ITO, Ludhiana V. M/s Dimple Knitwear, Ludhiana

ITA 75/CHANDI/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51508 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-10-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 21-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY SHARMA
• Keywords: Business income; Additional evidence; Wrong claim
• Section: 142(1); 153A; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NOS. 73 TO 75/CHD/2011 ASSESSMENT YEARS: 1998-99, 2000-01 & 2001-02 THE ITO-II(I), VS. M/S DIMPLE KNITWEAR, LUDHIANA LUDHIANA PAN NO. AAAFD8229L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY SHARMA RESPONDENT BY : NONE DATE OF HEARING : 05.10.2011 DATE OF PRONOUNCEMENT : ORDER PER H.L.KARWA, VP THESE THREE APPEALS BY THE REVENUE ARE DIRECTED AG AINST THE ORDER OF CIT(A)-I, LUDHIANA DATED 15.10.2010 RELATING TO ASSESSMENT YEARS 1998-99, 2000-01 & 2001-02 RESPECTIVELY. 2. THESE APPEALS BY THE REVENUE INVOLVING COMMON IS SUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 3. THE FACTS INVOLVED IN ALL THE APPEALS ARE IDENTI CAL EXCEPT THE AMOUNT OF ADDITION AND, THEREFORE, FIRST OF ALL WE WILL DE CIDE ITA NO. 2 73/CHD/2011 RELATING TO ASSESSMENT YEAR 1998-99 WH EREIN THE ONLY GROUND RAISED BY THE REVENUE READS AS UNDER:- THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 29,97,012/- MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF LABOUR CHARGES PAID BY ASSESSEE, WHEN NO DETAILS OF THE FABRICATION, DYEIN G AND LABOUR CHARGES PAID BY ASSESSEE WERE FURNISHED BEFORE THE ASSESSING OFFICER DESPITE SUFFICIENT OPPORTUNITY BEING PROVIDED. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE DERIVES INCOME FROM DEALING IN EXPORT OF HOSIERY GOODS. A SEARCH U/S 132 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) TOOK PLACE ON 15.10.2003 AT VARIOUS BUSINESS AND RESIDENTIAL PREMISES OF THE DUGGAL GROUP OF CASES IN WHICH THE ASSESSEE IS ONE OF THE CONSTITUE NTS. THE ASSESSING OFFICER ISSUED NOTICE U/S 153A TO THE ASSESSEE ON 3 .10.2005 REQUIRING IT TO FURNISH RETURN OF ITS INCOME WITHIN 20 DAYS OF R ECEIPT THEREOF. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE SUBMITTED ITS RETURN DECLARING TOTAL INCOME OF RS. 4,07,300/- ON 2.12.2005. STA TUTORY NOTICE U/S 142(1) & 143(2) OF THE ACT ALONGWITH BASIC CONSOLI DATED QUESTIONNAIRE DATED 15.12.2005 WERE ISSUED AND SERVED UPON THE AS SESSEE. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE D ECLARED GROSS PROFIT OF RS. 1,73,80,962/-, ON TOTAL SALES OF RS. 4,75,26 ,090/- INCLUDING EXPORT INCENTIVE OF RS. 40,44,367/- THEREBY GIVING GP RATE OF 36.57%. THE CASH BOOK OF THE ASSESSEE PERTAINING TO THE YEAR UNDER C ONSIDERATION WAS SEIZED DURING THE COURSE OF SEARCH FROM THE BUSIN ESS PREMISES OF S/SHRI YASHPAL RAWAL AND VISHAL RAWAL AT 1437, KASHMIR NAGAR, LUDHIANA WHO DEAL IN WASTE PAPER WHILE THE LEDGER T HEREOF WAS NOT AVAILABLE. HOWEVER, AFTER TAKING COPY OF THE SEIZE D CASH BOOK, THE 3 ASSESSEE PREPARED THE LEDGER ON COMPUTER AND PRODUC ED THE SAME WHICH HAS BEEN IMPOUNDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS DEBITED A SUM OF RS. 29,97,012/- ON AC COUNT OF FABRICATION AND LABOUR CHARGES TO THE TRADING ACCOUNT. THE ASS ESSING OFFICER VIDE HIS LETTER DATED 10.02.2006 ASKED THE ASSESSEE TO F URNISH COMPLETE PARTY WISE DETAILS OF FABRICATION AND LABOUR CHARGES INCL UDING QUANTITY AND VALUE WISE DETAILS OF GOODS ALONGWITH EVIDENCE IN T HE SHAPE OF ITS ACCOUNTS APPEARING IN THEIR BOOKS OF ACCOUNT. IN R ESPONSE, THE ASSESSEE HAS SUBMITTED THE BREAKUP OF FABRICATION AND LABOUR CHARGES AS UNDER:- I) FABRICATION CHARGES RS. 3,10,050/- II) DYEING CHARGES RS. 8,14,480/- III) LABOUR CHARGES RS. 18,72,482/- 5. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE SUBMITTED THE DETAILS OF FABRICATION AND DYEING CHARGES INDICATIN G THE NAMES OF PARTIES TO WHOM THE FABRICATION CHARGES WERE ALLEGEDLY PAID ALONGWITH THEIR COPIES OF ACCOUNTS, YET NO COPIES OF ACCOUNTS WERE FURNISHED. AS REGARDS THE LABOUR CHARGES, NO PARTY WISE DETAILS THEREOF W ERE FILED. THE DETAILS OF LABOUR CHARGES PAID BY THE ASSESSEE WERE FURNIS HED AS UNDER:- DATE PARTICULARS DEBIT (IN RS. 11.02.1998 ADVANCES (TO AMOUNT TFD.) 5,38,216/- 07.03.1998 ADVANCES (TO AMOUNT TFD.) 6,66,833/- 31.03.1998 ADVANCES (TO AMOUNT TFD.) 6,07,073/- 31.03.1998 TO CASH (LABOUR CHARGES) 60,360/- TOTAL 17,72,482/- 4 THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA S NOT FURNISHED ANY EVIDENCE WITH REGARD TO THE LABOUR CHARGES AS TO WH OM SUCH LABOUR CHARGES WERE PAID. THE ASSESSING OFFICER CONCLUDED THAT ASSESSEE COULD NOT SUBSTANTIATE THE CLAIM OF RS. 29,97,012/- AND T HEREFORE, HE TOOK THE VIEW THAT THE ENTIRE TRANSACTION IS BOGUS. THE ASS ESSING OFFICER DISALLOWED THE ENTIRE CLAIM OF RS. 29,97,012/- MADE BY THE ASSESSEE UNDER THIS HEAD AND ADDED THE SAME TO THE TOTAL INC OME OF THE ASSESSEE. 6. ON APPEAL, THE CIT(A) DELETED THE ADDITION OF RS . 29,97,012/- FOLLOWING THE DECISION OF THIS BENCH OF THE TRIBUNA L PASSED IN ASSESSEES OWN CASE IN ITA NOS. 536 & 537/CHD/2008 DATED. 28.5 .2009 RELATING TO ASSESSMENT YEARS 2003-04 AND 2004-05 AND HENCE THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD SHRI AJAY SHARMA, LD. DR AT LENGT H AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE BY THE DECISION OF THIS BENCH OF THE TRIBUNAL DATED 28 .05.2009 PASSED IN ASSESSEES OWN CASE IN ITA NOS. 536 & 537/CHD/2008 RELATING TO ASSESSMENT YEARS 2003-04 AND 2004-05 RESPECTIVELY W HEREIN THE TRIBUNAL DELETED THE ADDITION OF RS. 2,30,80,652/- AND RS. 1 ,11,08,364/- OUT OF LABOUR CHARGES, OBSERVING AS UNDER:- DURING ARGUMENTS, WE HAVE HEARD SMT. SHEBA BHATTAC HARYA LD. CIT DR AND SHRI S.K. MUKHI, LD. COUNSEL FOR THE ASS ESSEE. AT THE OUTSET, IT WAS CLAIMED THAT THE IMPUGNED ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TR IBUNAL IN THE CASE OF DCIT VS. S.G. EXPORTS ( ITA NO. 413/CHD/20 03). THIS FACTUAL FINDING WAS NOT CONTROVERTED BY THE REVENUE . HOWEVER, THE LD. CIT DR CONTENDED THAT THE LD. FIRST APPELLA TE AUTHORITY 5 SHOULD NOT HAVE ENTERTAINED THE NEW EVIDENCE WITHOU T SEEKING REMAND REPORT FROM THE ASSESSING OFFICER. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON THE FILE. IN VIEW OF THE ARG UMENTS ADVANCED BY THE LD. REPRESENTATIVES FROM BOTH SIDES , WE ARE REPRODUCING HEREWITH THE AFORESAID ORDER OF THE TRI BUNAL DATED 30.4.2009. THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 11.2.2008 ON THE GROUND THAT THE LEARNED FIRST APPELLATE AUTHORITY ERRED IN DELETING THE DISALLOWANCE OF RS. 1,80,40,340/- OUT OF UNSUBSTANT IATED LABOUR CHARGES IGNORING THE WHEREABOUTS THE RECIPIE NTS AS EVEN THEIR NAMES AND COMPLETE ADDRESSES WERE NOT FURNISHED DEBARRING ANY SCOPE OF FURTHER ENQUIRIES AND FURTHER ERRED IN ENTERTAINING ADDITIONAL EVIDENCE W ITHOUT FOLLOWING THE PROCESS OF RULE 46A OF THE I.T. RULES . 2. DURING ARGUMENTS, WE HAVE HEARD SMT SHEBA BHATTARCHARA, LEARNED CIT DR AND SHRI S.K. MUKHI, L D COUNSEL FOR THE ASSESSEE. THE CONTENTION ON BEHALF OF THE REVENUE IS THAT NO DETAILS WERE FILED BY THE ASSESS EE, NOTICE WAS CLAIMED TO BE SENT TO 5.12.2005 AND THE ASSESSMENT WAS FRAMED ON 31.3.2006 TO THE EFFECT TH AT SUFFICIENT OPPORTUNITY / TIME WAS PROVIDED TO THE A SSESSEE. PLEA WAS ALSO RAISED THAT EVEN THE LEARNED FIRST AP PELLATE AUTHORITY NEVER SOUGHT REMAND REPORT FROM THE ASSES SING OFFICER, THEREFORE, THE ASSESSMENT ORDER WAS SUPPOR TED. ON THE OTHER HAND, SHRI S.K MUKHI, DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT SEARCH WAS CONDUC TED UNDER SECTION 132 ON 15.10.2003, NOTHING INCRIMINAT ING WAS FOUND. THERE WAS NO REMARKS BY THE SEARCH PART Y THAT NO LABOUR WAS FOUND, LABOUR REGISTER WERE DULY MAINTAINED, THE ASSESSEE IS AN 100% EOU. RELIANCE WAS PLACED IN 181 ITR 6 (ALL) AND 269 ITR 577 (P&H). 6 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON THE FILE. BRIEF FACTS ARE THAT THE ASSESSEE DERIVES INCOME FROM MANUFACTURING AND EXPORT OF HOSIERY GOODS AND DECLARED GROSS PROFIT O F RS. 4.16 CRORES ON THE EXPORT OF RS. 14.95 CRORES INCLU DING PROFIT ON PREMIUM ON DEPB AND DUTY DRAW BACK AMOUNTING TO RS. 1.49 CRORES BY GIVING GROSS PROFIT RATE AT 27.83%. THE ASSESSEE DEBITED RS. 2.3 CRORES IN ITS TRADING ACCOUNT AS LABOUR CHARGES OUT OF WHICH THE LEARNED ASSESSING OFFICER DISALLOWED RS. 1,80,40,34 0/- AND ADDED TO THE INCOME OF THE ASSESSEE BY OPINING THE SAME TO BE INGENUINE. ON APPEAL, THE LEARNED FIRST APPELLATE AUTHORITY DELETED THE ADDITION, WHICH IS UNDER CHALLENGE BEFORE THE TRIBUNAL. WE HAVE FOUND THAT THE IMPUGNED DISALLOWANCE WAS MADE BY THE LEARNED ASSESSING OFFICER ON THE GROUND THAT ANOTHER ASSESS EE I.E. GLIDE IMPACTS CLAIMED LABOUR CHARGES OF RS. 30.38 L AKHS ONLY AGAINST THE TOTAL EXPORT TURN OVER OF AROUND R S. 34 CRORES. THE IMPUGNED ADDITION WAS DELETED BY THE LEARNED FIRST APPELLATE AUTHORITY ON THE GROUND THA T THE LABOUR CHARGES ARE FULLY VOUCHED, PAID AND THE CONC ERNED PERSONS / PARTIES ARE IDENTIFIABLE, THEREFORE, IT W AS HELD THAT THE ASSESSING OFFICER WAS REQUIRED TO MAKE FUR THER INQUIRIES AND TO BRING ON RECORD AS TO HOW THE PAYM ENTS WERE INGENUINE OR TO THE NON EXISTENT PARTIES. ON A QUERY FROM THE BENCH, AS TO HOW THE CASE OF M/S GLI DE IMPACT IS NOT APPLICABLE, IT WAS EXPLAINED BY THE L EARNED COUNSEL FOR THE ASSESSEE THAT FIRSTLY, M/S GLIDE IM PACTS IS MANUFACTURING DIFFERENT ITEMS AND SECONDLY, IT IS F ULLY AUTOMATIC ONE, WHEREAS IN THE CASE OF THE ASSESSEE, IT WAS CLAIMED THAT T-SHIRTS ARE MANUFACTURED WHEREIN MORE AND MORE LABOUR IS REQUIRED AND THE MACHINERY IS AL SO NOT FULLY AUTOMATIC. EVEN IN THE ASSESSMENT ORDER, THE LEARNED ASSESSING OFFICER HAS MENTIONED AS UNDER: NO DOUBT, A NUMBER OF PROCESS INVOLVED IN THE MANUFACTURING ACTIVITY OF A PARTICULAR ITEM, WHICH MAY VARY FROM CASE TO CASE BUT STILL CONSIDERING THAT E VEN IF 7 THE ASSESSEE WOULD HAVE INVOLVE ITSELF IN A NUMBER OF PROCESSES FOR THE MANUFACTURING PROCESS AS COMPARED TO THE COMPARABLE CASE, STILL THE CLAIM OF LABOUR CHAR GES AT RS. 2.3 CRORES SEEMS TO BE AN ALARMING FIGURE IF THE AFORESAID CONCLUSION IS ANALYSED, ADMITTEDLY , NUMBER OF PROCESSES ARE INVOLVED IN THE MANUFACTURI NG PROCESS OF THE ASSESSEE. EVEN OTHERWISE, WE HAVE FOUND THAT NO CONTRARY MATERIAL HAS BEEN PRODUCED BY THE ASSESSING OFFICER EVIDENCING THAT THERE IS A FALSE CLAIM BY THE ASSESSEE. EVEN DURING THE SEARCH CONDUCTED ON 15.10.2003, AT THE PREMISES OF THE ASSESSEE, THERE IS NO FINDING THAT EITHER NO LABOUR IS INVOLVED OR ANY OT HER INFIRMITY IN THE CLAIM OF THE ASSESSEE. DURING APP ELLATE PROCEEDINGS, BEFORE US THE ASSESSEE PRODUCED THE REGISTERS MAINTAINED FOR THE PURPOSES. WITHOUT BRI NGING ANY EVIDENCE ON RECORD, NO ADHOC DISALLOWANCE IS PERMISSIBLE. EVEN OTHERWISE, THERE IS NO FINDING I N THE IMPUGNED ORDER THAT THE CASE OF THE ASSESSEE COMES WITHIN FIRST PROVISO TO SECTION 145(1) OF THE ACT. EVEN, THE EVIDENCES FURNISHED BY THE ASSESSEE HAS NOT BEE N REJECTED BY THE LEARNED ASSESSING OFFICER, THEREFOR E, THE DISALLOWANCE MERELY ON PRESUMPTION THAT THE EXPENSE S ARE HIGHLY EXCESSIVE IS NOT JUSTIFIED. OUR VIEW IS FURTHER FORTIFIED BY DECISION FROM THE HON'BLE JURISDICTION AL HIGH COURT PRONOUNCED IN CIT VS. K.S. BHATIA (269 ITR 57 7) (P&H). EVEN OTHERWISE, THE ASSESSEE HAS BEEN ALLOW ED DEDUCTION UNDER SECTION 80 IB OF THE ACT , BEING 10 0% EOU, THEREFORE, BY CLAIMING INGENUINE OR EXCESSIVE EXPENSES, THE ASSESSEE WOULD NOT HAVE GAINED ANYTHI NG, CONSEQUENTLY, THERE IS NO INFIRMITY IN THE CONCLUS ION DRAWN BY THE LEARNED FIRST APPELLATE AUTHORITY, THE SAME IS UPHELD. IN THE RESULT APPEAL OF THE REVENUE IS HAVING NO ME RIT, THEREFORE, DISMISSED. IF THE FACTS OF THE PRESENT APPEALS ARE ANALYSED WI TH THE FACTS OF THE AFORESAID ORDER OF THE TRIBUNAL, WE HAVE FOUND THAT THE FACTS 8 ARE IDENTICAL. IN THE PRESENT APPEALS ALSO, THE ASS ESSEE DERIVES INCOME FROM MANUFACTURING AND EXPORT OF HOSIERY GOO DS. THE LD. ASSESSING OFFICER DISALLOWED MAJOR PART OF THE EXPE NSES CLAIMED UNDER THE HEAD LABOUR CHARGES MERELY ON THE GROUN D THAT ANOTHER ASSESSEE I.E. GLIDE IMPACTS, HAVING ITS IND USTRIAL UNDERTAKING AT BADDI CLAIMED LABOUR CHARGES OF RS. 10.38 LAKHS ONLY AGAINST THE TOTAL EXPORT TURN OVER OF RS. 34 C RORES. THERE IS A FACTUAL FINDING THAT THE ASSESSING OFFICER HAS NO T REFERRED TO TRADING AND MANUFACTURING RESULTS OF THE ASSESSEE I N THE PRECEDING YEAR. THE LD. FIRST APPELLATE AUTHORITY HAS ALREADY CONSIDERED VARIOUS DECISIONS INCLUDING FROM HON'BLE HIGH COURT / SUPREME COURT INCLUDING THE DECISION FROM THE HON'B LE JURISDICTIONAL HIGH COURT IN THE CASE OF LIBERTY IN DIA LTD V CIT AND CIT V FIVE STAR RUGS. IDENTICAL ARE FACTS IN T HE CASE OF S.G. EXPORTS LTD. SINCE, NOTHING CONTRARY WAS POINTED O UT, WE HAVE NO HESITATION IN UPHOLDING THE STAND OF THE LD. CIT(A) , CONSEQUENTLY, BOTH THESE APPEALS OF THE REVENUE ARE DISMISSED IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. 8. SINCE THE ISSUE IS IDENTICAL, FOLLOWING THE ABOV E ORDER OF THE TRIBUNAL, WE DISMISS THIS GROUND OF APPEAL. ITA NOS. 74/CHD/2011 & 75/CHD/2011 9. IN THESE APPEALS, THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS. 3,27,44,865/- AND RS. 54,33,002/- M ADE ON ACCOUNT OF LABOUR CHARGES PAID BY THE ASSESSEE FOR THE ASSESSM ENT YEARS 2000-01 & 2001-02 RESPECTIVELY. 10. THE FACTS OF THE ABOVE APPEALS ARE IDENTICAL AN D, THEREFORE, THE ORDER PASSED BY US IN ITA NO. 73/CHD/2011 (SUPRA) S HALL APPLY WITH 9 EQUAL FORCE TO THESE APPEALS ALSO. CONSEQUENTLY, W E DISMISS BOTH THE APPEALS. 11. IN THE RESULT, ALL THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF OCTOBER, 2011. SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 5 TH OCTOBER, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 10