The ACIT, Circle-5,, Surat v. M/s. J.B. Brothers, Surat

ITA 2546/AHD/2008 | 2005-2006
Pronouncement Date: 13-01-2011 | Result: Dismissed

Appeal Details

RSA Number 254620514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 2546/AHD/2008
Duration Of Justice 2 year(s) 6 month(s) 4 day(s)
Appellant The ACIT, Circle-5,, Surat
Respondent M/s. J.B. Brothers, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 13-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 13-01-2011
Date Of Final Hearing 23-12-2010
Next Hearing Date 23-12-2010
Assessment Year 2005-2006
Appeal Filed On 09-07-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.2546/AHD/2008 & C.O. NO.219/AHD/2008 ASSESSMENT YEAR: 2005-06 DATE OF HEARING:23.12.10 DRAFTED:3.1.11 ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE-5 ROOM NO.309 3 RD FLOOR AAYAKAR BHAVAN MAJURA GATE SURAT J.B. & BROTHERS 2 ND FLOOR AMBER PALACE OPP. LIC QUARTERS TIMALIAWAD NANPURA SURAT PAN NO.AABFJ8700D V/S . V/S . M/S. J.B. BROTHERS AMBER PALACE NANPURA TIMALIWAD SURAT ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE-5 AAYKAR BHAVAN MAJURA GATE SURAT (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI K.K. SHAH AR REVENUE BY:- SHRI K.MADHUSUDAN SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY REVENUE AND CROSS OBJECTION (CO) BY ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME- TAX (APPEALS)-III SURAT APPEAL NO CAS-III/278/07-08 DATED 08-05-2008. THE ASSESSMENT WAS FRAMED BY ACIT CIRCLE-5 SURAT U/S143(3) OF THE INCOME TA X ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 12-0 3-2008 FOR ASSESSMENT YEAR 2005-06. I TA NO.2546/AHD/2008 & CO 219/AHD/08 A.Y 2005-06 ACIT CIR-5 SRT V. M/S. JB BROTHER PAGE 2 2. THE FIRST COMMON ISSUE IN APPEAL OF REVENUE AND ASSESSEES CO IS AGAINST THE ORDER OF CIT(A) IN RESTRICTING THE ADDI TION MADE BY ASSESSING OFFICER ON ACCOUNT OF SAWING LABOUR EXPENSES POST AGE ANGADIA EXPENSES AND FACTORY EXPENSES. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A)-III SURAT HAS ERRED IN RESTRICTING THE ADDITION OF RS.8 25 483/- TO RS.1 00 000/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF SAWING LABOUR EXPENSES POSTAGE AND ANGADIA EXPENSES AND F ACTORY EXPENSES. AND ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1 IN CO AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ADDITION ON ACCOUNT OF SHOWING LABOUR EXPENSES POSTAGE AND ANGADIA EXPENSES AND FACTORY EXPENSES M ADE BY ASSESSING OFFICER. 1) THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRMING ADDITION OF RS.1 00 000/- OUT OF SHOWING LABOUR EXPENSES POSTA GE AND ANGADIA EXPENSES AND FACTORY EXPENSES. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ASSESSEE-COMPANY HAS CARRIED OUT ON TWO TYPES OF BUSINESS ACTIVITY I .E. MANUFACTURING TRADING AND EXPORT OF DIAMOND AND GENERATING OF POWER THROU GH WIND MILLS. THE ASSESSEE-FIRM HAS FILED ITS RETURN OF INCOME DECLAR ING TOTAL INCOME OF RS.16 85 54 275/- ON 30-10-2005 ALONG WITH AUDIT RE PORT IN FORM NO.3CA AND 3CD PROFIT AND LOSS ACCOUNT BALANCE SHEET AND AUD ITED ACCOUNTS. THE CASE WAS SELECTED FOR SCRUTINY AND THE NOTICE U/S.143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE-FIRM. DURING THE COURS E OF ASSESSMENT PROCEEDINGS ASSESSING OFFICER NOTICED THAT DISALLO WANCE OF RS.75 74 742/- BEING 50% OF BOGUS LABOUR CHARGES PAID TO FOUR PART IES WHO IN THEIR STATEMENTS RECORDED U/S.131 ADMITTED THAT THEY WER E MERELY NAME LENDERS AND THEY HAD NOT DONE ANY JOB WORK FOR THE ASSESSEE . AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) RESTRICT ED THE DISALLOWANCE AT RS.1 LAKH BY STATING THAT THE ASSESSING OFFICER FAILED T O POINT OUT ANY DEFECTS AND I TA NO.2546/AHD/2008 & CO 219/AHD/08 A.Y 2005-06 ACIT CIR-5 SRT V. M/S. JB BROTHER PAGE 3 THE DISALLOWANCE WAS MADE ONLY FOR THE SAKE OF MAKI NG SOME ADDITION. AGGRIEVED NOW REVENUE AND ASSESSEE CAME IN CROSS A PPEAL BEFORE TRIBUNAL. 4. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SHRI K.K.SHAH STATED THAT IN EARLIER YEAR IN ASSESSEES OWN CASE IN ITA NO.3687/AHD/2007 DATED 05-02- 2010 FOR ASSESSMENT YEAR 2004-05 WHEREIN THE TRIBU NAL CONFIRMED THE ORDER OF CIT(A) IN PARA-13 :- 13. THE ASSESSING OFFICER HAS MERELY OBSERVED THAT PERSONAL USE EXPENSES CANNOT BE RULED OUT AND HENCE 10% OF THE EXPENSES ARE DISALLOWABLE. THE ASSESSEE HAS BEEN EXPORTING DIAMO ND. IN CONNECTION WITH EXPORT THE FOREIGN TRAVEL WAS UNDERTAKEN AND COMPLETE DETAILS WERE FIND IN THIS REGARD. OUT OF THE TOTAL EXPENSES INCURRED ON ACCOUNT OF SEWING LABOUR POSTAGE AND ANGADIA FACTORY EXP ENSES AND FOREIGN TRAVELING EXPENSES 10% EXPENSES ARE DISALLOWED ON ADHOC BASIS. THE VOUCHERS IN THIS REGARD HAVE BEEN PRODUCED. WHEN TH E MAJOR EXPENSES IS IN RELATION TO FACTORY EXPENSES SIT CANNOT BE S AID THAT THEY HAVE ANY PERSONAL ELEMENT. SIMILARLY FOR POSTAGE AND ANGADI A EXPENSE ALSO THERE CANNOT BE ANY PERSONAL ELEMENT. FOREIGN EXPEN SES ARE EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. WHEN THE A SSESSEE FILED THE DETAILS IT IS THE DUTY OF ASSESSING OFFICER TO FIN D OUT WHICH EXPENSES ARE NOT INCURRED FOR THE PURPOSE OF BUSINESS. IN ABSENC E OF ANY SUCH FINDING THE DISALLOWANCE WAS RIGHTLY DELETED BY TH E LEARNED CIT(APPEALS) HAS ALSO UPHELD DISALLOWANCE OF RS.1 LAC FOR THE POSSIBLE PERSONAL USE OUT OF ALL THESE EXPENSES THE SAME BE ING REASONABLE DID NOT CALL FOR ANY INTERFERENCE. 5. WE FIND THAT THIS ISSUE IS COVERED ON FACTS BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 WHEREIN THE TRIBUNAL HAS CONFIRMED THE ORDER OF CIT(A) IN RESTRICTING TH E ADDITION. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL TO EARLIER YEAR TA KING CONSISTENT VIEW AND RESPECTFULLY FOLLOWING THE SAME WE DISMISS THE ISSU E RAISED BY BOTH SIDES. 6. THE NEXT COMMON ISSUE IN APPEAL OF REVENUE AND A SSESSEES CO IS AS REGARDS TO THE ORDER OF CIT(A) IN RESTRICTING THE A DDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.2 :- I TA NO.2546/AHD/2008 & CO 219/AHD/08 A.Y 2005-06 ACIT CIR-5 SRT V. M/S. JB BROTHER PAGE 4 [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A)-III SURAT HAS ERRED IN RESTRICTING THE ADDITION OF RS.8 63 314/- TO THE HALF I.E. RS.4 32 600/- MADE ON ACCOUNT OF FOREIGN RAVELING EXPENSES. AND ASSESSEE HAS RAISED IN CO AS UNDER:- 2) THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRMING ADDITION OF RS.4 32 600/- OUT OF FOREIGN TRAVEL EXPENSES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF CASE. WE FIND THAT TRIBUNAL IN ASS ESSEES OWN CASE IN ITA NO.3952/AHD/2007 (SUPRA) HAS ALREADY CONFIRMED THE ORDER OF CIT(A) IN PARA- 13 WHICH HAS ALREADY BEEN REPRODUCED IN THIS ORDER I N PARA-4. ACCORDINGLY WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY CONF IRMED THE ADDITION OF RS.4 32 600/- OUT OF FOREIGN TRAVEL EXPENSES BY STA TING THAT THE PERSON IN RESPECT OF WHOM THE EXPENSE HAS BEEN CLAIMED ARE NE ITHER THE EMPLOYEE NOR THE PARTNER OF THE ASSESSEE-FIRM BUT THEY HAVE TRAV ELED TO BELGIUM. IN THIS LIKELIHOOD THE CIT(A) HAS RIGHTLY RESTRICTED THE D ISALLOWANCE OF FOREIGN TRAVELING EXPENSES AT RS.4 32 600/- AND WE CONFIRM THE SAME. 8. THE NEXT COMMON ISSUE IN THE APPEAL OF REVENUE A ND ASSESSEES CO IS AS REGARDS TO THE ORDER OF CIT(A) IN RESTRICTING THE ADDITION ON ACCOUNT OF LABOUR CHARGE MADE BY ASSESSING OFFICER. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.3 :- [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A)-III SURAT HAS ERRED IN RESTRICTING THE ADDITION OF RS.75 74 742/- TO THE HALF I.E. RS.37 87 371/- MADE ON ACCOUNT OF LABOUR CHARGES. AND ASSESSEE HAS RAISED IN CO THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRMING ADD ITION OF RS.37 87 371/- OUT OF LABOUR CHARGES. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. LD. COUNSEL FOR THE ASSE SSEE HAS STATED THAT I TA NO.2546/AHD/2008 & CO 219/AHD/08 A.Y 2005-06 ACIT CIR-5 SRT V. M/S. JB BROTHER PAGE 5 TRIBUNAL IN EARLIER YEAR IN ASSESSEES OWN CASE (SU PRA) DELETED THE EXPENSES IN PARA-10-11 WHICH READS AS UNDER:- WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND THE DECISIONS CITED ABOVE. TH E DETAILS OF JOB-WORK CHARGES PAID FOR THE YEAR UNDER APPEAL AND FOR THE IMMEDIATELY PRECEDING YEAR IS TABULATED BELOW:- PARTICULARS A.Y. 2003-04 A.Y. 2004-05 CARAT AMOUNT AVERAGE CARAT AMOUNT AVERAGE OWN MANUFACTURING 152 459.67 54 826 258 359.02 132 528.93 50 189 830 378.71 OUTSIDE MANUFACTURING 53 355 85 16 033 378 300.50 67 854.82 23 818 078 351.02 TOTAL 205 812 52 70 859.636 344.29 200 383.75 74 007 908 369.33 11. FROM THE ABOVE TABLE IT IS CLEAR THAT IN THE I MMEDIATELY PRECEDING PREVIOUS YEAR THE ASSESSEE WAS PROCESSING ITSELF BY ALMOST 75% OF THE TOTAL DIAMONDS PROCESSED. IN THE YEAR UNDER APPEAL THE DIAMOND PROCESSED WITHIN THE PREMISES HAS COMEDOWN TO 66%. THUS THE ASSESSEE IS RELYING MORE ON THE PROCESSES BEING CAR RIED OUT AT OUTSIDE PLACE. IT IS ALSO SEEN THAT THE AVERAGE COST PER CA RAT OF DIAMONDS PROCESSED AT THE PREMISES OF THE ASSESSEE IS RS.378 .71 BUT IF DONE FROM OUTSIDE IS ONLY RS.351/- PER CARAT. IF WE CONS IDER THE LABOUR CHARGES IN PERCENTAGE OF TURNOVER THE MANUFACTURIN G LABOUR CHARGES FOR ASSESSMENT YEAR 2003-04 WERE 2.22% WHEREAS IN THE YEAR UNDER APPEAL THE SAME IS ONLY 1.30%. THUS THE LABOUR CHA RGES PAID FOR OUTSIDE MANUFACTURING ARE ALL WITHIN LIMITS AS COMP ARED TO EARLIER ASSESSMENT YEARS. IF THE GENERAL TREND OF INCREASE IN EXPENSES ARE ALSO CONSIDERED THE EXPENSES DURING THE YEAR ARE NOT HI GHER WHEN COMPARED WITH ALL MANUFACTURING COST. THOUGH IN THE STATEMENTS RECORDED THE PREVIOUS HAVE GIVEN ADVERSE STATEMENT YET IF IT IS SEEN THAT WHEN THE PROCESS IS CARRIED OUT THE ASSESSEE COULD NOT MANUFACTURE AND EXPORT DIAMONDS INCURRING OF EXPENSES AT OUTSI DE PLACE IS INEVITABLE AND CONSEQUENTLY EXPENSES IN THIS REGA RD. THE ASSESSEE HAS MAINTAINED COMPLETE RECORD FOR ISSUE OF ROUGH D IAMONDS FOR PROCESSING AND RECEIPT BACK OF POLISHED DIAMONDS AF TER PROCESSING. THE FACT HAS NOT BEEN DENIED BY ANY OF THE PERSONS EXAM INED BY THE ASSESSING OFFICER. THUS THERE CANNOT BE DENIAL OF FACT THAT THE DIAMONDS WERE PROCESSED BY OUTSIDE PARTIES AND IN R ESPECT OF WHICH THE ASSESSEE HAVING PAID A/C PAYEE CHEQUES . THE EXPENSES BEING WITHIN REASONABLE LIMITS AS COMPARED TO EARLIER YEA R AND ALSO WITHIN THE INDUSTRY NORMS ARE ALLOWABLE AS SUCH. WE THEREFORE DELETE THE DISALLOWANCE UPHELD BY THE LEARNED CIT(APPEALS) ALS O. THEREFORE THIS WILL RESULT INTO TOTAL DELETION OF DISALLOWANCE AS MADE BY THE ASSESSING OFFICER. I TA NO.2546/AHD/2008 & CO 219/AHD/08 A.Y 2005-06 ACIT CIR-5 SRT V. M/S. JB BROTHER PAGE 6 10. WE FIND THAT THE ISSUE IS COVERED IN ASSESSEES OWN CASE WHEREIN THE TRIBUNAL AS NOTED ABOVE HAS ALREADY ALLOWED IN EA RLIER YEAR THE CLAIM OF THE ASSESSEE JOB CHARGES PAID TO OUTSIDER PARTIES. RESP ECTFULLY FOLLOWING THE SAME WE ALLOW THE CLAIM OF THE ASSESSEE AND THIS I SSUE OF REVENUES APPEAL IS DISMISSED AND THAT OF ASSESSEES CO IS ALLOWED. 11. I N THE RESULT REVENUES APPEAL IS DISMISSED AND THA T THE CO OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 13/01/2011 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 13/01/2011 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- III SURAT 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD