATION OF CLOSING STOCK ON THE BASIS OF ESTIMATED MARKET PRICE LESS MARGIN OF PROFIT. I FIN D THAT THE RATES OF SUBSEQUENT EXPORT BILLS VARY FROM RS.4750 PER CARAT TO RS.5200 PER CARAT & THESE RATES ARE APPROXIMATE 'TO THE ESTIMATED MARKET RATE ADOPTED FOR VALUATION OF CLOS ING STOCK. I ALSO FIND THAT THIS METHOD OF VALUATION OF CLOSING STOCK HAS BEEN CONSISTENTLY FOLLOWED BY ASSESSEE & THIS IS ONE OF THE RECOGNIZED METHOD OF VALUATION OF CLOSING STOCK. IN THIS REGARD, REFERENCE CAN BE MADE TO THE ITAT AHMEDABAD BENCH D ECISION IN THE CASE OF M/S RAVI DIAMONDS WHEREIN THIS METHO D HAS BEEN APPROVED. IT IS ALSO RELEVANT TO NOTE HERE THAT THE RE IS NO MAJOR FLUCTUATION IN G.P RATIO & THIS ALSO SHOWS THAT VAL UATION OF CLOSING STOCK MADE BY ASSESSEE IS PROPER. IN OTHER WORDS, IF ITA NO.532/AHD/2009 -4- VALUATION IS DONE IN ORDER TO SUPPRESS THE PROFIT I N THAT CASE THERE WOULD HAVE BEEN MAJOR FLUCTUATION IN THE RATE OF G.P. HOWEVER, SAME IS NOT THE CASE. BESIDES THIS THE MET HOD ADOPTED BY AO TO ARRIVE AT THE VALUE OF CLOSING STOCK DOES NOT APPEAR TO BE THE REGULAR METHOD FOLLOWED IN THIS LINE OF INDU STRY. THE AO HAS WORKED OUT AVERAGE COST OF POLISHED DIAMONDS AT EACH STAGE (I.E. AS & WHEN PRODUCTION OF POLISHED DIAMON DS IS RECEIVED) ON THE BASIS OF AVERAGE COST OF ROUGH DIA MOND & LABOUR CHARGES. FURTHER, AS & WHEN SALES HAVE BEEN MADE, IT IS ASSUMED THAT ASSESSEE HAS SOLD GOODS OF LOWER VALUE (I.E. GOODS WITH LOWER AVERAGE COST). THIS ALSO DOES NOT APPEAR TO BE A FAIR & PROPER METHOD AS TO HOW IT CAN BE ASSUMED THAT WH ENEVER SALES ARE MADE THE SAME IS OF GOODS WHOSE AVERAGE C OST IS LOW. FROM THE FACTS OF THE CASE IT IS ALSO SEEN THAT THE VALUATION OF STOCK ADOPTED BY THE AO IS FAR MORE THAN EVEN THE S ALES PRICE REALIZED BY THE APPELLANT FIRM ON ITS SALES. FROM T HE TABLE OF PRODUCTION AND SALES SO MADE. IT IS SEEN THAT THE S ALES WERE EFFECTED IN THE RANGE OF RS.9300/- TO RS.10000/- PE R CARATS AND THEREFORE VALUING THE STOCK ON SUCH HIGHER FIGURE W OULD NOT BE JUSTIFIED. THE AO ALSO FAILED TO PROVE THAT THIS IS THE NORMAL PRACTICE PREVAILING IN THE INDUSTRY FOR VALUATION O F CLOSING STOCK. AS THE METHOD ADOPTED BY ASSESSEE IS ONE OF THE ACCEPTED METHODS OF VALUATION OF STOCK & AS THE SAME HAS BEE N CONSISTENTLY FOLLOWED & THERE IS NO MAJOR FLUCTUATI ON IN G.P RATIO, I DO NOT FIND ANY JUSTIFICATION IN DISTURBIN G THE VALUATION OF CLOSING STOCK DONE BY ASSESSEE. AS REGARDS THE ADDITION TO THE VALUE OF CLOSING STO CK OF REJECTION DIAMONDS, I FIND THAT ASSESSEE HAS FOLLOWED A CONSI STENT POLICY TO VALUE THE SAID STOCK AT RS.10 PER CARAT. THIS I S ALSO APPARENT ON PERUSAL OF VALUATION OF OPENING STOCK WHICH IS A LSO MADE AT THE RATE OF RS.10 PER CARAT. IT IS A KNOWN FACT TH AT REALIZABLE VALUE OF REJECTION DIAMONDS IS VERY LESS & IT WOULD NOT BE PRUDENT TO VALUE THE STOCK AT RS.20 PER CARAT & THE REBY DISTURB THE METHOD OF VALUATION WHICH IS CONSISTENTLY FOLLO WED BY ASSESSEE. AS SUCH THE ADDITIONS OF RS.6,11,589 & R S.85,065/- ARE HEREBY DELETED. 5. AGGRIEVED BY THE ACTION OF CIT(A), THE REVENUE I S NOW IN APPEAL BEFORE US. ITA NO.532/AHD/2009 -5- 6. BEFORE US, THE LD.D.R. SUBMITTED THAT THE ASSESS EE DID NOT SUBMIT THE DETAILS OF INVENTORY OF POLISHED DIAMOND S GIVING DETAILS OF CUT, COLOUR, CLARITY AND VALUE. THE ASSESSEE MERELY SUBMITTED TOTAL CARATS AND TOTAL VALUE OF POLISHED DIAMONDS AND HAD SHOWN ITS VALUATION AT THE RATE OF RS.4,553/- PER CARAT. FURT HER, THE ASSESSEE DID NOT MAINTAIN LOTWISE DETAILS FROM WHICH IT COULD BE ASCERTAINED AS TO WHICH PART OF THE OPENING STOCK/MANUFACTURED DIAMON DS REMAINED IN CLOSING STOCK AND WHICH PART WAS SOLD. THE ASSESSEE ALSO COULD NOT EXPLAIN AS TO WHAT WAS THE BASIS OF VALUATION OF CL OSING STOCK. HE FURTHER SUBMITTED THAT IN THE ABSENCE OF COMPLETE D ETAILS OF STOCK, THE VALUATION ADOPTED BY THE ASSESSEE COULD NOT BE RELI ED AND THEREFORE THE AO HAD RIGHTLY APPLIED A SYSTEMATIC METHOD TO WORK OUT THE VALUE OF CLOSING STOCK. WITH RESPECT TO GP RATE, HE SUBMITTE D THAT GOOD G.P RATE DOES NOT NECESSARY MEAN THAT THE BOOKS AS WELL AS THE VALUATION OF CLOSING STOCK WERE CORRECT. HE THEREFORE URGED IN T HE GIVEN SITUATION THE AO WAS RIGHT IN REJECTING THE BOOK RESULTS AND THEREFORE URGED THAT THE ORDER OF THE AO BE UPHELD. 7. ON THE OTHER HAND THE LD.A.R SUBMITTED THAT IT V ALUES THE STOCK OF POLISHED DIAMONDS ON THE BASIS OF ESTIMATED MARK ET PRICE LESS ESTIMATED GP MARGIN. THE ASSESSEE HAS BEEN CONSISTE NTLY FOLLOWING THE SAME PRACTICE FOR VALUATION OF STOCK AND THE SA ME IS A RECOGNISED METHOD IN ITS LINE OF BUSINESS. DUE TO THE PECULIAR NATURE AND DUE TO DIFFERENT VARIETIES OF DIAMOND IT IS NOT POSSIBLE T O MAINTAIN QUALITY WISE STOCK OF POLISHED DIAMONDS. HE FURTHER SUBMIT TED THAT THE GP IS COMPARABLE TO THAT OF EARLIER YEAR. HE THUS SUPPORT ED THE ORDER OF CIT(A) AND URGED THAT THE ORDER OF CIT(A) BE UPHELD . ITA NO.532/AHD/2009 -6- 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) HAS GIVEN A DETAILED REASON WHILE ALLOWING THE APPEAL OF THE ASSESSEE. THE CIT(A) HAS GIVEN A FINDING THAT THE STOCK HAS BEEN VALUED AT APPROXIMATELY THE RATE AT WHICH SUBSEQUENT EXPORTS HAVE BEEN MADE BY THE ASSESSEE A ND THE AFORESAID METHOD HAS ALSO BEEN ACCEPTED BY THE CO-ORDINATE BE NCH IN THE CASE OF RAVI DIAMONDS (SUPRA). HE HAS ALSO GIVEN A FIND ING THAT THE METHOD OF VALUATION ADOPTED BY THE AO DOES NOT APPE AR TO BE FAIR & PROPER METHOD. THE METHOD FOLLOWED BY THE ASSESSEE HAS BEEN FOLLOWED BY IT IN THE PAST AND HAS ALSO BEEN ACCEPT ED BY THE REVENUE. BEFORE US, THE LD.D.R. COULD NOT BRING ANY CONCRETE MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A). IN VIE W OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDE R OF CIT(A). WE THUS UPHOLD HIS ORDER ON THIS ISSUE. THUS THIS GROUND OF THE REVENUE IS REJECTED. 9. THE GROUND NO.3 READS AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.3,25,929/- MADE BY THE AO ON ACCOUNT OF LABOUR C HARGES, WITHOUT APPRECIATING THE FACTS OF THE CASE. 10. AO OBSERVED THAT ASSESSEE HAS PAID RS.11,89,529 /- AS LABOUR CHARGES TO C.M.IMPEX WHICH IS A RELATED PARTY AS SP ECIFIED U/S 40A(2)(B). ASSESSEE WAS ASKED TO PRODUCE THE PARTY ALONGWITH THE BOOKS OF ACCOUNTS. ASSESSEE DID NOT PRODUCE THE PAR TY AND IT WAS SUBMITTED THAT SINCE C.M.IMPEXS BALANCE SHEET, P&L A/C, ALONGWITH THE BOOKS OF ACCOUNTS HAVE BEEN MISPLACED AND THERE FORE THE DETAILS CALLED FOR CANNOT BE SUBMITTED. IT WAS FURTHER SUBM ITTED THAT C.M.IMPEX DOES NOT HAVE ITS OWN FACTORY BUILDING AN D MACHINERY. IT ITA NO.532/AHD/2009 -7- GETS THE DIAMOND CUTTING AND POLISHING DONE THROUGH SUB CONTRACTORS ON JOB WORK BASIS. HOWEVER, THE CONFIRMATION FROM C .M.IMPEX WAS SUBMITTED. FROM THE SCRUTINY OF THE LEDGER ACCOUNT , AO NOTICED THAT IN AY 2004-05 C.M.IMPEX HAD CARRIED OUT LABOUR WORK OF RS.9,12,216/- AND OUT OF THAT RS.8,13,790/- WAS OUT STANDING AT THE END OF THE YEAR AND RS.8 LAKHS WAS PAID IN THE MONTH OF JULY 05. SIMILARLY, THE OUTSTANDING BALANCE AS ON 31.3.2005 WAS RS.6,00 ,132. HE THUS CONCLUDED THAT SUB CONTRACTOR AND LABOURER OF C.M.I MPEX WERE NOT PAID FOR THE WORK DONE BY THEM ON REGULAR BASIS AND THERE WAS NO EVIDENCE REGARDING THE WORK DONE THROUGH IT. HE THE REFORE CONCLUDED THAT THE GENUINENESS OF EXPENSES HAS NOT BEEN PROVE D BY ASSESSEE BY PRODUCING ANY SUPPORTING EVIDENCE. HE ACCORDINGLY C ONSIDERED THE LABOUR CHARGES FOR POLISHING OF ROUGH DIAMOND TO BE RS.250 PER CARAT (BEING THE SAME RATE CHARGED PAID BY JODHANI EXPORT S) AND ACCORDINGLY ALLOWED RS.8,63,600/- AND DISALLOWED RS.3,25,929/-. AGGRIEVED BY THE ORDER OF AO ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE D ELETED THE ADDITION BY HOLDING AS UNDER: I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE AO. IT IS NOT IN DISPUTE THAT THE AMOUN T SOUGHT TO BE DISALLOWED IS SUM PAID TO SISTER CONCERN WHERE THE APPELLANT HAD PAID LABOUR CHARGES WHICH IN THE OPINION OF THE AO WAS ON HIGHER SIDE. I ALSO FIND THAT APPELLANT HAS FILED C ONFIRMATION OF THE PARTY & TDS IS ALSO MADE FROM THE LABOUR PAYMEN TS MADE TO THE PARTY. THE AO HAS PLACED RELIANCE ON THE LAB OUR CHARGES PAID BY TWO CONCERNS VIZ. M/S D. NITIN & CO & M/S J ODHANI EXPORTS WHO ARE MAKING PAYMENTS AT THE RATE OF RS.1 60-180 PER CARAT & RS. 265 PER CARAT RESPECTIVELY. IN THIS REG ARD, IT HAS BEEN ARGUED BY THE APPELLANT THAT AO HAS NOT SUPPLI ED COMPLETE DETAILS RELATING TO THE ALLEGED COMPARABLE CASES & HAS ALSO NOT POINTED OUT THEIR G.P & N.P RATIOS. IN THIS REGARD, IT IS A SETTLED LAW THAT IF AO WANTS TO PLACE RELIA NCE ON SAID ITA NO.532/AHD/2009 -8- CASES IT IS IMPERATIVE FOR HIM TO SUPPLY COMPLETE D ETAILS OF SAID COMPARABLE CASES. AS THE SAME IS NOT SUPPLIED TO AS SESSEE, ADVERSE INFERENCE CANNOT BE DRAWN ON THE BASIS OF S AID CASES. BESIDES THIS, I ALSO FIND THAT ASSESSEE HAS SHOWN N .P RATIO OF 5.57% (BEFORE PARTNERS SALARY) WHICH CAN BE REGARDE D AS VERY MUCH REASONABLE IN THIS LINE OF INDUSTRY. THE DISAL LOWANCE BY INVOKING PROVISIONS OF SECTION 40A(2)(B) CAN BE MAD E ONLY IF THERE ARE COGENT EVIDENCES WHICH INDICATES THAT ASS ESSEE HAS MADE PAYMENTS TO ITS SISTER IN EXCESS OF THE MARKET RATE. HOWEVER, IN THE INSTANT CASE, IN MY CONSIDERED OPIN ION THERE IS NO COGENT EVIDENCE WHICH INDICATES THAT THE PAYMENT S HAVE BEEN MADE IN EXCESS OF THE MARKET RATES. EVEN ON PE RUSAL OF THE ALLEGED TWO COMPARABLE CASES CITED BY AO, IT IS APP ARENT THAT THERE IS SIGNIFICANT VARIATION IN THE RATES OF LABO UR CHARGES PAID BY THEM & THUS, THERE IS NO COGENT EVIDENCE WHICH C OULD PRECISELY INDICATE AS TO WHAT IS THE FAIR MARKET VA LUE. IN THIS VIEW OF THE MATTER, THERE DOES NOT SEEM TO BE ANY L OGICAL REASON FOR ADOPTING THE REASONABLE RATE OF LABOUR CHARGES AT RS.250 PER CARAT. THE ADDITION MADE BY AO IS THEREFORE HEREBY DELETED . 11. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NO W IN APPEAL BEFORE US. 12. BEFORE US, THE LD.D.R SUBMITTED THAT THE ASSESS EE WAS REQUIRED TO PRODUCE THE PARTY BUT THE SAME WAS NOT DONE BY T HE ASSESSEE. THE ASSESSEE ALSO DID NOT SUBMIT THE COPY OF THE ANNUAL ACCOUNT OF C.M.IMPEX. THE ASSESSEE HAS FAILED TO PROVE WHETHER ACTUAL WORK WAS CARRIED OUT BY THE SAID PARTY. THE AO WAS DEPRIVED OF OPPORTUNITY TO EXAMINE THE FACTS RELATED TO C.M.IMPEX. HE THEREFOR E URGED THAT CONSIDERING THE FACTUAL POSITION NARRATED BY THE AO AND AS SUBMITTED BY HIM, THE ORDER OF AO BE UPHELD. 13. THE LD.A.R ON THE OTHER HAND SUBMITTED THAT ASS ESSEE COULD NOT PRODUCE THE DETAILS CALLED FOR BY THE AO AS THE DET AILS WERE LOST. HE ITA NO.532/AHD/2009 -9- FURTHER SUBMITTED THAT ASSESSEE HAD DEDUCTED TDS BE FORE MAKING PAYMENT OF LABOUR CHARGES. THE AO HAS FAILED TO PRO VE THAT THE FACTS OF THE ASSESSEES CASE ARE IDENTICAL TO THE COMPARE D RESULTS. IT WAS FURTHER SUBMITTED THAT EVEN AFTER MAKING THE PAYMEN T OF LABOUR CHARGES AT THE RATE OF RS.375 PER CARAT, ASSESSEE H AS EARNED DECENT PROFIT AND THEREFORE THE GENUINENESS OF LABOUR CHAR GES CANNOT BE DOUBTED. THUS THE LD.A.R SUPPORTED THE ORDER OF CIT (A). 14. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE WAS ASKED TO PRODUCE C.M.IMPEX AND ALSO THEIR BOOKS OF ACCOUNTS. THE ASSESSEE DID NOT PRODUCE FOR THE REASON THAT THE BO OKS OF ACCOUNTS WERE MISPLACED. IN THE ABSENCE OF DETAILS THE AO WO RKED OUT THE LABOUR CHARGES ON THE BASIS OF RATES PAID BY OTHER PARTIES AND THEREBY DISALLOWED THE EXCESS AMOUNT. CIT(A) DELETED THE AD DITION FOR THE REASON THAT CONFIRMATION OF THE PARTY WAS FILED AND TDS WAS ALSO DEDUCTED,, AND THERE WAS NO COGENT EVIDENCE TO INDI CATE THAT THE PAYMENT WAS EXCESSIVE. WE DO NOT AGREE WITH THE CON TENTION OF THE CIT(A) FOR THE REASON THAT THE ASSESSEE HAS DEBITED THE EXPENSES BUT FAILED TO EITHER PRODUCE THE PARTY OR FURNISH HIS A NNUAL ACCOUNTS. MERELY BECAUSE THE TDS HAS BEEN DEDUCTED BEFORE MAK ING THE PAYMENT CANNOT BE CONSIDERED TO BE PROOF OF CARRYIN G OUT THE WORK. WE ARE OF THE VIEW THAT MERELY BY FILING CONFIRMATI ON, IT CANNOT BE SAID THAT THE PARTY HAS CARRIED OUT THE LABOUR WORK . SINCE THE ASSESSEE HAS CLAIMED THE EXPENSES, THE ONUS LIES ON THE ASSE SSEE TO PROVE THE GENUINENESS OF THE EXPENSES WHICH THE ASSESSEE HAS FAILED TO PROVE. IN VIEW OF THESE FACTS WE ARE OF THE VIEW THAT THE AO WAS JUSTIFIED IN MAKING THE ESTIMATION OF LABOUR EXPENSES. WE ACCORD INGLY UPHOLD THE ORDER OF AO AND THUS THIS GROUND OF THE REVENUE IS ACCEPTED. ITA NO.532/AHD/2009 -10- 15. THE FOURTH GROUND OF THE REVENUES APPEAL IS AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID.C.I.T.(A) HAS ERRED IN DELETING THE ADD ITION OF RS.30,000/- MADE BY THE A.O., OUT OF SALARY EXPENSE S, WITHOUT APPRECIATING THE FACTS OF THE CASE. 16. AO NOTICED THAT THE ASSESSEE HAS CLAIMED SALARY EXPENSES OF RS.1,68,000/- BEING PAID TO ASSORTERS. HE ALSO NOTI CED THAT THERE WAS NO VOUCHER PERTAINING TO SALARY EXPENSES BUT MERELY COMPUTER ENTRY OF RS.5000 PER MONTH AND RS.50,000 WAS DEBITED TO SALA RY EXPENSES IN CASH ON 31.3.2005. THUS ACCORDING TO AO THE TOTAL S ALARY EXPENSES WAS RS.1,10,000 AND SINCE THERE WAS NO RECORD OF RE MAINING 58,000/- HE DISALLOWED THE SAME. ASSESSEE LATER ON PRODUCED THE VOUCHERS FOR RS.58,000/ . AO HELD THAT THE SAME WERE NOT AVAILAB LE AT THE TIME OF EXAMINATION OF RECORDS BY HIM. HE ACCORDINGLY CONCL UDED THE VOUCHER TO BE NOT GENUINE AND ACCORDINGLY DISALLOWED RS.58, 000/. AGAINST THE DISALLOWANCE, THE ASSESSEE CARRIED THE MATTER BEFOR E CIT(A). CIT(A) GAVE PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS U NDER: I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AND ALSO ASSESSING OFFICER. IT IS WELL SETTLED THAT ONUS LIE S ON THE ASSESSEE TO PROVE THE CLAIMS MADE IN THE RETURN OF INCOME BY PRODUCING COGENT EVIDENCE. I FIND THAT ASSESSEE HAS PRODUCED VOUCHERS IN SUPPORT OF THE SALARY EXPENSES PERTAINING TO MUMBAI OFFICE FOR WHICH CERTAIN DISCREPANCIES HAVE BEEN NOTED BY AO. THE AO HAS DOUBTED THE GENUINENESS OF VOUCHERS & HAS ALLOW ED THE CLAIM OF SALARY TO THE EXTENT OF RS.1,10,000/-. IN THIS REGARD, IN MY VIEW, IN ORDER TO MEET THE ENDS OF JUSTICE, IT W OULD BE FAIR IF DISALLOWANCE IS SUSTAINED TO THE EXTENT OF RS.30,00 0/- AS AGAINST ITA NO.532/AHD/2009 -11- RS.58,000/- MADE BY A0. THUS, APPELLANT GETS RELIEF OF RS.28,000/- & THE BALANCE ADDITION OF RS.30,000/- I S HEREBY CONFIRMED. 17. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE I S NOW IN APPEAL BEFORE US. 18. BEFORE US THE LD.D.R SUBMITTED THAT IT WAS OBSE RVED BY THE ASSESSING OFFICER THAT THE ASSESSEE MADE PAYMENT OF LABOUR CHARGES TO A SISTER CONCERN; NAMELY M/S. C M IMPEX, AT A VERY HIGH RATE (RS.325 TO RS.350 PER CARAT). THE ASSESSEE WAS REQUIRED TO PRODUCE THE SAID PARTY WITH BOOKS OF ACCOUNT. BUT THE SAME WAS NOT D ONE BY THE ASSESSEE. EVEN FINAL ACCOUNTS OF THE SAID PARTY WER E NOT FURNISHED. NO EVIDENCE REGARDING WORK CARRIED OUT BY M/S. C M IMP EX COULD BE PRODUCED BY THE ASSESSEE. IN RESPONSE TO A SHOW CAU SE NOTICE, THE ASSESSEE MERELY SUBMITTED ONE CONFIRMATION FROM THE SAID PARTY. THE ASSESSING OFFICER OBSERVED THAT OTHER ASSESSEES ASS ESSED IN THE SAME RANGE WERE PAYING LESS LABOUR CHARGES AS COMPARE TO THE LABOUR CHARGES PAID BY THE ASSESSEE TO M/S.C M IMPEX. IN A DDITION TO THE ABOVE THE ASSESSING OFFICER ANALYZED THE PATTERN OF PAYMENT MADE BY THE ASSESSEE TO THE SAID PARTY AND IT WAS NOTICED T HAT MOST OF THE PAYMENT REMAINED OUTSTANDING FOR A LONG TIME. THUS, THE ASSESSEE FAILED TO PROVE GENUINENESS OF THE EXPENSES. THE AS SESSING OFFICER CONSIDERED LABOUR CHARGES @ 250 PER CARAT AS REASON ABLE AND ACCORDINGLY BALANCE WAS DISALLOWED WHICH COMES TO R S.3,25,929/-. HE THUS URGED THAT THE ORDER OF AO BE UPHELD. ON TH E OTHER HAND THE LD.A.R, SUPPORTED THE ORDER OF CIT(A). ITA NO.532/AHD/2009 -12- 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE AO HAS DISALLOWED RS.58 ,000 AND CIT(A) HAD RESTRICTED THE DISALLOWANCE TO RS.30,000/-. CON SIDERING THE REASONS STATED BY CIT(A) FOR RESTRICTING THE DISALL OWANCE, WE FEEL THAT IN THE PRESENT FACTS NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A). WE THUS UPHOLD HIS ORDER ON THIS ISSUE. THUS THIS G ROUND OF REVENUE IS DISMISSED. 20. IN THE RESULT, THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT.