The DCIT, Central Circle- 1, Surat V. M/s. Rijiya Brothers, Surat

ITSSA 10/AHD/2016

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9364 (ITAT-SURAT)
• Duration Of Justice: 5 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 01-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL PATEL
• Keywords: Business expenditure; Tax effect; TDS; Set aside
• Section: 143(3); 142(1); 143(2); 13; 153C; 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER IT(SS)A NO.10/AHD/2016 (AY 2011-12)& ITA NO.12/AHD/2016 (AY 2012-13) (H EARING IN VIRTUAL COURT) DCIT, CENTRAL CIRCLE-1, ROOM NO. 505, 5 TH FLOOR, AAYAKAR BHAVAN, MAJRA GATE, SURAT-395001 VS M/S RAJIYA BROTHERS, 20/21, NISHAL FALIA, GOTALAWADI, KATARGAM, SURAT-395006 [ PAN NO.AADFR 4197 A ] REVENUE / APPELLANT ASSESSEE /RESPONDENT ASSESSEE BY SHRI MEHUL PATEL, ADVOCATE REVENUE BY SHRI RITESH MISHRA, CIT-DR DATE OF HEARING 13.07.2021 DATE OF PRONOUNCEMENT 26.07.2021 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THESE TWO APPEALS BY REVENUE ARE DIRECTED AGAINST THE COMMON ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-4 SURAT (CIT(A) FOR SHORT) DATED 14.10.2015 FOR ASSESSMENT YEARS 2011-12 & 2012-13. THE LD.CIT(A) PASSED CONSOLIDATED ORDER FOR ASSESSMENT YEARS (AY) 2007-08 TO 2012-13. THE REVENUE CHALLENGED THE ORDER OF LD CIT(A) FOR ALL ASSESSMENT YEARS, HOWEVER, THE APPEALS FOR OTHER YEARS WERE DISMISSED DUE TO LOW TAX EFFECT. IN BOTH THE APPEALS THE REVENUE HAS RAISED CERTAIN COMMON GROUND OF APPEALS, FACTS IN BOTH THE YEARS ARE ALMOST SIMILAR EXCEPT VARIATION OF FIGURES DISALLOWANCE OF LABOUR EXPENSES. THEREFORE, WITH THE CONSENT OF BOTH THE IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 2 PARTIES, BOTH THE APPEALS ARE CLUBBED, HEARD AND ARE DECIDED BY COMMON ORDER. FOR APPRECIATION OF FACTS, THE APPEAL FOR AY 2012-13 IS TREATED AS LEAD CASE. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS FACTS AND CIRCUMSTANCES OF THE CASE BY RESTRICTING THE DISALLOWANCES TO 15% INSTEAD OF 100%, IN SPITE OF THE FACT THAT THE TRANSACTIONS BETWEEN THE JOB WORK PARTIES AND THE ASSESSEE WERE A STRUCTURED ARRANGEMENT TO SERVE THE NEEDS OF THE ASSESSEE AND LEND LEGITIMACY TO THE SIPHONING OFF FUNDS FROM THE ASSESSEE TO REDUCE ITS TAX LIABILITY. [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW BY RELYING ON THE JUDGMENT OF THE HONBLE ITAT AHMEDABAD IN THE CASE OF M/S ASHWIN DIAMONDS IN ITA NO. 1145/AHD/2009 SINCE THE FACTS MENTIONED IN THE CASE OF M/S ASHVIN DIAMONDS IS NOT IDENTICAL WITH THE PRESENT CASE I.E. M/S RIJIYA BROTHERS. [3] ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. [4] IT, IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM, ENGAGED IN THE BUSINESS OF IMPORT OF ROUGH DIAMONDS FROM THE MANUFACTURING AND EXPORT AND ALSO IN TRADING OF POLISHED DIAMONDS. INFORMATION WAS RECEIVED FROM THE LOCAL POLICE TO IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 3 THE DEPARTMENT THAT HUGE CASH WAS FOUND AT THE PREMISES OF THE ASSESSEE-FIRM. ON THE BASIS OF SUCH INFORMATION, THE REVENUE CARRIED OUT ACTION UNDER SECTION 132 OF THE ACT ON 10.11.2011. DURING THE COURSE OF SEARCH CASH OF RS.53 LAKHS WERE FOUND AND SEIZED. THE STATEMENT OF ONE OF THE PARTNER OF ASSESSEE WAS RECORDED UNDER SECTION 131 OF THE ACT ON 11.10.2011. THE ASSESSEE WHILE MAKING THE STATEMENT DISCLOSED THAT A CASHOF RS.40 LAKH WAS WITHDRAWN ON 10.10.2012 FROM THE BANK ACCOUNT OF NINE JOB WORKS PARTIES AS ALL JOB WORK PARTIES AND THE ASSESSEE ARE MAINTAINING THEIR BANK ACCOUNTS IN THE SAME BANK I.E. SARASWAT CO-OPERATIVE BANK VARACHA BRANCH, SURAT. THECASH OF RS.15 LAKH WAS WITHDRAWN FROM THE CURRENT BANK ACCOUNT OF ASSESSEE ON 07.10.2011, OUT OF WHICH CASH OF RS.13 LAKH WAS SEIZED. 3. ON THE BASIS OF STATEMENT OF THE PARTNER OF ASSESSEE, GORDHANDAS P RIJIYA, THE ASSESSING OFFICER TOOK HIS VIEW THAT PART OF CASH OF RS.13 LAKH, OUT OF TOTAL CASH SEIZED OF RS.53 LAKH BELONGS TO ASSESSEE-FIRM.THE ASSESSING OFFICER TREATED THE STATEMENT OF PARTNER AS ADMISSION AND FORMED HIS OPINION THAT IT IS A FIT CASE OF ISSUING NOTICE UNDER SECTION 153C OF THE ACT. IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 4 ACCORDINGLY, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 153C ON 04.09.2013. IN RESPONSE TO NOTICE UNDER SECTION 153C, THE ASSESSEE FILED ITS RETURN OF INCOME ON 10.10.2013 DECLARING TAXABLE INCOME OF RS.6.10 CRORE. THE ASSESSING OFFICER AFTER SERVING STATUTORY NOTICE UNDER SECTION 143(2) AND 142(1) PROCEEDED FOR ASSESSMENT. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN INCOME FROM BUSINESS OF IMPORT OF ROUGH DIAMONDS, MANUFACTURING AND EXPORT OF ROUGH DIAMONDS AND TRADING OF POLISHED DIAMONDS. THE ASSESSEE HAS DEBITED MANUFACTURING AND LABOUR EXPENSES OF ROUGH DIAMONDS OF RS.20.50 CRORE IN THE PROFIT AND LOSS ACCOUNT. THE PARTNER OF ASSESSEE WHILE EXPLAINING THE SOURCE OF SEIZED CASH, ADMITTED THAT CASH OF RS.40 LAKH WAS WITHDRAWN BY THE ACCOUNTANT OF ASSESSEE FIRM NAMELY KHUSHAL FROM THE BANK ACCOUNT OF NINE JOB WORK PARTIES ( WHO WERE WORKING FOR JOB WORK OF ROUGH DIAMONDS ). THE ASSESSING OFFICER IN ORDER TO VERIFY THE GENUINENESS OF THE SAID EXPENSES ISSUED NOTICE UNDER SECTION 131 OF THE ACT TO ALL THE PARTIES THROUGH REGISTERED LETTERS. THE ASSESSING OFFICER RECORDED BY MOST OF THE NOTICES WAS RETURNED BACK UNSERVED. IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 5 THE ASSESSEE WAS ASKED TO PROVIDE FRESH ADDRESSES OF ALL THE PARTIES. THE ASSESSEE FURNISHED THE NAME OF FOLLOWING NINE PARTIES; (I) SHANTIBHAI B BHATIA, (II) HARESHBHAI M CHOPADIA, (III) ISHWARBHAI B BHATIA, (IV) SANJAY BHAI NAROLA, (V) VINODBHAI PALADIA, (VI) HIMMATBAHI DOLAKIA, (VII) NARESHBHAI NAROLA, (VIII) DHIRUBHAI CHANDPARA AND (IX) NARAYANBHAI M MAGTARPA 4. ON FURNISHING FRESH ADDRESSES OF ALL PARTIES, THE ASSESSING OFFICER AGAIN ISSUED NOTICE UNDER SECTION 131 OF THE ACT. THE ASSESSING OFFICER RECORDED THAT ONLY ONE PARTY, OUT OF NINE PARTIES, INVOLVED AS JOB WORKS HAS MAINTAINED JOB RESISTER, SALARY REGISTER. HOWEVER, NO DETAILS ARE MAINTAINED IN RESPECT OF JOB WORK EXECUTED RELATED TO THE ASSESSEE-FIRM. 5. THE ASSESSING OFFICER ALSO EXAMINED MODUS OPERANDI OF JOB WORKS OF ROUGH DIAMONDS. IT WAS NOTED BY ASSESSING OFFICER THAT ROUGH DIAMONDS ARE RECEIVED BY THE JOB WORKS PARTIES THROUGH JANGAD AND ARE ALSO RETURNED BACK TO THE ASSESSEE IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 6 AFTER DOING WORK THROUGH JANGAD ONLY. THE JOB WORKS PARTIES ARE NOT MAINTAINING BASIC RECORD LIKE WORK REGISTER, LABOUR REGISTER, OR, BASIC RECORD SHOWING THE EXECUTION OF WORK. JOB WORKS ARE PREPARED AT THE BUSINESS PREMISES OF THE ASSESSEE- FIRM AND THE ASSESSEE-FIRM OBTAINED SIGNATURES OF JOB WORKS PARTIES ON THE SAID BILLS. THEY AFFIX THEIR SIGNATURES WITHOUT VERIFYING THE RELEVANT DETAILS LIKE LOT NUMBER, PACKET NUMBER, AND NUMBER OF PIECES, GROSS WEIGHT, NET WEIGHT, WASTAGE OR RATE OF LABOUR. THE ASSESSING OFFICER ASKED ALL THE JOB WORKS PARTIES TO PROVIDE THE RATE OF RECEIVING DIAMONDS, NATURE OF ROUGH DIAMONDS, NUMBER OF PIECES, WEIGHT, DATE OF DELIVERY OF ROUGH DIAMONDS, WEIGHT OF ROUGH DIAMONDS AFTER JOB, WASTAGE AND JOB CHARGES. THE ASSESSING OFFICER FURTHER RECORDED NONE OF THE PARTIES COULD PROVIDE REQUIRED INFORMATION OR DETAILS. THEREFORE, THE ASSESSING OFFICER SUSPECTED THE ENTIRE JOB WORKS EXPENSES OF THOSE NINE PARTIES. THE ASSESSING OFFICER ALSO NOTED THAT MOST OF THE PERSONS ARE EITHER EMPLOYEE OF THE ASSESSEE-FIRM OR RELATED TO THE PARTNER OF THE ASSESSEE. THE RATE OF JOB WORK DISCLOSED BY THE WORKERS IS DIFFERENT THAN ACTUAL WORK DONE BY THEM. THE ASSESSEE CLAIMS THAT EXPENSES IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 7 OF JOB WORK WERE PAID THROUGH CHEQUES.THE ASSESSING OFFICER ALSO EXAMINED THE BANK STATEMENT OF ALL NINE PARTIES. ON VERIFICATION OF ACCOUNTS, THE ASSESSING OFFICER NOTED THAT ON CREDITING CHEQUE AMOUNT, 99.90% OF THE CREDIT AMOUNT WAS WITHDRAWN IMMEDIATELY BY CHEQUES. ON FURTHER INVESTIGATION THE ASSESSING OFFICER CAME TO KNOW THAT ALL WITHDRAWAL ARE MADE BY SHRI KHUSHAL, ACCOUNTANT OF ASSESSEE-FIRM THROUGH SELF-CHEQUE AND THAT THE BALANCE OF JOB WORK PARTIES REMAINS IN BETWEEN RS.1,500/- AND RS.5,000/-. ON THE BASIS OF AFORESAID INVESTIGATION, THE ASSESSING OFFICER ISSUED SHOW- CAUSE NOTICE ABOUT THE ADVERSE EVIDENCE AND THE STATING FACT ADMITTED BY THE JOB WORK PARTIERS. A PHOTO COPY OF THE STATEMENTS OF JOB WORKS PARTIES WERE ALSO PROVIDED BY THE ASSESSEE-FIRM. 6. THE ASSESSEE-FIRM FILED ITS REPLY ON 10.02.2014. IN REPLY, THE ASSESSEE STATED THAT IN ALL EARLIER YEARS FROM 1998-99 TO 2010- 11 THEIR BOOKS OF ACCOUNTS ARE ACCEPTED IN REGULAR ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT. SIMILAR JOB WORKS WERE EXAMINED IN ASSESSMENT YEARS 2004-05 AND 2005-06, AFTER EXAMINING THE JOB WORKS IT WAS ACCEPTED IN BOTH THE YEARS. THE IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 8 ASSESSEE FURTHER EXPLAINED THAT THE DIAMONDS ARE GIVEN TO VARIOUS JOB WORKS FOR CUTTING AND POLISHING DIAMONDS MANUFACTURING AND FURTHER ADMINISTRATIVE EXPENSES ARE BORNE BY JOB WORKS PARTIES. THE JANGADS ARE AFFIXED WITH THE PACKETS OF ROUGH DIAMONDS SO THAT DURING THE MOVEMENT IN MANUFACTURING STAGE, THE EVIDENCE OF OWNERSHIP AS WELL AS PROOF OF ACCOUNTED DIAMONDSIS MAINTAINED. THE ASSESSEE MAINTAINING CASH BOOK, LABOUR EXPENSES REGISTER, STOCK REGISTER OF POLISHED DIAMONDS, GENERAL REGISTER, MANUFACTURING / PRODUCTION REGISTER, STOCK OF POLISHING DIAMOND AND MANUFACTURING JANGAD . THE ASSESSEE FURTHER STATED THAT ALL JOB WORKS PARTIES ARE AVAILABLE AND THEIR JOBS OF WORK WAS VERIFIED BY ASSESSING OFFICER THEY ARE ASSESSED TO TAX ON FILING RETURN OF INCOME, THE JOB WORKS APPLIED TO THEM WITH DETAILS WERE PROVIDED TO THE ASSESSING OFFICER. WORK PREMISES AND RESIDENTIAL PREMISES WERE VERIFIED AND BOOKS OF ACCOUNT WERE PROVIDED. THE EXPENSES ARE WITHIN THE INDUSTRY NORMS. ALL THE PAYMENTS WERE MADE THROUGH CHEQUES AND THERE IS NO EVIDENCES THAT ANY PART OF THE WAGE WAS RETURN BACK TO THE ASSESSEE. THE ASSESSEE ALSO PROVIDED THE VARIOUS OTHER DETAILS IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 9 AND RELIED ON A NUMBER OF DECISIONS OF TRIBUNAL AND HIGHER COURTS. ALL THE DETAILS PROVIDED BY THE ASSESSEE WAS EXAMINED AND ANALYZED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER ALSO OBTAINED THE COPY OF CHEQUES FROM THE BAKERS OF JOB WORKS PARTIES WHICH ARE EXTRACTED BEING A PART OF ASSESSMENT ORDER. THE ASSESSING OFFICER HELD THAT JOB WORK EXPENSES SEVEN SUCH JOB WORKS PARTIERS ARE NOT GENUINE ACCORDINGLY EXPENSES OF SUCH SEVEN PARTIES (EXCEPT DHIRUBHAI CHANDPURA AND NARAYANBHAI MAGTARPA) AGGREGATING RS.2.36 CRORE, WAS DISALLOWED BY TAKING VIEW THAT JOB WORKS OF THESE SEVEN PARTIERS REMAINS UNSUSTAINABLE AND NOT ELIGIBLE FOR DEDUCTION AS BUSINESS EXPENSES. 7. AGGRIEVED BY THE ADDITIONS THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A). BEFORE LD. CIT(A), THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS. THE SUBMISSION OF THE ASSESSEE ARE RECORDED IN PARA. 10.1 OF THE IMPUGNED ORDER. IN THE WRITTEN SUBMISSION, THE ASSESSEE CONTENDED THAT THE BOOKS OF ASSESSEE WAS ACCEPTED IN REGULAR ASSESSMENT YEARS 1998-99 TO 2010-11 AND NO DEFECTS WERE FOUND BY THE ASSESSING OFFICER. THE ASSESSING OFFICER DEPUTED INSPECTOR UNDER SECTION 133B WHO EXAMINED IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 10 THE JOB WORKS REGARDING SOURCE OF WAGE PAYMENT, RATE OF LABOUR AND OUTSTANDING BALANCE DURING THE REGULAR ASSESSMENT. THE ASSESSEE MAINTAINED JANGADS WHICH ARE AFFIXED WITH THE PACKETS OF ROUGH DIAMONDS DURING THE MOVEMENT OF MANUFACTURING STAGES. THE STATEMENT OF JOB WORKERS RECORDED ON 15, 17 AND ON 21 OCTOBER 2011 WHEREIN THEY ADMITTED OWNERSHIP OF MACHINERIES, MAINTENANCE OF BOOKS OF ACCOUNT, RENTED FACTORY PREMISES AND ELECTRICITY INSTALLATION. THE ASSESSEE ALSO STATED THAT JOB WORKS OF BY TWO JOB WORKS ARE 4571.03 CARAT WERE SOLD BY EXPORT DURING THE YEAR AND IN SUBSEQUENT YEAR AND EARNED FOREIGN EXCHANGE. THE ASSESSEE ALSO EXPLAINED THE SIMILAR FACTS AS EXPLAINED BEFORE THE ASSESSING OFFICER REGARDING EXISTENCE OF WORKERS AT WORKING PLACE, THEY ARE ASSESSED TO INCOME TAX HAVING BANK ACCOUNT, PAYMENTS WERE MADE THROUGH BANKING CHANNEL ETC., THE ASSESSEE ALSO FURNISHED GROSS PROFIT (GP) AND NET PROFIT (NP) AND THE RATIO WITH COMPARABLE COMPANIES THE PERSON WHO ARE ENGAGED IN SIMILAR TRADE AND CLAIMED THAT GP AND NP OF ASSESSEE IS BETTER THAN THE OTHER COMPARABLE NAMELY THUMOR GEMS SHOWN GP AT 6.14% AND NP AT 2.12% JODHANI EXPORTS IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 11 WHO HAVE SHOWN GP RATE 7.76% AND NP 3.46% AND K. N. DIAMONDS WHO HAVE SHOWN GP AT 6.56% AND NP AT 3.22%, WHEREAS THE ASSESSEE SHOWN ITS GP AT 8.49% AND NP AT 4.27%, WHICH IS HIGHER TO THE OTHER COMPARABLE CONCERN. ON THE BASIS OF AFORESAID FIGURES THE ASSESSEE CLAIMEDTHAT THE ASSESSEE HAS SHOWN HIGHER GP AND NP RATIO AMONGST COMPARABLE. ACCORDINGLY, THE ASSESSEE SHOWN HIGHER PROFIT MARGIN. THE ASSESSEE HAS ALSO SHOWN COMPARATIVE FIGURE OF TURNOVER LABOUR EXPENSES DISALLOWED AND EXPENSES DISALLOWED IN TERMS OF PERCENTAGE IN THE FOLLOWING MANNER: M/S RIJIYA BROTHERS DETAILS OF TOTAL LABOUR E XPENSES AND EXPENSES DISALLOWED YEAR TURNOVER LABOUR & JOB WORK CHARGES EXPENSES DISALLOWED EXPENSES DISALLOWED IN PERCENT TERMS 2007 - 08 50,47,20,562 5,26,09,020 46,64,353 8.87 2008 - 09 65,32,53,844 7,41,23,310 71,24,748 9.61 2009 - 10 62,75,89,520 6,43,53,246 72,82,860 11.32 2010 - 11 75,17,79,217 9,35,07,614 77,27,652 8.26 2011 - 12 1,32,22,17,565 20,49,75,673 2,36,94,581 11.56 2012 - 13 1,49,15,95,949 22,38,76,237 1,86,84,477 8.35 8. THE ASSESSEE ALSO RELIED ON VARIOUS CASE LAWS. THE LD. CIT AFTER CONSIDERING THE MATERIAL ON RECORD, ASSESSMENT ORDER AND THE SUBMISSION OF THE ASSESSEE HELD THAT ASSESSEE CLAIMED ITS IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 12 NP RATE IS REASONABLE COMPARED TO NP MARGIN WITH OTHER CONCERNED IN SIMILAR TRADE OR BUSINESS. IT WAS ALSO HELD BY THE LD. CIT (A) THAT IT IS DIFFICULT TO FIND OUT THE ACTUAL NP MARGIN MAY BE. IN MOST OF THE CONCERNED HAVING SAME BUSINESSES ARE COMPARING FROM SPECIAL ECONOMIC ZONE (SEZ) DURING THE SAME YEAR ARE SHOWN NP WITH THE RANGE OF 20% WITHOUT BENEFIT IN THE COST OF SALE OR PRICE. THE LD.CIT(A) FOLLOWED THE DECISION OF TRIBUNAL IN THE CASE OF M/S ASHWIN DIAMONDS VS. INCOME TAX OFFICER IN ITA NO.1145/AHD/2009 DATED 11.05.2012 WHEREIN THE DISALLOWANCE OF SIMILAR (BOGUS) JOB WORK WAS UPHELD TO THE EXTENT OF 10%. THE LD. CIT(A) AFTER CONSIDERING THE OTHER MATERIAL HELD THAT THE FACTS OF THE PRESENT CASE IS LITTLE DIFFERENT WITH THE FACTS OF THE PRESENT ASSESSEE BECAUSE OF NON-PRODUCTION OF BASIC RECORD AND NOT KEEPING ORIGINAL JANGADS WITH VERIFIABLE SPECIFIC DETAILS AND THAT THE SAME ACCOUNTANT WAS WITHDRAWN THE CASH AND OTHER RELATED. 9. ON THE BASIS OF HIS AFORESAID OBSERVATION, LD. CIT UPHELD THE DISALLOWANCE TO THE EXTENT OF 15% OF JOB WORK CHARGES. AGGRIEVED THEREBY THE REVENUE HAS FILED PRESENT APPEALS BEFORE THIS TRIBUNAL. IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 13 10. WE HAVE HEARD THE SUBMISSION OF THE LD. COMMISSIONER OF INCOME TAX-DEPARTMENTAL REPRESENTATIVE (CIT-DR) FOR REVENUE AND THE LD. AUTHORIZED REPRESENTATIVE (AR) FOR THE ASSESSEE AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THE LD. CIT-DR FOR THE REVENUE SUBMITTED THE ORDER OF THE ASSESSING OFFICER AND LD. CIT-DR FURTHER SUBMITTED THAT A HUGE CASH AMOUNT WAS SEIZED AT THE PREMISES OF THE ASSESSEE-FIRM BY LOCAL POLICE. THE LOCAL POLICE INFORMED THE INVESTIGATION AGENT OF THE DEPARTMENT. THE INVESTIGATION WING OF THE DEPARTMENT RECORDED THE STATEMENT OF THE PARTNER OF ASSESSEE. ONE OF THE PARTNERS OF THE ASSESSEE- FIRM IN HIS STATEMENT UNDER SECTION 131 OF THE ACT AND STATED THAT OUT OF TOTAL CASH OF RS. 53 LAKH, RS. 40 LAKH WAS WITHDRAWN FROM THE BANK ACCOUNT OF JOB WORKS PARTIES AND SAID AMOUNT OF RS.40 LAKH WAS FOUND IN THE POSSESSION OF THE ASSESSEE. FOR REMAINING 13 LAKH THE ASSESSEE SUBMITS THAT IT WAS WITHDRAWN FROM CURRENT ACCOUNT OF ASSESSEE-FIRM ACCOUNT DURING THE ASSESSMENT, THE ASSESSING OFFICER MADE DETAIL INVESTIGATION AND BROUGHT SUFFICIENT MATERIAL ON RECORD THAT OUT OF NINE JOB WORK PARTIES, THE EXPENSE WORKS OF SEVEN IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 14 PARTIES WERE ABSOLUTELY FICTITIOUS. THE ASSESSING OFFICER EXAMINED THE BANK ACCOUNT OF THE JOB WORKS PARTIES. NO DOUBT, THE AMOUNTS WERE PAID TO THE WORKERS BY CHEQUE. HOWEVER, THE AMOUNTS WERE IMMEDIATELY WITHDRAWN AFTER CLEARANCE OF CHEQUES. THE ASSESSING OFFICER HAS BROUGHT ON RECORD THAT THE AMOUNT WAS WITHDRAWN BY ACCOUNTANT OF THE ASSESSEE-FIRM FROM THE JOB WORKS PARTIES. THE ASSESSEE FAILED TO SUBSTANTIATE THAT THE EXPENSES WERE GENUINE. THE ASSESSING OFFICER AFTER DISCUSSING IN DETAILED DISALLOWED THE EXPENSE TO THE EXTENT OF RS.2.36 CRORE. THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 15% ONLY. THOUGH THE ASSESSING OFFICER IN A DETAILED DISCUSSION ON EXAMINED THE JOB WORK PARTIES AND CAME TO DEFINITE CONCLUSION THAT THE EXPENSE CLAIMED BY THE ASSESSEE WAS FICTITIOUS. LD. CIT-DR PRAYED FOR REVERSING THE ORDER OF LD. CIT(A) AND TO RESTORE THE ORDER OF ASSESSING OFFICER. 11. ON THE OTHER HAND, LD. AR FOR THE ASSESSEE SUBMITS THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT REJECTED BY ASSESSING OFFICER AND NO DEFECTS IN THE BOOKS OF ACCOUNTS WERE POINTED OUT BY ASSESSING OFFICER. THE ASSESSING OFFICER IS NOT EMPOWEREDTO DISALLOW THE GENUINE EXPENSE WITHOUT REJECTING IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 15 THE BOOKS OF ACCOUNT. THE PAYMENT OF LABOUR CHARGERS WERE MADE BY DEDUCTING TAX AT SOURCE (TDS) AND ENTIRE PAYMENTS WERE MADE THROUGH CHEQUES. THE ASSESSEE HAS DEBITED MORE THAN RS. 20 CRORE OF LABOUR EXPENSES. THE LABOUR EXPENSES, WHICH WERE DOUBTED BY THE ASSESSING OFFICER, WERE ONLY ABOUT 10% OF THE TOTAL LABOUR EXPENSE. THE ASSESSEE HAS SHOWN TAXABLE INCOME OF RS.6.10 CRORE. THE ASSESSEE HAS ALSO SHOWN BETTER GP AND NP WITH COMPARATIVE OTHER COMPARABLE BUSINESS HOUSES WHICH ARE IN THE SAME TRADE AND BUSINESS. THE LD. AR FOR THE ASSESSEE FURTHER SUBMITS THAT THE REVENUE HAS FILED APPEAL AGAINST THE SUSTAINING THE DISALLOWANCE TO THE EXTENT OF 15% OF SUCH LABOUR CHARGES JOB EXPENSES. 12. THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS ACCEPTED THE ORDER OF LD CIT(A) AND HAS PAID DUE TAX ON THE LIABILITY OF TAX ON THE 15% DISALLOWANCE OF LABOUR EXPENDITURE BY AVAILING THE BENEFITS OF VIVAD SE VISVAS SCHEME 2020. THE LD. AR FOR THE ASSESSEE FURTHER SUBMITS THAT APPEAL OF REVENUE IS LIABLE TO BE DISMISSED. TO SUPPORT HIS SUBMISSIONS THE LD. AR OF THE ASSESSEE RELIED UPON THE ORDER OF TRIBUNAL IN DCIT VS M/S MINAXI DIAMONDS IN ITA IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 16 NO.354/AHD/2017DATED 11.01.2021AND ASHWIN DIAMONDS VS. INCOME TAX OFFICER (SUPRA). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO DELIBERATED ON VARIOUS CASE LAWS REFERRED AND RELIED BY THE LD.AR OF THE ASSESSEE AS WELL AS BY LOWER AUTHORITIES AS NOTED ABOVE. DURING THE COURSE OF ASSESSMENT, ASSESSING OFFICER DOUBTED THE LABOUR EXPENSES OF NINE PARTIES, NAMES OF WHOM ARE MENTIONED IN PARA-3 (SUPRA). 14. THE ASSESSING OFFICER MADE THE THOROUGH INVESTIGATION AND EXAMINED THE JOB WORKS PARTIES AND RECORDED THEIR STATEMENT UNDER SECTION 131, THEIR MODUS OPERANDI OF WORKING, THEIR BANK STATEMENT, WITHDRAWAL OF AMOUNT IMMEDIATELY FORM THE BANK ON CLEARANCE OF CHEQUE. THE ASSESSING OFFICER ALSO EXAMINED THE WITHDRAWAL STATUS FROM THE BANKERS OF JOB WORKS PARTIES FIND THAT MOST OF THE CHEQUE AMOUNT WAS WITHDRAWN IMMEDIATELY AFTER THE CLEARANCE OF CHEQUE. MOST OF THE WITHDRAWAL WERE MADE BY SELF CHEQUE BY ACCOUNTANT OF ASSESSEE-FIRM NAMELY KHUSHAL. THE ASSESSING OFFICER HAS EXTRACTED THE COPY OF SEVERAL CHEQUES IN THE BODY OF IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 17 ASSESSMENT ORDER. THE ASSESSING OFFICER AFTER DETAILED DISCUSSION HELD THAT OUT OF NINE PARTIES EXCEPT TWO HIMMATBHAI AND DHIRUBHAI, ALL EXPENSES FOR REMAINING SEVEN JOB WORKS PARTIES ARE NOT GENUINE. THE ASSESSING OFFICER DISALLOWED THE ENTIRE (100%) OF JOB WORKS EXPENSES TO ALL SEVEN PARTIES BY TAKING VIEW THAT PAYMENTS TO SEVEN PARTIES REMAINED UNSUBSTANTIATED. AS NOTED ABOVE BEFORE THE LD. CIT(A), THE ASSESSEE FILED DETAILED WRITTEN SUBMISSION. THE LD. CIT (A) AFTER CONSIDERING THE DETAILED SUBMISSION OF THE GP & NP OF ASSESSEE-FIRM COMPARATIVE TO OTHER COMPARABLE COMPANIES IN THE SIMILAR BUSINESS AND TRADE AND RELYING UPON THE DECISION OF TRIBUNAL IN ASHWIN DIAMONDS VS INCOME TAX OFFICER (SUPRA) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 15% OF THE JOB WORKS PARTIES.THE LD CIT(A) WHILE RESTRICTING THE DISALLOWANCE TO THE EXTENT OF 15% OF TOTAL DISALLOWANCE OBSERVED THAT ALL THE PAYMENTS TO LABOUR JOB WORK WAS PAID THROUGH CHEQUES. THE ASSESSEE DEDUCTED TAX AT SOURCE WHILE MAKING PAYMENT TO THE JOB WORKS PARTIES. IT WAS ALSO HELD THAT THE ENTIRE CLAIMS ARE NOT VERIFIABLE. THE ROLE OF THE ACCOUNTANT WHO HAD ALLEGEDLY PREPARED BILLS OF THE JOB WORKERS AND IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 18 WITHDRAWN THE AMOUNT FROM THE ACCOUNTS OF THE JOB WORKERS WAS ALSO EXAMINED. THE LD CIT(A) FIND THAT SUCH BILLS ARE SIGNED BY THE JOB WORKERS WITHOUT VERIFYING THE DETAILS AND THE PAYMENTS WERE WITHDRAWN FROM THE BANK BY THE ACCOUNTANT. NONE OF THE WORKER COULD PRODUCE THE ORIGINAL OF THE BILLS. THE LD CIT(A) AFTER CONSIDERING THE DECISION OF TRIBUNAL IN ASHWIN DIAMONDS (SUPRA) HELD THAT IN THE SAID CASE THE TRIBUNAL RESTRICTED THE LABOUR AND OTHER EXPANSES TO THE EXTENT OF 10%. BUT KEEPING IN VIEW, THE BASIC DIFFERENCE IN FACTS OF THE PRESENT CASE THAT ORIGINAL OF JANGAD WAS NOT VERIFIABLE AS THE SAME WERE NOT PRODUCED AND SOME OF THE PAYMENTS FROM THE BANKERS OF THE JOB WORKERS WERE WITHDRAWN BY THE ACCOUNTANT OF THE ASSESSEE AND FOR COVERING SUCH DISCREPANCIES THE LD CIT(A) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 15% OF THE TOTAL DISALLOWANCE OF LABOUR EXPENSES TO MEET THE END OF JUSTICE. 15. WE FIND THAT THE GP AND NP RATIO OF THE ASSESSEE IS BETTER COMPARATIVE TO OTHER SIMILAR BUSINESS HOUSES. IN AY 2012-13, THE ASSESSEE HAS SHOWN NP @ 4.27%, HOWEVER, THUMAR GEMS HAS SHOWN NP @ 2.12 %, JODHANI EXPORT @ 3.46% AND K.N. IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 19 DIAMOND @ 3.22%. THEREFORE, CONSIDERING THE AFORESAID FACTUAL AND LEGAL DISCUSSIONS, WE ARE ALSO OF THE VIEW THAT 15% DISALLOWANCE IS REASONABLE TO AVOID THE POSSIBILITY OF REVENUE LEAKAGE. HENCE, WE AFFIRM THE ORDER OF LD CIT(A). RESULTANTLY, THE GROUNDS OF GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE REVENUE FOR AY 2011-12 IS DISMISSED. ITA N. 12/AHD/2016 FOR AY 2012-13 BY REVENUE . 17. AS NOTED EARLIER THE REVENUE HAS RAISED IDENTICAL GROUNDS OF APPEAL AS RAISED IN APPEAL FOR AY 2011-12, WHICH WE HAVE DISMISSED, THEREFORE, FOLLOWING THE PRINCIPLES OF CONSISTENCE THE APPEAL FOR AY 2012-13 IS ALSO DISMISSED WITH SIMILAR OBSERVATION. 18. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 26 TH JULY BY PLACING THE RESULT ON THE NOTICE BOARD. SD/- SD/- (DR ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER SURAT, DATED: 26/07/2021 DKP. SR.P.S. O.S IT(SS)A NO.10/AHD/2016 & ITA NO.12/AHD/2016 M/S RIJIYA BROTHERS(AY 2011-12 & 2012-13) 20 COPY TO: 1. APPELLANT- DCIT, CC-1, R.NO.505, 5 TH FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT 2. RESPONDENT-M/S RIJIYA BORTHERS, 2320/21 NISHAL FALIA, GOTALAWADI, KATARGAM, SURAT 3. CIT(A)-SURAT 4. CIT 5. DR 6. GUARD FILE TRUE COPY/ BY ORDER ASSISTANT REGISTRAR, ITAT, SURAT