The ACIT, Circle-1,, Bhavnagar v. Siddhant J. Pavasia, Bhavnagar

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND D. C. AGRAWAL AM) ITA NO.295/AHD/2008 A. Y.: 2004-05 THE A. C. I. T. CIRCLE-1 AAYAKAR BHAVAN NAKUBAUG JASHONATH CHOWK BHAVNAGAR 364 001 VS SHRI SIDDHANT J. PAVASIA 2286 HILL DRIVE OPP. MADHAV BAUG BHAVNAGAR PA NO. AJQPP 0741 E (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI DARSI SUMAN RATNAM DR ASSESSEE BY SHRI S. N. SOPARKAR AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-XX AHMEDABAD DATED 29 TH OCTOBER 2007 FOR ASSESSMENT YEAR 2004-05 CHALLEN GING THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADD ITION MADE ON ACCOUNT OF NON-GENUINE LABOUR PAYMENT OF RS.44 03 2 71/-. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS PROPRIETOR OF SIDDHANT IMPEX CARRYING ON BUSINESS OF DIAMOND C UTTING AND POLISHING JOB WORK. THE AO DISALLOWED LABOUR PAYMEN T BY CASH OF RS.47 02 971/- ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO PROVE THE GENUINENESS OF THE SO CAL LED CASH PAYMENT. THE AO DISCUSSED THIS ISSUE IN THE ASSESS MENT ORDER FROM PAGES 2 TO 9. THE ASSESSEE IN THE STATEMENT OF FACT EXPLAINED THAT FULL ITA NO.295/AHD/2008 ACIT CIR-1 BHAVNAGAR VS SIDDHANT J. PAVASIA 2 EVIDENCES IN THE FORM OF BILLS AND RECEIPTS OF CASH LABOUR CHARGES PAID WERE FILED TO SHOW QUANTITY OF WORK CARRIED OU T AND THE RATES OF LABOUR CHARGES AND BILL AMOUNT RECEIPTS AND THE DAT E OF PAYMENT. IT WAS FURTHER EXPLAINED THAT THE PARTIES WERE NOT ABL E TO APPEAR BECAUSE OF LACK OF TIME THEREFORE THEIR CONFIRMAT ION OF LABOUR PAYMENT BY WAY OF AFFIDAVITS WERE FILED. ALL THE LA BOUR PAYMENTS ARE VERIFIABLE. IT WAS SUBMITTED THAT MERELY BECAUSE CA SH PAYMENT HAS BEEN MADE IS NO GROUND TO DISALLOW THE PAYMENTS. TH E GROSS PROFIT EARNED BY THE ASSESSEE IS REASONABLE. SOME OF THE L ETTERS COULD NOT BE SERVED UPON THE PARTIES BECAUSE THEY HAVE CHANGE D THEIR ADDRESSES AND AFTER LAPSE OF TIME THE PARTIES COULD NOT APPEAR. THE SIGNATURES OF THE PARTIES ARE GENUINE. THE ASSESSEE HAS RECEIVED LABOUR JOB PAYMENT @ RS. 325/- PER CARAT AND PAID L ABOUR JOB EXPENSES @ RS.300 PER CARAT WHICH HAS NOT BEEN APPR ECIATED PROPERLY BY THE AO. ALL THE QUERIES OF THE AO WERE EXPLAINED IN THE WRITTEN SUBMISSION AND IT WAS EMPHASIZED THAT PAYME NTS TO ALL THE PARTIES ARE MADE AT THE SAME RATE. THEREFORE NO DI SALLOWANCE SHOULD BE MADE. THE LEARNED CIT(A) CONSIDERING THE SUBMIS SION OF THE ASSESSEE FINDING OF THE AO AND MATERIAL ON RECORD DELETED THE ADDITION OF RS.44 03 271/-. HIS FINDINGS IN PARA 5 TO 5.6 ARE REPRODUCED AS UNDER: 5. I HAVE CONSIDERED THE FACTS OF THE CASE ASSESS ING OFFICERS FINDINGS AND OBSERVATIONS IN THE ASSESSME NT ORDER DETAILED SUBMISSIONS AND VARIOUS DOCUMENTS F ILED BY THE APPELLANT BEFORE THE ASSESSING OFFICER AS WE LL AS BEFORE ME. IT IS FOUND THAT VIDE OFFICE LETTER NO. CIT (A) XIX/CIR.1/BNR/103/06-07 DTD. 05.03.2007 THE A.O. WA S ASKED TO SUBMIT REMAND REPORT. IN THIS CONNECTION T HE ITA NO.295/AHD/2008 ACIT CIR-1 BHAVNAGAR VS SIDDHANT J. PAVASIA 3 ASSESSEE HAS SUBMITTED TO THE ASSESSING OFFICER IN RESPONSE TO A.OS LETTER DATED 30.03.2007 A LIST OF NAMES & ADDRESSES OF THE PARTIES VIDE LETTER DATED. 13.04 .2007. THEREAFTER IN RESPONSE TO A.OS LETTER DTD. 05.07. 2007 THE ASSESSEE PRODUCED 7 PARTIES BEFORE A. O. FOR EXAMINATION AND 5 PARTIES HAVE WRITTEN LETTERS BY R PAD ADDRESSED TO THE A.O. CONFIRMING JOB WORK DONE AND PAYMENT THEREOF RECEIVED BY THE PARTIES (COPIES THE REOF FILED BY THE AR). THUS OUT OF 26 PARTIES 12 PARTIES HAVE CONFIRMED THE WORK DONE AND PAYMENT RECEIVED BY THE M. TILL DATE REMAND REPORT IS NOT RECEIVED FROM THE A. O. HOWEVER I HAVE CONSIDERED THE FACTS OF THE CASE A .OS FINDINGS AND OBSERVATION IN THE ASSESSMENT ORDER AN D DETAILED SUBMISSION AND DOCUMENTS FILED BY THE APPE LLANT BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE ME. 5.1 IN THE PRESENT CASE A. O. DISALLOWED CERTAIN CA SH LABOUR PAYMENT OF RS. 44 03 271 OUT OF TOTAL LABOUR PAYMENT OF RS.2 56 14 209 MAINLY BECAUSE THE ASSESS EE COULD NOT PRODUCE PARTIES FOR EXAMINATION. THE ASSE SSING OFFICER HAS DRAWN A PRESUMPTION THAT THESE LABOUR PAYMENTS ARE NOT GENUINE WITHOUT ANY EVIDENCE WHATSOEVER MERELY ON THE BASIS OF NON PRODUCING LAB OUR JOB PARTIES FOR EXAMINATION. THE GROUND TAKEN BY TH E A. O. MAY GIVE RISE TO SUSPICION BUT IT IS NOT SUFFICIENT TO DISALLOW THE CLAIM OF THE ASSESSEE. 5.2 IN THE PRESENT CASE I HAVE NOTED THAT APPELLANT HAS SOME DIFFICULTIES IN PRODUCING PARTIES FOR EXAMINAT ION WHICH IS INTIMATED TO THE A. O. THIS FACT IS NOT TO BE LIGHTLY BRUSHED ASIDE BY THE A. O. AS IN BUSINESS REALITIES DIFFICULTIES DO ARISE IN KEEPING TRACK OF JOB WORKE RS WHEN BUSINESS OF THE APPELLANT IS CLOSED AND JOB WORKERS ARE AT VARIOUS PLACES AT ABOUT 50 TO 90 KMS. AWAY FROM BHAVNAGAR. THE JOB WORKERS MAY HAVE SETTLED ELSEWHE RE OR MIGRATED ELSEWHERE. IN SUCH CIRCUMSTANCES IT AP PEARS NOT POSSIBLE TO CONTACT AND PRODUCE ALL THE PARTIES AFTER LAPSE OF A CONSIDERABLE TIME. ITA NO.295/AHD/2008 ACIT CIR-1 BHAVNAGAR VS SIDDHANT J. PAVASIA 4 5.3 THE APPELLANT HAS FURNISHED BEFORE THE A. O. AN D ALSO BEFORE ME A STATEMENT SHOWING JOB CHARGES PAID TO VARIOUS JOB WORKERS AND ACCORDINGLY THE RATE OF THE JOB CHARGES PAID ARE SAME FOR ALL THE JOB WORKERS AND I T IS ALSO NOT DISPUTED BY THE A. O. TAT EXCESS PAYMENT M ADE TO THE PARTIES WHOSE LABOUR PAYMENTS ARE DISALLOWED AS SUCH PAYMENT MADE TO ALL THE PARTIES ARE GENUINE PAYMENTS. THE APPELLANT HAS ALSO RECONCILED THE TOT AL QUANTITY OF WORK RECEIPT WITH LABOUR EXPENSES. THER EFORE THERE IS QUANTITY TALLY ALSO. THUS THE APPELLANT PR ODUCED ALL RELEVANT MATERIALS TO SHOW LABOUR PAYMENTS AND ITS CORRESPONDING LABOUR INCOME. 5.4 THE APPELLANT ALSO SUBMITTED THAT G. P. RATE IS ALSO REASONABLE AND THERE IS NO QUESTION OF LOW G. P. RA TE BY INFLATING ANY LABOUR EXPENSES. THUS THIS FACT IS AL SO TO BE APPRECIATED WITH ALL FACTS. THE APPELLANT IS MAINTA INING REGULAR BOOKS OF ACCOUNTS AND LABOUR BILLS AND RECE IPTS ARE ALSO KEPT IN THE NORMAL COURSE OF BUSINESS. 5.5 IT IS NOT THE CASE OF THE ASSESSING OFFICER THA T THERE IS SUPPRESSION OF LABOUR INCOME OR INFLATION OF LAB OUR EXPENSES AND A. O. HAS NOT POINTED OUT ANY MANIPULA TION IN THE ACCOUNTS. IT IS FOUND THAT THERE IS NO EVIDE NCE ANYWHERE THAT THESE PARTIES GAVE BOGUS VOUCHERS TO THE APPELLANT. THE A. O. HAS UNJUSTIFIABLY TREATED THE PAYMENT AS BOGUS AND HAS IGNORED THE EVIDENCE PRODUCED BY T HE ASSESSEE. 5.6 IN VIEW OF ABOVE DISCUSSION AND MATERIALS ON RE CORD CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES OF TH E CASE I FIND THAT THE SUBMISSION MADE BY THE AR CANNOT BE IGNORED WITHOUT VALID REASONS. I AM SATISFIED THAT THERE IS ENOUGH EVIDENCE TO SUPPORT THE CLAIM OF THE ASSESSE E IN RELATION TO THE EXPENDITURE OF RS.44 03 271 ON ACCO UNT OF LABOUR JOB PAYMENT AND IN THE CIRCUMSTANCES I FIND THAT ACTION OF THE A. O. IN DISALLOWING LABOOUR PAYMENTS OF RS.44 03 271 (REDUCED FROM RS.47 02 971/- TO RS.44 03 271/-- AS PER RECTIFICATION ORDER U/S 154 OF THE ITA NO.295/AHD/2008 ACIT CIR-1 BHAVNAGAR VS SIDDHANT J. PAVASIA 5 ACT BY THE A.O.) IS NOT JUSTIFIED. THEREFORE THE AD DITION OF RS.44 03 271/- IS HEREBY DELETED. 3. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT NO DETAILED EVIDENCES WERE FILED BEFORE THE AO AND THE PARTIES WERE NOT PRODUCED FOR VERIFICATION AND THE SIGNATUR ES DIFFER FROM THE AFFIDAVITS. 7 PARTIES WERE PRODUCED BEFORE THE AO A T THE REMAND STAGE AND ONLY 5 PARTIES CONFIRMED. BUT THE DETAILS OF STATEMENT SHOW THAT THEY HAVE NOT RECEIVED ANY JOB CHARGES FROM TH E ASSESSEE. NO DETAILS WERE FILED FOR THE REMAINING PARTIES THERE FORE THE LEARNED CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. THE LEARNED DR REFERRED TO THE TRANSLATED COPIES OF 5 STATEMENTS R ECORDED BY THE AO AT THE REMAND STAGE AND REFERRED TO SOME OF THE QUE STIONS TO SHOW THAT PARTIES HAVE DENIED TO RECEIVING AMOUNT FROM T HE ASSESSEE. THE LEARNED DR HOWEVER ADMITTED THAT THOSE 5 PERSONS A PPEARED BEFORE THE AO AT THE REMAND STAGE WAS NOT SUBJECTED TO CRO SS EXAMINATION BY THE ASSESSEE. THE LEARNED DR SUBMITTED THAT SINC E THE PARTIES WERE PRODUCED BY THE ASSESSEE AND STATEMENTS WERE R ECORDED IN PRESENCE OF THE ASSESSEE THEREFORE THERE WAS NO N EED TO ALLOW FURTHER CROSS EXAMINATION ON BEHALF OF THE ASSESSEE . 4. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITI ES BELOW AND SUBMITTED THAT THERE IS NO DISPUTE ABOUT THE QUANTI TY AND RATES OF THE JOB CHARGES PAID TO SEVERAL PARTIES THROUGH BANKING CHANNEL AND THE CASH THEREFORE ADDITION IS RIGHTLY DELETED BY THE LEARNED CIT(A). HE HAS SUBMITTED THAT ONLY CASH PAYMENTS HAVE BEEN DIS ALLOWED BUT PAYMENTS MADE TO THE SAID PARTIES THROUGH CHEQUE HA VE NOT BEEN ITA NO.295/AHD/2008 ACIT CIR-1 BHAVNAGAR VS SIDDHANT J. PAVASIA 6 DISALLOWED. THE JOB CHARGES RECEIPTS AND JOB CHARGE S PAYMENTS ARE SAME AND THERE IS NO VARIATION IN THE SAME. HE HAS REFERRED TO THE REPLY OF THE ASSESSEE TO THE AO TO SHOW THAT ASSESS EE WAS NOT ALLOWED CROSS EXAMINATION OF THE PARTIES WHO WERE E XAMINED BY THE AO IN THE ABSENCE OF THE ASSESSEE. HE HAS SUBMITTED THAT NO REMAND REPORT WAS FILED BY THE AO AT THE APPELLATE STAGE; THEREFORE NONE OF THE STATEMENTS RECORDED BY THE AO CAN BE RELIED UPO N BY THE ASSESSEE. HE HAS REFERRED TOO PB-6 AND SUBMITTED TH AT THE PAYMENTS MADE TO THE PARTIES ON ACCOUNT OF JOB CHARGES THROU GH CHEQUE HAVE NOT BEEN DISPUTED BUT THE PAYMENTS MADE TO THE SAME PARTIES THROUGH CASH HAVE BEEN DISPUTED BY THE AO. HE HAS R EFERRED TO PB- 73 AND 74 TO SHOW THE DETAILS OF JOB CHARGES PAID A ND THE WORK DONE BY THE PARTIES WHICH IS CONSISTENT IN ALL THE CASES . HE HAS RELIED UPON THE ORDER OF ITAT AHMEDABAD BENCH IN THE CASE OF SH RI TOLARAM B. SHARMA VS ITO DATED 25-01-2008 IN ITA NO.2239 AND 2291/AHD/2004 IN WHICH THE TRIBUNAL FOUND THAT PURC HASES HAVE NOT BEEN INFLATED IN THE VALUE OR IN THE QUANTITY THER EFORE SIMILAR ADDITION WAS DELETED. HE HAS SUBMITTED THAT THE SAME ORDER I S CONFIRMED BY THE HONBLE HIGH COURT IN TAX APPEAL NO. 1344 OF 20 08 WITH TAX APPEAL NO.1355 OF 2008 VIDE ORDER DATED 09-02-2010 IN WHICH ALSO THE HONBLE HIGH COURT CONFIRMED THE VIEW OF THE TR IBUNAL BECAUSE THERE WAS NO ALLEGATION OF INFLATION OF PURCHASES O N ACCOUNT OF QUANTITY AND VALUE WISE. HE HAS ALSO FILED GROSS PR OFIT CHART TO SHOW THAT THE SAME IS REASONABLE AS COMPARED TO EARLIER YEARS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD. THE LEARNED CIT(A) REFERRED TO THE DETAILED SUBMISSIONS AND ITA NO.295/AHD/2008 ACIT CIR-1 BHAVNAGAR VS SIDDHANT J. PAVASIA 7 DOCUMENTS FILED BY THE ASSESSEE AT THE APPELLATE ST AGE TO THE AO FOR FILING REMAND REPORT. THE AO EXAMINED SOME OF THE P ARTIES ON OATH TO WHOM JOB CHARGES WERE PAID BUT ADMITTEDLY THEY WERE NOT ALLOWED CROSS EXAMINATION ON BEHALF OF THE ASSESSEE. THEREF ORE SUCH STATEMENTS CANNOT BE READ IN EVIDENCE AGAINST THE A SSESSEE. MOREOVER THE LEARNED COUNSEL FOR THE ASSESSEE HAS REFERRED TO SOME OF THE QUESTIONS PUT TO THOSE PARTIES BY THE AO IN WHICH THEY HAVE CONFIRMED TO HAVE RECEIVED THE PAYMENTS FROM THE AS SESSEE. THE AO DID NOT FILE ANY REMAND REPORT AT THE APPELLATE STA GE. THE ASSESSEE FILED COMPLETE DETAILS OF JOB CHARGES PAID TO VARIO US PARTIES FOR DOING THE WORK FOR THE BUSINESS OF THE ASSESSEE. IN THIS CASE THE AO DISALLOWED CASH LABOUR PAYMENTS MADE TO CERTAIN PAR TIES IN A SUM OF RS.44 03 271/- OUT OF TOTAL PAYMENT OF RS.2 56 14 2 09/-. THE ASSESSEE RECEIVED LABOOUR CHARGES @ RS.325/- PER CA RAT FOR DOING THE JOB WORK OF 85416.10 NET CARAT. THE SAME QUANTI TY OF THE CARAT IS FURTHER GIVEN TO THE JOB WORKERS FOR DOING JOB WORK AND PAYMENT OF RS.300/- PER CARAT IS MADE. THE AO DID NOT DISPUTE THE RECEIPT OF RS.325/- PER CARAT BY THE ASSESSEE AND ALSO DID NOT DISPUTE THE PAYMENT OF RS.300/- PER CARAT BY THE ASSESSEE TO VA RIOUS JOB WORKERS. THE ASSESSEE CLAIMED THAT SUBSTANTIAL PAYM ENTS HAVE BEEN MADE THROUGH BANKING CHANNEL WHICH HAS NOT BEEN DIS PUTED BUT ONLY CASH PAYMENTS HAS BEEN DISPUTED BY THE AO. THE DETA ILS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE WOULD REVEA L THAT THE AO DISALLOWED CASH PAYMENTS MADE TO SOME OF THE PARTIE S @ RS.300/- PER CARAT TO WHOM THE PAYMENTS THROUGH BANKING CHA NNEL HAVE ALSO BEEN MADE @ RS.300/- PER CARAT. IT WOULD SHOW THAT THE P ARTIES TO WHOM CASH PAYMENTS HAVE BEEN MADE ARE GENUINE PARTIES AN D THUS THERE ITA NO.295/AHD/2008 ACIT CIR-1 BHAVNAGAR VS SIDDHANT J. PAVASIA 8 WAS NO REASON TO DISALLOW THE CASH PAYMENTS MADE TO THEM. THERE IS THUS NO DISPUTE BETWEEN THE QUANTITY OF THE JOB WOR K DONE BY THE PARTIES AND THE RATE OF JOB CHARGES RECEIVED BY THE M. THE AO HAS NOT MADE OUT A CASE OF EXCESS OR INFLATED LABOUR PAYMEN TS TO THE PARTIES. THE GROSS PROFIT SHOWN BY THE ASSESSEE IS ALSO REAS ONABLE. THE DETAILS CONTAINED IN THE PAPER BOOK SUPPORT THE CON TENTION OF THE ASSESSEE THAT GENUINE PAYMENTS HAVE BEEN MADE TO TH E PARTIES. THE SAME VIEW WAS TAKEN BY ITAT AHMEDABAD BENCH IN THE CASE OF SHRI TOLTRAM B. SHARMA (SUPRA) WHICH HAS BEEN CONFIRMED BY THE HONBLE HIGH COURT VIDE ORDER DATED 09-02-2010. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE NOT INCLINED TO I NTERFERE WITH THE ORDER OF THE LEARNED CIT(A). THE LEARNED CIT(A) ON PROPER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD RI GHTLY DELETED THE ADDITION. WE CONFIRM HIS FINDINGS AND DISMISS THE A PPEAL OF THE REVENUE. 6. IN THE RESULT THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 18-02-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 18-02-2011 LAKSHMIKANT/- ITA NO.295/AHD/2008 ACIT CIR-1 BHAVNAGAR VS SIDDHANT J. PAVASIA 9 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 D Y. REGISTRAR ITAT AHMEDABAD