BHAGWANJI KHETSI GADA, MUMBAI V. ITO (CEN) THANE, THANE

ITA 795/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0629 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K AGARWAL
• Assessee Lawyers: KEYURI DESAI
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, MU MBAI BEFORE SHRI P.K. BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.795/MUM/2014 (ASSESSMENT YEAR- 2006-07) ITA NO.796/MUM/2014 (ASSESSMENT YEAR- 2006-07) BHAGWANJI KHETSI GADA 302/303, MARATHON APARTMENT, DEVIDAYAL ROAD, MULUND(WEST), MUMBAI-400080 PAN: AAWPG6112B VS. ITO (CENTRAL) , THANE. (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. KEYURI DESAI (AR) REVENUE BY : SHRI V.K. AGARWAL (DR) DATE OF HEARING : 29.05.2017 DATE OF PRONOUNCEMENT : 29.05.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE TWO APPEAL BY ASSESSEE U/S. 253 OF THE INCOME -TAX ACT (THE ACT) ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, THANE [THE CIT(A)] DATED 25.10.2013 FOR THE ASSESSMENT YE AR 2006-07. 2. IN ITA NO. 795/MUM/2014, THE ASSESSEE HAS CHALLENGE D THE CORRECTNESS OF THE ADDITION MADE IN THE QUANTUM ASSESSMENT AND IN ITA NO. 796/MUM/2014, THE ASSESSEE HAS CHALLENGED THE LEVY OF PENALTY U/S 271 (1)(C) OF THE ACT. AS BOTH THE APPEALS ARE ARISING OUT OF SAME ASSESSMENT ORDER, THUS, BOTH THE APPEAL WERE HEARD TOGETHER AND ARE DECIDED BY A CONSOLIDATED ORDER TO AVOID THE CONFLICTING DECISION. IN ITA NO. 795/MUM/2014, THE ASSESSEE HAS RAISED THE F OLLOWING GROUNDS OF APPEAL: ITA NO.795 & 796/M/2014- BHAGWANJI KHETSI GADA 2 1 ) ON THE FACTS & CIRCUMSTANCES OF THE CASE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE ACTION OF THE LEARNED A.O. IN DISALLOWING THE AMT OF RS. 27,88,938/- 2 ) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS IGNORED THE FACTS, DIRE CTION & REFERENCE GIVEN BY THE 'I' BENCH OF ITAT MUMBAI VIDE ITS ORDER DATED 06/09/201 3 IN THE CASE OF K.K. TEX ENTERPRISES GROUP CONCERN HAVING SAME NATURE OF BUS INESS AND AS PER DIRECTION GIVEN BY ITAT MUMBAI 'A' BENCH VIDE ITS ORDER DATED 17/11/20 11 IN THE CASE OF ALPESH B GADA ANOTHER GROUP CONCERN HAVING SAME NATURE OF BUSINES S IN WHICH IT HAS BEEN MENTIONED THAT THERE IS SEIZED. MATERIAL CONFIRMING THE RATE OF LABOUR CHARGES @ RS.3.25/-MT IN AY 02/03 & THE RATE OF LABOUR CHARGES IS MORE THAN RS 3/MT & ALSO INFLATION FACTOR CAN NOT BRUSH ASIDE IN THE PERIOD OF AY 06/07,(SHOULD BE CO NSIDERED). THE ABSTRACT COPY OF BOTH THESE ORDER IS ENCLOSED DULY MARKED. I FURTHER STATE THAT THE LABOUR CHARGES WHICH WAS A CTUALLY PAID @ 5.20/- PER METER THAN RS. 5.07/- PER METER IN SIMILAR GROUP CONCERN IN TH E SAME PERIOD WHICH WAS CONFIRMED & ACCEPTED BY INCOME TAX AUTHORITY AS PER DIRECTION G IVEN BY ITAT VIDE ITS ORDER DATED 17/11/11. I FURTHER SAY THAT BEING MANUFACTURE OF S UPERIOR QUALITY OF CLOTHES, THE HIGHER RATE HAS BEEN PAID, THE NECESSARY EVIDENCES HAD BEE N SUBMITTED TO THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), THANE DURING THE TIME OF HEARING, THE SAME HAS NOT BEEN CONSIDERED. THE LEARNED CIT(A) ERRED BY AC CEPTING THE RATE OF RS. 3/- PER METER ONLY BY IGNORING ALL OTHER RELEVANT FACTS. 3) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW THE RATE PER METER OF LABOUR CHARGES PAID IN 2002/03 CANNOT BE SAME & IT IS UNRE ALISTIC TO ADOPT THE SAME RATE IN 2006/07 WHILE THERE ARE SEVERAL FACTORS WHICH HAS D IRECT BEARING ON ENHANCEMENT OF LABOUR CHARGES AFTER DURATION OF 4YEARS. IN ITA NO. 796/MUM/2014, THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 1 ) ON THE FACTS & CIRCUMSTANCES OF THE CASE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE PENALTY U/S 2 71(1)(C)OF THE INCOME TAX ACT, 1961 WITHOUT PREJUDICE TO THE GENERALLY. 2 ) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED BY UPHOLDING THE ORDER OF A.O LEVYING THE PENALTY U/S 271 (1) (C) WI THOUT APPRECIATING THE FACT THAT THE KIND AO HAS IGNORED THE FACT THAT THE ADDITIONAL IN COME HAS BEEN SHOWN IN THE REVISED INCOME TAX RETURN ON WHICH TAXES & INTEREST PAID AS PER CONVOCATION MADE AT THE TIME OF SEARCH ACTION. 3 ) IN THE FACTS & CIRCUMSTANCES OF THE CASE THE LE ARNED CIT(A) HAS ERRED IN UPHOLDING THE AO'S ACTION BY CONFIRMING THE PENALTY LEVIED ON ADDITION OF RS. 3453812/- WHILE THIS ADDITION WAS ON ASSUMPTION BASIS WITHOUT ANY CONCRE TE EVIDENCES BROUGHT ON RECORDS. THE ADDITION OF THE INCOME WAS MADE JUST ON DISALLO WANCES OF LABOUR CHARGES ON PRESUMED ADHOCE RATE IN THE ASSESSMENT ORDER PASSED BY AO. 4 ) I FURTHER STATE THAT THE ASSESSEE HAS VOLUNTARI LY OFFERED THE UNDISCLOSED INCOME & FILED THE REVISED INCOME TAX RETURN & PAID ALL THE TAXES ON IT ALONG WITH INTEREST. HENCE NO PENALTY SHOULD HAVE BEEN LEVIED. I FURTHER STATE TH AT THE ASSESSEE HAS NEITHER FURNISHED ANY INACCURATE PARTICULARS OF INCOME NOR CONCEALED ANY PARTICULARS OF INCOME. ITA NO.795 & 796/M/2014- BHAGWANJI KHETSI GADA 3 3. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZU RE U/S. 132 WAS CARRIED OUT AT THE PREMISES OF ASSESSEE ON 12.07.2007. DURING THE COUR SE OF SEARCH PROCEEDING, IT WAS REVEALED THAT THE ASSESSEE HAS MADE THE INFLATION O F EXPENSES OF LABOUR CHARGES OF M/S APPU TEXTILE MILLS AND M/S K.K. TEX ENTERPRISES . THE ASSESSEE SHOWN INCOME FROM LABOUR WORK. HOWEVER, THIS ACTIVITY WAS DIRECT LY DONE BY THE PROPRIETARY CONCERNED AND THE JOB WORK WAS SHOWN IN HIS NAME. D URING THE SEARCH PROCEEDING AT KALPANA COMPOUND, STATEMENTS OF SHRI JETHALAL RAMJI PRAJAPATI, BHAVESH JETHALAL PRAJAPATI, VINOD SAGATHIA AND RAJU GANGARAM CHILVER I (WORKERS) WERE RECORDED ON 12.07.2007. ALL OF THEM HAVE CONFIRMED THAT THEY AR E SALARIED EMPLOYEES REGULARLY GETTING SALARY AND APART FROM THAT NO OTHER PAYMENT S WERE RECEIVED BY THEM. THEIR ACCOUNTS HAVE BEEN OPENED BY THE EMPLOYER AND THE T RANSACTION APPEARED IN THEIR BANKS ARE ALL DONE BY EMPLOYER. THE EMPLOYER USED T O MAKE THEM SIGN ON THE BLANK CHEQUE BOOKS AND KEEP THE SAME IN HIS CUSTODY. NONE OF THEM HAD ANY IDEA ABOUT THE NATURE OF TRANSACTIONS APPEARING IN THEIR BANK ACCOUNTS. WHATEVER BALANCE IS THERE IN THEIR BANK ACCOUNT BELONGS TO THEIR EMPLOY ER ON THE BASIS OF INCRIMINATING MATERIAL COLLECTED DURING THE SEARCH ACTION. THE AS SESSEE WAS SERVED NOTICE UNDER SECTION 153A OF THE ACT. IN RESPONSE TO THE NOTICE U/S 153A OF THE ACT, THE ASSESSEE FILED RETURN OF INCOME ON 02.05.2008 DECLARING TOTA L INCOME OF RS. 8,70,397/-. THE ASSESSMENT WAS COMPLETED ON 30.12.2009 U/S 143(3) R .W.S. 153A OF THE ACT. THE ASSESSING OFFICER (AO) WHILE FRAMING THE ASSESSMENT ORDER BESIDES THE OTHER ADDITION AND DISALLOWANCE, MADE THE ADDITION OF RS. 34,53,812/- ON ACCOUNT OF INFLATION OF LABOUR CHARGES. ON APPEAL BEFORE THE L D. CIT(A), THE ACTION OF AO WAS CONFIRMED. THE ASSESSEE FILED FURTHER APPEAL BEFORE THE ITAT VIDE ITA NO. 376/MUM/2011. THE APPEAL WAS RESTORED TO THE FILE O F LD. CIT(A) VIDE ORDER DATED ITA NO.795 & 796/M/2014- BHAGWANJI KHETSI GADA 4 29.07.2011. IN THE RESTORATION PROCEEDING, THE LD. CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE AND CONFIRMED THE DISALLOWANCE OF LABOUR C HARGES TO THE EXTENT OF RS. 27,88,938/-. AFTER RECEIPT OF ORDER OF LD CIT(A) TH E AO AFTER SERVING THE NOTICE UNDER SECTION 274 RWS 271(1) (C) LEVIED PENALTY ON THE DISALLOWANCE OF LABOUR CHARGES. ON APPEAL THE PENALTY ORDER WAS SUSTAINED. FURTHER, AGGRIEVED BY THE ORDER OF LD. CIT(A), IN QUANTUM ASSESSMENT THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. SIMULTANEOUSLY, THE ASSESSEE ALSO CHALLE NGED THE CONFIRMATION OF PENALTY ORDER. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE ARG UED THAT IN ALL GROUP CASES OF ASSESSEE, APPEAL WAS FILED BEFORE THE ITAT AND IN C ASE OF B.K. TEX CORPORATION, THE MATTER WAS RESTORED TO THE FILE OF AO IN ITA NO. 37 0 & 371/MUM/2011 FOR AYS 2004-05 & 2005-06 VIDE ORDER DATED 29.11.2011. FOLL OWING THE ORDER OF TRIBUNAL IN ITA NO. 370 & 371/MUM/2011, THE CASE OF ASSESSEE WA S RESTORED TO THE FILE OF AO. THE OTHER GROUP CASES IN CASE OF ALPESH B. GADA AND K.K. ENTERPRISES WHICH WERE ALSO COVERED IN THE SAME SEARCH WERE ALSO RESTORED FOLLOWING THE DECISION OF GROUP CASES TO THE FILE OF AO. IT WAS FURTHER ARGUED THAT IN CASE OF ALPESH B. GADA FOR AY 2006-07, THE AO HAS ACCEPTED THE LABOUR CHARGE @ 4. 84 PER METER INSTEAD OF RS. 5.61 PER METER. THE LD. AR OF THE ASSESSEE FURTHER ARGUED THAT THOUGH THE RATE ADOPTED BY LOWER AUTHORITY/ AO IS AT THE HIGHER SI DE AND MAY BE CONSIDERED @ RS.3.00/- PER METER. THE AO HAS NOT MADE ANY INDEP ENDENT ENQUIRY BEFORE MAKING THE ADDITION/DISALLOWANCE ON LABOUR CHARGES. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. T HE LD. DR FOR THE REVENUE ITA NO.795 & 796/M/2014- BHAGWANJI KHETSI GADA 5 VEHEMENTLY ARGUED THAT IN ASSESSEES GROUP CASE I.E . IN CASE OF ALPESH B. GADA, THE AO CALCULATED THE LABOUR CHARGE @ RS. 4.84/- PER ME TER AND THE ASSESSEE ( IN THAT CASE) HAS NOT FILED ANY FURTHER APPEAL BEFORE THE HIGHER AUTHORITIES. THE LABOUR CHARGES ADOPTED BY AO @ RS.4.84/- HAS ATTAINS FINAL ITY. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE NOTICED THAT D URING THE APPEAL BEFORE THE TRIBUNAL, THE LD. REPRESENTATIVE FOR THE ASSESSEE M ADE THE SUBMISSION THAT WHATEVER IS DECIDED IN CASE OF M/S B.K. TEXTILE GROUP APPEAL, WHICH WERE HEARD ALONG WITH THE APPEAL OF ASSESSEE, WOULD BE FOLLOWED IN ASSESSEES CASE. FURTHER, WHILE HEARING THE APPEAL IN CASE OF ALPESH B. GADA IN ITA NO. 893, 89 4, 895 & 896/MUM/2011 AND IN K.K. TEX ENTERPRISES IN ITA NO. 1487/MUM/2011, THE LD. REPRESENTATIVE AGREED FOR RESTORATION OF CASE TO THE FILE OF AO FOR VERIFICAT ION OF SEIZED MATERIAL. FURTHER, DIRECTION WAS SOUGHT FROM THE BENCH THAT ORDER OF B HAGWAN DAS GADA IN ITA NO. 376/MUM/2011 BE FOLLOWED IN CASE OF ALPESH B. GADA. ON THE SUBMISSION OF LD. REPRESENTATIVE OF THE PARTIES, THE GROUND OF APPEAL RELATED TO THE LABOUR CHARGES WAS RESTORED TO THE FILE OF AO VIDE ORDER DATED 25.11.2 011. 6. WE HAVE SEEN THAT IN THE RESTORATION PROCEEDING IN CASE OF ALPESH B. GADA FOR AY 2006-07, THE AO HAS CONSIDERED/ ADOPTED LABOUR CHAR GES @ RS.4.84/- PER METER IN ASSESSMENT DATED 30.03.2013 PASSED U/S 143(3) R.W.S . 153A/254 OF THE ACT. ON OUR SPECIFIC ENQUIRY, IT WAS REVEALED THAT NO FURTHER A PPEAL WAS FILED AGAINST THE ORDER PASSED BY AO ON 30.03.2013 IN ASSESSEES GROUP CASE . THE ORDER DATED 30/03/2013 ATTAINED FINALITY. CONSIDERING THE FACTUAL BACKGROU ND AND THE SUBMISSION BEFORE THE CO-ORDINATE BENCH IN FIRST ROUND OF APPEAL, WE FOUN D THAT LABOUR CHARGES CONSIDERED BY THE AO ARE QUITE REASONABLE ONE. FURTHER, CONSID ERING THE ORDER IN ASSESSEES ITA NO.795 & 796/M/2014- BHAGWANJI KHETSI GADA 6 GROUP CASE, WE DIRECT THE AO TO MAKE THE DISALLOWAN CE OF LABOUR CHARGES @ RS. 4.84 PER METER, WE ORDER ACCORDINGLY. HENCE, THE GROUND OF APPEAL RAISED BY ASSESSEE IS PARTLY ALLOWED. ITA NO. 796/MUM/2014 , 7. THE AO WHILE PASSING THE ASSESSMENT ORDER U/S 153A R.W.S. 143(3) OF THE ACT MADE THE DISALLOWANCE ON LABOUR CHARGES OF RS. 34,53,812 /-. ON APPEAL BEFORE THE LD. CIT(A), THE DISALLOWANCE WAS RESTRICTED TO RS. 27,8 8,938/- VIDE ORDER DATED 25.10.2013. FURTHER, THE AO MADE THE DISALLOWANCE O F RS. 6,44,874/- ON ACCOUNT OF UNDISCLOSED INCOME. THE AO LEVIED THE PENALTY @ 100 % ON DISALLOWANCE OF LABOUR CHARGES AND RS. 6,44,874/- ON ACCOUNT OF UNDISCLOSE D INCOME. WE HAVE SEEN THAT IN THE ASSESSMENT THE ADDITION WAS MADE ON ESTIMATE BA SIS. THE AO LEVIED THE PENALTY ON ESTIMATED DISALLOWANCE. IT IS SETTLED PREPOSITIO N OF LAW THAT NO PENALTY IS LEVIABLE ON ESTIMATED DISALLOWANCES. THUS, THE PENALTY ORDER IS ALSO SET-ASIDE. 8. IN THE RESULT THE APPEAL ITA NO 795/M/2014 IS PARTL Y ALLOWED AND APPEAL ITA NO.796/M/2014 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF MAY 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE PRESEDENT JUDICIAL MEMBER MUMBAI; DATED 29/05/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/