Rajan Technocast Pvt. Ltd., RAJKOT-GUJARAT V. The Income Tax Officer, Ward-1(3), RAJKOT-GUJARAT

ITA 57/RJT/2012

• Counselvise Citation: 5724914 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-04-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 09-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: J C RANPURA
• Keywords: Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH BEFORE: SHRI D.K. TYAGI , JUDICIAL MEMBER AND SHR I A. MOHAN ALANKAMONY , ACCOUNTANT MEMBER RAJAN TECHNOCAST PVT. LTD. SURVEY NO. 281, PLOT NO.2, SHAPAR (VERAVAL), TAL. KOTDA SANGANI, DIST. RAJKOT (APPELLANT) VS INCOME TAX OFFICER, WARD - 1(3) RAJKOT (RESPONDENT) REVENUE BY : SRI AVINASH KUMAR , D . R. ASSESSEE BY: SRI J.C. RANPURA , A.R. DATE OF HEARING : 25 - 04 - 2013 DATE OF PRONOUNCEMENT : 06 - 0 6 - 2013 / ORDER P ER : D.K. TYAGI , JUDICIAL MEMBER : - TH IS IS THE ASSESSEE S APPEAL AG AINST THE ORDER OF LD. CIT(A) - II RAJKOT DATED 29 - 12 - 2 011 . I T A NO . 5 7 / RJT /20 12 A SSESSMENT YEAR 2004 - 05 I.T.A NO. 57/RJT/2012 A.Y. 2004 - 05 PAGE NO RAJAN TECHNOCAST PVT. LTD VS. ITO 2 2. AT THE TIME OF HEARING ONLY FOLLOWING GROUND WAS PRESSED: - 1. THE LD CIT(A) - II, RAJKOT ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING DISALLOWANCE OF RS. 8,13,281/ - MADE FROM LABOUR EXPENSE. THE DISALLOWANCE MAY KINDLY BE DELETED. 3. ASSESSING OFFICER WHILE MAKING DISALLOWANCE OF RS. 8,13,281/ - OUT OF L ABOUR EXPENSES HAS OBSERVED AS UNDER: - '3.1 WITH REGARD TO FALL OF GP, IT WAS SUBMITTED VIDE REPLY DTD. 21.09.2006 VIDE PARA - 14 THAT COST PRICE OF RAW MATERIAL WAS INCREASED WITHOUT CORRESPONDING INCREASE IN THE SALE PRICE. APART FROM THAT IT WAS ALSO CONTENDED THAT DUE TO DISPUTE WITH THE GEB, THE ASSESSEE HAS STARTED TO USE GENERATOR SET FOR ITS MANUFACTURING ACTIVITIES AND THE COST OF PRODUCTION IS INCREASED ON ACCOUNT OF HIGHER CHARGES FOR MAINTENANCE OF DG SET AS COMPARED TO THE CHARGES OF ELECTRIC ITY. VIDE QUESTIONNAIRE ISSUED ON 11.09.2006, IN ITEM NO. 13, THE ASSESSEE WAS ASKED TO DRASTIC VARIATION IN THE FOLLOWING DIRECT EXPENSES: DETAILS OF EXPENSES: THIS YEAR LAST YEAR (I) WAGES RS. 12,54,500 RS. 3,08,545/ - (N) OIL CONSUMPTION RS. 29,28,350/ - RS. 3,80,246/ - (III) TESTING EXPENSES RS. 3,50,000/ - RS. 1,60,000/ - 3.2 IN REPLY DTD , 21.09.2006, IT IS CONTENDED THAT ASSESSEE HAS NOT UTI LIZED ELECTRICITY POWER IN THE L AST EIGHT MONTHS OF THE YEAR ON ACCOUNT OF DISCONNECTION OF SUPPLY BY GEB. FURTHER, THE MANUFACTURING ACTIVITIES WAS CARRIED OUT WITH THE AID OF DG SET. BESIDE IT WAS CO NTENDED THAT THERE IS INCREASE IN THE EXPORT SALE AS COMPARED TO PRECEDING YEAR. FURTHER, IT WAS CONTENDED THAT INCREASE IN LABOUR CHARGE IS DUE TO REQUIREMENT OF TECHNICALLY SOUND LABOUR AND REPROCESS OF REJECTED FINISHED PRODUCTS BY FOREIGN BUYER. TESTI NG I.T.A NO. 57/RJT/2012 A.Y. 2004 - 05 PAGE NO RAJAN TECHNOCAST PVT. LTD VS. ITO 3 CHARGES IS AL SO INCREASED ON ACCOUNT OF HEAVY RISE IN EXPORT TURNOVER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON EXAMINATION OF EVIDENCES AND COPY OF ACCOUNTS AND DETAILS IT IS SEEN THAT ASSESSEE U SED TO INCUR THE EXPENSES OF SAL ARY ON SELF MADE VO UCHERS. NO REGULAR SAFETY R EGISTER/RECORDS DEPICTING THE NA ME OF THE PERSONS, DAYS OF THE ATTENDANCE, DESIGNATION OR TYPE OF WORK ASSIGNED TO SPECIFIED PERSONS WAS NOT FORTHCOMING FROM THE EVIDENCES. FURTHER IT IS NOTICED THAT ON THE LAST DATE OF ACCOUNTIN G YEAR THE ASSESSEE HAS INCURRED EXPENDITURE IN CASH IN THE NAME OF BONUS PAYMENT TO ITS WORKERS WHICH IS NOT A USUAL PRACTICE PREVAILING THIS LINE OF BUSINESS. IT I S PERTINENT TO NOTE THAT THE ALL EGED VOUCHERS OF BONUS PAYMENTS DO NOT SPECIFY THE BASIS OF PAYMENT OF BONUS SUCH AS LENGTH OF SERVICE/SALARY - WAGES FOR THE YEAR OF EA CH INDIVIDUA L/RATE OF BONUS ETC, THUS, THE L UMP SUM PAYMENT EVIDENCED BY SUCH ALL EGED VOUCHERS FOR PAYMENT OF BONUS IS NOT VERIFIABLE. 3.3 A PART FROM IT, VIDE THIS OFFICE L ETTER DTD. 27.11.2006, THE ASSESSEE WAS SPE CIFICALLY ASKED, VIDE ITEM NO. (I V) THAT THE DETAILS OF TECHNICAL SOUND LABOUR AND REPROCESS OF REJECTED FINISHED PRODUCT BY FOREIGN BUYER S BY FURNISHING THE DETAILS TO JUSTIF Y THE CLAIM FOR INCREASE IN L ABOUR EXPENSES . IT WAS ALSO ASKED TO FURNISH THE DETAILS OF SUCH SOUND LABOUR DEPLOYED ALONG WITH THE DETAILS OF THEIR QUALIFICATION, EFFICIENCY/PROFICIENCY ETC. 3. 4 IN REPLY TO THE ABOVE QUERY, THE ASSESSEE VIDE REPLY DTD. 01.12.2006 , CONTENDED VIDE PARA - 4 THAT LABOUR REGISTER HAS NOT BEEN MAINTAINED. IT WAS FURTHER CONTENDED THAT EXPERIENCED LABOUR WAS HIRED FOR DEVELOPING THE EXPORT MARKET, NO SPECIFIC REPLY WITH THE IDENTITY OF EXPERIENCED HIRED LABOUR WAS FURNISHED TO JUS TIFY ITS SUBMISSION. 3. 5 IN SUBMISSION DTD. 12.12.2006, THE ASSESSEE FURTHE R COME FORWARD WITH THE NEW SUBMISSION THAT THE REASON IN I NCREASE IN LABOUR CHARGES THAT THE FAMILY OF THE ASSE SSEE WAS JOINT FAMILY DURING EARLIER YEARS, HOWEVER, DURING THE YEA R UNDER CONSIDERATION THEY HAVE SEPARATED AND THE ASSESSEE COMPANY LOST THE HELP OF FAMILY MEMBERS COMPELLED THE ASSESSEE TO EMPLOY FURTHER LABOUR WHICH RESULTED INTO INCREASE IN LABOUR EXPENSE. I.T.A NO. 57/RJT/2012 A.Y. 2004 - 05 PAGE NO RAJAN TECHNOCAST PVT. LTD VS. ITO 4 3.6 IN THIS REGARD IT MAY BE SUBMITTED THAT THE CONTENTION OF THE ASSESSEE IS FAR FROM EVIDENCES. NO DETAILS OF THE FAMILY MEMBERS EMPLOYED IN THE PRECEDING YEARS FOR THE EXECUTION OF BUSINESS ARE PRODUCED. THE DETAILS OF NEW SUBSTITUTED MAN POWER DEPLOYED ON THIS COUNT HAVE ALSO NOT BEEN SUBMITTED. APART FROM THE BALANCE SHEET INDICATE THAT THE SHARE CAPITAL REMAINED UNCHANGED AN D NO DETAILS OF CHANGING IN HOLDING OF SHARES IS PRODUCED EITHER ALONG WITH THE AUDITED ACCOUNTS OR NOT SUBMITTED IN SUPPORT OF THE CLAIM. BESIDES, THE CLAIM OF THE ASSESSEE COMPANY FOR TH E REPROCESS OF THE EXPORTED GOODS HAS NOT BEEN EVIDENCED OR THE DETAILS IN THIS REGARD WITH REFERENCE TO THE NAME OF THE PAR TY AND THE DATE OF RETURN WITH Q UANTITY ETC. THUS, THE CONTENTION IS NOT SUPPORTED BY ANY COGENT, CONVINCING AND SOUND MATERIAL/INFO RMATION. 3. 7 CONSIDERING THE TOTALITY OF THE CASE AND INVOLVEMENT OF FACTUAL LEGAL POSITION/OBSERVATION AND CLAIM WITHOUT EVIDENCES FOR THE INCREASE IN LABOUR CHARGES IS NOT ACCEPTABLE AND ACCORDINGLY, A PROPORTIONATE LABOUR CHARGES FOR THE YEAR IS WORKED OUT AT RS. 4,01,108/ - AND THE BALANCE HELD TO BE DISALL OWABLE. HOWEVER, IN COMING TO THE CONCLUSION FOR THE ABOVE DISALLOWANCE, FURTHER 10% OF INCREASE IN EXPENSES HAS BEEN CONSIDERED ON THE GROUND OF INCREASE IN THE EXPORT AND THE SAME IS WORKED OUT AT RS. 4,4L,2L9/ - . ACCORDINGLY, RS. 8,13,281 / - (RS.12,54,500 - 4,41,219) IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ' 4. BEFORE LD CIT(A) ASSESSEE FILED WRITTEN SUBMISSIONS WHICH HAS BEEN REPRODUCED BY HIM IN PARA 4.1 OF HIS ORDER . HOWEVER, LD.CIT(A) CONFIRMED THE ACTION OF A.O. BY OBSERVING AS UNDER: - 4.2 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE CONTENTIONS OF THE A.R. OF THE APPELLANT. IN HIS F INDINGS, THE AO HAS DISCUSSED THE ISSUE BY ANALYZING THE FACTS OF THE CASE IN MICRO DETAILS. THE QUERIES RAISED BY THE AO HAVE BEEN ELUDED AND NO POSITIVE EVIDENCE IN SUPPORT OF ITS CLAIM HAS BEEN PRODUCED BY I.T.A NO. 57/RJT/2012 A.Y. 2004 - 05 PAGE NO RAJAN TECHNOCAST PVT. LTD VS. ITO 5 THE APPELLANT AS I S EVIDENT FROM THE FINDINGS GIVEN IN PARA 3. 3 TO 3. 7 OF THE ASSESSMENT ORDER AS PRODUCED IN PARA - 4 OF THIS ORDER. IT IS ALSO EVIDENT THAT WHEN THE APPELLANT WAS CORNERED WITH THE PROPER LOGIC, THE APPELLANT HAS COME FORWARD WITH ENTIRELY NEW SUBMISSIONS WHICH WAS DEVOID OF ANY MATERIAL EVIDENCE AS NO DETAILS OF FAMILY MEMBERS WAS GIVEN AND UNDER NORMAL CIRCUMSTANCES, IT IS JUST UNBELIEVABLE THAT THE FAMILY MEMBERS WERE PERFORMING THE LABOUR WORK AND THE FAMILY OF THE PARTNERS WAS SO BIG THAT THEY COULD HAVE PERFORMED SUCH TECHNICAL JOB WHILE THEY W ERE UNITED AND DOING THE BUSINESS JOINTLY. IN ABSENCE OF PROPER DETAILS WITH INDEPENDENT EVIDENCES, THE AO WAS HANDICAPPED TO REACH TO THE CONCLUSION WITH REGARD TO GENUINENESS OF SUCH EXPENSES. NOT ONLY THIS, THE AO HAS BEEN VERY REASONABLE WHILE CALCULAT ING AND MAKING THIS DISALLOWANCE BY GIVING 10% INCREASE ON THE GROUND OF INCREASE IN EXPORT TURN OVER. THE SUBMISSIONS OF THE APPELLANT ARE DEVOID OF ANY MERIT AS NO SUPPORTING EVIDENCE HAS BEEN PRODUCED BEFORE THE AO AS WELL AS BEFORE THE UNDERSIGNED. THE ADVERSE INFERENCE DRAWN BY THE AO IS JUSTIFIED AND ADDITION MADE BY HIM ON THIS ACCOUNT IS CONFIRMED. THIS GROUND OF APPEAL IS REJECTED. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT ASSESSING O FFICER HAS MADE DISALLOWANCE OF RS. 8,13,281/ - OUT OF LABOUR EXPENSES OF RS. 12,54,500/ - CLAIMED BY ASSESSEE DURING THE YEAR ON THE GROUND THAT ASSESSEE FAILED TO ADDUCE ANY EVIDENCE FOR INCREASE IN THESE EXPENSES THIS YEAR. THE LD. CIT(A) HA S CONFIRMED THIS ACTION OF THE A.O. AS BEFORE HIM ALSO NO INDEPENDENT EVIDENCE IN THIS RESPECT WAS BROUGHT ON RECORD TO JUSTIFY THIS INCREASE IN LABOUR EXPENSES. BEFORE US ALSO NO SUCH EVIDENCE WAS PRODUCED HOWEVER INCREASE IN EXPENSES DUE TO INFLATIONARY TREND IN THE ECONOMY CANNOT BE RULED OUT THEREFORE WE FEEL IT PROPER THAT WHILE MAKING THIS DISALLOWANCE 10 % INCREASE IN EXPENSES DUE TO INFLATION BE TAKEN INTO CONSIDERATION. ASSESSING OFFICER IS THEREFORE DIRECTED TO RE - COMPUTE ACCORDINGLY. I.T.A NO. 57/RJT/2012 A.Y. 2004 - 05 PAGE NO RAJAN TECHNOCAST PVT. LTD VS. ITO 6 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. SD/ - SD/ - (A.MOHAN ALANKAMONY ) ( D. K.TYAGI ) ACCOUNTANT MEM BER JUDICIAL MEMBER AHMEDABAD : DATED /05 /2013 A K ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONED HEREINABOVE AT CAPTION PAGE SD/ - SD/ - (D. K. SRIVASTAVA) (T.K.SHARMA ) ACCOUNTANT MEM BER JUDICIAL MEMBER Z.YG EG / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT RAJAN TECHNOCAST PVT. LTD., SURVEY NO. 281, PLOT NO. 2M SHAPAR (VERAVAL), TAL. KOTDA SANGANI, DIST. RAJKOT 2 . / RESPONDENT THE I.T.O., WARD - 1(3), RAJKOT 3 . / CONCERNED CIT I, RAJKOT 4 . - / CIT (A) - II, RAJKOT 5 . Z , , / DR, ITAT, RAJKOT 6 . [ / GUARD FILE. //TRUE COPY// BY ORDER/ , SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL RAJKOT