DEORA TRADING CO, MUMBAI v. ITO 20(2)(1), MUMBAI

ITA 547/MUM/2010 | 2003-2004
Pronouncement Date: 21-01-2011 | Result: Allowed

Appeal Details

RSA Number 54719914 RSA 2010
Assessee PAN AABFD4909N
Bench Mumbai
Appeal Number ITA 547/MUM/2010
Duration Of Justice 11 month(s) 29 day(s)
Appellant DEORA TRADING CO, MUMBAI
Respondent ITO 20(2)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 21-01-2011
Assessment Year 2003-2004
Appeal Filed On 22-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH BEFORE SHRI N.V.VASUDEVAN JUDICIAL MEMBER & SHRI T.R.SOOD ACCOUNTANT MEMBER I.T.A.NO.547/MUM/2010 A.Y 2003-04 M/S DEORA TRADING CO. A 69 MIDC CHAKALA ANDHERI (E) MUMBAI 400 092. PAN: AABFD 4909 N VS. INCOME TAX OFFICER 20 (2)(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K.GHOSH. C.A RESPONDENT BY : SHRI JITENDRA YADAV. O R D E R PER T.R.SOOD AM: IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOW ING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS C ASE AND IN LAW THE LD. CIT[A] ERRED IN CONFIRMING ESTIMATED AD DITION OF ` `` ` .7 23 816/- MADE BY THE AO ON ACCOUNT OF ALLEGED LO W GROSS PROFIT WITHOUT APPRECIATING THE FACT THAT NO GOODS WAS SOLD AT A PRICE LESS THAN THE COST. 2. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS C ASE AND IN LAW THE LD. CIT[A] ERRED IN CONFIRMING THE ADDITION OF ` `` ` .1 61 704/- MADE BY THE AO ON ACCOUNT OF 1/3 RD OF TOTAL LABOUR CHARGES AS ALL VOUCHERS ARE PREPARED FOR PAYMENTS M ADE IN CASH TO THE CONTRACTOR. 3. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS C ASE AND IN LAW THE LD. CIT[A] ERRED IN CONFIRMING THE ADDITION OF ` `` ` .1 20 000/- MADE BY THE AO BY INVOKING THE PROVISIO NS OF SECTION 40A(2)(B) R.W.S. 40(A)(IA). 2. GROUND NO.1 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG THE ASSESSMENT PROCEEDINGS AO NOTICED THAT THE ASSE SSEE HAD MADE MAJOR SALES TO THE SISTER CONCERN WHICH WERE AT PRI CE LESS THAN THE PRICE CHARGED FROM THE OTHER CUSTOMERS AND ACCORDI NGLY REJECTED THE 2 BOOKS OF ACCOUNTS AND APPLIED THE GP OF 3% INSTEAD OF 2.29% DECLARED BY THE ASSESSEE. 3. THE LD. CIT[A] AFTER ELABORATE DISCUSSION FOLLOW ED THE ORDER FOR A.Y 2001-02 AND UPHELD THE APPLICATION OF GP RATE A T 3%. 4. BEFORE US LD. COUNSEL OF THE ASSESSEE MADE DETA ILED SUBMISSIONS. HOWEVER HE ADMITTED THAT THE ISSUE IN A.Y 2001-02 TRAVELLED UPTO THE TRIBUNAL WHEREIN THE MATTER WAS SET ASIDE TO THE FILE OF THE AO FOR RE-EXAMINATION. 5. ON THE OTHER HAND LD. DR RELIED ON THE ORDER OF THE AO. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND FOLL OWING THE ORDER OF THE TRIBUNAL FOR A.Y 2001-02 IN I.T.A.NO.4342/M/ 05 WE DIRECT THE AO TO RE-EXAMINE THE ISSUE AFTER PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. GROUND NO.2 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS AO SOUGHT VARIOUS DETAILS ON ACCOUNT OF LABOUR CHARGES. IN RESPONSE IT WAS STATED VIDE LET TER DATED 14-3-2002 AS UNDER: THE PAYMENTS OF LABOUR CHARGES ARE MADE TO THE LAB OUR CONTRACTORS UNDER WHOM VARIOUS PEOPLE ARE APPOINTED AND PAID BY THE CONTRACTOR. VOUCHERS ARE PREPARED AND SIGNATURES ARE TAKEN ON T HE VOUCHERS WHILE MAKING THE PAYMENTS TO THE MAIN CONTRACTOR. THE AO IN THE ABSENCE OF DETAILS DISALLOWED 1/3 RD OF SUCH LABOUR CHARGES AMOUNTING TO ` `` ` .1 61 704/-. 8. ON APPEAL LD. CIT[A] CONFIRMED THE ADDITION. 3 9. BEFORE US LD. COUNSEL OF THE ASSESSEE MAINLY SU BMITTED THAT THE ADDITION HAS BEEN MADE PURELY ON AN ADHOC BASIS AND IN RESPECT OF LABOUR CHARGES NO OUTSIDE EVIDENCE IS POSSIBLE EXCE PT FOR SELF PREPARED VOUCHERS. 10. ON THE OTHER HAND LD. DR SUBMITTED THAT THE AS SESSEE WAS DEALING IN WHOLE SALE TRADE OF CLOTH AND WAS MAINLY SUPPLYING TO THE SISTER CONCERN. THERE IS NO QUESTION OF LABOUR EXPE NSES AT ALL BECAUSE THE MATERIALS HAVE BEEN DIRECTLY DIVERTED FROM THE FACTORY. HE ARGUED THAT THE AO HAS BEEN MORE THAN REASONABLE TO ALLOW 1/3 RD OF THE LABOUR CHARGES. 11. IN THE REJOINDER LD. COUNSEL OF THE ASSESSEE S UBMITTED THAT IN ANY CASE SOME AMOUNT OF PACKING AND RE-PACKING IS I NVOLVED AND SOME LOADING ETC. IS ALSO INVOLVED AND THEREFORE LABOU R EXPENSES ARE REQUIRED TO BE INCURRED. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIN D SOME FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT SOME EXPENSES ARE REQUIRED TO BE INCURRED ON ACCOUNT OF LABOUR. B UT IT MAY NOT ALWAYS BE POSSIBLE TO HAVE OUTSIDE EVIDENCE IN RESP ECT OF SUCH LABOUR CHARGES. HOWEVER AT THE SAME TIME IT HAS NOT BEEN EXPLAINED IN DETAIL AS TO HOW THESE LABOUR CHARGES ARE JUSTIFIED. CONSI DERING THE OVER ALL CIRCUMSTANCES OF THE CASE WE RESTRICT THE DISALLOWA NCE OF LABOUR CHARGES TO ` `` ` .1 LAKH AND ACCORDINGLY SET ASIDE THE ORDER OF THE CIT[A] AND DIRECT THE AO TO MAKE THE ADDITION OF ` `` ` .1 LAKH IN RESPECT OF LABOUR CHARGES. 4 13. GROUND NO.3 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS PAID A SUM OF ` `` ` .1 20 000/- TO SMT. GEETADEVI DEORA WIFE OF THE PA RTNER AS CAR HIRE CHARGES AND A FURTHER SUM OF ` `` ` .39 047/- ON ACCOUNT OF PETROL. THE ASSESSEE WAS REQUESTED TO GIVE DETAILS OF CAR HIRE CHARGES ALONG WITH BILLS ETC. IN RESPONSE IT WAS REPLIED VIDE LETTER D ATED 23-2-2006 AS UNDER: SMT. GEETADEVI DEORA IS PAID CAR HIRING CHARGES. S HE HAS NOT FILED HER RETURN OF INCOME AS THE TAXABLE INCOME IS BELOW THE TAXABLE LIMIT FOR THE ASSESSMENT YEAR IN QUESTION. A STATEMENT OF TOT AL INCOME IS ATTACHED FOR YOUR RECORD. THE AO WAS NOT SATISFIED WITH THE EXPLANATION AND D ISALLOWED A SUM OF ` `` ` .1 59 047/-. 14. ON APPEAL THE LD. CIT[A] UPHELD THE DISALLOWAN CE OF ONLY ` `` ` .1 20 000/- ON ACCOUNT OF CAR HIRE CHARGES FOR NON DEDUCTION OF TAX U/S.40(A)(IA). 15. BEFORE US LD. COUNSEL OF THE ASSESSEE SUBMITTE D THAT PROVISIONS OF SEC.40(A)(IA) WERE INSERTED BY TAXATION AMENDMEN T LAW 2006 WITH RETROSPECTIVE EFFECT FROM 1-4-2006 IN RESPECT OF PR OFESSIONAL SERVICES AND THEREFORE SAME WERE NOT APPLICABLE IN THIS YE AR. 16. ON THE OTHER HAND LD. DR STRONGLY RELIED ON TH E ORDER OF THE CIT[A]. 17. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFUL LY WE FIND THAT SEC.40(A)(IA) WAS AMENDED TO INCLUDE PROFESSIONAL S ERVICES FOR THE PURPOSE OF TAX DEDUCTION ONLY W.E.F. 1-4-2006 BY TA XATION LAW 5 AMENDMENT ACT THEREFORE THIS PROVISION COULD NOT HA VE BEEN APPLIED IN A.Y 2003-04. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT[A] AND DELETE THIS ADDITION. 18. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JANUARY 2011. SD/- SD/- (N.V.VASUDEVAN) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 21 ST JANUARY 2011. P/-*