M/s. Shreya Diamonds, Navsari V. The Income tax Officer, Ward-4, Navsari

ITA 849/AHD/2013

• Counselvise Citation: 84920514 RSA 2013
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 29-09-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 25-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G C DAXINI
• Keywords: Corroborative evidences
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER M/S. SHREYA DIAMONDS, 504, MAH AVIR CHAMBERS CO.OP . SOC. LTD, DHOBIWAD, NAVSARI PAN: AALFS6307D (APPELLANT) VS THE INCOME TAX OFFICER, WARD - 4, NAVSARI (RESPONDENT) REVENUE BY : S H RI G.C. DAXINI , SR. D . R. ASSESSEE BY: S H RI TUSHAR HEMANI , A.R. DATE OF HEARING : 29 - 09 - 2 015 DATE OF PRONOUNCEMENT : 21 - 10 - 2 015 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2001 - 02 , AR ISES FROM ORDER OF THE CIT(A), VALSAD DATED 30 - 12 - 2012 IN APPEAL NO. CIT(A)/110/1 0 - 11 , I T A NO . 849 / A HD/20 13 A SSESSMENT YEAR 200 1 - 02 I.T.A NO.849 /AHD/20 13 A.Y. 2001 - 02 PAGE NO M/S. SHREYA DIAMONDS VS. ITO 2 IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 254 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2 . THE ASSESSEE S SOLE SUBSTANTIVE GROUND CHALLENGES ACTION OF BOTH THE LOWER AUTHORITIES IN DISALLOWING LABOUR CHARGES OF RS. 14,28,291/ - . THE ASSESSEE FIRM IS A DIAMOND EXPORTER. IT P URCHASES AND IMPORTS ROUGH DIAMOND, GETS THEM CUT AND POLISHED ON LABOUR JOB WORK BASI S FOLLOWED BY EXPORT. IT INCURRED/PAID THE IMPUGNED LABOUR CHARGES OF RS. 14,28,291/ - TO M/S HARDIK GEMS, PROPRIETOR HASMUKH K. MEHTA TOWARDS POLISHING AND JOB WORK CHARGES. THE ASSESSING OFFICER REOPENED ASSESSMENT IN ITS CASE BY RECORDING REASONS THAT THIS PAYEE DID NOT HAVE ANY MA NUFACTURING BUSINESS ESTABLISHMENT LIKE FACTORY, MACHINERY ETC TO CARRY OUT ANY SUCH ACTIVITIES . HE WAS ACCORDINGLY OF THE VIE W THAT THIS TRANSACTION WAS A SHAM ONE I.E. A HAWALA BILL TO ACCOMMODATE THIS ASSESSEE. 3. THE ASS ESSEE FILED ABOVE STATED PAYEE S CONFI RMATION AS SUPPORTING EVIDENCE. THE ASSESSING OFFICER IN REASSESSMENT DEPUTED I NSPECTOR , INCOME TAX WHO REPORTED THE PAYEE AS NOT TRACEABLE . HE THEREAFTER REFERRED TO ASSESSMENT PROCEEDINGS OF M /S HARDIK GEM PERTAININ G TO THE VERY IMPUGNED ASSESSMENT YEAR HOLDING IT TO HAVE BEEN W ORKING AS HAWALA DEALER. ALSO THAT ITS BANK ACCOUNT HAD BEEN USED FOR FACILITATING BOGUS TRANSACTIONS OF S ALES, PURCHASE, M AJURI AND DIAMOND LABOUR RECEIPTS. HE HEAVILY RELIED ON THE ABOVE S TATED REASO NS OF REOPENING, TURNED DOWN AS SESSEE S EXPLANATION AND INVOKED THE IMPUGNED DISALLOWANCE /ADDITION OF RS. 14,28,291/ - IN I.T.A NO.849 /AHD/20 13 A.Y. 2001 - 02 PAGE NO M/S. SHREYA DIAMONDS VS. ITO 3 REASSESSMENT FRAMED ON 11 - 10 - 2010. IT IS ALSO TO BE SEEN THAT THE ASSESSEE REITERATED AN ALTERNATIVE CLAIM TO ALLOW SECTION 80HHC DEDUCTION ON ENHANCED INCOME AFTER THE ABOVE STATED DISALLOWANCE. WE FIND THAT THE ASSESSING OFFICER ACCEPTED THIS PLEA IN THE ABOVE STATED RE - ASSE SS MENT. 4. THE ASSESSE E FILED APPEAL. THE CIT(A) UPHE LD THE ASSESSING OFFICER S ACTION IN THE ORDER UNDER CHALLENGE. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE CASE FILE. THE ASSESSEE RECITES ALL FACTS NARRATED IN THE PRECEDING PARAGRAPHS. IT SUBMITS THAT THE IMPUGNED LABOUR CHARGES W ERE PAID THROUGH ACCOUNT PAYEE CHEQUES AFTER DEDUCTIN G TDS U/S. 194C. THE AUTHORITIES BELOW OUGHT NOT TO HAVE DISALLOWED THE GENUINE TRANSACTIONS OF LABOUR CHARGES PAYMENTS . IT REITERATES ITS STATUS OF A DIAMOND EXPORTER WITHOUT HAVING ITS OWN POLISHING FACILITIES FOR ROUGH DIAMONDS. THE ASSESSEE SUBMITS AC CORDINGLY THAT ALL ITS POLISHING ACTIVITIES IS GOT COMPLETED FROM OPEN MARKET. IT IS SUBMITTED THAT THE LOWER AUTH ORITIES DO NOT QUESTION M/S HARDIK JAIN , ITS PRESENCE WHO COULD APPROVE THE IMPUGNED TRANSACTION. IT FURTHER REFERS TO THE ASSESSING OFFICER S ACCEPTING ITS DEDUCTION CLAIM U/S 80HHC QUA THE ENHANCED INCOME. NO REASONS OF BOO KS OF ACCOUNT OR AUDIT REPORT ARE ALSO PLEADED. DETAILS OF POLISHED DIAMOND THROUGH OUTSIDE CONTRACTORS INCLUDING PAYEES IN QUESTION AS WELL ITS CONFIRMATION AND ACKNOWL EDGEMENT RECEIPTS ARE ALSO QUOTED AS CRUCIAL SUPPORTIVE EVIDENCE . THE ASSESSEE REFERS ALL THE ABOVE STATED OVERWHELMING I.T.A NO.849 /AHD/20 13 A.Y. 2001 - 02 PAGE NO M/S. SHREYA DIAMONDS VS. ITO 4 EVIDENCE AND PRAYS FOR DELETING THE IMPUGNED DISALLOWANCE OF LABO U R CHARGES OF RS. 14,28,291/ - . 6. THE REVENUE STRONGLY SUPPORTS THE L OWER AUTHORITIES ACTION IN MAKING THE DISALLOWANCE IN QUESTION. 7. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO RIVAL CONTENTIONS. THE REVENUE HAS INVOKED THE IMPUGNED DISALLOWANCE OF RS. L ABOUR CHARGES INCURRED ON ROUGH DIAMOND POLISHING AS PAID TO M/S HARDIK GEMS (SUPRA) ON THE GROUND THAT IT HAS HELD TO BE A HAW ALA OPERATOR FOR FACILITATING SUCH KIND OF ENTRIES. THE FACT ALSO REMAINS THAT ALL THE NECESSARY EVIDENCE SUBMITTED AT ASSESSEE S BEHEST SUPPORTING THIS EXPENDITURE CLAIM HAS NOWHERE BEEN SPECI FICALLY DEALT WITH FOLLOWED BY REJECTION THEREOF. IN THESE PECULIAR CIRCUMSTANCES , WE FIND IT MORE APPROPRIATE IN LARGER INTEREST OF JUSTICE THAT A LUMP SUM 15% DISALLOWANCE OF THE GROSS PAYMENT AMOUNT OF RS. 14,28,291/ - WOULD BE JUST AND FAIR. WE ORDE R ACCORDING LY. THE ASSESSING OFFICER SHALL PASS A CONSEQUENTIAL ORDER. 8. THIS ASSESSEE S APPEAL IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 21 - 10 - 2015 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 21 /10 /2015 AK I.T.A NO.849 /AHD/20 13 A.Y. 2001 - 02 PAGE NO M/S. SHREYA DIAMONDS VS. ITO 5 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,