Shri Pravindchadra Kabra,HUF, Surat V. The Income tax Officer,Ward-2(1), Surat

ITA 689/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5908 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 22-02-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Assessee Lawyers: S KABRA
• Keywords: Depreciation; Business expenditure; Rule of consistency; Accommodation entries

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AT SURAT CAMP BEFORE S/SHRI T.K.SHARMA, JM AND D.C.AGRAWAL, AM PRAVIN CHANDRA KABRA, HUF, S-553, J. J. (AC) MARKET, RING ROAD, SURAT. VS . INCOME-TAX OFFICER, WD 2(1), SURAT. (APPELLANT) .. (RESPONDENT) APPELLANTS BY :- SHRI S. KABRA, AR RESPONDENT BY:- SHRI H. P. MEENA, SR. DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- 1. AS REGARDS ADDITION ON ACCOUNT OF JOB CHARGES PAID (RS.9,57,293/-) 1.1 THE LD. CIT(A) WAS NOT JUST AND PROPER ON THE FACTS OF THE CASE AND IN LAW IN CONFIRMING THE ASSESSMENT ORDER TREATING THE AMOUNT OF JOB WORK CHARGES FOR VALUE ADDITION WORK AMOUNTING TO RS.9,50,293/- PAID TO THREE PARTIES AS BOGUS IGNORI NG THE FACT THAT THE APPELLANT HAD PROPER RECORDS AND DOCUMENTS IN H IS POSSESSION SUFFICIENT TO SPEAK THAT THE WORK WAS ACTUALLY PERF ORMED ALONG WITH CONFIRMATION OF ACCOUNT FROM THE RESPECTIVE PARTIES AND PAYMENT THEREOF BY ACCOUNT PAYEE CHEQUES. 2. AS REGARDS ADHOC DISALLOWANCE OF CERTAIN EXPENSE S (RS.53,518/-) ITA NO.689/AHD/2008 ASST. YEAR:2005-06 2 2.1 THE LD. CIT(A) WAS NOT JUST AND PROPER ON THE FACTS OF THE CASE AND IN LAW IN CONFIRMING THE ASSESSMENT ORDER DISALLOWI NG 20% OUT OF THE EXPENSES INCURRED ON ACCOUNT OF SHOP, TEA AND W ATER FOR WANT OF SOME MISSING VOUCHERS. 2.2 THE LD. CIT(A) WAS NOT JUST AND PROPER ON THE FACTS OF THE CASE AND IN LAW IN CONFIRMING THE ASSESSMENT ORDER DISALLOWI NG 20% OUT OF THE EXPENSES INCURRED ON ACCOUNT OF TELEPHONE AND C AR FOR PERSONAL UTILIZATION. 2. THE MAJOR ISSUE INVOLVED IN THIS APPEAL IS DISAL LOWANCE OF RS.9,57,293/- BEING JOB CHARGES PAID TO THREE PARTI ES BUT TREATED AS BOGUS BY THE REVENUE AUTHORITIES. 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN TEXTILE TRADE AS MERCHANT MANUFACTURER. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS THE AO NOTICED THAT ASSESSEE HAS CLAIMED TO HAVE PAID S UM OF RS.24,33,681/- ON ACCOUNT OF JOB WORK CHARGES CLAIMED IN THE TRADI NG AND PROFITS AND LOSS ACCOUNT. THESE PAYMENTS INCLUDED PAYMENTS MADE TO T HREE PARTIES AS UNDER :- 1. M/S VIKRAM JOB WORKS RS.2,24,988/- 2. M/S SHALINI SCREEN PRINTING WORKS RS.3,29, 383/- 3. M/S PRATIKA HAND PRINTING WORKS RS.4,02,922/- TOTAL RS.9,57,293/- ========= THE AO NOTED THAT PARTIES NO.1 & 2 ARE ASSESSED IN HIS WARD WHEREAS THE 3 RD PARTY M/S PRATIKA HAND PRINTING WORKS IS ASSESSED WITH ITO WARD 9(1), SURAT. ALL THE THREE CASES OF THESE PARTIES W ERE SCRUTINIZED. DURING THE COURSE OF SCRUTINY OF THEIR ASSESSMENTS IT WAS NOTICED THAT THESE PARTIES FAILED TO PROVE THAT THEY HAVE ACTUALLY DONE ANY JO B WORK FOR ANY PARTY DURING THIS YEAR. THEY FAILED TO PROVE THE NAMES AN D ADDRESSES OF THE PERSONS WHO HAVE DONE ACTUAL JOB WORK ON THEIR BEHA LF AND RECEIVED 3 PAYMENTS FOR THE SAME. THESE THREE PARTIES FAILED T O SUBMIT THE IDENTITY, DETAILS OF THE PERSONS TO WHOM THEY HAVE TRANSFERRE D MONEY ON ACCOUNT OF ALLEGED DOING OF JOB WORK. THE ITO WARD 9(1) REPORT ED THAT BANK ACCOUNT OF PRATIKA HAND PRINTING WORKS WAS NOT OPERATED BY ITS PROPRIETOR BUT BY SOME BODY ELSE. THE AO ACCORDINGLY INFERRED THAT TH ESE THREE PARTIES ARE ONLY PROVIDING ACCOMMODATION BILLS TO HELP OTHERS W HO USED THE BILLS OF ALL THESE THREE PARTIES TO INFLATE THEIR EXPENSES. DURING THE COURSE OF ASSESSMENT YEAR 2005-06 THE ASSESSEE WAS FOUND TO B E ONE OF SUCH BENEFICIARIES. THE AO, THEREFORE, REQUIRED THE ASSE SSEE TO PRODUCE THE DETAILS TO JUSTIFY THAT THESE THREE PARTIES HAVE AC TUALLY DONE ANY WORK FOR THE ASSESSEE. A DETAILED QUESTIONNAIRE WAS ISSUED B Y THE AO WHICH WAS REPRODUCED BY HIM AT PAGES 3 & 4 OF HIS ORDER. THE AO ALSO REQUIRED THE ASSESSEE TO PRODUCE THREE PARTIES FOR EXAMINATION B UT DESPITE SEVERAL OPPORTUNITIES NONE OF THE PARTIES WAS PRODUCED, NOR THE DETAILS WERE FURNISHED AS TO WORK ASSIGNED TO THEM, DESTINATION OF GOODS DELIVERED, TYPE OF WORK DONE BY THESE THREE PARTIES, THE PERSO NS WHO ACTUALLY CARRIED OUT THE WORK AND WHERE THE GOODS WERE DELIVERED AFT ER COMPLETING THE JOB WORK. IN RESPONSE TO SHOW CAUSE NOTICE ASSESSEE PRO DUCED CERTAIN DETAILS IN RESPECT OF THESE THREE PARTIES AS UNDER :- A) JOB WORK BOOK CUM PRODUCTION BOOK MAINTAINED FOR TH ESE PARTIES; B) BANK BOOK OF THE ASSESSEE; C) THE COPY OF ACCOUNT DULY CONFIRMED BY THE SAID PART IES; D) STOCK REGISTER OF THE ASSESSEE FIRM; AND E) THE COPIES OF BILLS AS ISSUED BY THE PARTIES. IN ADDITION TO THIS, THE ASSESSEE HAD ARGUED BEFORE THE AO THAT - A. THE SALES REALIZATION FOR THE VALUE ADDITION MATERI AL IS HIGHER THAN THE OTHER NON-VALUE ADDITION MATERIAL; 4 B. THE ASSESSEE HAD MAINTAINED PARTY WISE RECORDS OF I SSUES AND RECEIPTS FOR THE MATERIAL; C. THE BILLS ISSUED BY THE PARTIES ARE AVAILABLE; D. THE PAYMENT HAD BEEN MADE BY ACCOUNT PAYEE CHEQUES TO THE SUPPLIERS; & E. IT IS NOT FOR THE ASSESSEE TO SEE AS TO HOW THE PAR TY GOT THE WORK DONE TILL THE WORK WAS SATISFACTORY. FURTHER AS STA TED EARLIER THE PARTIES WERE ONLY MEDIATING THE WORK AND IT WAS THE ASSESSEE WHO FOUND THIS SYSTEM TO BE MORE COMFORTABLE INSTEA D OF PUTTING TIME WITH VARIETY OF LABOURS. THE AO REJECTED THIS EXPLANATION ON THE GROUND THAT ASSESSEE FAILED TO PRODUCE THE PERSONS FOR EXAMINATION IN SPITE OF HAV ING BEEN SPECIFICALLY ASKED. THE PRESENT POSTAL, OFFICE, RESIDENCE PHONE NUMBERS ETC. HAVE NOT BEEN SUPPLIED. THE CLAIM THAT JOB WORK HAS ADDED VA LUE COULD NOT BE VERIFIED. THERE IS NO QUALITY-WISE STOCK REGISTER M AINTAINED FOR SUCH TYPE OF VALUE ADDITION WORK. EVIDENCE IN RESPECT OF MOVE MENT OF GOODS IS SELF MADE AND IS NOT CORROBORATED BY THIRD PARTY EVIDENC E. ACTUAL PAYMENTS TO THESE THREE PARTIES HAVE NOT BEEN MADE DURING THIS YEAR. NO EVIDENCE OF ACTUAL JOB WORK HAS BEEN PRODUCED. THE THREE PARTIE S HAVE ONLY PROVIDED COPIES OF BILLS WHICH ARE NOTHING MORE THAN ACCOMMO DATION BILLS IN RESPECT OF BOGUS EXPENSES. MERE PAYMENTS THROUGH AC COUNT PAYEE CHEQUES ARE NOT SACROSANCT. THESE THREE PARTIES DID NOT HAVE ANY SYSTEM OR INFRASTRUCTURE TO DO SUCH JOB WORK AS CLAIMED BY THE ASSESSEE. THESE THREE PARTIES FAILED TO PRODUCE NAMES AND ADDRESSES OF PERSONS WHO HAVE ACTUALLY CARRIED OUT THE WORK AS SUB-CONTRACTORS. P ROVIDING BILLS BY THESE THREE PARTIES TO THE ASSESSEE IS ONLY A COLLUSION F OR BOGUS JOB WORK EXPENSES. AS THERE WAS NO MOVEMENTS OF FUNDS IT DID NOT LEAD TO ANY IDENTIFIABLE PARTY. THEREFORE, THE PAYMENT OF JOB W ORK CHARGES OR COMMISSION BY THE ASSESSEE TO THESE PARTIES CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. 4. THE LD. CIT(A) CONFIRMED THE ADDITION ON THE GRO UND THAT - 5 (1) THE ASSESSEE DID NOT FURNISH OFFICIAL AND RESID ENTIAL ADDRESSES AND CONTACT NUMBER OF THREE PARTIES. THE ASSESSEE APPAR ENTLY HAD NO INFORMATION ABOUT THEIR WHEREABOUTS; (2) THOUGH IT IS CLAIMED THAT THERE IS A VALUE ADDI TION BY WAY OF EMBROIDERY BUT NO RECORD HAS BEEN MAINTAINED REGARD ING MOVEMENT OF THE GOODS FROM ASSESSEES PREMISES AND THEIR RECEIV ING BACK AFTER JOB WORK; (3) IF THERE WERE ACTUAL WORK DONE BY THREE PARTIES THEN THERE SHOULD HAVE BEEN ACTUAL PAYMENT TO THEM BUT IN FACT THERE IS PRACTICALLY NO MOVEMENT OF FUNDS TO THESE PARTIES. THE FUNDS ARE S TANDING IN THE BALANCE SHEET. MERELY BECAUSE SOME PAYMENT IS MADE THROUGH ACCOUNT PAYEE CHEQUES, IT IS NOT ENOUGH WHEN MOST OF THE AMOUNT P AYABLE IS PENDING IN THE BALANCE SHEET; (4) NONE OF THE PARTIES SUCCEEDED IN ESTABLISHING T HAT THEY HAVE DONE ANY WORK FOR THE ASSESSEE. THERE IS NO EVIDENCE OF ANY SUB-CONTRACT OR PAYMENT BY THREE PARTIES TO ANY SUB-CONTRACTOR OR A NY RECEIPT ISSUED BY THE ASSESSEE TO THEM AS A TOKEN OF PAYMENT TO THESE SUB-CONTRACTORS. THE IDENTITIES OF SUB-CONTRACTORS COULD NOT BE ESTABLIS HED. THEREFORE, BILLS RAISED BY THESE PARTIES ARE APPARENTLY BOGUS AND TH ESE THREE PARTIES HAVE ONLY PROVIDED ACCOMMODATION ENTRIES. 5. BEFORE US, LD. AR FOR THE ASSESSEE SUBMITTED THA T SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN M/S JHAWAR INTERNATI ONAL VS. ITO AND SUPREME INDIA OVERSEAS CORPN. VS. ITO IN ITA NO.193 8 & 2015/AHD/2008 FOR ASST. YEAR 2004-05 AND IN ITA NO. 1941 & 2019/AHD/2008 FOR ASST. YEAR 2004-05 DECIDED ON 8.1 .10. IN THIS CASE ALSO THE ISSUE OF PAYMENTS OF JOB WORK CHARGES TO T HESE THREE PARTIES WAS INVOLVED, THE TRIBUNAL FOLLOWING THE DECISION IN IT A NO.1939/AHD/2008 AND OTHER DATED 26.6.2009, HAS ALLOWED THE CLAIM OF ASSESSEE. HE SUBMITTED THAT THE TRIBUNAL SHOULD TAKE A CONSISTEN T VIEW AND SHOULD ALLOW THE CLAIM OF THE ASSESSEE. 6 6. AGAINST THIS, THE LD. DR SUBMITTED THAT IN THESE CASES THERE WAS NO INSISTENCE BY THE AO TO PRODUCE THESE THREE PARTIES PERSONALLY FOR EXAMINATION WHEREAS IN THE PRESENT CASE THE AO HAS REQUESTED SEVERAL TIMES TO PRODUCE THESE THREE PARTIES WHICH ASSESSEE FAILED TO DO SO. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THOUGH THE TRIBUN AL HAS TAKEN A VIEW THAT NO DISALLOWANCE CAN BE MADE IN RESPECT OF JOB WORK DONE THROUGH THESE THREE PARTIES, BUT RULE OF CONSISTENCY WILL N OT APPLY IF FACTS AND CIRCUMSTANCES OF THE CASE ARE DIFFERENT. IN OUR CON SIDERED VIEW CONSISTENCY IS THE RECOGNIZED PRINCIPLE AND CURBS O UT AN EXCEPTION FROM THE PRINCIPLE OF RES JUDICATA, IF FACTS AND CIRCUMS TANCES OF THE CASE REMAIN THE SAME AND POSITION OF LAW HAS NOT CHANGED. IN AN Y CASE THERE IS A NECESSARY CONDITION INHERENT IN THE PRINCIPLE OF C ONSISTENCY THAT STAND OF THE AO IN THE PAST SHOULD BE LEGALLY CORRECT AND THERE IS NO ERROR, EITHER OF LAW OR OF FACT. IT IS ALSO A JUDICIALLY RECOGNIZ ED PRINCIPLE THAT THERE IS NO HEROISM TO CONTINUE TO COMMIT ERRORS FROM ONE YEAR TO ANOTHER. IF AO HAS NOT AT ALL CONSIDERED THE ISSUE; OR ASSESSMENT HAS BEEN ACCEPTED UNDER SECTION 143(1); OR ALL THE NECESSARY FACTS FOR APPL YING MIND ON THE ISSUE ARE NOT BROUGHT INTO THE KNOWLEDGE OF THE AO; OR WH ILE ACCEPTING A POSITION IN THE EARLIER ASSESSMENT YEARS, GRAVE ERR OR OF LAW OR FACT HAS BEEN COMMITTED; OR THERE HAS BEEN CHANGE IN LAW; OR THERE IS A JUDICIAL DECISION ON THE SUBJECT; OR THERE ARE DISCOVERY OF NEW FACTS WHICH WERE NOT AVAILABLE IN THE EARLIER YEARS THEN PRINCIPLE O F CONSISTENCY CANNOT BIND THE AO AND HE HAS TO APPLY HIS MIND AFRESH AND ARRI VE AT A FRESH DECISION. SINCE IN THE PRESENT CASE, THE DIFFERENTIATING FACT OR IS THAT AO HAS INSISTED THE PRODUCTION OF THESE THREE PARTIES AND ASSESSEE HAS FAILED TO DO SO THEN ALL OTHER JUDGMENTS OF THE TRIBUNAL WHERE THIS FACT OR IS MISSING CANNOT BE APPLIED. EVEN OTHERWISE ARGUMENTS TAKEN BY THE LD. AO/ LD. CIT(A) AND 7 LD. DR ARE MORE THAN WHAT WAS TAKEN IN THESE CASES. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND DIFFERENTIATING FACTOR IN THE PRESENT CASE, WE ARE OF THE CONSIDERED VIEW THA T ASSESSEE SHOULD PRODUCE THREE PARTIES BEFORE THE AO FOR EXAMINATION AND HIS SATISFACTION AS TO WHETHER ANY ACTUAL WORK HAS BEEN DONE BY THEM . THEREFORE, WE RESTORE THE MATTER TO THE FILE OF AO WITH THE DIREC TION THAT HE WILL GIVE REASONABLE OPPORTUNITY TO THE ASSESSEE TO PRODUCE T HESE THREE PARTIES. IN CASE ASSESSEE FAILS TO PRODUCE THEM THE AO WILL BE FREE TO TAKE AN INDEPENDENT DECISION. THUS THIS GROUND OF ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. 8. THE NEXT GROUND IS ABOUT 20% DISALLOWANCE OUT OF SHOP, TEA, WATER, TELEPHONE AND CAR EXPENSES. THE DETAILS ABOUT THE C LAIM AND DISALLOWANCE MADE BY THE AO UNDER THESE HEADS ARE AS UNDER :- EXPENSE HEADS TOTAL AMOUNT CLAIMED DISALLOWANCE SHOP EXPENSES 93,023 18,605 TEA & WATER EXP. 13,976 2,795 CAR EXP. 37,675 7,535 TELEPHONE EXP. 49,973 9,995 DEPRECIATION ON CAR 72,943 14,588 THE AO NOTICED THAT SOME OF THE EXPENDITURE ARE NOT VOUCHED AND CAR AND TELEPHONE ARE USED FOR PERSONAL USE. HE CONSIDERED THE DISALLOWANCE AT 20% OF THE EXPENSES. LD. CIT(A) CONFIRMED THE ADDIT ION ON THE GROUND THAT DISALLOWANCE IS REASONABLE. 9. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL ON RECORD. IN OUR CONSIDERED VIEW NO INTERFERENCE IS CALLED FOR I N THE ORDER OF LD. 8 CIT(A). THE REASONS ARE THAT ASSESSEE HAS NOT PRODU CED ANY EVIDENCE. ACCORDINGLY DISALLOWANCE IS REASONABLE AND PROPER. THIS GROUND OF ASSESSEE IS REJECTED. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 18/06/2010 SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 18/06/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD