The ITO, Ward-3,, Navsari v. Shri Manishbhai Nitinbhai Mehta, Navsari

ITA 2390/AHD/2009 | 2006-2007
Pronouncement Date: 25-02-2011 | Result: Dismissed

Appeal Details

RSA Number 239020514 RSA 2009
Assessee PAN ABIPM2339K
Bench Ahmedabad
Appeal Number ITA 2390/AHD/2009
Duration Of Justice 1 year(s) 6 month(s) 12 day(s)
Appellant The ITO, Ward-3,, Navsari
Respondent Shri Manishbhai Nitinbhai Mehta, Navsari
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 25-02-2011
Date Of Final Hearing 24-02-2011
Next Hearing Date 24-02-2011
Assessment Year 2006-2007
Appeal Filed On 12-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. N. PAHUJA AM) ITA NO.2390/AHD/2009 A. Y: 2006-07 THE INCOME TAX OFFICER WARD-3 NAVSARI VS MANISHBHAI NITINBHAI MEHTA 505/B CITY SQUARE LUNSIKUI NAVSARI PA NO. ABIPM 2339 K (APPELLANT) (RESPONDENT) APPELLANT BY SHRI R. K. DHANISTA SR. DR RESPONDENT BY SMT. URVASHI SODHAN AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A) V ALSAD DATED 29 TH MAY 2009 FOR ASSESSMENT YEAR 2006-07 CHALLENGING THE DELETION OF ADDITION OF RS.27 10 017/- MADE ON ACCOUNT OF LABOU R PAYMENT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE AO CALLED FOR VARIOUS I NFORMATION OF LABOUR EXPENSES PAID AND RECORDED STATEMENT ON OATH OF THE UNDER MENTIONED THREE LABOUR CONTRACTORS TO WHOM LABOUR C HARGES OF RS.27 10 017/- WERE PAID. A) DALSAJI V. PUROHIT RS. 8 68 592/- B) RAJUBHAI D. MEHTA RS. 9 87.648/- C) NISHABEN N. MEHTA RS. 8 53 777/- RS.27 10 017/- ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 2 THE AO OBSERVED THAT THE STATEMENTS OF THE ABOVE LA BOUR CONTRACTORS WERE CONTRADICTORY AND TWO LABOUR CONTRACTORS WERE NOT MAINTAINING BOOKS OF ACCOUNTS AND THEREFORE THE TRANSACTIONS S TATED TO BE MADE WITH THEM COULD NOT BE BELIEVED TO BE GENUINE. THE AO ALSO OBSERVED FROM THEIR BANK ACCOUNTS THAT THE LABOUR PAYMENTS R ECEIVED BY THEM WERE WITHDRAWN ON THE SAME DAY WHICH WAS STATED TO BE USED FOR PAYMENT TO KARIGARS BUT NO EVIDENCES IN THIS REGARD COULD BE PRODUCED BY THEM. HE ALSO OBSERVED THAT SHRI RAJUBH AI MEHTA HAD STATED TO HAVE CHARGED RS.150/- PER CARAT WHERE LAB OUR CHARGES COULD BE RS. 3 35 490/- WHEREAS THE LABOUR PAYMENT OF RS.9 87 648/- SHOWN BY HIM. IN RESPECT OF OTHER 10 PERSONS TO WHO M LETTERS WERE SENT U/S 133 (6) OF THE IT ACT THE AO OBSERVED THA T THE LETTERS WERE RETURNED BACK WITH THE REMARK NOT KNOWN. THEREFOR E THE AO HELD THAT THE ASSESSEE HAD SIPHONED OFF THE LABOUR PAYME NT AND THE LABOUR PAYMENTS MADE TO THESE PARTIES WERE BOGUS LA BOUR PAYMENTS AND ACCORDINGLY HE DISALLOWED RS.27 79 091/-. 3. THE ADDITION WAS CHALLENGED BEFORE THE LEARNED C IT(A) AND THE ASSESSEE PUT VARIOUS ARGUMENTS AND FILED DETAILED S UBMISSIONS WHICH IS SUMMARIZED BY THE LEARNED CIT(A) AND INCORPORATE D IN THE APPELLATE ORDER AS UNDER: A. THE APPELLANT HAD GENUINELY CARRIED OUT THE BUSINESS OF DIAMOND POLISHING WORK AND HAD ASSIGNED THE JOBWORK TO DIFFERENT LABOUR CONTRACTORS. IN THE STA TEMENT RECORDED OF DIFFERENT PARTIES THEY HAD ACCEPTED TO HAVE CARRIED OUT JOBWORK AND HAVE RECEIVED THE JOBWORK CHARGES FROM THE APPELLANT. THEY EMPHASIZED ON UNDE R MENTIONED REPLIES OF DIFFERENT LABOUR CONTRACTORS W HOSE STATEMENTS WERE RECORDED ON OATH. ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 3 STATEMENT OF SHRI RAJUBHAI D. MEHTA ANS. 10 I HAVE NOT DONE ANY OTHER WORK OTHER THAN THAT OF SHRI MANISHBHAI. DURING THE F.Y. 2005-06 A LABO UR WORK OF SHRI MANISHBHAI AMOUNTING TO ABOUT RS. 9.00 LACS TO RS. 9.50 LACS WAS DONE AND THE PAYMENT THEREOF H AD BEEN MADE BY CHEQUES. ANS. 11 WHATEVER AMOUNT I HAD RECEIVED WAS BY CHEQUES ONLY WHICH WERE DEPOSITED IN MY BANK ACCOUN T AND THE SAID DEPOSITED AMOUNT WAS TOWARDS LABOUR CHARGES RECEIVED BY ME WHICH WAS GIVEN TO ME BY SHR I MANISHBHAI. ANS. 13 OUT OF THE AMOUNT DEPOSITED IN MY BANK ACCOUNT NO. CA 366 I HAD MADE CASH WITHDRAWALS ON THE SAME DAY AND OUT OF THAT I HAD PAID KARIGAR MAJOORI AND MACHINERY REPAIRING EXPENSES AS WELL AS POWER BILL AND FACTORY RENT. STATEMENT OF DALSAJI V. PUROHIT ANS. 8. DURING F. Y. 2005-06 I HAD DONE LABOUR W ORK OF SHRI MANISHBHAI AMOUNTING TO ABOUT RS. 8 LACS TO RS. 8.5 LACS AND THE TOTAL PAYMENTS RECEIVED FROM HIM W ERE BY CHEQUES ONLY. ANS. 9. I HAVE RECEIVED THE PAYMENTS OF DIAMOND LABOUR WORK DONE FOR SHRI MANISHBHAI NILINBHAI MEHT A. ANS. 11 OUT OF THIS AMOUNT I HAD INCURRED EXPENSES TOWARDS KARIGAR MAJOORI FACTORY POWER BILL FACTOR Y RENT AND MISCELLANEOUS ITEMS LIKE DIE POWDER KATORI ET C. STATEMENT OF SMT. NISHABEN N. MEHTA ANS. 6 YES I HAD BUSINESS RELATIONS WITH SHRI MANISHBHAI SINCE 1999 - 2000 UPTO 2006. THEREAFTER I AM NOT DOING ANY BUSINESS ACTIVITIES. I USED TO OBT AIN ROUGH DIAMONDS FROM HIM AND GIVE BACK POLISHED DIAMONDS AFTER GETTING IT DONE. ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 4 ANS. 7 MY FACTORY WAS AT JALARAM SOCIETY. VIJALPOR E NAVSARI AND I DO NOT REMEMBER ITS NUMBER NOW. THE S AID FACTORY PREMISES AND MACHINERIES WERE TAKEN ON LEAS E FROM SHRI MANISHBHAI AND I USED TO PAY FACTORY RENT AND MACHINERY RENT AT RS. 5 500/- PER MONTH AND- THE PO WER BILL WAS PAID BY ME. THERE WERE ABOUT 25 TO 30 KAR IGARS IN MY FACTORY WHO WERE MANAGED BY MANAGER SHRI SAJA JI PUROHIT WHO WAS ORIGINALLY FROM PALANPUR AND WAS RESIDING AT SHANTADEVI ROAD AND HIS PRESENT ADDRES S IS NOT KNOWN TO ME. THE MANAGERIAL REMUNERATION WAS PA ID AT RS. 7000/- PER MONTH. IN MY FACTORY THERE WERE 5 LATH MACHINES AND 5 TO 6 DIAMOND POLISHING MACHINES. ANS. 11 I HAD DONE LABOUR WORK OF ABOUT RS. 8 LACS DURING F. Y. 2005-06 AND THE PAYMENT THEREOF WAS RECEIVED BY ME BY CHEQUES. ANS. 12 THE AMOUNT DEPOSITED ON DIFFERENT DATES IN MY BANK ACCOUNT NO. CA 395 WAS RECEIVED BY ME BY CHEQUES FROM MANISHBHAI MEHTA WHICH WAS WITHDRAWN O N RESPECTIVE DATE FOR PAYMENT TO KARIGARS AND FOR INC URRING OTHER MAINTENANCE EXPENSES. THE ARS ARGUED THAT THE LABOUR CONTRACTORS HAVE ACCEPTED THE BASIC FACT OF JOBWORK CARRIED OUT BY T HEM AND ALSO ACCEPTED THE FACT OF PAYMENTS RECEIVED BY THEM BY CHEQUES AND ALSO EXPLAINED THE USE OF CASH WITHDRAWALS FROM THEIR BANK ACCOUNT. THE ARS ALSO ARGUED THAT THE AO FAILED TO PROVIDE OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE THESE PERSONS AND THEREF ORE HE HAD NO RIGHT TO DRAW ANY ADVERSE INFERENCE FROM THE STATEMENTS OF THESE PARTIES AND TO TREAT THE WHOLE TRANSACTIONS AS BOGUS. B. THE ARS FURTHER ARGUED THAT THE APPELLAN T HAD ASSIGNED JOBWORK TO DIFFERENT LABOUR CONTRACTORS AN D HE WAS NOT CONCERNED WITH BOOKS OF ACCOUNTS AND FINANC IAL AFFAIRS OF THE SAID PERSONS AND HE HAD DEDUCTED TAX AT SOURCE FROM THE SAID PARTIES AND HE HAD NOTHING TO DO ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 5 WITH THE FACT AS TO WHETHER THE SAID PARTIES WERE F ILING THEIR RETURNS OF INCOME OR NOT. C. THE ARS STATED THAT THE APPELLANT HAD SH OWN CONSISTENT GROSS PROFIT AND NET PROFIT MARGIN OVER A PERIOD OF LAST FEW YEARS AS UNDER ;- ASSESSMENT YEAR GROSS PROFIT RATIO (%) NET PROFIT RATIO (%) 2006-07 9.73 4.88 2005-06 9.61 3.92 2004-05 6.75 2.77 2003-04 5.85 2.80 2002-03 7.01 3.40 THEY STATED THAT THE APPELLANT'S PERFORMANCE HAD IMPROVED IN LAST TWO YEARS AND THEREFORE THERE WAS NO REASON TO DOUBT THE PAYMENT OF LABOUR EXPENSES. THE Y FURTHER POINTED OUT THAT THE TOTAL LABOUR PAYMENT W AS 43 73 934/- WHICH WAS 82.59% OF TOTAL LABOUR INCOME AND IF THE AO'S ARGUMENT IS ACCEPTED THEN THE TOTAL LA BOUR PAYMENT WOULD BE RS. 15 94 843/- ONLY WHICH WAS JUS T 30% OF LABOUR INCOME WHICH WAS HIGHLY IMPOSSIBLE IN THIS LINE OF BUSINESS. THEY FURTHER STATED THAT IF THE L ABOUR PAYMENT OF RS. 27 79 091/- WOULD BE TREATED AS NOT GENUINE THEN THE GROSS PROFIT MARGIN WOULD COME TO ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 6 62.21% WHICH WOULD BE HIGHLY IMPROBABLE TO EARN BY ANY PERSON . D. THE ARS FURTHER ARGUED THAT WHEN TAX WAS DEDUCTE D AT SOURCE FROM PAYMENT TO LABOUR CONTRACTORS THERE WAS NO DOUBT ABOUT THE GENUINENESS OF EXPENSES. E. ALL PAYMENTS WERE MADE BY CHEQUES AND THE AO HAD NO MATERIAL ON RECORD OR NO EVIDENCE TO INDICAT E THAT ANY PART OF THE FUND GIVEN TO THE LABOUR CONTRACTOR S CAME BACK TO THE APPELLANT IN CASH OR IN ANY OTHER FORM AND THE LABOUR CONTRACTORS HAD CATEGORICALLY ADMITTED TO HA VE RECEIVED PAYMENTS AND NONE OF THEM HAVE ADMITTED TO HAVE GIVEN BACK THE CASH AMOUNT TO THE APPELLANT. T HEY RELIED ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. M.K. BROTHERS [163 ITR 249]. F. REGARDING DISALLOWANCE OF RS. 69 074/- BEING PAYMENT TO DIFFERENT 10 LABOUR CONTRACTORS TO WHOM LETTERS U/S. 133(6) WERE WRITTEN THEY STATED THAT THEY WER E TEMPORARY KARIGARS AND THEY MIGHT HAVE MIGRATED DUE TO RECENT RECESSION IN THE MARKET AND MOST OF THE PAYM ENTS TO THESE PERSONS WERE BELOW RS 10 000/- IN TOTAL. 4.3 THE WRITTEN SUBMISSION OF THE APPELLANT WAS FORWARDED TO THE AO FOR HIS COMMENTS AND REMAND REPORT AND THE AO HAD SUBMITTED HIS REMAND REPORT WHEREIN HE AGAIN EMPHASIZED ON VARIOUS REPLIES GIVE N BY THE LABOUR CONTRACTORS IN THEIR STATEMENT RECORDED ON OATH AND STATED THAT THE SAID LABOUR CONTRACTORS HAD NOT PRODUCED ANY DETAILS OF EXPENSES INCURRED BY THEM AND HAD ALSO NOT PRODUCED JANGAD RECEIPTS. THE ARS REPL IED ON THE AO'S COMMENT THAT THE AO COULD NOT REBUT THE BASIC FACTS OF ADMISSION BY ALL THREE LABOUR CONTRA CTORS THAT THEY HAD CARRIED OUT JOBWOR OF DIAMOND POLISHI NG WORK OF THE APPELLANT AND THE PAYMENTS WERE RECEIVE D BY CHEQUES BY THEM FROM THE APPELLANT AFTER DEDUCTION OF TAX AT SOURCE AND THEY HAD WITHDRAWN MONEY OUT OF THE S AID PAYMENT FOR INCURRING VARIOUS EXPENSES. THEREFORE THE ARS SUBMITTED THAT THE APPELLANT HAD DULY DISCHARGE D HIS ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 7 BURDEN OF ESTABLISHING THE GENUINENESS OF ASSIGNMEN T OF LABOUR JOBWORK AND PAYMENTS MADE TO THEM AND THE APPELLANT WAS NEVER ASKED TO PRODUCE JANGAD RECEIPT S DURING ASSESSMENT PROCEEDINGS. THEY CONTENDED THAT NONE OF THE LABOUR CONTRACTORS HAD ADMITTED IN THEI R STATEMENT THAT THE CASH WAS GIVEN BACK TO THE APPEL LANT AND THEREFORE THERE WERE NO MATERIAL EVIDENCE TO ESTABLISH THAT THE EXPENSES WERE NOT GENUINE. 4. THE LEARNED CIT(A) CONSIDERING THE FACTS AND MAT ERIALS ON RECORD DELETED THE ADDITION. HIS FINDINGS IN PARA 4 .4 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER: 4.4 I HAVE CONSIDERED THE ASSESSMENT ORDER AS WELL AS THE SUBMISSION MADE BY THE ARS AND ALSO GONE THROUG H THE STATEMENTS OF DIFFERENT PARTIES RECORDED ON OAT H. IT IS OBSERVED FROM VARIOUS REPLIES OF DIFFERENT LABOUR CONTRACTORS THAT THEY HAVE CATEGORICALLY ADMITTED T O HAVE RECEIVED THE LABOUR INCOME FROM THE APPELLANT FOR J OBWORK CARRIED OUT BY THEM AND THEY HAVE ALSO STATED THAT THEY HAD DONE JOBWORK TO THE TUNE OF ABOUT RS. 8 TO RS. 9.50 LACS. WHILE GIVING STATEMENT NONE OF THEM HAVE ACC EPTED THAT THE INCOME RECEIVED WAS GIVEN BACK IN FORM OF CASH TO THE APPELLANT AND THEY HAVE ALSO EXPLAINED ABOUT THE SPENDING OF THEIR CASH WITHDRAWALS. ONE SMT. NISHAB EN MEHTA HAD STATED TO HAVE MADE PAYMENT FOR FACTORY R ENT AND MACHINERY RENT TO THE APPELLANT AT RS. 5 500/= FOR WHICH IT IS OBSERVED FROM THE ASSESSMENT ORDER THAT THE AO HAS MADE A SEPARATE ADDITION OF RS. 66 000/- WHI CH MEANS THAT THE AO HAS ACCEPTED THAT THE SAID RENT M UST HAVE BEEN PAID BY HER TO THE APPELLANT MEANING THER EBY THE ADMISSION OF FACT OF BUSINESS CARRIED OUT BY HE R. ALL THESE LABOUR CONTRACTORS HAD ALSO MENTIONED THEIR B ANK ACCOUNTS WHEREIN THE PAYMENTS WERE DEPOSITED BY THE M. THEY HAD ALSO STATED THE APPROXIMATE VALUE OF JOBWO RK DONE BY THEM WHICH WAS VERY NEAR TO THE EXPENSES SHOWN BY THE APPELLANT. IT IS OBVIOUS THAT WHILE GI VING STATEMENT THEY MIGHT NOT BE POSSESSED OF THE EXACT AND ACTUAL DATA WITH THEM HOWEVER THE SPONTANEOUS REPL Y OF ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 8 APPROXIMATE VALUE STATED BY THEM HAS ITS OWN SIGNIFICANCE. IN THE REMAND REPORT ALSO THE AO COULD NOT REBUT T HE CONTENTION OF THE APPELLANT THAT ALL THE LABOUR CON TRACTORS HAD ADMITTED TO HAVE CARRIED OUT JOBWORK AND RECEIV ED PAYMENT FOR LABOUR CHARGES. THEREFORE NO ADVERSE INFERENCE CAN BE DRAWN FROM THEIR STATEMENTS PARTIC ULARLY WHEN THEY HAD ADMITTED TO HAVE RECEIVED PAYMENTS TOWARDS LABOUR CHARGES AND TWO OF THEM WERE ASSESSE D TO TAX. THE APPELLANT CANNOT BE EXPECTED TO HAVE SP ECIAL KNOWLEDGE ABOUT THE FINANCIAL AFFAIRS OF HIS LABOUR CONTRACTORS AND WHEN HE HAD DEDUCTED TAX AT SOURCE THERE WAS NO REASON FOR HIM TO DOUBT THE FINANCIAL AFFAIRS OF HIS LABOUR CONTRACTORS. NOW CORNING TO THE OTHER CONTENTION OF THE APPELLAN T IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE AO HAS NOT DOUBTED THE BUSINESS ACTIVITIES OF THE APPELLANT. T HE AO HAS ACCEPTED THAT THE APPELLANT HAD EARNED JOBWORK INCOME TO THE TUNE OF RS. 52 95 773/-. WHEN THE BUS INESS ACTIVITY WAS ACCEPTED OBVIOUSLY THE APPELLANT MUST HAVE INCURRED VARIOUS BUSINESS RELATED EXPENSES. AS THE APPELLANT HAD ASSIGNED DIAMOND POLISHING JOBWORK TO DIFFERENT PARTIES AS SUB CONTRACTORS HE MUST HAVE INCURRED EXPENSES TOWARDS LABOUR CHARGES. FROM THE SUBMISSION IT IS SEEN THAT THE APPELLANT HAD EARNED GROSS PROFIT MARGIN OF 9.73% WHICH WAS BETTER THAN THE MA RGIN EARNED DURING EARLIER YEARS. SIMILARLY THE PERFORM ANCE OF NET PROFIT SHOWED 4.88% WHICH WAS MORE THAN HIS EAR LIER YEAR'S PERFORMANCE. THE APPELLANT HAD RECEIVED A CONTRACT OF DIAMOND POLISHING WORK WHERE HE RECEIVE D ROUGH DIAMONDS FOR POLISHING WORK AND FOR THAT HE H AD EARNED LABOUR INCOME OF RS. 52.95 LACS. IT IS OBVIO US THAT HE MUST HAVE SPENT SUBSTANTIAL AMOUNT TOWARDS LABOU R EXPENSES AND ACCORDING TO THE APPELLANT THE TOTAL L ABOUR CHARGES PAID WAS RS. 43 79 934/-WHICH CAME TO 82.59 % OF LABOUR INCOME. I FOUND FORCE IN THE CONTENTION O F THE ARS THAT IF THE TOTAL AMOUNT OF RS. 27 79 091/- IS TREATED AS BOGUS LABOUR EXPENSES NOT INCURRED BY THE APPELL ANT ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 9 THEN THE TOTAL LABOUR COST WOULD COME TO RS. 15 94 843/- ONLY WHICH WOULD BE JUST 30% OF TOTAL LABOUR INCOME RECEIVED AND THAT WOULD RESULT INTO A DISTORTED GRO SS PROFIT MARGIN OF 62 21% WHICH IS HIGHLY IMPROBABLE AND IMPOSSIBLE TO EARN IN DIAMOND POLISHING LABOUR WORK . THEREFORE LOGICALLY IT IS QUITE CLEAR THAT THERE I S NO JUSTIFICATION IN THE ACTION OF THE AO TO TREAT SUCH A HUGE PORTION OF LABOUR EXPENSES AS BOGUS EXPENDITURE PARTICULARLY WHEN THE AO HAS ON ONE HAND ACCEPTED T HE LABOUR INCOME SHOWN BY THE APPELLANT. CONSIDERING A LL THESE FACTS AND IN ABSENCE OF ANY ADVERSE EVIDENCES IT APPEARS THAT THE AO ACTED ON PRESUMPTION AND GUESSWORK. THEREFORE I AM OF THE OPINION THAT THE ACTION OF THE AO TO DISALLOW THE LABOUR EXPENSES OF RS. 27 10 017/- PAID TO DALSAJI V. PUROHIT RAJUBHAI ME HTA AND SMT. NISHABEN MEHTA IS NOT JUSTIFIABLE AND ACCORDINGLY I DIRECT THE AO TO DELETE THE ADDITION OF RS.27 10 017/-. 5. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND ALSO REFERRED TO PB-18 WHICH IS REMAND REPORT FILED BEFO RE THE LEARNED CIT(A) AT THE APPELLATE STAGE AND POINTED OUT THAT THE ASSESSEE ISSUED JANGAD RECEIPTS OF ROUGH DIAMOND (RECEIPTS I SSUED TO THE LABOURERS FOR DOING THE WORK) BUT THE SAME WAS NOT PRODUCED BEFORE THE AO. THE LEARNED DR SUBMITTED THAT IT IS THE BE ST EVIDENCE TO PROVE THAT DIAMONDS WERE GIVEN TO THE LABOURERS FOR POLISHING ETC. AGAINST WHICH PAYMENT HAVE BEEN MADE. HOWEVER THE ASSESSEE FAILED TO PRODUCE SUCH RECEIPTS BEFORE THE AO AND A S SUCH GENUINENESS OF THE LABOUR PAYMENT IS NOT PROVED. TH E ONUS UPON THE ASSESSEE IS THUS NOT DISCHARGED. THE LEARNED DR SUB MITTED THAT NO BOOKS ARE MAINTAINED BY THE LABOURERS AND NO DETAIL S OF JOB WORK DONE BY THEM HAVE BEEN FILED. HE HAS RELIED UPON TH E ORDER OF ITAT AHMEDABAD B BENCH IN THE CASE OF MARADIA COPPER E XTRUSION PVT. ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 10 LTD. IN ITA NO.4097/AHD/1995 DATED 30-10-2010 WITH REGARD TO BOGUS PURCHASES. 6. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND SUBMITTED THAT ALL THE LABOUR CONTRACTORS WERE EXAM INED BY THE AO WHO HAVE ADMITTED DOING JOB WORK FOR THE ASSESSEE A ND RECEIPT OF PAYMENTS FROM THE ASSESSEE THROUGH BANKING CHANNEL. THEY HAVE ADMITTED RENDERING SERVICES FOR THE ASSESSEE. THE A CCOUNTS OF THE ASSESSEE ARE AUDITED. NO DEFECTS IN THE SAME HAVE B EEN FOUND. THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED. THE ASSESS EE DEDUCTED TDS ON THE PAYMENTS MADE TO THE LABOUR CONTRACTORS AND THAT GP RATE OF THE ASSESSEE IS HIGHER AS COMPARED TO THE E ARLIER YEARS. THE LEARNED COUNSEL FOR THE ASSESSEE CATEGORICALLY STAT ED THAT THE AO NEVER ASKED TO PRODUCE THE JANGAD RECEIPTS OF ROUGH DIAMONDS AT THE ASSESSMENT STAGE. NO EVIDENCE HAS BEEN BROUGHT ON RECORD THAT MONEY HAS COME BACK TO THE ASSESSEE WHICH WAS PAID THROUGH BANKING CHANNEL TO THE LABOUR CONTRACTORS. THE LEAR NED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF ITAT AHMEDABA D BENCH IN THE CASE OF DCIT VS M/S. BAHUBALI PRINTS PVT. LTD. IN I TA NO.2705/AHD/2008 DATED 24-09-2010 IN WHICH ON IDENT ICAL FACTS THE DEPARTMENTAL APPEAL HAS BEEN DISMISSED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD. WE FIND THAT LABOUR CONTRACTO RS HAVE ADMITTED TO HAVE RECEIVED THE LABOUR PAYMENT FROM THE ASSESSEE FOR DOING THE JOB WORK CARRIED BY THEM FOR THE ASSESSEES BUSINES S. THEY HAVE ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 11 RECEIVED THE PAYMENT THROUGH BANKING CHANNEL ON WHI CH TDS HAS ALSO BEEN DEDUCTED. NONE OF THE LABOUR CONTRACTORS HAVE ACCEPTED THAT THE AMOUNT RECEIVED BY THEM WAS GIVEN BACK TO THE ASSESSEE. ONE OF THE LABOUR CONTRACTORS HAS ALSO STATED TO HA VE MADE PAYMENT FOR FACTORY RENT AND MACHINERY RENT TO THE ASSESSEE WHICH MEANS THAT THE LABOUR CONTRACTORS RENDERED SERVICES FOR THE BU SINESS OF THE ASSESSEE. ALL THE PAYMENTS ARE RECEIVED BY THEM THR OUGH BANKING CHANNEL; COMPLETE DETAILS OF THE WORK DONE BY THEM HAVE BEEN BROUGHT ON RECORD. IN THE REMAND REPORT ALSO THE C ONTENTION OF THE ASSESSEE AND THE MATERIAL ON RECORD HAVE NOT BEEN D ISPUTED BY THE AO. HOWEVER THE LEARNED DR REFERRED TO THE REMAND REPORT OF THE AO TO POINT OUT THAT JANGAD RECEIPT WAS NOT PRODUCED A T THE ASSESSMENT STAGE. HOWEVER WE FIND MERIT IN THE CONTENTION OF THE LEA RNED COUNSEL FOR ASSESSEE THAT NO SUCH RECEIPT WAS ASKED FOR BY THE AO AT THE ASSESSMENT STAGE BECAUSE THE ASSESSMENT ORDER IS SI LENT WITH REGARD TO SUCH REQUIREMENT. THE GP RATE OF THE ASSESSEE IS HIGHER IN THE ASSESSMENT YEAR UNDER APPEAL AS COMPARED TO THE EAR LIER YEARS AS NOTED ABOVE IN THIS ORDER. THE BUSINESS OF THE ASSE SSEE HAS NOT BEEN DOUBTED. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DIAMOND CUTTING/POLISHING AND FOR THAT THE ASSESSEE HAS TO OBTAIN SERVICES OF THE LABOUR CONTRACTORS. THESE FACTS WOULD SHOW THAT THE LEARNED CIT(A) ON PROPER APPRECIATION OF FACTS AND MATERIAL EVIDENCE ON RECORD HAS RIGHTLY DELETED THE ADDITION. ITAT AHMED ABAD BENCH IN THE CASE OF M/S. BAHUBALI PRINTS PVT. LTD. (SUPRA) CONSIDERING THE IDENTICAL ISSUE DISMISSED THE DEPARTMENTAL APPEAL. THE FINDINGS GIVEN IN THAT ORDER IN PARA 6 ARE REPRODUCED AS UNDER: ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 12 6. ON CONSIDERATION OF THE ABOVE FACTS AND SUBMISSIONS OF THE PARTIES IN THE LIGHT OF THE FIND INGS OF THE LEARNED CIT(A) WE DO NOT FIND IT TO BE A CASE FOR INTERFERENCE. THE ASSESSEE PRODUCES ONE OF THE SUB CONTRACTORS BEFORE THE AO FOR EXAMINATION ON OATH A ND HE HAS IN HIS STATEMENT SUPPORTED THE CASE OF THE ASSE SSEE THAT THE SUB CONTRACTOR DID WORK FOR THE ASSESSEE A ND RECEIVED PAYMENTS BY ACCOUNT PAYEE CHEQUES WHICH WERE DEPOSITED IN HIS ACCOUNT. THE OTHER SUB CONTRA CTOR HAS EXPIRED WHO WAS REAL BROTHER OF THE OTHER SUB CONTRACTOR WHOSE STATEMENT WAS RECORDED BY THE AO. THE AO DID NOT INSIST FOR PRODUCTION OF HIS WIFE BEING LEGAL HEIR. THE ASSESSEE THEREFORE PROVED ON RECORD THA T THE SUB CONTRACTORS HAD DONE WORK FOR THE BUSINESS OF T HE ASSESSEE AND HAVE RECEIVED PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES ON WHICH TDS HAVE BEEN DEDUCTED. PAYMENTS ARE VERIFIABLE FROM THE BANK ACCOUNTS OF T HE SUB CONTRACTORS. IT WOULD SHOW THAT BOTH THE SUB CONTRACTORS WERE ASSESSED TO TAX AND HAVE ACKNOWLED GED RECEIPT OF THE PAYMENTS FROM THE ASSESSEE. THE AO H AS NOT BROUGHT ANY EVIDENCE ON RECORD THAT THE BILLS R AISED BY THE SUB CONTRACTORS WERE FALSE OR BOGUS. THE GROSS PROFIT RATE IS BETTER AS COMPARED TO THE PRECEDING ASSESSM ENT YEARS. THEREFORE THERE WAS NO REASON FOR THE ASSES SEE TO INFLATE EXPENSES. MERELY BECAUSE THE SUB CONTRACTOR HAS GIVEN ADDRESS OF THE ASSESSEE IN HIS RETURN OF INCO ME WITHOUT KNOWLEDGE OF THE ASSESSEE IS NO GROUND TO T AKE ADVERSE INFERENCE AGAINST THE ASSESSEE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE NOTED ABOVE WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. TH E LEARNED DR COULD NOT POINT OUT ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY WE CONFIRM THE FIN DINGS OF THE LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. THE ISSUE IS THEREFORE COVERED IN FAVOUR OF THE A SSESSEE. THE LEARNED DR RELIED UPON ANOTHER DECISION OF ITAT AHM EDABAD BENCH IN THE CASE OF MARADIA COPPER EXTRUSION PVT. LTD. ( SUPRA) IN WHICH THE ITA NO.2390/AHD/2009 ITO WARD-3 NAVSARI VS MANISHBHAI NINITNBHAI MEHTA 13 ISSUE WAS OF BOGUS PURCHASES AND AS SUCH WOULD NOT SUPPORT THE CONTENTION OF THE LEARNED DR. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE LEARNED CIT(A) IN ALLOWING THE APPEAL OF THE AS SESSEE. THERE IS NO MERIT IN THE DEPARTMENTAL APPEAL. THE SAME IS AC CORDINGLY DISMISSED. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 25-02-2011. SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 25-02-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR ITAT AHMEDABAD